Real Estate Fraud Part 4: Wire Fraud
Parts 1, 2 and 3 of this series discussed buyers and sellers victimized by seller impersonation fraud. Seller impersonation fraud is just one type of real estate fraud that contributed to the 9,359 cases of real estate fraud reported to the Federal Bureau of Investigation in 2024 resulting in a loss of $173,586,820. This series of articles will identify some of the most common types of fraud in real estate transactions so that both buyers and sellers of real estate can be aware of the potential danger.
Wire fraud, simply put, is the unlawful diversion of funds in a real estate transaction. In any real estate transaction, there are multiple sums of money paid in and paid out at various times in the closing timeline. A buyer wires earnest money in. At closing, a buyer, or its lender, wires in the remainder of the purchase price. Also at closing, various sums are wired out to the seller, to lien holders being paid off, for real estate commissions and to various professionals assisting in the deal such as title companies, lawyers, surveyors and others.
The criminal is able to intervene in the transaction and divert funds either by hacking the email of one of the participants or by “phishing” and sending a fake email to a party responsible for wiring the funds. The criminal impersonates one of the parties to the transaction and claims that they need to send updated payment instructions or to correct an invoice. It is not unusual for payment amounts to change from time to time in transactions, but the criminal will take this opportunity to also change the wire instructions originally provided and substitute the criminal’s bank account information for the bank account information of the legitimate party. Once the wire has been sent to the criminal’s bank account, discovery and recovery can be difficult.
Wire fraud can be prevented through verification of wiring instructions, by telephone, with a phone number that has been previously verified. Emails that send updated invoices or changed wire instructions should be scrutinized for inconsistencies. Frequent wire senders can use third party software to verify legitimate wire instructions. Of course, using a title company or attorney to close a transaction can help prevent fraud since these professionals should have the necessary procedures in place to help identify suspicious transactions.
As explained in this series of articles, real estate fraud takes various forms and recovery of lost funds is unlikely and difficult. Insurance often does not cover this type of loss. An ounce of prevention, use of professionals and a careful eye can often help both real estate buyers and sellers from falling victim to fraud.