Homeowners should beware of wire fraud
Q: Our escrow officer was extremely busy and impossible to reach via telephone, but she was always available via email and text. Three weeks ago, we received wire instructions from the escrow company, encrypted with DocuSign authentication, and confirmation via text. We wired almost $500,000. Later that day, we learned that the company never received our money. We were shocked and depressed — then we got enraged.
Our bank wasn’t willing to help get our money back. Nobody knew anything, and when the FBI and Secret Service got involved, nobody would tell us anything because the investigation was ongoing.
The FBI executed a “kill chain,” for which we are grateful, but we lost half our money and there’s a 90-day hold on the money that was recovered. So we fell out of escrow and can’t close on our home.
News flash to fellow buyers: You’re not protected when you wire money. Why didn’t we know this? Why does the bank get a free pass? Why isn’t there a regulatory agency that can help consumers if something like this happens? Why don’t people talk about this brave new world we live in?
A: Thanks for sharing your story. It’s heartwrenching to know that you’ve possibly lost $ 250,000.
We’ve written about wire fraud for some years. In the real- estate industry, there are people in the financial side of the transaction who are constantly worried about wire fraud.
Most wire-fraud issues are really email hacks. The most frequent way hackers get wind that a person is about to wire a large sum of money is by hacking the closing agent’s, real- estate attorney’s, settlement agent’s or real- estate broker’s email accounts.
Once they hack in, they monitor the emails, waiting for the right time to copy or mimic the owner of the email account to send out fraudulent wire instructions to an unsuspecting homebuyer. Those instructions really lead to the scammer’s bank account. They may even give you a phone number to call to confirm the wire, but that phone number leads to a person who is an accomplice to the fraud.
In that case, the settlement agent, lender or broker whose email was hacked may have some responsibility for the fraud. The company or its insurance coverage may reimburse you. But if your email gets hacked, the responsibility is yours.
Recently Sam had a person who called him with a situation similar to yours. The homebuyer’s email had been hacked. The hackers knew he was buying a home, knew when to send him wire instructions and knew what to say. Like you, he lost a considerable amount of money.
No system is completely secure. But the entire wire system is at risk the way it is handled now, and the financial world needs to create a two- step authentication method to safeguard people and their money. We don’t know exactly what that would look like, but it needs to happen.
In the meantime, here are a few steps to protect yourself:
1. Never wire funds to anybody or any institution unless you have checked the wire instructions independently with your title company, settlement or closing agent.
2. If you can’t or won’t confirm the information over the phone, most title companies, settlement companies and closing agents post their wire instructions online, so be sure you check their official websites. If they do, you can compare those instructions with the instructions you received.
3. Some agents will confirm the instructions you received over the phone if you give them the information you received. Just make sure you are talking to the right person at the right place. Do not call a phone number provided to you in the same email. Look it up from another source.
Be vigilant. If you receive an email, make sure it’s from a trusted source. If you receive a text, you must make sure it’s from a trusted source. If you receive a call, you need to make sure it’s from a trusted source.
We’re sorry you got scammed. Believe it or not, you’re one of the lucky ones: You didn’t lose everything. We hope you get the rest back.