Request to Redirect Funds Should Trigger Caution

Tread with care if you unexpectedly receive an email or phone call asking you to send funds related to a real estate transaction to a new location—even if the instructions contain accurate information and appear to come from a trusted source—because you may be the target of a swindler.

That warning from the Boulder Area REALTORS® Association (BARA) in Colorado comes in the wake of a nearly successful effort by scammers outside the United States to drain a buyer's funds by posing as a title company representative and instructing an unsuspecting buyer agent member of the association to wire the money to a new account. Had the fraudulent transaction gone through, the funds would have gone to the thief instead of to the seller, and the client could have lost $300,000.

BARA sent out an alert about the scam to its members on Sept. 29. According to the association, the buyer agent member received several e-mails that appeared to be from a title company and contained new wiring instructions. The messages, which actually came from a thief who surreptitiously obtained information about a closed deal from the listing agent's hacked e-mail account, included the title company logo, an accurate file number and information about the buyer.

"The instructions would have sent the funds out of the country and were completely fraudulent," according to the alert from BARA. "Sensing something wrong, the REALTOR® called the title company to verify the change, which was bogus. The wire, already in progress, was able to be stopped in time."

BARA has referred the incident to the FBI for investigation.

BARA emphasized the need to personally call a title company to confirm instructions about where to direct funds before proceeding, as it seems these hackers set up a fake e-mail account that appeared to belong to a title company, making it possible for them to pretend to be actual employees of the firm.

Veronica Precella, CEO of the Boulder association, says the scammers may have targeted this transaction in particular because of the timing of the sham communications. The deal was to close on a Monday and the e-mail with the fake wiring instructions went out the Friday before, so the attempted theft may have been an effort by the scammers to capitalize on the presumed desire of the agent and buyer to close the deal on time despite the short interval, Precella says.

Precella added that the scammer's instructions included a key red flag: the inclusion of the words "SWIFT Wire"-which indicated that the money was bound for an overseas location. SWIFT refers to the Society for Worldwide Interbank Financial Telecommunication, a member-owned cooperative used to secure and standardize international money transfers. The scammer also attempted to throw off the buyer agent by claiming that the listing agent's phone was out of order.

Though she had not heard of this type of scam before, Precella says that soon after the alert went out, she got an indication that it wasn't the first time this had happened in a real estate transaction.

"After I sent out the email, the CEO of our regional MLS told me said she had heard of cases this summer where the transfer had gone though and a million dollars was lost," she says. "It is really frightening...it appeared completely legitimate."

Matt Cohen, chief technologist for Clareity Consulting, a real estate consulting company based in Scottsdale, Ariz., says this kind of scam has been going on for years, but that he's seen an uptick recently. He also notes that the request to change payment information could come in the form of a phone call instead of an e-mail, and that simply calling the number referenced in a fraudulent e-mail may not uncover the scam.

Cohen says he's even heard of a case where an agent's computer was hacked and a client received an email directly from the agent requesting a change to a routing number. He says he's seen so many examples and so many different methods that he's sure there are a lot of bad actors trying this scam. "My impression is that there must be more than one party."

Ben Scranton, chief executive officer of the REALTOR® Association of Pioneer Valley in Springfield, Mass., which has warned its members of a scam similar to the one reported by BARA, recommends that agents avoid transmitting confidential information via email and advise buyers to verbally confirm instructions relating to financial transactions before releasing funds. He also urges agents to use email passwords that are difficult to guess and to change them frequently.
 

More from NAR on protecting yourself from scams
https://www.nar.realtor/topics/risk-management

Boulder Area REALTOR® Association
http://www.baraonline.com/

Clareity Consulting
http://clareity.com/

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