They get you coming and going! Who? The banks? Well, yes, but that’s a subject for another day. Today, it’s thieves. They target buyers at the very beginning of a transaction and at the very end, when some let their guard down. First, a CURRENT scam targeting buyers before they’ve even SEEN the home. From the Calif. Association of Realtors website:
Buyer loses $40,000 in Earnest Money Deposit Scam
In March we reported that a wave of earnest money deposit scams had re-appeared and warned brokers and buyers to be vigilant. Here in June, these same scams are still occurring, and the perpetrators are absconding with even larger deposits.
This type of scam does not involve cybercrime, email phishing or identity theft. It’s an old-fashioned scam that appears to follow the same basic format. An agent claims to have a listing for a short sale (or probate or other distressed property), but the property cannot be shown. After acceptance of an offer, the buyer makes an initial deposit usually in the $5,000 to $10,000 range, but as high as $40,000, into the listing broker’s non-independent broker escrow.
As with most short sale or probate properties, the process can take several months, and the buyer’s agent is assured that the listing agent is working towards lender approval – it is just taking more time. Then the communication slows down, the selling agent begins to get concerned and calls the listing broker’s escrow. There is no answer, no return call, no other number to contact, and the earnest money deposit is gone.
This scam is nearly the same as a series of scams that appeared in the Los Angeles area about two years ago. The Los Angeles County sheriff eventually arrested the wrongdoers but only after millions of dollars had been lost.
The second, and likely more devastating scam involves wire fraud. There are dozens of sad stories being told online.
CNBC details how the scammer works:
The day before closing, a scammer manages to trick you into wiring your down payment to an offshore account. You lose your hard-earned money and you lose the house, and there’s no way you can get either one back.
That’s how some criminals have adapted the common “business email compromise” scam – so-named because it used to almost exclusively target businesses – to focus on individuals, especially people who are involved in a pending real estate transaction.
CNBC spoke with two victims of this type of crime who wished to remain anonymous. They were devastated to lose six-figure sums, their dream homes and in one case, the bulk of the individual’s life savings.
Here’s how it often works: a person involved in a real estate transaction, such as a real estate attorney or realtor, has his or her email account compromised by malicious software, known as malware, sent by a criminal over email. Unbeknownst to the professional, the fraudster can now monitor the realtor’s emails to look for upcoming transactions.
Next, just as a closing date is coming near, the fraudster uses the compromised email account to send a legitimate-looking message to the buyer – which, coming directly from the realtor or attorney’s account, appears real. The note tells the buyer that there’s been a change of plans, and he or she needs to wire the down payment just before the closing date, supposedly to a bank account belonging to the seller.
But the account actually belongs to the criminal, and is typically overseas, out of the reach of U.S. law enforcement, Kalember said.
In some cases, Kalember said, criminals even follow up with phone calls to the victim buyers, purporting to be from a representative for the title company or seller’s law office, and reassuring them the wire transfer request is real.
“The technical skill level is near zero for this crime, but the operational sophistication is very high,” Kalember said. “That means that the phishing kits and other technical tools are freely available on the internet, but they are investing more time and effort into taking steps to trick the consumer.”
The reason is clear. The immediate payout for the criminal is lucrative, often far more than other types of scams against individuals.
“It’s important to remember that in these cases, they lose the funds permanently,” said Kalember.
There are steps homebuyers should take to make sure they are protecting themselves from falling victim to fraudsters, according to Kalember and the FBI.
Be vigilant: Homebuyers should first just be aware that they may be a targeted by scammers in this manner, and should act accordingly to verify any suspicious correspondence associated with their home purchase or sale.
Voice verify: It might seem cumbersome in an already long homebuying process, but following up emails with a voice verification is a must, Kalember said. That’s especially true if the email involves e-signing a document, logging into a new website, transacting money or supplying any kind of financial information.
Talk to your bank: While not all banks may follow the guidelines you suggest, most will honor your request to not allow any wire transfers without a voice verification or other checkpoint from you. This is especially true for business accounts, but even individuals going through a real estate transaction can request a note be added to their primary accounts to put additional steps in place before allowing wire transactions to go through.
Don’t react immediately to email: Emails asking you to take some type of action, purporting to be from the title company, attorneys, realtors, bank lawyers or others involved in a transaction may not be authentic. Regard any of them with suspicion, and you should follow up on known phone numbers for the individuals making the request to confirm.