Help Desk: How to protect yourself from real estate fraud
In real estate transactions, there are multiple opportunities for hackers to gather your Social Security number, date of birth, address, and name.
A collaboration with The Boston Globe’s Help Desk:
If you’re like most people, your e-mail inbox overflows with friendly and not-so-friendly requests to update your bank information before your account is closed or to share in the profits of an overseas business. While most people successfully avoid being victimized by obvious scams, fraudulent activity related to real estate transactions catch far too many consumers.
“Consumers need to be vigilant all the time against fraud, but it’s particularly important during a real estate transaction,’’ said Dale Dabbs, CEO of Sontiq, an identity theft protection company for consumers and small businesses. “Real estate transactions are an easy target for criminals, because there’s more money involved and there’s a lot of personally identifiable information being exchanged between a lot of people, such as the lender, agent, bank, attorney, and title company.’’
The complexity of real estate transactions makes buyers and sellers vulnerable to a variety of scams, including title, rental, and wire fraud; predatory lending; and identity theft, said Tracey Hawkins, a former real estate agent who teaches safety and security procedures to real estate professionals.
“I’m a big believer in experts,’’ Hawkins said. “It’s important for people to do their due diligence when choosing an agent, a lender, a title company, and anyone involved in their real estate transaction. That helps them avoid being victimized and, if they are victimized, they have a good partner in place to help them.’’
Asking for referrals for real estate professionals and getting to know them personally can provide some protection from a scam, Dabbs said.
“Ask each professional how they are going to protect your information,’’ he said. “Ask them what system they use for electronic signatures and whether they use a virtual private network when they’re on their mobile device in public.’’
TYPES OF FRAUD
Hawkins said homeowners who sell their homes on their own as a “For Sale by Owner’’ scare her the most.
“They don’t know what they don’t know, and they have no mind-set that what they’re doing is dangerous,’’ Hawkins said. “They have no mechanism to screen the people who offer to buy their home, so they can go under contract and then end up in a long legal battle.’’
Some sellers and landlords, however, pay for background checks and credit checks on potential buyers or renters, Hawkins said.
The most common types of real estate fraud include:
Wire fraud
The biggest issue in real estate fraud revolves around closings, said Robert Siciliano, partner and head of training of Protect Now, which provides cyber social identity protection for real estate agents.
“What happens, for example, is that the real estate agent uses the same passwords for their e-mail, Facebook, Twitter, and other accounts,’’ Siciliano said. “The bad guy hacks one of those accounts, and then remotely logs into the agent’s e-mail and watches for phrases such as ‘offer is accepted.’ Then the buyer gets wiring instructions to send the money for the purchase to a bogus account. By the time the buyer gets to the closing and discovers the mistake, the hacker and the money are gone.’’
From 2015 to 2017, there was an increase of more than 1,100 percent in the number of real estate-related e-mail fraud victims reported to the FBI and a jump of nearly 2,200 percent in the amount of money lost to real estate fraud. Losses of $1.6 billion due to fraudulent e-mail scams, including real estate fraud, were reported to the FBI between June 2016 and May 2018.
“The most effective way to prevent being scammed is to pick up the phone and call the real estate agent, title company, or lender to ask if they sent an e-mail and whether the information is correct,’’ Siciliano said. “Don’t use the number in the e-mail; that’s too easy for the bad guy to change. Use a number stored in your phone, from a business card, or from their website.’’
If you receive a phone call related to your real estate transaction, Dabbs suggests hanging up and calling the number you have for that professional even if the call appears to be legitimate.
Paperless documentation and signing paperwork via companies like DocuSign is safer than paper, Siciliano said, but it’s still best to call to verify that the request is legitimate.
“There’s nothing wrong with adding another layer of verification, especially when so much money is involved,’’ he said.
Identity theft
Cybercriminals often play a long game when it comes to using stolen information, Dabbs said.
“Typically, when there’s a big data breach, sophisticated cybercriminals won’t do anything for six months,’’ he said. “They’ll monitor your information and then wait to open accounts with your name and Social Security number.’’
A real estate transaction becomes a social transaction, Dabbs said, with lots of e-mail interaction between buyers, sellers, agents, lenders, title companies, and attorneys. That means there are multiple opportunities for hackers to gather your Social Security number, date of birth, address, and name, which Dabbs said can be used for a variety of fraud schemes.
“Awareness is key,’’ Dabbs said. “Don’t let your guard down, and don’t rely on e-mail for everything. Just before a real estate transaction is a good time to change all your passwords and make sure you don’t use the same one for several accounts.’’ Dabbs also suggests signing up for two-factor verification whenever possible, so that you need to receive a one-time use code before getting into an account.
“Request a credit freeze with all three credit bureaus, because then you’ll be notified if there’s a credit inquiry on your account,’’ Dabbs said. “Sign up for credit alerts and monitor all your financial statements.’’
Siciliano recommends investing in identity theft protection for an extra layer of security and for restoration expertise.
Title fraud
If your lender and title company are following best practices, you should be protected against title fraud, Hawkins said.
“Keep in mind, though, that all title companies aren’t created equal,’’ she said. “I know of one buyer who purchased a house from a father, and after the closing, it was discovered that the father sold without his son’s permission even though the son was co-owner of the property.’’
In that case, the buyer had purchased the optional owner’s title insurance, as well as the required lender’s title insurance, which paid for the legal battle that ensued.
For protection, Hawkins recommends personal referrals for lenders and title companies and purchasing owner’s title insurance.
Rental scams
As many as 5.2 million US renters have lost money due to a rental scam, according to ApartmentList.com, typically by providing money for a security deposit, application fee, or first month’s rent on a nonexistent rental.
“Scammers can easily steal information about a property listing, whether it’s for sale or rent, and add contact information for themselves,’’ Hawkins said. “They ask for money upfront for a property that they don’t control.’’
Renters should avoid signing a lease or other paperwork without seeing the rental and should not send money until a lease is signed.
Predatory lending
Examples of predatory lending range from a “bait-and-switch’’ on interest rates to being encouraged to refinance repeatedly to being charged exorbitant fees for a loan.
“Thankfully, predatory lending is less of an issue because there are more checks in place since the housing crisis,’’ Hawkins said, “but consumers still need to be vigilant and check the reputation of every lender and mortgage broker.’’
Ask for referrals, read online reviews, and check the Nationwide Multistate Licensing System for information on a mortgage professional before you begin a loan application.
The consequences of letting your guard down during any type of real estate transaction can be financially and emotionally devastating.
“Practice ‘cyber-hygiene’ consistently throughout every step of your real estate transaction,’’ Siciliano said. “Obsessively respond to everyone, and ask them if every request is legit.’’
To report real estate fraud, contact the Federal Trade Commission or the FBI.
Michele Lerner can be reached at [email protected]. Subscribe to the Globe’s free real estate newsletter — our weekly digest on buying, selling, and design — at pages.email.bostonglobe.com/AddressSignUp. Follow us on Facebook and Twitter @globehomes.
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