Imagine this: You’re in the last stages of buying your first home. It’s an exciting time, and you can’t wait for the process to be over so you can move into your new place. But then your LA escrow agent informs you that the down payment and closing costs you wired yesterday still haven’t arrived. After a brief investigation, it soon becomes clear that you’ve fallen prey to a quickly growing type of scam — mortgage closing scams.
All that money you paid down is gone — and there’s very little you can do to recover it.
Mortgage Closing Scams Are on the Rise
According to the Consumer Financial Protection Bureau, scams involving the misappropriation of closing costs and down payments are on the rise. Between 2015 and 2017, the number of reports of these types of scams rose by 1,100 percent. Furthermore, in 2017 alone, almost $1 billion in real estate transaction costs were stolen this way. Some people even lose six-figure sums. Regardless of the actual amount, it should be clear that any such loss is devastating to a homebuyer.
How Mortgage Closing Scams Work
Mortgage closing scams are highly sophisticated types of scams that usually involve the cybercriminals using phishing tactics to gain access to a real estate agent or escrow agent’s email account. They then monitor email exchanges, and when it becomes apparent that a closing date is approaching, they spoof the real estate agent or escrow agent’s email address to send fraudulent wiring instructions to the homebuyer. If the homebuyer follows those instructions, the money is sent to an offshore account instead of the escrow account. By the time the homebuyer finds out, it’s too late. Banks typically don’t cover these types of losses — and since the money is in an offshore account, there’s little to no hope of recovering it.
How to Protect Yourself if You’re Buying a Home
Knowing this, it’s clear that if you’re buying a home, it’s critical to know how to protect yourself from falling victim to this type of scam. Keep the following tips in mind:
- Always double-check the sender’s email address. Make sure to verify the actual email address — hover over it till you see it spelled out. If anything is off — like a letter or number out of place or an incorrect domain name — don’t trust the message.
- Be wary of red flags. You can prevent many scams simply by being vigilant. Emails with poor grammar or spelling and a sense of urgency are very likely scams.
- Voice verify the wiring instructions. The National Credit Union Administration recommends calling the closing agent to verify the details outlined in the email. Make sure that you have a passcode in place that you can use to verify you’re speaking to the right person — not a scammer.
- Ask your bank to request multiple verifications before wiring money. CNBC advises that some banks will allow you to put more than one verification step in place before money can be wired out of your account.
- Check the account number with your bank. You can always call your bank and ask them to verify the owner of the account listed in the email. They can tell you if it’s an offshore account you shouldn’t trust.
Keep in mind that when you’re closing, you’re about to wire a large sum of money. So if you’re concerned about the trustworthiness of the wiring instructions, always err on the side of caution. Make sure to verify them with someone you know you can trust — like your real estate agent.