How To Protect Yourself From Escrow Fraud

by Kenda Geary Ruck

NAR President, Vince Malta said, “Wire fraud is one of the fastest-growing cybercrimes in the U.S., and consumers need to understand the risks that exist within every real estate transaction.”

Luckily, we have not heard of many cases here in Los Cabos, maybe 4 in the last year (and consider, we had more real estate sales in Los Cabos last year than several past years combined. We’ve been busy). However, it can happen here, just like anywhere else.

Just recently a friend of mine sadly fell prey to an escrow scam. My friend received an email, seemingly from their agent, letting them know their next deposit was due, and included wire instructions in the body of the email. My friend sent the wire. Escrow did not receive it. Come to find out, the wire instructions were ever so slightly different than the correct ones. The money had been sent to some random criminal somewhere in the world.

The good news is, of the 4 cases we have heard about, at least 2 have recovered their money. The other 2 may still be ongoing.

There are steps you can take to protect yourself to ensure this never happens; and there are also steps you should take if it does happen. Keep reading.

Most commonly, cyber scams happen when hackers, posing as real estate or title agents, send fraudulent emails instructing home-buyers to initiate wire transfers to illegitimate accounts. These emails often appear credible because they include specific, personal information.

There are simple steps you can take to remain vigilant and to ensure your money is sent to the correct account!

FOUR STEPS TO TAKE WHEN WIRING MONEY TO ESCROW:

1. Always verify wire instructions. Call your real estate agent; or call the escrow company directly. You will also likely have a transaction coordinator or closing attorney working on your purchase – call them. The important part to note here is CALL. Pick up the phone and call to verify the wire instructions you are using are correct. with your agent via their known telephone number when verifying wire instructions. Do not depend solely on phone numbers or links from emails.
2. Cross reference the wire instructions. Most commonly, your offer to purchase will include the wire instructions to use for all deposits associated with your purchase. You will also sign an escrow agreement. Check the signed contract, do not trust wire instructions that are sent independently – cross reference with the official documents specific to your transaction.
3. Use email safety tricks. One great example of this is to hit forward (and enter the addresses manually) instead of reply. Many times, hackers use emails that are very similar to the email you’d expect, and you may not notice the difference. If you forward, you can be sure the email goes to the proper destination. Another option is to compose a new email.
4. Notify your agent immediately before and after any wire transfers.  Your agent should verify with your escrow company that the funds were safely received. Once your initial deposit has been verified, use the same wire instructions. Escrow rarely changes their wire instructions, and if they do, they notify well in advance and keep the old instructions active for a substantial period – it is almost a fact that the bank information will not change suddenly.

WHAT SHOULD I DO IF MY WIRE TRANSFER HAS BEEN HACKED?

In few cases, unfortunately, a buyer receives an email requesting the wire, it seems timely, and the buyer requests the wire be sent without verifying – the funds are then sent to some unknown third-party’s account, and not to the escrow agent.

In these unlucky scenarios, quick action is essential!

The faster you notify your bank, agent, and escrow company, the more likely the chance that you will be able to recover your funds.

These are some of the recommended steps if you have sent a wire to a fraudulent account:

1. Call your bank, tell them you’ve mistakenly sent your wire to a fraudulent account. Your bank can initiate a recall process.
2. Notify escrow (directly or through your real estate agent). Most escrow companies have in-house fraud departments so let escrow know right away if you think you have fallen prey to one of these schemes.
3. Report the crime tothe FBI. They have a specific department to this kind of incident, the Internet Crime Complain Center (IC3).
4. Change your email password. Choose a difficult, complex password, and don’t share that password with anyone. Use a mixture of upper and lowercase letters, numbers, and symbols.
5. Only send wire transfers while connected to secure servers. Avoid public connections. Use your home or other private and trusted connection. Coffee shops, airports, libraries, etc. are public locations, and are usually not secure.

At FINN, we want to keep you as informed as possible, including the best ways to protect your money.  When you work with us, we will stay in touch with clear instructions throughout your entire purchase process. Your investment is so important.

If you or someone you know has questions about real estate in Los Cabos, please reach out to us at FINN – and please, if you found this article helpful, share it; and add your email to the subscription line below to continue receiving important information.

We are here to help you and to protect you.