Real Estate Wire Fraud in New Jersey: How to Protect Yourself at Closing

Let’s present to you a scary – but not unrealistic – scenario. After an exhausting search and buying process, you’re almost at the finish line. You’ve found your home. The mortgage is approved. Closing day is almost here. Then you check your email with a title company with some “updated wiring instructions” … and you’re on the very brink of sending tens of thousands of dollars to a criminal.

This is the way it happens. Wire fraud is one of the most common and costly scams in real estate closings across the United States. In fact, FBI statistics show that more than $446 million was lost to real estate wire fraud in a single calendar year. Here in New Jersey – a state with high property values and enormous transaction volume – home and property owners are prime targets for fraudsters; a single misdirected wire transaction could mean that six figures of hard-earned cash are gone in a matter of minutes. And unlike deed fraud, wire fraud is a real-time scam at closing, and the consequences can be dire: once the money moves, it’s nearly impossible to reverse the transaction.

In this article, the experts at Cortes & Hay outline exactly how this scam works, the warning signs to watch for, and the steps buyers, sellers, and agents should take to stay protected.

What is Real Estate Wire Fraud?

Real estate wire fraud is part of the “Business Email Compromise” (BEC) scam family. In BEC scams, criminals intercept or spoof closing communications from legitimate sources to try to fool buyers or sellers into wiring funds to a criminal account rather than the legitimate one. Typically, these scams target large wire transfers that may occur at closing (payoff funds, sale proceeds, down payments, etc.), ranging from tens of thousands to hundreds of thousands of dollars.

Amid the flurry of payments and paperwork that accompany a real estate closing, these scams can easily fool the parties involved. Once this wire transfer is sent to a criminal’s account, the bad actors will typically move the funds within minutes to a different account, making it incredibly difficult to recover the money. These scams are tremendously harmful to the parties involved; in fact, the FBI’s Internet Crime Complaint Center (IC3) annually ranks real estate wire fraud among the most financially damaging cybercrime categories.

An important note: this type of fraud is NOT a title defect. This is classified as a theft of funds in transit, and it requires different protective measures than title insurance.

How Does the Scam Work?

There are typically four steps to the real estate wire scam; let’s go through them here:

Step 1: Compromising an email account

In the weeks before a closing, criminals will monitor or hack into the email accounts of key people involved with the closing (real estate agents, title agencies, attorneys, buyers, etc.); once in, they’ll watch for closing dates, transactions, and communication patterns so they can create fake messages that seem real.

Step 2: The Fraudulent Email

A few days or hours before the closing, a buyer will get an email that looks like it comes from a key player in the process – a title agency, attorney, or lender. This will contain “updated wiring instructions” with a new account or routing number and some official-sounding language to make it seem genuine, like a “banking system update” or “account change for security.” The email address will look very similar to the real one, perhaps with only one or two characters changed.

Step 3: The Wire Transfer

After being fooled by the scammer, the buyer sends their funds to the fraudulent account. Here in New Jersey, that down payment or closing funds could run into the hundreds of thousands of dollars, all sent to a criminal in a single transfer.

Step 4: The Discovery

This fraud is typically not discovered until the actual closing, when the parties find out the funds have not arrived, or even a few days later, when the genuine title company follows up. By that time, the criminals will have moved the money across several accounts (most likely international ones as well), making recovery unlikely.

Who is targeted?

The most common target for real estate wire fraud? Homebuyers who are wiring their down payments for their home, especially those first-time or inexperienced homebuyers who have never gone through the closing process and may be more apt to sign documents. Other common targets include those sellers who may expect large proceeds from a sale and investors with multiple transactions (more exposure, less scrutiny). In New Jersey, the number of parties involved in the process (the buyer’s attorney, title agency, etc.) and the constant communication via email increase the chances of fraud.

Red flags to watch out for

Here are the big red flags to be on the lookout for during the closing process:

Last-minute changes to wiring instructions

Legitimate title agencies don’t make those kinds of last-minute, emergency, unexpected changes to their wiring processes that a scam email would demand. ANY email requesting a last-minute change should be treated with the utmost scrutiny.

Urgency and pressure

In scam emails, you’ll often see ticking-clock pressure created by statements like “the wire must be sent today or the closing will be delayed.” This type of act-now urgency is a trademark of these scammers.

Slight email address variations

Email address variations from the sender are a massive tell. Check the sender’s email address very carefully; scammers may add hyphens, extra letters, or different domains that resemble the authentic address but are just a little off.

Requests to keep the change confidential

No legitimate party in the process would request that this kind of transaction remain confidential. Any request for confidentiality should immediately raise a red flag.

How to Protect Yourself: Before Closing

Looking to protect yourself against real estate wire fraud? Here are some things to remember in the pre-closing period:

• Be sure to establish a verbal verification protocol right at the start. Confirm with the title agency and attorney that you’ll have a known phone number to verify any wiring instructions and that they will never change instructions solely via email.
• Use a verified phone number provided directly by the title agency and the real estate attorney; avoid using any phone numbers sent to you directly via email.
• Treat every email that includes wiring instructions as potentially fraudulent; double-check and reconfirm any information received via email.
• Carefully check all email addresses and verify the sender’s entire email address, not just the display name.
• Check in with the title agency and attorney about their cybersecurity practices and ask specifically about how they protect against fraud.

How to Protect Yourself: At and After Closing

Ensure your safety against real estate wire fraud at and after closing by remembering these strategies:

• Contact the parties involved before you wire any money, every single time, via a phone call with a phone number you’ve independently verified. After wiring, call the parties again to confirm the funds have been received.
• If you can, wire as early in the day as possible to give authorities time to catch and reverse the process before the end of the day should fraud be involved.
• If you feel that anything at all is off, stop the process and do not send the wire. A little delay is always preferable to losing money.
• Think fraud has occurred? Call the bank immediately to request a wire recall and contact law enforcement; your alerts should include both local authorities and the FBI’s IC3 division at ic3.gov.

What Does Cortes & Hay Do to Protect Clients?

Cortes & Hay follows ALTA Best Practices for information security; additionally, wire instructions are routed through secure channels, and clients receive direct contact information for verification. All changes to wire instructions go through multiple channels before communication to clients, and staff have specialized training to recognize email compromise attempts.

Does Title Insurance Cover Wire Fraud?

Standard title insurance policies do not extend to cover wire fraud losses. However, some title agencies and real estate attorneys may carry separate liability insurance that provides limited coverage for losses. However, the best protection against wire fraud is prevention through the steps outlined above.

Real estate wire fraud is a growing threat, but it’s also largely preventable with the right practices and a title agency that pays close attention to security (like Cortes & Hay). Remember: always call to verify wiring instructions, no matter how authentic the email looks.

Buyers and sellers in New Jersey need a title partner that communicates their cybersecurity practices clearly and proactively, not one that leaves you to figure it out at closing. Ready to partner with that type of title agency? Contact Cortes & Hay to learn about our client security protocols and get the protection you need from the start of the process.

Frequently Asked Questions