For over 10 years, we’ve seen many examples of different types of deed fraud in real estate transactions that can destroy the finances of a buyer or seller. This can take away all the hard-earned money that one has accumulated. Here’s how deed fraud works.

The mechanics of deed fraud
Anytime there’s a real estate transaction, the money involved is transferred back and forth through wire transfers. During real estate closings or settlements, multiple fund transfers occur. These transfers are at risk of being stolen by cyberthieves and criminals.

The Modus Operandi of Cyber Thieves
Cyber thieves often find out about real estate sales through platforms like Zillow or Redfin. They intercept communications between buyers, sellers, brokers, and lenders. They then provide false instructions to wire money to a different account, leading to significant financial losses.

A real-life example
In one instance, individuals lost $160,000 due to deed fraud. However, this amount is relatively low compared to other cases we’ve seen. In this scenario, the title company was hacked, resulting in a loss.

How Deed Fraud Happens
In the case mentioned, the hacker changed the account number on the payoff statement, leading to the money being sent to the wrong account. Despite the arrest of the individual who owned the account, they claimed they were hacked.

Preventing deed fraud
To prevent yourself from becoming a victim of deed fraud, a simple solution exists: perform a test transaction. This involves sending a small amount of money to confirm the accuracy of the recipient’s account details.

Executing a Test Transaction
Before wiring a substantial amount, such as a down payment on a property, send a smaller amount first. Confirm with the recipient that they received the transfer. Once confirmed, proceed with the larger transaction using the same account details.

Benefits of Test Transactions
Test transactions ensure that the correct account details are used, minimizing the risk of errors or fraudulent activity. Though it requires extra effort and may incur additional fees, the security it provides outweighs the inconvenience.

Verifying with Title Companies
Similarly, title companies can conduct test transactions to verify account details for mortgage payoffs or commission payments. This additional step enhances security and reduces the risk of losses from deed fraud.

Conclusion
While preventing deed fraud requires diligence and extra steps, it’s a necessary measure to safeguard your finances in real estate transactions. By implementing test transactions and verifying account details, you can protect yourself against significant financial losses. Always ensure direct communication with the title company to mitigate the risk of intercepted emails and fraudulent instructions.