The manner by which real estate transactions are conducted has changed a great deal over the past several years. Deals that were formerly completed entirely using ink and paper, are now becoming electronic, particularly when it comes to the movement of money. The cashier’s check was formerly the preeminent mode for moving funds from one account to another for a real estate transaction. This generally worked well and, excepting the occasional story about a fraudulent check, there were relatively few problems.
The most noticeable downside to checks, from the perspective of a party to the transaction, was that the movement of money was somewhat slow. Checks had to be written, deposited, recut, and signed in order to fund a sale. This made for some logistical problems when a seller was buying another property and needed the sale proceeds from one deal to fund another. Some of the slowdown eased when wire transfers were offered to transaction parties. The wire transfers themselves were nothing new, but they were not the commonplace in real estate transactions. After a while, consumers latched onto the convenience a wire transfer offered to move money in and out of their accounts. The wire transfers may be convenient, as well as fast, but those features come at a price.
The rise in the prevalence of wires in real estate transactions created a very tempting opportunity for thieves to prey on those involved. The transactions usually involved large amounts of money and many of the participants were not accustomed to sending wires or carefully guarding their account information and emails. The result was, and continues to be, a chance for large sums to be diverted away from their rightful owners. Below are a number of helpful tips and procedures to prevent fraud in your transaction.
Be Vigilant Regarding Email Usage
Many communications are now via electronic mail. Criminals look for the chance to hack into weaker email accounts and steal important information. This may include information about the timing of a real estate transactions, the amounts involved, the method by which monies will be disbursed, and the names of the people involved. Once this information is in the possession of a criminal, it can be used to trick a participant into sending money to an unauthorized recipient.
Counter this by using encrypted emails, change your email password regularly, and watch for signs that your email may have been compromised. If you believe your email may have been hacked or infiltrated by a criminal, stop all communications using that account and establish lines of communication with lenders, settlement agents, broker, and other parties to the transaction by an alternate method. Telephone conversations and in-person meetings will help get things back on track.
Verify Information Through an Independent Source
Important information for your transaction should be verified using an independent source. If, for example, you receive wiring instructions from the settlement agent, you should telephone the settlement agent to verify receipt of the instructions and the information on the instructions is correct and unaltered. The telephone number you use to call the settlement agent should be obtained from somewhere other than the email in which you received the instructions. Check the agent’s website or a document known to have come from the agent. Never verify by replying to the email or calling a number found in that email, unless confirmed to be correct through another source.
Important information and important events in your transaction should always be confirmed as completed. If, for instance, your closing date is approaching and you wire your funds due to close to the settlement agent, you should confirm those funds were actually received by the settlement agent the same day. Bear in mind although wires go through quickly, it can take several hours for some wires to be received. Be patient, but be ready to speak with the recipient and your bank if a wire is not received within a reasonable amount of time.
Proof of Identity
Because fraud and hacking have become common, many organizations that regularly handle sensitive information now use information checks to verify identities of their clients and customers. You may be asked to provide photo identification, set up and use a password or passcode, verify identity through security questions, or some other form of antifraud measure. Please be patient and cooperative when asked to furnish such information as it is intended for your protection.
Avoid Last Minute Changes
Changes to wiring instructions or methods of disbursement are a major red flag when preventing cybercrimes. There should be no changes to either and some attorneys require in person confirmation of wiring instructions, if proceeds are to be wired. In the event there is an absolute need to change wiring instructions, or the manner for disbursement (e.g., a request for a wire instead of a check), all parties involved should be prepared to visit the settlement agent in person, verify their identities, and provide written confirmation of the new instructions.
Cybercrimes are usually crimes of opportunity and thieves will look for the path of least resistance when choosing a victim. The above methods are things you can do to reduce your chances of being a target. The attorneys and staff at Black, Slaughter & Black can help answer your questions about how your transaction can be made safer and how these crimes can be prevented.