Scammers Are Targeting Homebuyers More Often Than You Think

COMMENTARY

When Darryl Aldrich from Virginia was looking to invest in real estate, he didn’t realize he was entering one of the most predatory cybercrime environments that exist today.

By using the accurate down payment amount and his title company’s name, a scammer was able to exploit his trust. After realizing he had over $28,000 stolen from him, Aldrich swiftly contacted the relevant authorities, who were able to issue a full recovery of funds. Although the money was recovered, this is often not the case.

This is just one of many incidents of real estate wire fraud. One in 20 consumers has the likelihood of becoming a victim of fraud during a home purchase transaction, according to a recent report by CertifID, a real estate fraud protection company. 

Real estate wire fraud typically occurs when scammers use information relevant to the buyer, seller or others in their transaction to trick them into sending funds to the wrong place. Victims could be made to believe an email has been sent by their real estate agent, title agent or lender. They gain the victim’s trust to trick them into sending wire transfers into accounts controlled by bad actors. Scenarios such as this are a prime example of social engineering.

In today’s highly digital world, new methods of fraud have evolved with technological progress. Social engineering has emerged as one of the most pervasive of these methods. It involves manipulating, influencing or deceiving individuals in order to seize control over computer systems or steal personal and financial data. 

As the most prevalent tool for cybercrime, 74% of all security breaches were the result of human interaction and manipulation in 2023, according to a study by Verizon. With the uptick in artificial intelligence technology and the growth of instant payment platforms like Venmo, Zelle and FedNow, a new era of cybercrime is emerging. 

In real estate transactions, wire fraud is typically enabled by business email compromise, a catch-all term that now includes all forms of trusted communications, including text, voice, voicemail, video and social media. The real estate sector accounted for 17% of all BEC losses, according to CertifID’s report. 

Real estate is just one industry affected by cybercrime. Per a 2023 report by the FBI, the Internet Crime Complaint Center received a record-high of 880,418 complaints, with reported losses surpassing $12.5 billion. This marks an alarming 10% increase in complaints and a 22% surge in losses compared to 2022.

The fact that these numbers keep increasing every year signals the lack of effectiveness in our current approach. Treating this as a law enforcement issue cannot solve the problem. Their ability to seize funds via current asset forfeiture laws is limited, due to the speed with which fraudsters move money to safe harbors outside the United States. Fraudsters are often located in parts of the globe that are uncooperative and sometimes complicit, further complicating recovery and mitigation efforts.

Policymakers should consider pursuing a collaborative effort with foreign banks and financial entities by committing to more checks and balances on bank account activity and the sharing of intelligence regarding the movement of money between suspicious accounts. With cross-country and cross-sector data sharing, governments will significantly improve their ability to identify and respond to fraud more effectively. 

This enhanced level of data exchange could facilitate a comprehensive fraud-prevention network and foster a collaborative approach to curbing financial fraud.

Through this exchange, organizations could gain a clearer view of the fraud landscape and introduce policies accordingly. For example in the U.K., upon reasonable suspicion, ​​payment service providers like banks will receive an extended time frame to notify customers, law enforcement and relevant parties of fraud prior to initiating a payment. In key areas such as real estate fraud prevention, data is important because it better equips the authorities to identify fraudulent activity.

Publishing more insights on the level of fraud across platforms can also increase awareness among the general public and business community. For reference, CertifID’s State of Wire Fraud report provides the only comprehensive examination of wire fraud in the real estate sector.

Industry trade groups, such as the American Land Title Association, also provide resources that, with greater compliance by member companies, can help increase security for consumers. Victims must be better empowered to identify instances of fraud, particularly in the case of real estate, as it is the biggest expense in the lifetime of most Americans.

The technology and business communities can play more meaningful roles tackling this issue, leading to better outcomes in the United States. Greater data sharing between platform providers could enable much faster insight into patterns that can inform fraud detection and prevention. That would mean stronger consumer protection, more secure businesses and a better chance of closing the gaps exploited by bad actors.

Criminal organizations have created enterprise-level infrastructures allowing them to operate at scale across the globe. It’s time for business leaders to do the same, and find ways to collaborate to improve our preventive capabilities. 

We need policymakers to enact data-sharing practices across financial institutions; financial institutions to educate the public effectively; and businesses to take on stronger protections against wire fraud.

Without these efforts, stories like Aldrich’s will continue to occur. Social engineering has made buying and selling a home a dangerous experience for consumers. There is no one-stop solution. Instead, we must educate ourselves and those around us and urge policymakers to enact policies to prevent fraud.

Tom Cronkright is the executive chairman of CertifID, a real estate fraud protection company. He co-founded the company in response to a wire fraud he experienced and the rising instances within the real estate wire sector. He also serves as the CEO of Sun Title, a leading title agency in Michigan. Tom is a licensed attorney, real estate broker, title insurance producer and nationally recognized expert on cybersecurity and wire fraud. He can be reached on LinkedIn.

Matt O’Neill, is the co-founder of and a partner at 5OH Consulting LLC. He also launched the Global Investigative Operations Center at the U.S. Secret Service. He spearheaded the GIOC’s use of innovative means to combat transnational organized criminal groups. Matt provides actionable intelligence to USSS Field Offices and public/private sector partners. He can be reached on LinkedIn.