How to Protect Yourself From Wire Fraud During Closing

by | BiggerPockets.com

Recently, one of our members fell victim to wire fraud. His agent’s email was hacked, and the hacker sent wiring instructions for the closing that included his own wire instructions, allowing him to steal the proceeds from the purchase.

Unfortunately, this is an up-and-coming scam that is sure to snag more victims. A few years ago, cashier’s checks were being forged, resulting in title companies not accepting them over a certain dollar amount — some as low as $1,000.

So how do you safely purchase your home, when you can’t bring a check to closing and don’t want to risk wire fraud?

Use a Reputable Title Company

Your agent will know which title companies are great to work with — and can ask other agents in their office about title companies they’ve never worked with.

Chris Mason, a mortgage lender from Bay Equity Home Loans, suggests visiting the title company in person: “When you go into contract and have to make your earnest money deposit, bring that check to the title company physically in person. Pick up a printed copy of your wire instructions at that point and always refer back to that. So far, I’ve not heard of fraudsters setting up an entire fake title company branch, so if you walk in and it feels like a title company and has a bunch of middle aged women in cubicles typing away and talking away on landline phones, with other couples and babies in strollers hanging out in the front waiting area type place, it’s probably a title company. Your agent will also be able to let you know if they’ve done business with XYZ Title on 5th Street before.

Immediately prior to ordering the wire, you can call the title company and have them recite the routing/account numbers, etc. to you, with that copy of the wire instructions in-hand in front of you. None of the routing/account numbers should have changed.

real-estate-negotiation

Related: 4 Types of All-Too-Common Real Estate Scams Making Headlines

Have Wire Instructions Overnighted

If you are purchasing outside of your local area, ask the title company via telephone (not email) to overnight the wire instructions to you.

Jay Hinrichs of Turnkey-Reviews has been investing since before dirt was even invented. He takes extra precautions to prevent fraud:

“My SOPs are as follows…

  1. I always send my wire instructions via FedEx. I have them all printed out for my various companies. When I set up with a new closer, i.e. I am going to do 20 to 50 deals in a year with them, I send them via FedEx my wire instructions.
  2. Once they have them, then verbal conference that they are correct.
  3. I ONLY accept wired funds from closing attorneys. I will NOT accept their company checks. Many of these one-man shops are simply too small, and there are rotten attorneys that pilfer clients’ dough. So I want collectible funds on the spot.”

I Love the ’80s!

Remember fax machines? Remember that awful thermal paper on a roll? I had a machine that didn’t even have a cutting feature. Yikes!

Some lenders and attorneys are reverting back to that fantastic ’80s technological wonder, the fax machine, to share wire instructions with their clients.

Secure Password

When you’re discussing your purchase with your agent, ask them about their email password. No, don’t ask them FOR it, but ask them how they chose it. If they used “the same thing I use for all passwords I have,” then perhaps it’s time to ask them to change it. Ditto if they used “something easy to remember” or “my children’s names.”

Ask them to use a more secure password and to change it frequently. Request that they do not write it down so they can remember it. Instead, suggest they utilize a secure password manager service like LastPass. LastPass is free and stores all the passwords for all your accounts in one place. Now, you just have one master password to remember. And LastPass securely encrypts your data so only YOU can access it.

mint-software

Telephone Verification

On the day of the wire transfer, pick up the phone and verbally verify the wire instructions with the recipient. Use the phone number you have been using to contact them all along — not a “new” phone number you received through an email.

Related: 10 Glaring Red Flags That Indicate Your “Great Deal” May Be a Costly Scam

In fact, you will be communicating with the title company, your real estate agent, and possibly an attorney multiple times throughout the transaction. Consider saving their contact information in your phone the first time you contact them.

You Can’t Be Too Careful

Check and double check the information for the wire transfer as many times as you need to in order to feel comfortable. Use the phone — which is far more difficult to hack — or better yet, pick up a physical copy of the wire instructions direct from the source (or have them sent to you using a secure overnight delivery service). Consider going into your bank in person to make the wire transfer happen, rather than emailing.

Criminals are getting smarter. Nothing beats in-person transactions, but those aren’t always practical. Double check your instructions on a phone call you initiate using a phone number you’ve used since the beginning of the deal. You just can’t be too careful.

How have you secured your wire transfers or checked the legitimacy of the account numbers you’ve been given?

Please share below.

About Author

Mindy Jensen

Mindy has flipped numerous homes in the past 10 years, one at a time and doing much of the work with her husband. She lives in Longmont, CO, and is always looking for an ugly duckling to turn into a swan.

13 Comments

  1. Ralph R.

    Mindy all my purchases are out of state and in 3 different areas. I use the same tittle company’s in each city and the same closing person in each company. I have 2 lenders I use for all transactions one is for commercial loans and one is for conventional loans. While this doesn’t replace going to the tittle company in person at least there is an element of continuity. I know the persons voice, and the phone number is always the same. Wire instructions are always given over the phone to or from somebody I know in this manner. RR

  2. Huiping Sheng

    Very useful information Mindy!
    My recent closing attorney has the typical ARRORGANT of this profession: no response, or slow response, or never pick-up the phone or call back. Need to be careful for wire transfer in future with this situation.

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