Avoid Wire Fraud

Although this column is about real estate, it includes important information for anyone handling high-dollar transactions electronically. Whether you’re wiring money for real estate, a vehicle, or equipment, you can lose a lot of money in a hurry if you don’t know how to spot wire fraud. Sadly, this happened recently when a family here in Ukiah lost all their savings to wire fraud and were not able to buy their first home.

These days, people want transactions to be fast and convenient. To avoid the hassle of worrying whether a check will clear or spending the time to order a cashier’s check, people often use an electronic funds transfer. In real estate, the transfer can be a down payment; or in an all-cash sale, it can be for the full value of the property. The downside of all that speed is that mistakes can happen, and people I consider to be scum-sucking pigs take advantage of honest, hard-working people.

Here’s how it works. The principals (buyers and sellers) enter into escrow. Before the escrow closes, there’s a lot of communication among lenders, Realtors, escrow officers, and others involved in the sale. Somehow, one of those scum-sucking pigs I mentioned earlier gets access to this email string and begins monitoring the transaction. As the escrow reaches the deadline, it’s pretty common for a flurry of activity to occur—all the final details have to get buttoned down and things can feel a little frantic. This is when the fraudster strikes. Recognizing that everyone wants the transaction to go through without a hitch, he uses an email address that looks legitimately from the escrow officer or Realtor and sends an urgent message to the buyer that says something like this.

“Dear George, Sorry for the short notice, but your down payment needs to be wired in immediately. Please follow the instructions below.” So, George wires the money as instructed.

The following day, George shows up to sign final documents and the escrow officer says, “Great. All we need now is your down payment.” George is confused and a little miffed. He reminds the escrow officer that he sent the payment the day before. Sadly, the money is long gone. With a little tracking, they discover the down payment was sent to a bank in West Texas where our fraudster had an automatic alert that allowed him to immediately send those funds to five different banks in Eastern Europe.

The FBI noted that last year $1.2 billion was reported stolen in this manner, which probably only represents 10 percent of the actual losses. People are often too embarrassed to report that they fell for a scam. The bigger the loss, the bigger the embarrassment.

Now that I’ve given you heartburn, I can help you avoid this nightmare. Here’s how: NEVER accept wiring instructions from someone you haven’t been dealing with directly, even if they name-drop. (Remember, they’ve been monitoring your emails and can provide all kinds of details.) Also, NEVER accept wiring instructions via email. Call your Realtor and have them put you in touch with your escrow officer to confirm the transaction. Another way to avoid this problem is to plan ahead and order a cashier’s check. This minor inconvenience could save you hundreds of thousands of dollars.

Once money is wired, it’s gone. There’s no insurance for this. The bank was following your instructions, so they’re not responsible for repaying the money. And the escrow company had nothing to do with it. They didn’t even know you transferred money.

Although it’s tedious, it’s important to read what you sign. Most buyers sign at least two disclosures that talk about wire fraud. And, at the bottom of every legitimate escrow officer’s email is a warning not to accept wiring instructions via email without verifying them.

If you have questions about getting into real estate, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

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