Jan 3, 2024
This year has been filled with change across all facets of life - social movements, economic pressures, and tragic conflicts. However, one thing that hasn’t changed is the trajectory of cybercrime. The latest available numbers from the FBI showed cybercrime losses climbed to $10B annually.
Real estate in particular has been severely affected by cybercrime. In our industry, the transactions are complex. They involve a lot of money and a lot of people. Much of the information is publicly available. That’s why real estate has been particularly targeted for cybercrime. In 2024, we face these and several new challenges and opportunities.
Wire fraud, particularly seller impersonation, is a growing threat that shows no signs of abating. Cybercriminals now target a wider array of real estate properties, using sophisticated tactics to impersonate owners and entities. The key to combating this trend lies in the industry adopting robust identity verification processes, ideally at the start of every transaction. Increased industry education and broader public awareness will be vital to mitigating this threat.
Affordability remains a pressing concern. With inventory levels at historic lows, real estate prices continue to challenge new entrants, particularly Gen Z. This dynamic, combined with escalating construction costs, suggests that the industry will continue grappling with supply-demand imbalances.
Tightness in housing inventory creates conditions for a greater risk of fraud. Funds stolen through business email compromise (BEC) involving real estate transactions reached $446M last year. BEC is a form of fraud that relies on social engineering to create urgency to act in ways we may not in a less stressful situation. Cybercriminals will urge buyers to send funds immediately so they don't lose the house they've been waiting months to find.
Elevated mortgage rates have sent more buyers toward cash sales. According to Redfin, cash sales just hit another all-time high, at over one-third of all home sales. That increases risks for cybercrime. Cash sales mean larger sums of money being wired in a closing transaction. With the expectation of elevated interest rates for some time, cash sales will remain popular.
The regulatory environment is becoming increasingly vigilant. We're seeing a surge in enforcement activities around insurance regulatory standards. States are initiating pre-audit inquiries, which signifies a shift towards more stringent oversight. This trend is not limited to states with existing escrow regulations; it's spreading across the board, bringing a sharper focus on title and settlement processes.
The industry handles vast amounts of private information, and with the rising incidence of data breaches, we need to reassess our data hygiene practices. This includes evaluating the type of data we store, the duration of storage, and post-threshold data management strategies. Ensuring data security, both at rest and in transit, is paramount to safeguarding our clients' interests.
The recent Sitzer/Burnett class action verdict will mean more home buyers could be trying to navigate a complex process without representation by a real estate agent, attorney, or REALTOR®️. Without a trained professional at the consumer’s side, there’s even less chance of education about risks such as wire fraud. The impact will also be greater in lower socio-economic populations as they're more likely to be price-sensitive and go without representation.
2024 will bring regulation, affordability, wire fraud, and data privacy challenges. But with cooperation and smart strategies, we can turn these challenges into a path that creates more value for consumers and the industry.
We must work together across title and real estate agents, brokers, underwriters, and lenders to improve our services. By focusing on education, leveraging technology, and designing our businesses to be more secure, we can steer the industry toward a safer and prosperous future.
Tom Cronkright is the Executive Chairman of CertifID, a technology platform designed to safeguard electronic payments from fraud. He co-founded the company in response to a wire fraud he experienced and the rising instances of real estate wire fraud. He also serves as the CEO of Sun Title, a leading title agency in Michigan. Tom is a licensed attorney, real estate broker, title insurance producer and nationally recognized expert on cybersecurity and wire fraud.