Why do I have to use a wire transfer to pay for closing?

Q: I am buying a home, and my agent told me that I would need to send the money for the closing by wire transfer to the title company and that I needed to call the title company to confirm the details before having my bank wire the funds. I don’t understand why I can’t give them a check. Is this legit? — Sarah

A: Checks, even bank checks, can be stopped. They can also be easily counterfeited using modern technology. Because various parties will want their funds on closing day, the closing escrow agent will require “hard” funds, meaning they need money put into their account that cannot be called back or faked. Wire transfers are one of the only ways to accomplish this, and escrow agents no longer accept funds other than wire transfers at closing time to protect all involved.

Because of this requirement and the fact that real estate transactions involve large amounts of money, there is an ever-present threat of fraud. Criminals are constantly developing new ways to separate you from your hardearned savings, and wire fraud is a genuine concern.

One of the more common scams involves a fraudster hacking into one of the participants’ unsecured email accounts. It may be your account that is hacked or your real estate agent’s, or even the title company or loan officer that falls victim to this. Once they have access to the account, they monitor the emails until a few days before closing. Then they send a fake email that looks like it came from someone you trust containing fraudulent wiring instructions.

If you are careful, this scam can be avoided. The best way is to deal with your closing professionals in person. Drive to the title company and get the instructions in person. Call them from an independently verified phone number if this is not practical.

The independently verified part is crucial because you can not trust the phone numbers found on the unverified email.

You should insist on dealing with companies that use secure and encrypted email and take security seriously. Call and ask what they do to protect you.

I spend significant resources to protect my clients and am more than happy to explain it to anyone who asks and sometimes to people who do not ask.

There is no perfect way to protect yourself completely. However, taking the proper precautions can significantly reduce your chances of becoming a victim.