What is Wire Fraud?

Every year, the real estate industry reports billions of dollars in loss due to wire fraud. This article will explain what wire fraud is and who it affects.

What is Wire Fraud?

Every year, the real estate industry reports billions of dollars in loss due to wire fraud. This article will explain what wire fraud is and who it affects.

A woman looking pensively at her computer.What is Wire Fraud?
Written by:

Tom Cronkright

Read time:

6 mins


Wire Fraud


Mar 28, 2024

Wire fraud is an epidemic in the real estate industry. According to information recently obtained from the FBI, from June 2016 through December 2018, roughly $90 billion in attempted wire fraud was reported through the FBI’s IC3 division. This represents a significant increase in wire fraud activity over the past two years as most attempts go unreported. While some of this will have been recovered, it points to a worrying trend.

Over the past two years, cyber perpetrators have spent time learning about real estate transactions and the nuances of how money is transferred in connection with closings.

What they’ve learned is that large sums of money are frequently transferred by way of wire transfer between multiple parties. Through business email account compromise and sophisticated social engineering strategies, they have found a repeatable process for diverting wires from the intended destination to themselves.

Wire transfers are unique in that once they are received in a bank account, they can be transferred out immediately. This makes them very hard to recall. Because of this, it is important that real estate professionals know about the challenges they are facing.

Wire Fraud in Real Estate: What You Need To Know

While the exact methods fraudsters use when attempting wire fraud vary, the goal is still the same—impersonate a trusted party in a transaction in order to divert a wire transfer to a fraudulent bank account. The scammer will usually provide the false wiring instructions by email but will also use the phone or regular mail.

As the victim is generally in the closing stages of a transaction—and expecting to send funds via wire transfer—they may not think twice when they receive fake wiring instructions from the scammer.

These wiring instructions are convincing—typically only the account number is different from that of the authentic instructions.

Criminals have an in-depth knowledge of the real estate transaction process. They are also skilled in social engineering, and they use several methods to ensure the contact with the victim is timely and believable.

How do they gain knowledge on a real estate transaction? It all starts with phishing.

First, scammers use phishing scams to trick someone into unknowingly giving up email or other account credentials. They typically target real estate agents, title and settlement providers, or the actual buyer or seller involved in the transaction.

Once they have access to someone’s email account, everyone involved in the transaction is exposed to potential fraud. Cyber perpetrators monitor real-time communications in order to obtain intimate details on an upcoming transaction and the transfer of funds involved in a closing.

This arms them with the ability to impersonate a trusted party in the transaction and defraud someone by sending them fake wiring instructions that appear real.

Real estate transactions take on average about 42 days to close. This provides a long runway for the fraudster to learn about the communication styles, the timing of communication, and responsibilities of each party in connection with the real estate closing.

This is what makes these scams uniquely dangerous: the fraudsters have time to create the most believable version of someone in a transaction.

A major component in this believability comes from the spoofing of an email account of a trusted party. The criminals create fake email accounts that are so similar to the ones they are impersonating that they often avoid detection by the individual receiving the communication.

For example, titleagency@emailprovider.com will be changed to titeagency@emaiIprovider.com. Do you think you’d spot the difference?

Who does wire fraud affect in real estate?

While wire fraud directly affects the party sending funds to the fraudulent account, all other transaction participants stand to lose something if they failed to protect the person who was scammed.

The Buyer

The person who will often lose the most in real estate wire fraud is the buyer. In general, they are easy targets as they can be unaware that they may be personally targeted by a cybercriminal during a real estate transaction.

That, coupled with a lack of understanding about wire transfers often leads them to wire their life savings to a cyber perpetrator after they’ve been tricked.

Another factor used by cybercriminals is “buyer fatigue.” Let’s take a home buyer who is going through this long and exhausting process to purchase a home for the first time.

This buyer receives countless requests for information in the form of a deluge of emails from multiple parties including their real estate agent, lender, and title company. By the time the closing is scheduled, many of them will do anything it takes just to get their hands on the key to the front door.

This period of exhaustion and frustration is where the cybercriminal strikes. In the industry, it’s called the “kill zone“—the period between the closing being scheduled and the transaction being fully completed and funded.

With the buyer’s frustrations running high, they typically let their guard down and become more trusting and willing to follow instructions without questioning the source or integrity.

It is at this time that scammers present well-drafted emails with specific transaction information and a request to wire funds nearly immediately or the transaction may be at risk. This is the winning formula to trick buyers into wiring funds without question.

Fraudsters target everyone from first-time buyers with relatively small down-payments to those paying cash for multi-million dollar properties.

Falling victim to wire fraud can be devastating to buyers. Unfortunately, once a buyer becomes a victim of wire fraud, it is hard for them to get the money back.


When the buyer loses the money they were planning to purchase a house with, it’s also terrible news for the seller. If the buyer can’t get their money back quickly, the sale may fail and the seller will have to go through the whole selling process again.

Even worse, the seller may be exposed to liability if the sale of the property is tied to other contractual obligations, such as the purchase of a replacement property, that they can no longer fulfill due to the wire fraud loss.

With low inventory levels across most of the United States, this back-to-back closing phenomenon creates a domino effect that could disrupt multiple transactions when fraud occurs. This leads to disputes between parties and often, complex litigation scenarios.

Mortgage Holders

Equally as devastating is the impact of the fastest growing wire fraud scam that is sweeping the country—mortgage payoff fraud. Lenders who hold mortgages on real estate must now be concerned that the payoff instructions sent to title companies arrive safely and the funds are not diverted.

This fraud involves a legitimate closing between a buyer and a seller, where the title company receives all the money from the buyer and the lender needed to close. In order to transfer the property free and clear to the new buyer, the title or escrow company must pay off any existing mortgages on the property that relate to the seller.

These are the largest sums of money that typically transfer in a real estate transaction.

Armed with stolen knowledge and having gained access to someone’s email account in a transaction, the fraudster will email or fax fraudulent payoff instructions. The purpose is to divert the payoff from the current mortgage holder to a fraudulent account that is controlled by the perpetrator.

Mortgage payoff fraud has a devastating impact on transactions because the buyer fully consummated their side of the transaction but the seller never received the payoff of their mortgage, or possibly their net proceeds after the sale.

This is where the title or settlement provider comes in, as they are on the ones that are typically scammed with this type of fraud. State and federal courts are being flooded with lawsuits designed to resolve this conundrum.

Those Working in the Industry

While it is often buyers who fall victim to fraud, those working in the industry are also affected. A quick look through our list of 2017 fraud attempts will show you that fraudsters take advantage of anyone in the chain. This includes title companies, escrow companies, real estate lawyers, lenders, depository institutions and real estate agents.

Title and Escrow Companies

As title and Escrow companies themselves often wire money, they are vulnerable to wire fraud attempts. Once a buyer has transferred money for a closing, fraudsters will attempt to insert themselves into the stream of communication with the goal of diverting wires during the disbursement process.

This can lead unsuspecting and ill-prepared title and escrow companies to send money to a fraudulent account. In such cases, not only does the buyer lose their funds, but the title or escrow company may be held liable for the loss. This has forced many companies to close their doors because they cannot make up the shortfall in their escrow account caused by the fraudster.

Real Estate Agents and Brokers

In the event that wire fraud occurs, real estate agents stand to lose a whole lot more than their commission check. Both their reputation and business are on the line, and if a lawsuit is filed after a loss occurs, they may be held responsible if their email account was compromised and that led to the loss.

Juries have found real estate agents and their brokers personally liable for such losses with judgments in the hundreds of thousands of dollars.

Law Firms

As trusted coordinators and representatives in real estate transactions, attorneys and law firms are often held in high regard. The trust associated with an attorney-client relationship is one of the highest in the country.

Unfortunately, cybercriminals are homing in on law firms with similar fraud schemes to those they use against title and escrow companies.

Cyber scammers now know that law firms receive and send funds through their escrow accounts for real estate transactions. Scams that divert incoming wires from buyers and redirect disbursement wires after closing are proving successful against attorneys. This is another fast growing profile of fraud.

Wire fraud can be stopped

Wire fraud in real estate transactions is devastating for the victim(s). However, there are steps that can be taken to protect the integrity of the transaction and the parties involved. At CertiID, we protect your transactions from wire fraud with robust identity verification technology, and back every transfer with $1M in direct, first-party insurance.

If you'd like to learn more about how we can safeguard your business, request a demo.

Tom Cronkright

Co-founder & Executive Chairman

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.

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