Cybercrimes are becoming increasingly common as operations across various industries transition online. Real estate is a primary target because buying and selling houses is an incredibly lucrative business. Cybercriminals are continually developing new methods to commit fraud and steal people’s information.
What Is Real Estate Cyber Fraud?
Real estate cyber fraud occurs when criminals use online tactics to steal money during a property transaction. There are several methods a scammer might use, such as sending fraudulent wiring instructions to a buyer or conducting a mortgage payoff scam. Essentially, real estate cyber fraud is a sophisticated form of online theft that exploits the complexity and high financial stakes associated with real estate deals.
Between 2019 and 2023, 58,141 people in the United States reported $1.3 billion in losses related to real estate fraud, making it all the important to understand types of real estate cyber fraud and how to prevent them.
Types of Real Estate Cyber Fraud
There are many types of real estate cyber fraud. Below are a few common ones to be aware of.
Wire Fraud
Wire fraud occurs when cyberattackers hack into the email thread between a real estate agent and an interested buyer, monitor the exchanges and then send a false email instructing the buyer to wire money to a fraudulent account.
This happened to Rana Robillard, who received a false email and wired the money to the criminal instead of the trusted real estate agent. It was a hard battle from there to get her funds back. Wire fraud is the most common form of cyber fraud in real estate.
Posing as the Seller
Another common form of fraud is when criminals pose as sellers of property they do not own. They list the property for sale, collect payments from the real estate agent working with a buyer and then disappear. Everyone else loses money, and no one gets the property. This is why verifying through an escrow company, also known as a settlement services company, is a critical step, as this entity supervises the execution of real estate transactions, including the disbursement of funds.
Business Email Compromise
Business emails are compromised when attackers hack into them or create similar handles and make illegal transactions, altering payment instructions and mimicking real estate agents. For a couple in Colorado, a hacker used a fake email that looked similar to the one belonging to the agency and requested money, leading to a significant loss in the couple’s savings and a hold on their plans to start a family.
Phishing
Phishing is when cybercriminals steal information by posing as a trusted or authoritative source and requesting sensitive information, like passwords, Social Security numbers or credit card numbers. In the case of real estate, a hacker might pose as a real estate agent and claim they need the sensitive information to assist the buyer in purchasing a property. Instead, the cybercriminal is just using the information to commit fraud or identity theft.
Mortgage Payoff Scams
Another type of cyber fraud involves criminals claiming to offer properties to buyers without existing mortgages and then taking the money from lending institutions for themselves. A case like this occurred when Dora Martinez, a formerly licensed title agent, told buyers there was no existing mortgage, convinced lenders to pay the buyers and then took the money.
How to Avoid Cyber Fraud
While cyber fraud is a concern, there are methods real estate professionals can use to prevent such crimes from occurring.
1. Verify Everything
Make sure everything is legitimate. For wire transfers, confirm on the phone or in person before sending or requesting funds. Do not rely strictly on email for transactions. Check the information for the transfer multiple times to ensure it is sent to the correct account, and contact the title company to verify that the seller actually owns the land before completing the sale.
2. Use Multi-Factor Authentication
If the real estate agency has customer portals, ensure the passwords for accounts are protected through multi-factor authentication. Emails and any closing platforms should also have this feature to prevent hackers from infiltrating accounts and stealing funds.
3. Secure Communication Channels
Email should not be the only means of communication between buyers and agents. Avoid sharing sensitive information via email whenever possible. Use encrypted email or other messaging platforms with enhanced security. Also, do not send sensitive information when connected to unsecured Wi-Fi networks, as hackers can break into them more easily.
4. Research Reputations
When working with other organizations or banks, ensure the institution is credible through careful research. If a company has been involved in scams before, there is usually a record of the case on the internet. Some organizations and banks are flagged already for suspicious behavior, so researching them before doing business could save agencies from a scam.
5. Practice Online Vigilance
There are multiple ways to practice internet safety in general that can help real estate agencies. “HTTPS” should be at the beginning of any links if the site is secure. When interested parties provide attachments or files, be cautious about downloading or opening them, as they may contain a virus. Updating browsers and software diligently ensures that the latest cybersecurity measures are available for the agency’s computers and portals.
6. Look for Red Flags
Several red flags are common with cyberattacks. If there is a sense of urgency to send funds or information via email, it is likely a scammer. They might use suspicious language that is too general to relate to the transaction occurring. Some emails appear to be identical to the ones previously sent, but the address may vary slightly from the original. Look closely to spot false accounts.
7. Educate Staff
Inform the real estate agency staff and clients about the various types of cyber fraud and what to watch out for when sending emails and completing transactions. Authorities discover criminals earlier when staff report possible threats, preventing criminals from stealing money from clients.
8. Create Alerts
Set up alerts to get notifications when an email appears to be fraudulent. Protocols can be in place to detect possible fake emails, sending an automated warning to the necessary individuals who can determine their validity.
Protect Against Real Estate Cyber Fraud
Real estate is a common target for cyber fraud because the process of buying and selling property is incredibly lucrative. Be aware of the types of real estate cyber fraud that exist and take steps to prevent them to avoid significant losses for both agencies and customers.
Additional Resources
Video Overview
As the Features Editor at ReHack, Zac Amos writes about cybersecurity, artificial intelligence, and other tech topics. He is a frequent contributor to Brilliance Security Magazine.
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