Escrow Fraud: A Warning For Home Buyers
This is a terrible story about a retired teacher and their daughter, who had been living in an apartment and were buying a condominium. Unfortunately, they fell victim to wire fraud, which is a very common real estate scam when buying a home. Scammers intercept the money used for buying the property, whether it’s the down payment or paying in cash. In this event, this family was scammed out of the $200,000 they needed to buy the house, which was all their money. Now, they have neither an apartment nor any money, making them homeless and broke.
How does escrow fraud happen, and how can you prevent it?
Wire fraud is straightforward for scammers to execute, as most people only buy a home once or twice in their lifetime. It’s not something you do every day, so you may not know the procedures, and fraudsters take advantage of this. Typically, you will receive an email from your title company asking for the money, but unfortunately, oftentimes, fraudsters know how to intercept these emails. As a result, you may wire the money to the wrong place.
There is a straightforward way to prevent this. If you’re a buyer, before wiring your entire nest egg funds, wire a small amount, such as a dollar, $10, or $100, to the routing number and account number provided by your title company. Then, verify directly with your title company that they received it. This way, you know the right place to send your money. Once you have done this, you can wire the bulk of your money to the same place. When you go to your bank to wire it, make sure you tell them why or to the same place as before. Don’t change anything, so you know that the money is going to the right place.
This is a very simple solution to an ongoing, tragic problem. We recommend that all realtors instruct their buyers on preventing wire fraud. On our website, VerifyEscrow.com, for more information on how to do this. It doesn’t cost anything extra for buyers or realtors to use this solution and help their clients avoid this problem. Wire fraud can even happen on the sell side, with sellers having their wires intercepted on the way out. However, it’s typically a buyer-side problem. This is yet another example of wire fraud that occurs during closings. It’s a reminder to use simple techniques to avoid this problem, as it can leave people in difficult situations, like the poor woman who was told at closing that their money wasn’t there and they have no house or place to live.