Know the red flags to keep your money safe.
Large sums of cash tend to exchange hands when a real estate transaction takes place, and fraudsters are becoming increasing sophisticated at exploiting the vulnerability for their gain.
For most Americans, their homes are a means of building wealth. Many save for years for a down payment to buy a home, with the idea that eventually they’ll net some profit when they sell. That profit might be used to buy a larger home or live in retirement.
Meanwhile, the goal of fraudsters is to take advantage of buyers and sellers in those situations by duping their unsuspecting victim into sending the fraudster all their cash, often via bank wire.
The FBI reported over $350 million in losses due to fraud related to real estate in 2021. The losses have steadily increased over the years, and now real estate fraud ranks No. 5 on the FBI’s list of Internet crime types.
This guide explores how fraudsters are targeting buyers and sellers, red flags to avoid and ways to keep your money safe.
This page was updated 20 April 2022.
Victims unknowingly wire their closing funds to the fraudster’s bank account. Unless the defrauding is caught immediately, it’s unlikely funds can be recovered.
The weapon of choice in these situations is email. The fraudster will hack their way into the email account of some party to the real estate transaction.
In some cases, it’s been the real estate agent, in others it’s been a third-party such as the title company, in others still it’s been the buyer or the seller.
To gain access, a fraudster could employ a number of tactics designed to compromise their victim’s account password. Phishing is one method. Social engineering is another. Malware programs that log keystrokes can also help a fraudster commandeer a password.
Once they’ve gained access, the fraudster will then lie in wait, monitoring the inbox for emails pertaining to the real estate transaction and particularly the wiring instructions.
The red flags we see today are not always as glaringly obvious as they once were. That’s because today’s fraudsters are becoming increasingly sophisticated.A good rule of thumb is to assume the email is fake and then spend time proving it’s legitimate with a quick check:
One of the dead giveaways of a fraudulent email is the hyperlinks within the email. The hyperlinks will look unfamiliar, because a fraudster needs to lead their victim to an alternative web page to initiate their attack.
Never click a hyperlink unless you’ve hovered over it and can confirm the URL that pops up is your intended destination. If you’re still unsure from the pop-up, send a new email to your contact, or better yet call them to verify.
Another way to spot a fraudster is to look extra close at the sender’s email address.
Today’s email fraudsters are getting so good, only minor details may be changed, such as using a zero in an email address instead of the letter O, or the numeral 1 instead of the letter L. Verify the sender’s email address looks familiar and does not contain any strange numbers or characters.
While in years past, it was common for fraudulent emails to drip with poor grammar, misspellings and strange character spacings, that’s not always the case today.
Today’s emails may even mention specific individuals on the transaction or include email signatures that are similar to the legitimate ones.
Nevertheless, don’t overlook spelling or grammar errors in any email pertaining to your real estate tranaction. When in doubt, look up the number to call your contact and verify (fraudsters have been known to deploy fake phone numbers too).