Over the past decade, we’ve seen many examples of deed fraud in real estate transactions that can destroy the finances of a buyer or seller.
Here’s how deed fraud works:
Any time there’s a real estate transaction, there are various wire transfers that take place. It may be the buyer to the title company, the title company to the seller, the mortgage company to the seller, real estate commissions to the brokers, or the mortgage company to the buyer, etc. Large amounts of money are regularly transferred by wire for these types of transactions. And all of these transfers are at risk of being stolen.
Fraudsters and cybercriminals will stalk real estate websites like Zillow or Redfin to see when homes go from “for sale” to “pending”, indicating to them that wire transfers are coming down the line. When they see the house as pending, they’ll start sending messages to try to intercept communications between the buyers and sellers and the mortgage companies. They’ll pose as the lender or mortgage company and provide instructions to wire money. Unfortunately, the account is not a legitimate account with the mortgage company and if sent, the funds will be stolen.
How to prevent deed fraud
To prevent deed fraud by wire transfer, the best practice is to perform a test transaction before sending the full amount. Before wiring the full amount, have your bank wire $10-$20 to the account number provided, then confirm with the recipient that they received the test amount. This way if the recipient receives the test amount, you know the account number is accurate. If the recipient doesn’t receive the test amount, you’re only out that much and not the entire sum. If the recipient receives the test amount, have your bank perform a repeat transaction to the same account for the remaining amount.
Deed fraud can be absolutely devastating, but performing a small preliminary test transaction can help ensure the accuracy of the account numbers and the recipient before it’s too late.
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