Real Estate and Wire Fraud

Real estate wire fraud has become one of the most prevalent cybercrimes in the U.S. According to FBI data, roughly 13,600 people were victims of wire fraud in 2020 alone, an increase of 17% over the prior year. The most common type of wire fraud involves Business Email Compromise/Email Account Compromise (BEC/EAC), where criminals pose as a title agency, real estate agent, or attorney. Here’s what you need to know about this type of fraud and the steps you can take to keep your money safe when purchasing a home.

What is Wire Fraud in Real Estate?

When real estate wire fraud happens, it’s generally when a scammer impersonates your closing or real estate agent to convince you to send your closing costs to a fraudulent account. This type of fraud relies on a technique called phishing, where hackers use fake phone numbers, websites, or email addresses to impersonate a trusted party.

A scammer will commonly use a phone number or email address that looks like the one your title agency, lender, or real estate agent uses. They will call, text, or send you an authentic-looking message that might contain a lot of personal information. The message will generally tell you that there has been a last-minute change in the closing procedure or apologize for sending you the wrong directions the first time. They’ll give you updated instructions, which will route the money into the scammer’s bank account once wired.

How to Identify and Avoid Real Estate Wire Fraud

You can avoid this common type of real estate fraud by watching out for these common red flags and taking some proactive measures.

Understand Your Closing Process

Confusion about the closing process can open you up to scams. Speak with your real estate agent and title company about what to expect during the closing process. Find out what payment methods are accepted and any deadlines to wire money.

You can also set up a password with your trusted partners to confirm identities when communicating. But avoid sharing this password via email.

Write Down Contact Information

You will want to keep a notebook or some other record of the contact information for all of the parties involved in your real estate transaction. This includes your real estate agent, lender, title company, and attorney. Record each party’s name, phone number, and email address. Avoid sharing this list of partners with anyone you don’t know and trust.

Be Suspicious of Last Minute Changes

If anyone emails or calls you with “last minute” changes to changes to closing instructions, be very suspicious. Scammers like to use panic and confusion to get victims to take actions they would otherwise not take, especially when they think their home purchase could be in jeopardy.

Some scammers are sending out emails saying they are “short-staffed due to COVID-19” and need to make some changes. While this is a possibility, it’s not worth risking your money to trust such a message without verification.

Don’t Give Out Financial Information

If someone calls you (even if their voice sounds familiar) or sends you an email, don’t give out financial information. It’s just too important to take the risk. Particularly with email, hackers can access this information and take advantage of it too quickly. A better option is to stick to in-person meetings whenever possible. And remember, you don’t have to wire any funds for a closing. You always have the option of paying via cashier’s check to ensure the money gets into the right hands.

Call Back to Confirm Any Instructions

Assuming you get an email or phone call with wiring instructions, it’s important to confirm the legitimacy of the information. Check your list of trusted contact numbers or Google the title agency’s number and give them a call back to confirm any changes.

What If You Think You’ve Been Scammed?

If you believe you’ve been the victim of a wire scam, you must act quickly! Contact your wire transfer company or bank immediately and ask them to recall the wire. You may be able to get the money back if you act within 12 hours.

You should also submit a report to the FBI’s internet crime division. Whether you get the money back or not, let the FBI know what happened so that they can investigate and pursue the fraudsters on your behalf.

Partner With a Trusted Title Company

Mortgage wire fraud is a serious issue that can jeopardize your transaction. The bottom line is that you should always confirm your closing details in person and partner with a trusted title company.

United Title Company provides clients with a wide range of residential real estate services, including purchase agreement, escrow, and title services. Contact us today at (410) 544-5441 or reach out to us online to learn more about how we can assist with your upcoming transaction.

What Is Title Insurance?

Between homeowner’s, mortgage, and title insurance, it can be tough to keep all the policies straight that are meant to protect your real estate investment. But they all serve a particular purpose. When you get ready for closing, you will probably see title insurance listed as part of your closing costs. This is a common line item that property owners should understand because it protects their interests.

If you are buying a property, you want to make sure that you get a clear title, meaning you own the property without any hinderance or errors. If there are any problems, you’ll be glad you have title insurance.

What is Title Insurance?

Mistakes are possible when transferring ownership of a property. Title insurance is a type of insurance policy that protects the policyholder from potential losses, damages, and legal fees arising from undisclosed defects in the past chain of title or errors in the recording of the title for the property.

Title insurance began in the 19th century as a means to protect against clerical errors, recording mistakes, and fraud. This coverage also overrides any claims made on the property based on outdated documents that the buyer was unaware of at the time of purchase.

Two Different Types of Title Insurance

According to the American Land Title Association (ALTA), more than one-third (36%) of all real estate transactions have a title defect. This means that anyone with a financial stake in a piece of property needs to protect their interests with title insurance. That’s why there are two different types of title insurance sold:

Lender’s Title Insurance

This title insurance protects the mortgage holder if there is ever a claim against the property due to a title defect. Because of this, all lenders require title insurance, and you’ll see it included as part of your closing costs.

Owner’s Title Insurance

Owner’s title insurance protects the homeowner’s interests against title defect claims. Under Maryland law, the title company handling the closing within the state must offer the purchaser title insurance. While it isn’t a requirement, most mortgage and real estate professionals recommend it.

How Much Does Title Insurance Cost?

The fee for title insurance is generally a one-time charge. The ALTA estimates that title insurance costs roughly 0.5-1% of the property’s purchase price. Most title companies will show your rate for title insurance on the settlement statement. It will probably be bundled with your fees for escrow services.

Who pays for title insurance varies. Every deal is different, and you may negotiate having all closing costs paid by the seller or the buyer. If you are paying for title insurance, make sure you are working with a reputable title insurance company in Maryland that will get you competitive rates and the right coverage.

Common Defects in Property Titles

If you’re wondering what types of claims title insurance protects against, there are quite a few. Common issues include clerical errors, undisclosed documents, and liens against the property that weren’t uncovered during the title search. Here are some examples:

  • Previously unreported liens– A second mortgage that wasn’t recorded or an unpaid tax bill by a previous owner are common examples.
  • Ownership transfer by fraud– Examples of this are illegally prepared documentation and ownership transfers that involve forgery or identity theft.
  • Undisclosed heirs to the property– Someone connected to a past owner could claim property rights after the home has been transferred to the new owner.
  • Unintentional clerical errors – Mistakes can happen unintentionally. Examples are the loss of digital files and transposed figures or other clerical errors.
  • Property encroachments– One example of an encroachment issue is when a neighbor expands their home across the property owner’s boundary line.
  • Current disputes or lawsuits– There may be current court cases that involve the property, such as a bankruptcy or divorce.
  • Errors and omissions on the Deed of Trust– An incorrect address, misspelled name, or the wrong legal description for a property could cause title issues.

This isn’t an inclusive list, but it should give you a good idea about why title insurance is essential.

The bottom line – Title insurance gives buyers and lenders peace of mind against any unknown risks related to a property’s title. Without it, those potential issues could cause future financial and legal strain on you and your property.

Contact Maryland’s Premier Title Company – United Title

If you have any questions about title searches, title insurance, or the closing process, United Title can help. We have nearly 30 years of experience in the title industry and offer competitive title insurance rates to clients throughout Maryland. Contact us today at (410) 544-5441 for more information.