WAYPOINT ON WATCH:

As a result of lowered mortgage rates and a dicey case of low supply, the United States has witnessed a nearly unprecedented real estate boom since the beginning of the COVID-19 pandemic. With many houses going from listed to pending in a week or less, buyers placing cash offers sight-unseen, and the addition of escalation clauses and other contractual sweeteners, those working in real estate are quickly adapting to fast-paced and unpredictable conditions.

These conditions have opened the window for real estate wire fraud to rise to an all-time high.

According to the National Association of Realtors, there is a pattern to how this scheme breaks down: “Fraudsters will assume the identity of the title, real estate agent or closing attorney and forge the person’s email and other details about the transaction. The scammers will then send an email to the unknowing buyer and provide new wire instructions to the criminal’s bank account.” A simple, but effective approach that led to 2020 losses in excess of $213M.

In response to increased cases the FBI urges buyers to be wary of any communication that is email based and to establish a secondary means of communication for verification. In certain cases, the FBI recommends going so far as to establish code phrases in person between legitimate parties as a countermeasure to fraudulent phone calls from compromised agents requesting personal information and unauthorized payment changes.

While increased wire fraud is obviously concerning for personal protection, real estate businesses and agents ought to take the threat even more seriously. Lawsuits against real estate firms and title agencies over cyber negligence have resulted in millions of additional losses in the wake of wire fraud catastrophes. Businesses that have failed to implement comprehensive cyber strategies – including securing company email, educating their employees on how to recognize attacks, and monitoring third-party vulnerabilities – are at serious risk.