As a real estate professional, the complexities and precision required to shepherd a home sale from start to finish is almost second nature.

But, for the average buyer and seller, the process can be one full of questions, confusing legal and financial jargon, pitfalls, and even unexpected emotions, all of which can make getting across the finish line tricky.

The complexities and stress of a home purchase can be made even more complicated thanks to the steady rise of real estate fraud, a crime that takes advantage of the digitization of some of the key steps of the closing process.

So just how much should you, other real estate professionals, and average buyers and sellers be concerned about wire fraud? What fraud control steps can you take?

Fraud during real estate transactions is rising.

Real estate fraud can come in two main forms: mortgage fraud and wire fraud. 

Mortgage fraud can be further broken down into two types:

• Fraud for housing: Criminals misrepresent their financial ability to buy a home, supplying misleading income, assets, or financial information on their loan application. 
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• Fraud for profit: Criminals, usually in banking roles, misuse their position and knowledge of the mortgage lending process to steal money from lenders or equity from homeowners.

On the other hand, wire fraud often involves a form of business email compromise where a criminal convinces a victim to wire money to what they believe is a legitimate account.

Sadly, both forms of fraud are increasing. One FBI report shows a 16.8 percent increase in real estate fraud incidents from 2019 to 2020, resulting in more than $213 million in losses. With about one-third of wire transactions already experiencing at least one fraud attempt, the trajectory of this problem is expected to increase.

Each party can play a role in wire fraud control.

Fortunately, there are established best practices that each party to a real estate transaction can take to minimize the risk of wire fraud.

Title and closing services

• Begin a regular phishing awareness training program to educate employees on how to spot, avoid, and report phishing scams.
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• Ensure that your organization’s cybersecurity practices are up to date, including the use of firewalls and robust password management practices.
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• Implement a platform that allows for the secure collection of wire account information via end-to-end encryption to prevent unauthorized access or data manipulation.

Buyers and sellers

• Request clarity in advance from agents, banks, and closing agents on their responsibilities, including what information you need to provide, to whom, and through which prearranged method(s).
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• Confirm that your real estate professionals and others facilitating your closing are following cybersecurity best practices.

Realtors 

• Practice basic cybersecurity hygiene throughout your organization, including instituting steps such as regular password changes, the use of malware and spam controls, and using encryption when sensitive personal and financial information is being shared and collected. 
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• Take the time to educate clients on the closing process, their expectations, and what to look out for—both good and bad.

Take a stand against wire fraud.

Regardless of the number of times you have been involved in a real estate closing, the process can still be met with new challenges and risks, especially as the risk of wire fraud grows and becomes more prevalent.

Fortunately, with the right preparation, security practices, and tools, each party to the transaction can do their part to protect the interests and sensitive information of all those involved.

Ready to learn more about how you can take your wire fraud prevention to the next level? Then take a moment to review CertifID’s comprehensive guide.