The request Aaron Cole received, via email, to wire $123,000 to close on his new home certainly looked legit. It wasn’t, though, and in the click of a mouse, his money was gone.
It was a scam, and the criminals quickly whisked the money to various accounts in the United States and overseas.
Cole’s story has a happy ending, but many others lose big-time in what is becoming a booming niche: online real estate fraud.
Cole, a vice president of a gear and machine company in Oregon City, Oregon, had sold his old home and was ready to move with his wife and two children into a new place. But that happy occasion turned into a nightmare when he had to tell his wife their closing money had vanished.
“I never felt like that before in my life, and I hope I never feel like that again,” he says.
“The scammer got between my correspondence with the title company and me,” he says. The thief sent Cole false wiring instructions, which, “to my untrained eye, looked to be from the same people I’d been working with all along.”
By the time the legit title company called a week later with the actual wiring instructions, he recalls, “I knew my money was gone and there was very little chance of ever recovering any of it.”
Luckily, his title company, WFG National Title in New York City, made Cole whole, allowing him to close on his home and move in just in time for Christmas. In return, he has been telling his story to media outlets to warn consumers about the dangers of real estate “phishing” scams.
According to Bruce Phillips, senior vice president and chief information security officer at WFG, this kind of electronic wire fraud is all too prevalent. “We see a lot of attempted wire fraud,” he says. “We see one almost every day.”
These con artists scammers are clever, too, honing their techniques constantly. “When we change something, they change something back,” Phillips reports. “It’s almost like an arms race.”
In all, wire fraud has registered a year-over-year increase in losses of about 85-90 percent, he says.
A “spoofed” email is what fooled Cole. That’s when the return email address doesn’t match the real company’s URL. In Cole’s case, the email was from a “mail.com” address, rather than one from WFG Title. It was also a PDF document, which the title company never sends, nor does it send wiring instructions by email.
A 2018 FBI report on internet crime includes real estate as one of the hot areas for fraudsters, and the numbers are eye-opening. Though the FBI makes a substantial amount of recoveries, more than 11,000 victims of real estate/rental fraud lost $150 million in 2018, making real estate the fourth-largest loss category.
At a recent meeting of mortgage professionals, FBI Special Agent Kyle Armstrong updated those stats, reporting that mortgage scammers fleeced people out of $12 billion last year for an average of $162,000 per incident. And it’s pretty easy money with little or no consequences.
“If you rob a convenience store, you get $700 and 25 years in prison,” Armstrong said. But if you con someone in a real estate transaction, “you end up with $162,000 in Nigeria ... and it’s virtually impossible to prosecute them once the money’s been transferred.”
Fraudsters target a wide array of players in the real estate industry. Besides title firms, they hunt law firms, real estate agents, buyers and sellers. Armstrong said phishing scams directed at real estate pros use sophisticated schemes that are difficult to stop. Email scams -- referred to by the FBI as Business Email Compromise (BEC) or Email Account Compromise (EAC) -- are definitely booming in the real estate sector, according to the bureau.
“From 2015 to 2017,” it reports, “there was a rise of over 1,100% in the number of BEC-EAC victims reporting the real estate transaction angle, and an almost 2,200% rise in the reported monetary loss.”
How can you protect yourself from falling prey to these clever criminals? There are a couple of obvious steps. If someone you think you know is asking you to wire money, no matter how little, call them and ask if the request is legit. Also, take a close look at the URL the message comes from.
The FBI also advises you to:
-- Verify all requests for a change in payment type and/or location. A sudden request for a change in payment method -- from check to wire, for example -- should make you suspicious.
-- Be wary of any communication that is exclusively email-based. Establish a secondary means of communication for verification purposes.
-- Be mindful of phone conversations. One way to counteract fraudulent phone activity is to establish code phrases that would only be known to the two legitimate parties.
-- If you discover a fraudulent transfer, time is of the essence. First, contact your financial institution and request a recall of the funds. Second, contact your local FBI office and report the fraudulent transfer. Finally, regardless of dollar loss, file a complaint with the FBI’s Internet Crime Complaint Center (a.k.a. the IC3 unit) at ic3.gov or, for email victims, at bec.ic3.gov.
Personal stories like Cole’s make for potent educational tools. WFG’s Phillips now uses Cole’s story to start industry presentations on the topic.
“Nobody thinks it’s going to happen to them, right up to the time it happens to them,” Phillips warns.
-- Freelance writer Mark Fogarty contributed to this report.