No one wants to fall prey to scam artists. Better guidance from real estate agents would be a big help. After all, a staggering fifth of fraudulent money transfer requests pretend to be coming from real estate professionals.
So, why aren’t clients getting stronger warnings?
A New 2024 Wire Fraud Study Highlights Trouble for Agents, Sellers and Buyers Alike.
Fraud cases typically involve big money. Often, $70,000 or more vanishes. The victims are buyers losing down payments, or sellers whose profits are stolen.
Nearly one in four people in real estate deals say they’ve been targets, according to CertifID’s report. Home buyers and sellers want agents to help steer them away from these scams, CertifID’s new 2024 State of Wire Fraud report makes clear. Who is CertifID? A group that goes after stolen funds, in parallel with the U.S. Secret Service.
Recently, CertifID surveyed 650 people who’ve just sold or purchased homes. Most of them say they never heard anything from real estate professionals about the way bad actors gain control of real estate money transfers, finding entry points at any stage of the purchase. Clients are excited to get to closing day. The last thing they expect? Finding out they wired funds to a fake account in the lead-up to the big day. At that point, to the buyer’s horror, it’s too late to undo the mistake.
Review the most common types of mortgage and deed fraud schemes and how to steer clear.
In a fifth of scam email cases, the swindler “spoofed” an address from the brokerage or the agent.
These professionals handle deals all the time. They have insights and experience. They’re in a position to prevent bad actors from fooling clients and taking away their life savings.
Can a Defrauded Client Sue Real Estate Professionals for Failure to Warn?
In 2018, a court in Kansas issued a decision in the case Bain v. Platinum Realty LLC. The home buyer, Bain, had wired $197K to cybercriminals in response to falsified money wiring directions that seemed to come from the agent. The closing funds vanished.
What could the buyer have done to prevent this?
The buyer could have called the agent, using the agent’s known phone number that’s in the client’s phone, just to be sure the wire transfer go-ahead really did come from the agent. (Caution! Pro criminals will soon be able to use new versions of AI to mimic real human voices.)
Anyway, the agent claimed no knowledge of the email. The perpetrator was able to hack into emailed discussions between the agent and the home buyer. Using email addresses similar to those of the buyer and agent, the fraudster eventually got in the position to direct the buyer to have money wired to the bogus account. It was the agent who first sent the fund transfer plans to the swindler, unaware of having been roped into a crime.
The jury found both the brokerage and the individual agent liable to the home buyer for 85% of the loss — a verdict upheld by the U.S. District Court for the District of Kansas.
In Bain, the client won damages back from the agent. But it was 85%. The federal court had sent a message. Ordinary customers bear some percentage of the responsibility for keeping their funds safe.
The article you’re reading now, of course, is not financial or legal advice. We cannot tell you how a case like this would go in your state. But obviously, fraudsters absolutely ruin closing days. Then it takes time, effort, and money to go through a court case. Meanwhile, swindlers have access to the email accounts they’ve picked up — and access to a lot of personal and financial details. Today, those swindlers are building on that information by manipulating AI technology.
A Court in Arizona Added New Case Law Last Year.
In a recent Arizona Court of Appeals case a buyer sued an escrow firm that wired $79,000 in closing funds to an impersonator. The sale failed. The buyer’s funds were never recovered.
Once again, this is a case about an email hack. In response to a falsified seller’s request, the buyer emailed the firm, asking it to wire the funds. The firm did so — without first calling the sellers to verify the source of the request.
The Arizona case involved the purchase of a retail property, not a home. But either type of case would have to follow state law, meaning a court would determine the parties’ “relative degrees of fault.” Here, a jury assigned 100% of the fault to the escrow firm, and the superior court awarded the buyer a full refund from the company. The Arizona Court of Appeals shaved a little off the monetary award, but left the buyer’s win largely intact.
Meanwhile, the scoundrels made off with quite a haul. No wonder brokerages are coming up with fraud disclosure forms to warn customers about identity theft and wire fraud. Agents are also adding wire fraud disclaimers to the automatic email signature lines in their emails. Of course, an email tag line is no substitute for professional communication and safe practices.
Responsibility to Avoid Fraud Is About Collaboration.
Real estate transactions are like honey to bees — constantly appealing to criminals looking to redirect and collect money.
The information a fraudster needs is available through listings and public records. Rewards for criminals who use it can be enormous. As home prices rise, the stakes in fraud become ever higher.
Perhaps ten people are in the middle of setting up an ordinary closing, CertifID points out. Any of them can be potential security breach points.
Yet we can all take steps to steer clear. If you’re preparing to move money, be proactive. Anticipate fraud. Ask your agent to talk with you about fraud. A starting point for discussion could be this cybersecurity checklist, published by the National Association of REALTORS®.
Don’t give up your financial details, or click through any messages, until first double-checking the sources. And put a plan together for how you and your agent will verify communications, so that no one gets impersonated. It’s worth taking the time for a bit of role-playing. You’ll both be more informed and alert, through every phase of your transaction.
Supporting References
Bain v. Platinum Realty, LLC, No. 16-2326-JWL, 2018 WL 3105376 (D. Kan. Jun. 25, 2018).
Mago v. Arizona Escrow & Financial Corporation, No. 1 CA-CV 22-0270 (filed Mar. 30, 2023).
The National Association of REALTORS®: Cybersecurity Checklist.
Melissa Dittmann Tracey for REALTOR® Magazine: Consumers – Agents Aren’t Warning Us Enough About Scams (published by the National Association of REALTORS® on Mar. 6, 2024; citing CertifID’s 2024 State of Wire Fraud Report).
Atty. K. Michelle Lind for Arizona REALTORS®, via AAROnline.com: Wire Fraud Liability – Real Estate Tales From the Courtroom (May 2023).
Deeds.com: Now It’s the Deepfakes. Protect Deeds and Accounts From AI-Generated Imposters (Mar. 25, 2024).
Deeds.com: Fraud Update: Closing Scams Now Make Up Nearly Half of Cybercrime Losses (May 17, 2021).
And as linked.
More on topics: Preparing to close on your new home, Mortgage fraud
Photo credits: Sarah Chai and Fernando Arcos, via Pexels/Canva.