Three days before closing on a Chicago-area condo in September, Karen Brown received an email from the title company working with the seller detailing the down payment wire process. This was one of the final steps to achieving my dream of first home ownership.
But that instruction didn’t actually come from the title company. Brown had transferred nearly $60,000 (about $94,000), almost all of his savings, to the wrong place.
Watch the video above: How to spot a scam.
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He had been deceived.
Brown had unknowingly become a victim of real estate fraud. Fraud is becoming more and more common as more and more business transactions are communicated online.
The FBI calls this sophisticated scam “Business Email Compromise” (BEC). This occurs when a criminal hacks and impersonates a legitimate business or personal email account to trick another person into sending money or sensitive information.
Experts warn that new technologies such as artificial intelligence and fast payment products are making the schemes even more difficult to detect and track.
To Mr. Brown, the emails purported to be from the title company looked legitimate. It included his name, address, and the amount he was owed as a down payment on the house.
“The email arrived three days before closing, and it had all the correct closing information. It all made sense in that moment,” Brown said.
According to the federal agency’s latest Internet Crime Report, the FBI received 21,489 BEC complaints, with adjusted losses of more than $2.9 billion (approximately $4.5 billion) in 2023, and business electronics. Email compromise was the second costliest crime last year.
“This is something that happens all the time when you’re going through the home buying process these days,” said Michael Chapple, a professor of business analytics and cybersecurity at the University of Notre Dame.
“Unfortunately, this attack is successful because people either don’t heed warnings about this type of attack or it’s too convincing and warranted.”
hidden risks
Brown quickly caught the fraud. About an hour after Mr. Brown sent the money, his attorney called to say the title company had not received the money.
“That’s when it all started to unravel,” Brown said. “I realized that I made a mistake in not checking this information beforehand.”
He believes criminals obtained personal information by hacking the title company’s email.
A recent report from fraud recovery service CertifID found that in a survey of 650 home buyers and sellers, more than half of respondents rated their risk of fraud as either “some” or “unaware.” ” he answered.
Ritu Tiruthani, a 37-year-old Nashville resident, said she never thought something like this would happen to someone until she, too, was tricked into sending tens of thousands of dollars worth of down payments to a scammer. ” he said. August.
She didn’t learn about the scam for a whole day.
“The day after I made the wire transfer, my banker called me and said he hadn’t received the wire yet,” Tiruthani said. “I remember having a brain freeze. I worked two jobs to buy this house.”
According to CertifID, advances in technology have increased the risk of real estate fraud. AI is enabling criminals to communicate more effectively, and the Federal Reserve’s FedNow instant payments feature launched in 2023 has significantly reduced the likelihood of recovering fraudulent payments.
CertifID CEO Tyler Adams told CNN that real estate is particularly vulnerable to fraud because property data is public and transactions typically involve large sums of money.
Tiruthani said she contacted authorities as soon as she learned of the scam and called her bank four times a day to check whether the money had been recovered.
“I don’t think I slept for four nights,” Tirtani said. “I was like, ‘Oh my God, someone could scam me like that and take everything I worked for.'”
Beware of Red Flags
Both Brown and Tirtani were successful in recovering their money and closing on the house. Thanks to CertifID, Brown was able to get most of the money back in one week, and Tirtani said the FBI was able to track down the entire amount in about two weeks.
Neither Brown nor Tirtani said they knew the identities of the people who tried to steal the money. Many other victims never get their money back.
Joan Rogers, a real estate agent in Portland, Oregon, is taking extra precautions for buyers and sellers. A few years ago, a homebuyer was tricked into sending $500,000, the entire cost of her future home, to a scammer, and a deal she was working on nearly fell through. The buyer didn’t realize his mistake for more than 48 hours, and Rogers doesn’t believe the money was ever traced.
The longer a crime is reported, the less likely the money will be recovered, Adams said. Even if the money is found, it can take years to get it back.
Since the incident, Rogers told CNN that she has asked her customers to copy themselves to all incoming emails to ensure they are genuine.
“I always tell my clients not to open emails from my escrow company without first getting all permissions from me,” Rogers said. “It takes time, but I couldn’t bear to think that I could have prevented something if I had taken the time.”
Cliff Steinhauer, director of information security at the National Cybersecurity Alliance, said home buyers and sellers should look for red flags in the flood of emails and other correspondence about home closings. said.
“Be on the lookout for unexpected changes in the amount owed, changes in the remittance, or changes in the counterparty,” Steinhauer says. Real estate agents can also see this information.
“The main thing to remember is that incoming messages can be spoofed,” he added. “It is very important that you pick up the phone and call a known, trusted number to verify your information because it is possible to spoof the caller.”
Steinhauer advises against calling the phone number included in the email, as it may also be spoofed. Instead, find a phone number from a company or personal website.
If you suspect you have been a victim of this type of wire fraud, contact police and your bank immediately, he said.
In an era of low inventory and increased competition for homes, buyers may feel pressured to act quickly, making them more vulnerable to this type of fraud.
Tiruthani said if she could go back to the moment before she sent the money, she would tell herself to slow down.
“Don’t be in such a hurry; everything feels rushed during that period,” she said. “I feel like anyone can ask you for something and you just respond.”
