Broker’s Near Miss with Fraud is Life-Changing

By Susan Shackleford

This spring Linda Hoverman O’Neal was working with a couple buying their retirement home when a cyber thief nearly stole the buyers’ down payment — a whopping $257,000.

And, because the crook had perpetrated the fraud by hacking into her email account and sending fraudulent wiring instructions to the buyers, Hoverman O’Neal learned she would likely have been on the hook legally for the funds if they had been stolen.

“Both S.C. and N.C. Realtor® (association) legal departments assured me that if the funds were not recovered, without a doubt, the buyers could sue and win the case against me and most probably my company, lender and anyone involved in the trail of communication,” Hoverman O’Neal wrote in a Facebook post.

“Why?” she continued. “We owe to our clients safety and security in all communication, including email communication. My email address placed my client at risk, and, yes, in the eyes of the law, it would be my fault.”

Hoverman O’Neal, who has been in real estate sales since 1985, notes it wouldn’t take more than one or two such instances before most brokers and their firms would be bankrupt and out of business. “Thirty-plus years of hard work could, and would, go up in smoke in a lawsuit that the buyer would have no choice but to file and would win,” says the broker with RE/MAX Metro Realty in Charlotte.

Because so much is on the line with fraud, she would like to see a disclosure form added to the Offer to Purchase that outlines wiring and other financial procedures related to the transaction. “I’m on a mission about education,” she notes. “This was a life-changing experience for me.”

Here’s what happened.

In February, someone named “Casey” emailed Hoverman O’Neal saying he was a first-time buyer. He attached what he said was a loan pre-approval letter. When Hoverman O’Neal clicked on the attachment, she was unable to open it. Two more times “Casey” sent the “attachment” and she couldn’t open it.

She asked for his phone number but received no response. The FBI believes that’s how “Casey” hacked her email account, she says.

Unaware she had been hacked, Hoverman O’Neal went about her business as a broker. Meanwhile, the thief was reading her emails and gleaning info about transactions. The thief decided to target the couple making the $257,000 down payment.

Posing as Hoverman O’Neal in an email, the thief asked the buyers to send the money to a trust account so the funds would be ready for closing. This occurred early in the transaction process, and the buyers even questioned whether Hoverman O’Neal was making the request — an email she never saw and thus didn’t respond to. The buyers didn’t pursue the question with her and simply didn’t send the money.

Later as the closing was less than a week away, the thief — again posing as Hoverman O’Neal — sent the buyers wiring instructions for the $257,000. This time, the buyers bit; they sent the money.

But two hours later, they received another set of wiring instructions, the real ones from the closing attorney. The couple noticed that the bank routing number was different from the previous instructions.

In talking to Hoverman O’Neal, they learned the first set of instructions didn’t come from her and were fraudulent. The husband drove to a Wells Fargo branch to stop the wire, and both he and Hoverman O’Neal spent that day and several more with Wells Fargo officials, who were also obligated to check out their story to make sure Hoverman O’Neal was not perpetrating a scam.

Ultimately the bank froze the account where the fraudulent funds had gone — which also happened to be a Wells Fargo account, one that belonged to a child and had been hacked by the thief.

The fact that the buyers’ funds came from a Wells Fargo account and wrongly went to another Wells Fargo account was a stroke of good luck in stopping the transaction. Once bank officials validated Hoverman O’Neal’s story, they could act much quicker than if another bank had been involved. Finally, after more than five days went by, the buyers got their money back.

Hoverman O’Neal knows how lucky she and her buyers were that the money was recovered. Wire fraud involving real estate transactions has been happening throughout the country, she notes, and most of the time the money is lost to crooks.

Here are a few other notes about Hoverman O’Neal’s story — about what happened and how she’s changed practices.

  • Once she found out in late April that her email had been hacked, she changed her password three times, but the crook was still able to access her account.
  • She also found a “Junk” file on her computer that contained the fraudulent emails that the crook had been sending to her buyers.
  • She turned her old hard drives over to the FBI, got new ones and added software to her AOL account that is designed to stop thieves from being able to read keystrokes she makes on the computer. She also now has software to protect against viruses and scramble her password. She changes her password frequently, using highly random characters.
  • Since this happened, she doesn’t ask for or send confidential information over email.
  • She has clients confirm wiring instructions with the closing attorney’s office before wiring money.

She relies more on phone, fax and face-to-face interactions to transmit sensitive information.

One thought on “Broker’s Near Miss with Fraud is Life-Changing

  1. Several lawyers have stated that Mortgage Fraud occurs when buyers receive cash-back at closing such as when a buyer agent asks a seller agent to have a seller write a check at closing for repairs not completed prior to closing with the check made payable directly to the buyer without obtaining lender approval and without the words ESCROW being spelled out on the closing disclosure and with the funds being paid directly from the buyers closing attorney to the buyer with no third party independent inspection to ensure completion of the specific repairs and without the lender’s appraiser or lender’s inspector or PE engineer making the inspection and without the lender paying the funds to the contractor since all escrowed funds must be used only for the specific repair listed on the escrow agreement with any funds left over after repair of the specific item being used to pay down the mortgage balance but no funds are allowed to be paid directly to the buyer and no excess funds left over after repair of the specific item listed on the Escrow Agreement being used to repair or update or renovate other areas in the house. FHA 203 (k) rehab loans and most conventional loans docs state very clearly that a borrower is never allowed to be paid any funds directly and all escrowed funds must be used for the specific repair listed in an escrow agreement controlled by the lender with any funds not spent being used to pay down the mortgage but at no time is the borrowers allowed to decide where the funds are to be spent.

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