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Why No One Needs a Free Donut from Dunkin: Real Estate & Wire Fraud in the Wake of COVID-19

Bill Svoboda, co-founder of title software solutions provider CloseSimple, takes a deep dive into wire fraud, how the pandemic is giving scammers more opportunities and the fight the title industry is waging against it .

Ted had moved to Florida to take care of his ailing mother.

Unfortunately, she passed away in the early days of COVID-19. As a result, Ted reconsidered his living situation and decided to move back to the Midwest, where he had grown up. After selling his home in a southern state, he had received all of the money from the transaction and was working with a title company based in the Midwest to purchase his new home.

On the morning of his closing, Ted’s bags were all packed, and he was excited for this new chapter of his life to begin. Then, he received an email appearing to come from his title company requesting that he wire $360,000 to an account for closing. The email said to follow the instructions to avoid losing out on the closing or facing some sort of delay. So, Ted wired the money.

Scammers Exploiting New Consumer Mindset

A couple of hours later, Tom Cronkright — founder and CEO of CertifID, a company that helps secure and insure the transfer of funds during real estate transactions — was on the phone with the title company, as well as Ted, who was now distraught about the events that had unfolded. Thankfully, Conkright — in partnership with federal authorities — was able to retrieve the money and Ted was able to close on his new home without delay. But it had all happened so fast, with just the click of a mouse.

For every instance like Ted’s in which the consumer’s money is safely returned, there are countless others whose money is lost. In these cases, dreams are shattered, and the title company, real estate agent, lender and consumer are left wondering what went wrong — and whose fault it really was.

After analyzing the situation from all angles, Conkright and his team found that Ted’s circumstance was due to information harvesting– the scammer had hacked the real estate agent’s email and watched the transaction proceed until just the right time to impersonate the title company by sending a well-timed email from another, newly-made-up account with the fraudulent wiring instructions.

“Every action has a reaction,” says Cronkright, as he describes the mentality of fraudsters. “Today, especially with COVID, everyone wants faster and remote,” Cronkright  added. “But, there is the other, darker side to the equation where fraudsters are looking for an opportunity to take advantage of it.”

Plus, with real estate inventory at near vapor levels and an increasing number of aspects of the real estate transaction moving online due to COVID-19, new layers of complexity have been added to the deal. 

“Consumers’ guards should be up,”  Conkright said. “But, as things continue to speed up in a COVID world, they are stressed and, all-too-often, their guard is down or relaxed. They want to simply get through the transaction. This means they might click on a link in an email or do something they otherwise would not have done.”

With COVID, divorce rates have risen 34% year-over-year, and birth rates have also started trending up. Additionally, consumers have begun to move from large metropolitan areas to more rural environments with a renewed emphasis on quality of life, work-from-home amenities and larger areas to entertain within the home instead of going out.

Meanwhile low mortgage rates (which allow for greater buying power and higher bids) and the stress of buyers competing against multiple bidders for the same property are causing everyone to operate at breakneck speeds to close on the purchase of a home.

So, when a consumer — who’s in a race against the clock and the next buyer — receives an email with wiring instructions and information on the closing, their typical response is likely, “Why shouldn’t I trust this email? Let’s get this done.”

Unfortunately, that plays right into scammers’ tactics.

Industry Groups Educating Consumers

Wire fraud and phishing attempts are affecting the average title company at unprecedented rates, according to Diane Tomb, CEO of the American Land Title Association (ALTA), the largest advocacy group in the title industry with more than 6,400 members.

According to her, wire fraud & phishing attempts are affecting the average title company at unprecedented rates. “It used to be common to see these types of fraudulent activities occur once per month,” she said. “However, [now] it can be as frequent as multiple times per day.”

Consequently, title professionals have to stay on top of their game and be on watch for anything suspicious crossing their email, as well as look out for the consumer, real estate agent and lender partners, who could also be at risk.

Moreover, scams have evolved from the old “I’m a foreign prince and need help with my money” phishing email — which, according to CNBC, still rakes in more than $700,000/year. In fact, scammers are constantly changing their tactics in this high-stakes game in an attempt to be one step ahead of the consumer, real estate agent, title company and lenders.

Realizing this, ALTA has led an initiative to raise awareness about wire fraud. It’s also working with the National Association of Realtors and Mortgage Bankers Association to help inform consumers about ways to protect their money when buying a home or refinancing. In addition, ALTA created a two-minute video explaining how to submit a wire transfer fraud complaint with the FBI Internet Crime Complaint Center (IC3).

Specifically, the video details the eight sections of the online form that need to be completed, which allows the FBI to process a case more effectively than simply calling a local field office. This also helps inform the FBI that wire fraud is a significant problem.

“The professionals in the title industry work incredibly hard to perform the tasks of a closing both safely and securely,” Tomb said. “These title companies deserve the credit for everything they’re doing. Our industry’s response to a pandemic has brought out the best and allowed us to shine during the closing process. We’re not going to let scammers take that away from our clients.”

However, during COVID-19, stories like Ted’s are becoming more common as the internet removes the barriers that once limited the closing experience. And, while the process may not be 100% online yet, there have been more dramatic changes in the last six months than there had been in the previous six years.

Likewise, the tendency for consumers to be more open to a digital closing experience has shifted the way title companies must approach the closing process.

“When we made the digital pivot a few months back, there was no game plan to follow,” Tomb said. “Before March, very few title companies had built sterile closing rooms or developed plans for curbside closings. Remote Online Notarization was only legal in a dozen or so states and it was still in its infancy.

However, the lack of a model didn’t stop title insurance professionals from putting their customers first, trying new things to meet their needs and risking the chance of failure. This is the heart of what it means to innovate.”

Avoiding Scams Is About Due Diligence For All Parties

Rick Diamond, vice president and agency IT director at Fidelity National Financial, has seen his fair share of wire fraud and ransomware attempts. So, to combat the scammers’ attacks and train those around him, he had to quickly learn who he was dealing with in these faceless crooks.

“These bad actors are not one-hit wonders,” Diamond points out. “They have a process, and they are both smart and patient. They’ll hack an email, then sit back, watch, and wait for the right time to cast the line and fish for the information they want.”

Smart and patient are two unique traits of this foe that everyone involved in a real estate transaction must deal with. To mitigate the risks posed by wire fraud and ransomware, Diamond suggests making sure you have up-to-date software, network and internet-of-things settings. And, although this is easy to do, it’s also easy to overlook.

Furthermore, with the shift away from the office to working from home, hackers know that this can be one of the easiest ways to gain access to an unsuspecting computer or email account.

Diamond also strongly suggests not clicking on links in an email because 91% of all cyber theft comes through email. Similarly, check the email address that the email is coming from before trusting the contents, and note whether it is the actual domain of a company or person you are dealing with.

For instance, if you’re working with All American Title Agency and their web domain is www.allamericanagency.com, is the domain spelled correctly in the email you received? Or did the email come from [email protected] (note the double “aa” in to start American)?

“On top of that, no one needs a free donut from Dunkin Donuts,” Diamond emphasized. “It’s just not worth the click. Fraudsters know exactly how to entice people. If the offer for a free donut didn’t work, fraudsters simply wouldn’t do it.

But the sad thing is that it does work. Beyond donuts, though, the right clickbait might be an email asking the recipient to book a time with HR to discuss a raise/salary, or maybe an email regarding a PPP loan addressed to a business owner.”

This does not mean that you should avoid email and links altogether. Rather, be careful and realize how, in a COVID-affected world, the new norm is moving toward a more digital experience where clicks matter more than ever. So, to beat COVID-19, fraudsters, wire fraud, phishing and ransomware, we all have to work together.

About

Bill Svoboda is the co-founder of CloseSimple, a software solution that helps title companies communicate with consumers, real estate agents and lenders during the closing process. Bill is also a passionate speaker on the topics of entrepreneurism, customer engagement, growth strategies and delivering six-star customer care in a five-star world.

Eliza Theiss

Eliza Theiss

Eliza Theiss is a senior writer reporting real estate trends in the US. Her work has been cited by CBS News, Curbed, The Los Angeles Times, and Forbes among others. With an academic background in journalism, Eliza has been covering real estate since 2012. Before joining PropertyShark, Eliza was an associate editor at Multi-Housing News and Commercial Property Executive. Reach her at [email protected]