The Expert Podcast

…Many types of fraud affect consumers every single day but none is more insidious and sometimes devastating. Then real estate transaction action escrow wire fraud. How does this work Well, what happens is if you are buying or selling a piece of real estate, You are instructed to wire funds to the title company or the title company is instructed to wire funds to you as a seller. What happens is fraudster scammers hackers. We'll insert themselves into that.

Email chain. And instruct you as a buyer to send your hard-earned funds. To a wire transfer account number and routing number. That isn't the actual title company Well how would you fall for this So you wouldn't think it's never happened to me. Well we're going to describe how this happens.

How you can detect it how you can avoid it. And what can be done to recover funds If you're a victim now from. let's talk about how big of a problem This is. It's estimated that wire fraud in the U S exceeds $1 trillion per year. That's about.

3000 frauds a day…

if they were a million each. Right So think about it. There is on average $3,001 million frauds happening every single day Now. Usually these frauds are less than a million They're usually hundreds of thousands, but that just means there's more of them. There are thousands of these that happen every single day…

Why is it not discussed more Because in many cases it's a low conspicuous type of event, meaning that it's not in the news It's not something that happens. Yeah to a large volume of people happen to title companies and real estate home buyers. How does it work Well here's what happens. In a real estate trends…

The chain of events usually go something like this. A buyer and a seller of a piece of real estate come together on a contract that seller put their house for sale. On MLS through a realtor they might have. You know contracted with let's say…Coldwell banker or one of the large real estate brokerage companies, usually through a local agent. Right.

Sally Smith real estate agent Joe Schmoe real estate agent. And that house is listed for sale. People will come look at that house. One or more of them We'll put an offer on that house with a real estate offering contract. At some point it offers accepted.

When the offer is accepted at this point. All the communications are happening. Between two real estate agents, the seller's agent that had the listing and the buyer's agent that represents that buyer. Once a contract is done, there will be a title company. That will be inserted into this.

Transaction communication. Discussion. And that title company. Is a firm. That is contracted to handle that transaction What they do is they take the money from the buyer, the down payment, they take the money from the lender the mortgage company, put it in an account make sure it's all there.

Then they take the deed to the house. From the seller, transferred to the buyer and then put the money. In the seller's pocket. Many cases, the all the money doesn't go to the seller the seller may have a mortgage. So the title company also sends some of the money to pay off the old mortgage.

There's also fees that have to be paid from that transaction. There are closing costs There are commissions to the realtors insurance, escrows other types of fee So this title company He takes all the money from the places that comes in, distributed out to the places that it goes out. How does fraud gets. Included in that chain of events What happens is these hackers these scammers these fraudsters. We'll hack into the email account of one of the parties It doesn't have to be all of them.

It could be the real estate agent It could be an insurance company. It could be. Even a home inspector. All they have to do. Is to find out about a potential real estate closing that's happening.

That's it So all I got to do. Once they find out that a real estate closing is happening, what they'll do. Is in that. Chain of…

emails. Everybody will get copied So let's say the home inspector does a home inspection on that property. They'll send their report and CC everybody the buyer the seller the realtor the title company. The insurance company. Or let's say the realtor.

Sally Smith realtor. Has some notice that she has to send out, it gets CC to everybody The buyer the seller, the title company. Right. So what happens is a hacker will find the most vulnerable part of that real estate chain they're out there every single day hacking into email accounts Now think about it. It's going to be tough to hack into…the re the email of let's say IBM or, or Google or some major company, but many.

Small cottage industry mom and pop type companies. Sally Smith realtor Joe Schmoe, home inspector, Bob Smith. You know insurance company, they may not have the same level of…

Defenses against cyber attacks They may not have the same It people that every single day is protecting their infrastructure. And matter of fact a lot of people might work from home They work on their laptop from their wifi. That might work from a coffee shop. These hackers can more easily get into those accounts. So once they hack the email of let's say that home InSpec.

What they'll do is they'll see Okay. There's a closing happening. The buyer is John and Mary. Smith. Here's their email address The title company is XYZ title.

In their hometown. So then what they do. Is they will register. A domain name for a website That sounds like the title company So if it's XYZ title. Dot com they will go right on the spot register.

XYZ title company.com or XYZ title llc.com Something very similar. To the actual title company. And they'll make a website only takes an hour or two to make a website that looks exactly the same as. The actual title company, once they have that, they'll create email addresses That sound like it's the title company. Maybe the person at the title company is.

Amanda. Manda Jones at XYZ. So that's your email address amanda.Jones@xyztitle.com. So now once they have created a false fake website, they will then create an email address That sounds like the employee that's working with these buyers, Amanda dot Jones at XYZ title llc.com. Right.

So now they send. An email to the buyer. Hey this is Amanda Jones We've been working with you on your closing. We're getting ready to close your file. Here is your wire transfer instructions It'll have all the logos.

Addresses

emails, pictures all the information in that email that looks legitimate. Right. So the buyer…

Bob and Mary Jones, they get this email Oh here's a here's Amanda telling us where to wire our money and they go to their bank and they wire their down payment 182. $82,000 and 12 cents, 250,000 whatever it is they're paying for this house their down payment. They wire it. To this false. Account number.

And it goes to the hacker of. The scammer they take the money and run. What would that do to you as a buyer If you've wired all of your money…

To a false account Now you're out your money You can't buy the house. You're out your house Maybe that money came from selling your old house Maybe that came from your 401k. It's gone…

So that's how it happened That's the mechanism of how this happens. What can you do to prevent it Well the first thing to do is you can see our website verify escrow. It's a real simple process instead of sending the whole. amount of money, send a small amount. $1 $10 a hundred dollars even a thousand dollars, send it to…the instructions you're given from the title company…and make sure that you actually contact the real title company.

And make sure they got it And if they did, then you can send the full balance. Make sure when you're contacting the title company, you don't call a phone number from the email. Many of these scammers are actually. Making a phone number that they put in the email. That rings to them wherever they are doesn't ring to the real title company It rings to them So if you call them and verify it'll be there.

Make sure you get the phone number by looking them up on Google, that you walk in the door of the title company that you make sure the phone number you're calling is the authentic phone number Don't just take it from the email because. If you're taking the account number from the email they could fake a phone number too. So make sure you get the genuine phone number better yet Walk in the door of that title company their brick and mortar physical office say Hey look did you get my hundred dollars test deposit? And if they did, now you can go back to your bank and say, wire this whole amount is $250,000 and 12 cents to the same account number Don't change it Don't rewrite it to say send it to the same number because you know that one's right…

What about if you've already. Been a victim of this Well there's three steps you want to take First of all remember we're not attorneys we're not giving you legal advice You may want to contact an attorney. To find out what you can do about this. The first thing you want to do is file it with the IC three. It's the internet crime complaint center.

Part of the FBI. I want to get that file in first. You also want to check to see if you can use what's called the financial fraud kill chain It's a method that the FBI has come up with with financial institutions, where they can actually reverse certain wire transfers has to be done quickly. Usually within 72 hours usually I have to get good contacts at the two banks the bank that you sent that from and the bank that it was sent to, but filing with IC three and starting this. financial fraud kill chain.

We'll be way to undo it…

If it's longer than that or the financial fraud kill chain is not available then you want to do a more thorough investigation You may have to do. Osen research. discovering the flow of funds a lot. of time. This.

Stolen money gets turned into cryptocurrency or digital assets, and you want to have to, file R R follow the flow of funds and trace the money through different wallets different crypto blockchains That's a little more complicated than this Video's about. But the main thing is. Avoiding it. Bye. Doing a test transaction If you're a realtor, if you're a title company I use the forms that we have on our website Verify escrow.com They're free.

You can include these forms with every single contract that you do every single transaction you do If you're a title company you can send it out to all your customers and tell them look, even if you think it's the right one even if you're using our. Account numbers do a test transaction first It's a best practice that way If for some reason, You're fooled by this fake email Look. You don't you might not think you're going to get fooled but these people are very slick They know exactly how to make these emails Look correct They might even call you up. They might even…

send you something in the mail postal mail. It might look authentic…

The title companies or sometimes even fooled. So don't trust the fact that you can detect this, send a test transaction every time. If you're a realtor, this is a best practice Tell your buyers and your sellers to not send any money. Unless they've done a test transaction First it's simple, send a dollar send a $10 a hundred dollars, make sure it goes through to the proper destination and then send the critical amount to them. If you're a title company same thing Before you send off a payoff to a lien holder, before you send off a commission to a realtor, send a test transaction make sure they received it.

If they did then send the whole amount…

This is a extremely. Serious type of fraud because it can devastate somebody's life It's a matter of life or death If you don't have a place to live. you've lost all of your nest egg that you need to buy or sell a house…

It can have a substantial impact on your life It's not just financial it's a…quality of life issue. It's very prevalent. So far it's been. It's not been able to be defeated because these scammers know how much money is at stake. We're not talking about stealing a thousand dollars from somebody you're stealing hundreds of thousands of dollars from a consumer…

And there's weakness in the chain. Look it's not to say that realtors or title companies or inspectors or insurance companies are bad. It's just that they don't have the same level. Of technical defenses as a large company. Right Large companies have teams of it people that work every day to protect them from cyber attacks cyber liability.

A small real estate office or a home inspector or a small insurance company. may not have the same level of defenses and they may work remotely a lot where their laptops are connected through wifi. Or other networks and that's where the hackers get into the email And all they have to do is they only didn't have to hack your email to send something out They just have to be able to read. What you're saying, who's the title company Who's the buyer what's the address. And they can make up all the documents that make it seem like they're in the mix of this transaction.

So be very careful if you're any kind of professional involved with real estate transactions, notify your especially your buyer. But also notify everybody else. Do a test transaction. Here's a notice you can use the document from our website. As a.

you know a free distribution that you can send to your clients to inform them. Of using this test transaction defense to protect them against fraud And the more that this gets out there the more people use this technique It doesn't. any money. Right This is a defense that costs $0. It might cost 10 or 15 minutes of your time to send one extra.

wire transfer, but it doesn't cost any money. Right Maybe a cost of you a few dollars If the wire transfer has a fee. Right. W if they bank charged you $10 to send a wire transfer Okay It cost you $10. But really it costs $0 to protect against…escrow fraud 100% of the time.

And if every real estate agent. Every. title company every. Professional involved with a real estate transaction insurance inspections. anybody else that has any, inclusion on emails for a real estate transaction.

If all those professionals include this instruction to their buyers, eventually this type of fraud can be wiped out and people start losing or stop losing their life savings. And not be devastated by losing out on their money and also a place to live. Let us know in the comments what you think. Visit our website verify escrow.com and we're glad to be of assistance.