Cyber Smart: Protecting Your Identity During Escrow

It’s a hectic Friday afternoon at work. You’re scrambling to wrap up early so that you can get back to the apartment and finish packing for next week’s move. Your title and escrow closing process is finally at the end of the road and you’re looking forward to celebrating.

Excited about your new home purchase, closing next Wednesday, you spot an email from your escrow officer. She says there’s been a minor adjustment to your transaction and has included new wiring instructions, which you need to follow promptly to stay on schedule for next week’s property transfer. The email looks exactly like every other email she’s ever sent, right down to her signature. Without a second thought, you call your bank to initiate the transfer.

On Monday, packed and ready to go, you email your escrow officer to make sure the funds arrived. Perplexed, she says she never sent an email changing anything. A few phone calls later, to your horror, you discover that although the bank wired the funds to the account as instructed, that account didn’t belong to the escrow company. It went to an overseas account, and you can’t get it back.

The incidence of wire fraud schemes like these is rising sharply. According to the FBI, between December 2016 and May 2018, businesses and consumers reported a 136% increase in losses related to these kinds of crimes. Fraudulent transfers have been sent to 115 countries, and losses since 2013 have topped $12 billion.

Real estate transactions have become attractive targets for cyber criminals for good reason. The National Association of Realtors notes that the average person has been in their home for 14 years as of 2018. Given how infrequently most people buy or sell property, they are understandably unfamiliar with the closing process, and one can see how they might fall prey to cyber criminals. In our example above, a simple call to the escrow officer, confirming the contents of the email, would have prevented the homebuyer from losing funds to fraud.

But it’s not just wire fraud that home buyers and sellers need to worry about. Protecting your personal and financial information against identity theft is another serious, ongoing concern. During any real estate transaction, personal and financial information must be shared with lenders, real estate agents, escrow officers, attorneys and title agents. This may include social security numbers, driver’s licenses, passport IDs, tax returns, pay stubs, credit card, bank and investment account information.

Hackers can break into your email, harvest attachments and use that information to impersonate you. Social Security numbers can be sold to undocumented workers who can then access services, obtain fraudulent IDs, file false tax returns or open credit card accounts. Stolen bank information can be used to empty your account. Cleaning up after identity theft can take years and cost thousands in legal fees.

Given the sensitive information that must be exchanged during a real estate transaction, you must be vigilant throughout the escrow process—from signing the sales contract to applying for a mortgage and throughout the entire closing process.

Here are some tips to keep you safe during your next property sale or purchase:

1. Don’t email personal or financial information to real estate agents, lenders, attorneys or escrow officers. Standard email is not secure. Use encryption or secure upload sites instead.
2. Be careful about opening attachments, even from people you know. Some may contain malware that can compromise privacy and security. If you’re not expecting a document, don’t open it.
3. Carefully review all transaction paperwork to make sure it’s correct. Confirm any changes over the phone or in person with your escrow officer, attorney, lender or real estate agent to avoid exposure to online hackers.
4. Scammers sometimes call and impersonate employees of legitimate businesses or government agencies in an attempt to obtain compromising information. Do not provide any information about your transaction to unknown parties online, over the phone or in person.
5. Always inspect email addresses from anyone involved in the transaction to ensure it comes from the appropriate business domain. If something looks funny, call the sender to verify the information sent, using a known, previously used number.
6. If you receive any email containing wiring instructions, call your escrow officer, title agent or attorney to verify the information using the number on their business card or the one on the company’s website. Do not call using the number in the email.
7. Be vigilant. It’s unusual for title companies to change wiring instructions once they have been set.
8. Confirm everything, with the title or escrow company handling your transaction and with your bank, who is sending or receiving funds. Make sure all account numbers match, ask your bank to verify the account before sending the wire, and use the phone or go in person for all verifications.
9. Once you initiate a transfer, validate immediately with the parties involved to ensure funds are received. Try to avoid transferring funds late on a Friday in case there’s an issue. Contact your escrow officer or attorney if you don’t receive funds in a timely fashion.
10. If you think you’ve been scammed, immediately call your bank and ask them to recall the wire transfer. This can sometimes be done within a day or two if the other bank hasn’t yet accepted the payment order. Then report the crime to ic3.gov and call your regional FBI office, local police and the FTC.

At Endpoint, we have built a Title and Escrow technology platform and process that is designed to minimize the opportunity for wire fraud and other cyber crimes. Nevertheless, when dealing with large sums of money and sensitive information, don’t be afraid to follow up with an old-fashioned phone call to your title agent, escrow officer and real estate agent, just to make sure everyone is in sync. Safe escrow is smart escrow.

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