Fraud has become a part of everyday life in America, and real estate is no exception as shysters try to separate homebuyers from their money. Too often, they are successful.
One in every four parties in a real estate transaction is targeted by online crooks, and of those, one in 20 become victims, according to the latest State of Wire Fraud report from CertifID.
Overall, roughly half of us have been personally touched by cybercrime in one way or another. Maybe the ruse was merely a phone call that can be turned away with the push of a button. Perhaps, it was an unwanted e-mail that also can be disposed of easily. Or, possibly, it was an attempt to persuade you to wire your downpayment and closing cost funds to a thief waiting on the other end to snatch the money and run.
Whatever the situation, losses are mounting, according to the FHI’s Internet Crime Complaint Center. They now exceed more than $12.5 billion. That’s a 22% increase in annual losses.
Real estate has become a hot target in and of itself, the CertifID report says. Losses there have leaped 50 times in less than a decade, from $9 million to $446 million in annual losses as reported by the FBI.
And that may just be the tip of the proverbial iceberg. According to a recent industry survey by the American Land Title Association (ALTA), only 59% of businesses report incidents of fraud to the authorities.
The ALTA survey also found that 17% of the responding title companies sent money to an incorrect account last year. Of those, half did so more than once.
“For such a significant portion of the industry to have experienced an incident in their business further demonstrates how widespread the problem is,” the Wire Fraud report says.
One reason fraudsters are so successful is the nature of a real estate sale, the report says. People buy and sell houses only a few times in their lifetimes, so the process is practically new every single time. Consequently, some are easy pickings.
“Anything from a trusted source will be taken at face value, making the process ideal for socially engineered fraud,” the CertifID report says. “As a result, consumers are targeted at extraordinary levels during real estate transactions.”
The report calls for consumers to be better educated, starting right out of the box. As it is now, slightly more than half of the 1,500 buyers and sellers surveyed recently by CertifID were not aware or only slightly aware of wire fraud risks.
“Delivering safe and secure transactions is not just good for the real estate industry; it’s our duty to consumers as they enter into the largest transaction of their lives,” Thomas Cronkright II, co-founder and executive chair of CertifID, said in a statement.
As the fraud detection company sees it, consumers aren’t being warned about the risks early or often enough. “We can’t leave it to chance that a home buyer or seller will read a news article or report about real estate scams,” the report says. “We need to bring education to them more consistently.”
The earlier the better, too. Based on the hundreds of victims the company has helped to recover their stolen funds, trusted communications can be compromised anytime, before a sales contract is signed to right up until the closing.
Real estate agents and brokers are the most likely to be impersonated by scam artists. But title company are frequently portrayed as well. Mortgage companies are third on the list; still, a significant third of those polled said they heard from fake loan officers, even though their loan agents have no role in guiding the transfer of funds.
“This underscores the lack of understanding by consumers on the role of each party in the real estate transaction and what to expect in the process,” the report points out.
Not surprisingly, first-time homebuyers are especially at risk for wire fraud. They fall victim at three times the rate as more experienced borrowers, according to the report. And those aged 55 and older are two times more likely to be unaware of wire fraud risks compared to those who are 44 and younger.
