Unfortunately, with all the wonderful things technology can provide us with, there's a growing number of fraud incidences. Now your home closing could be in jeopardy with this new scam. Read to make sure you know how to avoid it.

If you’ve ever been a victim of credit card fraud, you know how violating it can be—even if the bank ends up covering the loss. Now, multiply that loss by thousands and imagine it’s your money the thieves steal, not your credit card company’s. You can begin to imagine what it feels like to fall victim to a recent string of scams targeting people wiring money to close on a home. Let’s take a look at how the real estate closing scam works, and how you can protect yourself.

When you’re in the process of buying a home, you may be instructed to wire the final closing funds to the title company. This could be your down payment and closing fees or, if you’re buying a home with cash, the entire purchase price.

The real estate closing scam is an interesting example of where lower-tech option, in this case, a paper check, would be more secure than a bank wire. Because it’s the wiring process that makes this scam possible.

In short, the real estate closing scam goes like this:

“To pull off their heists, hackers typically break into a realty agent’s (or title company’s) email account and watch for references to forthcoming cash-rich closing transactions on homes. From their monitoring of the email traffic, they can learn the identities of buyers and sellers, the company names of title, escrow and settlement service providers and the timing of scheduled closings. Once inside the agent’s account, they can effectively take over the agent’s identity and provide credible instructions to clients.”

Hackers will contact the buyer very shortly before the deadline to wire the money and tell you to send the money to a different bank account. Of course, the communication will be disguised as the legitimate title company you’ve been in communication with, so most victims never suspect a thing until their money is gone.

That’s pretty scary, not to mention financially devastating. With everything done online these days, it’s becoming easier for hackers to leave you broke and hopeless.

How do you avoid this scam?

Luckily, once you know the signs, this scam is pretty easy to avoid. Here’s some steps to take to make sure your money is secure.

Do as much in person, or over the phone, as you can

As much as everyone hates using the phone, when it comes to transferring large amounts of money to secure your home, you should call the bank immediately if anything seems suspicious, or even if nothing seems suspicious. It’s better to be safe than sorry.

Before you wire your money, you can call the title company and have them tell you the routing/account numbers to make sure they match. There’s no reason for these numbers to have changed.

Or, complete the whole process in person. It may take more effort, but it’ll be worth it.

If you’re purchasing a home outside your current area, you can ask the title company to overnight the wire instructions to take extra precautions.

Use an encrypted email server, and find a real estate agent who does

This scam is easy for sophisticated hackers to pull off because most of us don’t want to pay for an email server, therefore we don’t have access to encryption software that’s more difficult to break into.

Either don’t send sensitive information via email, or use an encrypted server.

ProtonMail based out of Switzerland is one of the well known mail encryption services. Lavabit (famously known as the email server Edward Snowden used) also relaunched early in 2017 and is offering a free open-source version of their email encryption service.

Insisting on a real estate agent and title company who uses an encrypted server is the best way to protect your money and your personal information.

Courtney Noles, director of business development with Lore Systems, puts it:

“When selecting a real estate agent, stress the need for e-mail encryption if financial data is being sent over the Internet. If they do not know much about the topic, then it is likely that the broker they work for is not being careful with sensitive data.”

The agents and title companies that are taking this scam the most seriously are the ones you want to be working with. They’re also more likely to help you out if the worst happens and you fall victim to the scam (although you shouldn’t if you’re working with them).

What if it happens to you?

Call all banks involved

If you believe you’ve been a victim of this scam, immediately call all banks involved and try to stop the wire.

As mentioned above, you should call to confirm everything with the bank before you even do the wire transfer. Remember, any last minute changes to routing numbers is a bad sign.

Call the police and get a lawyer

Although there isn’t a whole lot the police can do, informing them of the criminal activity is important. Second to that, you’re going to want to get a lawyer. Unfortunately, that means spending more money, but without a lawyer you’ve got a slim chance of getting your money back.

Since there’s a whole lot of money involved, no one is going to want to take responsibility for the security breach. A lawyer will be able to sort out who’s responsible for what.

Change your username and password for all financial sites

This is a given when any kind of fraud happens. In fact, you should be changing your passwords, if not your username AND password frequently (yes, I know we all say we will, but really it should be done).

Talk with your lender/realtor/title company

Unfortunately, even in the high-tech world we live in, there isn’t a whole lot police can do if this scam happens. Which is why you’re best bet it to do all you can to avoid it.

That being said, you should contact all the people involved in your closing deal if this happens to you.

In some cases, you might be able to work out a deal and still be able to keep the house.

Summary

Wire fraud is scary, but with the right steps it’s easy to avoid. Even though technology has made everything a lot easier, sometimes it’s best to go the old-fashioned way and call or bring checks to the bank in person. Closing on a home is one of those instances.

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About the author

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Christopher Murray is a professional personal finance and sustainability writer who enjoys writing about everything from budgeting to unique investing options like SRI and cryptocurrency. He also focuses on how sustainability is the best savings tool around. You can find his work on sites like MoneyGeek, Money Under 30, Investor Junkie, MoneyCrashers, and Time. You can find out more about Christopher on his website or via LinkedIn.