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The Resurgence of Real Estate Internet Scams
Sometimes a scam is easy to spot – we have learned to second-guess e-mails from Nigerian princes seeking a wire transfer or our personal information. Other times, however, the fraud is not that obvious, particularly when it comes to internet scams involving real estate. Real estate transactions are a target for scammers not just because they involve the exchange of large amounts of money, but because there are many possible targets. In any individual real estate transaction, a scammer has the option of hacking into the e-mail account of the real estate agent, banker, lawyer, seller, buyer, closing agent or any other real estate professional or service provider involved in the transaction. Once a hack is successful, the scammers can place themselves in the middle of a transaction and direct funds right into their own pockets.
In 2019, the F.B.I. received complaints of internet crimes involving real estate from 11,677 victims reporting over $221 million in losses worldwide. These scams exist in various forms. Scammers may present themselves as an escrow or title company providing directions for the wire transfer of your funds. They may offer refinancing options for a home loan, help with mortgage payments or fraudulent rental options. They might purport to be a client, another party involved in the transaction or even your own assistant as Shark Tank’s Barbara Corcoran recently experienced in a scam costing her company almost $400,000. A scammer may even exploit the trusted relationships among attorneys, brokers and title companies by claiming to be a real estate investor seeking a referral from one party to another. First, the scammer seeks to deposit funds in an escrow or trust account through a fraudulent check to cover virtually all of the costs related to a cash offer on real estate, often without so much as a basic inspection or other due diligence. Then, the scammer suddenly requests the return of the funds from the escrow or trust account due to an ostensibly urgent need for the funds before the funds have properly cleared and settled as good funds. This can, and often does, result in the funds being remitted back to the scammer leaving the account holder responsible for the dishonored check.
Fortunately, there are ways to protect yourself, your company and your clients from becoming the victims of a real estate scam. A good rule of thumb is to abide by the advice and guidelines of your company’s IT team. They can provide you with direction specific to the safeguards that your company has in place for maintaining the security of your transaction. Another best practice is to review the e-mail addresses of communications you receive for accuracy. Scammers may slightly alter a familiar e-mail address in an attempt to fool you. And lastly, consider making a phone call to confirm whether the communication is legitimate, especially when it involves the transfer of money.
As the COVID-19 pandemic keeps many of us working from home or communicating primarily through e-mail, it is especially important to remain alert to the potential for real estate scams. Eastman & Smith’s real estate attorneys are familiar with the various forms of fraud that are being perpetrated on real estate owners and industry professionals. They can provide guidance on how to avoid being snared by these scams as well as what to do if it should happen to you.
Anna L. Crisp, a law clerk with Eastman & Smith who is finishing her third year at The Ohio State University Moritz College of Law, contributed to this article.
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Disclaimers:
At the date of publication the above information was correct. It is quite possible the information above has changed as COVID-19 is a rapidly evolving situation.
The article in this publication has been prepared by Eastman & Smith Ltd. for informational purposes only and should not be considered legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney/client relationship.