Housing is a major driver of the U.S. economy. The industry sector contributes an estimated 18% of the national gross domestic product, or GDP, and the value of U.S. homes represents more than $50 trillion in household wealth in the form of home equity.
That economic value has attracted the attention of cybercriminals. Real estate wire fraud has grown significantly during the past decade, reaching $500 million in losses annually reported to the FBI. The business community has increased its focus on combatting this threat, especially the collective professionals who coordinate real estate transactions from contract to closing: the title industry.
The title industry protects homeowner property rights. Importantly, the industry has evolved continuously to serve each generation of home buyers better.
The pandemic drove a boom in housing demand and a shift to remote closings. These unique market forces helped transform the home-buying process to more of a digital experience. The title industry was a leader in developing and offering digital closings, allowing consumers to complete their transactions without having to get in a car and go to an office.
But even as innovation helped simplify real estate transactions, criminals became adept at utilizing technology to take advantage of unsuspecting consumers.
Losses to crimes from real estate transactions increased from $9 million in 2015 to $446 million in 2022, a staggering nearly fiftyfold increase over just seven years. Generative AI and other technologies are allowing bad actors to execute their crimes more efficiently and effectively than ever before. The only way to slow this growth and ultimately protect the real estate transaction is through education, empowerment, and technology — for all parties involved.
A recent study by the American Land Title Association (ALTA) showed:
- An overwhelming majority of title companies inform and warn consumers about cybercrime risks through email (84%) or by telephone / in person (72%).
- Title companies utilize an array of tools to mitigate the risk of wire fraud, including consumer training (51%), real estate agent training (37%), wire/payee verification software (48%), and simulated phishing email testing of employees (26%).
- These mitigation efforts require investments by title companies ranging from $1,000 to $25,000 annually, according to the survey.
Title companies historically have served as the last line of defense to protect and ensure homeownership rights. They sit at the center of every transaction, ensuring the proper transfer of title from sellers to buyers and serving as the escrow agent for all transaction-related funds.
That positions the title industry as the primary protector of consumers across millions of transactions each year, with trillions of dollars passing between home buyers and sellers in need of protection from organized cybercrime.
The title industry continues to lead the way to a more secure experience for consumers, with the support of key community groups:
- ALTA has taken steps to standardize key steps to increase security with resources like a best practices guide, which codifies the use of wire verification services where possible. Education also plays a critical role in addressing the critical gaps in knowledge that criminals exploit. ALTA’s awareness initiatives strive to do exactly that — the association’s educational events work to inform industry professionals about emerging fraud trends. ALTA also provides several resources to educate consumers including videos and infographics.
- The title industry must continue to invest to combat evolving threats. According to CertifID, more than half of all consumers are not well aware of the risks when they start the process of home buying. Generative AI has made the barrier to entry for cybercriminals incredibly low. The use of technologies for tasks like identity verification can detect and prevent fraud better than manual inspection alone. Expertly doctored, fraudulent IDs and deepfake video calls are becoming an all-too-common occurrence.
- Policymakers in states such as Tennessee are actively evaluating and strengthening education for identity verification to combat fraud. These are significant steps in the right direction to increase homeowner protection in the era of generative AI and increasingly lifelike deepfake email, text, voice, and video.
- Title agencies must always be looking around the corner and to the future. Sun Title, a title company in Michigan, continually revisits its technology stack, communications with clients, and internal processes to close vulnerabilities based on the ever-evolving sophistication of bad actors. With cyber threats on the rise, all professionals involved in a real estate transaction must embrace a larger commitment to education, operating procedures, technology, and other measures to keep pace with the threats facing home buyers and sellers.
Protecting real estate transactions must be viewed as a shared responsibility that requires the continued participation of industry groups, real estate professionals, and policymakers. Together, we must work to provide pragmatic and meaningful layers of protection for consumers.
These efforts will not only benefit home buyers and sellers but also boost confidence in the real estate sector. We must strive for solutions to create an experience where all can achieve the dream of homeownership. As criminal schemes grow more sophisticated, now is the time to reinforce protections to make home buying as accessible and safe as possible. With greater industry standardization, education, and collaboration, we can and must turn the tide.
