By Maren Brisson-Kuester
If you keep up with Realtor® liability issues, you may have heard about an important issue — wire fraud.
Cyber crooks are tapping into Realtor® email accounts to steal closing and other transactional information and then defraud clients of money. Once crooks hack your email system, they pretend to be you in emails to clients. They send bogus directives like fraudulent wiring instructions to buyers and sellers.
If the buyer or seller follows the instructions, then the money is usually like Clementine from the old western ballad — lost and gone forever.
And who do you think the consumer comes after? Yes, we Realtors®. It’s not like the client wants to sue us, but they have to sue somebody to get their money back. And, as a rule, errors and omission insurance doesn’t cover fraud, unless you have a special rider to that effect.
The crime is amazing and sophisticated. It happened to one of our own this spring, Linda Hoverman O’Neal. She had been working for a few months with a couple buying a retirement home on one of our area lakes. The couple was close to closing, and unbeknownst to Linda, the crook had access to her email for weeks, gleaning info.
The crook realized these clients had a big down payment — $257,000, to be exact — and was determined to steal it.
Several business days before closing, the husband received wiring instructions that appeared to come from Linda but, in fact, were from the crook. Because the request looked legitimate, he wired the down payment the next morning at 10 a.m.
But about two hours later, the husband received the real set of wiring from the closing attorney. When he saw that each set of instructions had different bank routing numbers, he called Linda immediately and headed to his bank to stop the wire.
Fortunately, the account where the fraudulent wire had gone was a Wells Fargo account, and the buyer’s own account was through Wells Fargo. That made it easier for the bank to freeze the account where the $257,000 wrongly went. After a few nerve-racking days of the bank checking out the situation — including the veracity of Linda and her buyers’ story — Wells Fargo was able to return the $257,000 to the clients.
It was pure luck that everything worked out, and Linda is dedicated to educating other Realtors® about what happened to her, calling it a “life-changing experience.”
Here are my tips for protecting ourselves:
- When clients are new and plan to wire money as part of the closing transaction, go over how the wiring process works and what protections are in place to safeguard their money.
- Use email software that encrypts emails to your clients. Encryption means clients have to go through a log-in and password step, which is a pain. My clients complain about it, but they have no choice. It’s for their and everyone else’s protection in safely completing the transaction.
- Have clients contact the closing attorney by phone for wiring instructions. I used to receive wiring instructions from the attorney’s paralegal by email and shoot them to my clients. Not anymore. If the client interacts directly with the closing attorney, this removes our Realtor® liability and makes sure the client is taken care of.
- Tell clients that when they receive wiring instructions by email to call the closing attorney’s office to verify that they came from that office before they wire the money.
There are more tips out there, and you can find them at NAR and elsewhere. Linda has some in the accompanying sidebar. Remember — it’s not just buyer (or seller) beware, it’s also broker beware.