Buyer Beware: Don't Fall Victim to the Latest Real Estate Wire Fraud Scheme

Real Estate Wire Fraud Scheme

In today’s world we have to be aware of a few things: contaminated lettuce, offensive holiday songs, and scammers. While these things have very little in common at first glance, they do have one major thing in common: no one is safe from them.

Across the nation, scammers are stealing money from unsuspecting home buyers by posing as real estate or title agents by email and providing fraudulent wire instructions. Kansas City news recently reported on a retired pastor and his wife who were scammed out of $130,000 during a home purchase. A scammer, posing as their agent, sent them an email requesting that they wire the funds on November 26, 2018. The couple responded to the email stating that they would be writing a check to pay for the home. The scammer emailed back stating, ironically, that they could no longer accept payment by check due to increases in fraudulent behavior. So, the couple followed the instructions and wired the money. A few days later at closing, the couple realized the costly mistake.

These cases emphasize several points which can provide valuable lessons to anyone who has ever sent an electronic message or dealt with a real estate transaction.

Read electronic communications, carefully. Many fraudulent e-mails can be identified based upon a basic visual inspection. Any irregularities should be cause for alarm. In this case, the agent failed to notice several irregularities in the both the e-mail messages and wiring instructions she received and forwarded to her client. When you are reading fast it can be easy to overlook the differences in and Take the time to notice other changes in sentence structure, grammar and spelling that may be different than how one might usually talk. Take note of changes of origin. If all correspondence has been done over email with a professional signature and suddenly there is a “sent from iPhone” at the end of the email that may be cause for alarm.

Cut out the middle man. Each time you send an electronic message, the risk that the transmission may be intercepted increases. The real estate agent in the Bain case was serving as the middleman between the settlement agent and her client. Serving in this role made her responsible for the delivery of accurate instructions to her client. As an agent, have your client communicate directly with the title company, or if you’re the client, ask to communicate directly with the person receiving your money.

DON’T SEND CONFIDENTIAL INFORMATION VIA EMAIL! The best way to prevent interception of wiring instructions or information is to not send it via electronic message. Make it a habit to never send social security numbers, bank information, wiring instructions or other account information via email no matter who is requesting it from you. Always deliver that information in hard copy or via postal mail. Further, if you’re the agent, make sure clients and other agents know that you will never request that they send any bank information by way of electronic message.

Brokers and agents licensed in Kansas should be particularly attune to this problem and caution clients against accepting any emailed instructions. In July 2018, a Kansas a jury determined that a buyer's representative was 85% responsible for the buyer's losses from a wire-fraud scam. The case, Bain v. Platinum Realty, LLC, involved a buyer who was working with a real estate agent to purchase a property. To fund the purchase, the buyer was instructed to wire $196,622.67 to the title company. Unbeknownst to the parties involved, a criminal was intercepting e-mails exchanged between the title company, agent, and buyer. The buyer had actually been sent hacked wiring instructions, which instructed him to wire funds straight to the criminal’s account. Once the funds were sent they could not be recovered and so buyer sued the agent, the broker, and others. The District Court affirmed the jury’s determination of fault.

Real estate brokers and agents should always caution clients against these kinds of scams and encourage clients to call before following any emailed instruction. Often, these scams can be avoided with a simple phone call.

Vernon L. Jarboe is an attorney licensed to practice in state and federal courts in Kansas. Mr. Jarboe concentrates his practice in the areas of real estate and business law. He is one of eight well-known real estate educators recently chosen by the Kansas Association of Realtors® to teach video-based online courses that will be available nationally to more than 200,000 real estate professionals. If you have questions about this article, call Vern at 785-357-6311.

This article was written with the assistance of Keegan McElroy. Keegan is a law clerk at Sloan Law Firm and is currently a third year law student at Washburn University School of Law.

The information and materials on this blog are provided for general informational purposes only and are not intended to be legal advice. The law changes frequently and varies from jurisdiction to jurisdiction. Being general in nature, the information and materials provided may not apply to any specific factual and/or legal set of circumstances. No attorney-client relationship is formed nor should any such relationship be implied. Nothing on this blog is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction. If you require legal advice, please consult with a competent attorney licensed to practice in your jurisdiction.