Is That Even Legal?
Is That Even Legal?
Real Estate Wire Fraud is on the Rise!
Could you lose $400,000 to a sophisticated email scam? Join us as we uncover the alarming rise of wire fraud in the real estate industry with Angelika Dobler, an experienced litigation and appellate attorney specializing in real estate litigation. Angelica shares a distressing case where a buyer fell victim to a sophisticated scam that led to a massive financial loss. With FBI statistics pointing to a significant surge in these types of crimes, we discuss how scammers spoof email addresses and exploit the quick pace of real estate transactions to deceive unsuspecting buyers and sellers. Learn why the real estate sector is particularly vulnerable and understand the critical need for heightened awareness and preventive measures to protect your investments.
Discover actionable best practices for preventing wire fraud from disrupting your real estate transactions. Angelica and I emphasize the importance of due diligence, secure verification methods, and face-to-face conversations. We also delve into the role of secure servers and consistent procedures in safeguarding against fraud. Additionally, we explore the potential for insurance coverage and the immediate steps victims should take to mitigate their losses, such as contacting their bank's fraud department and the FBI. This episode is packed with practical advice and insights that could save you from becoming the next victim of wire fraud. Tune in to protect your hard-earned money and ensure your real estate transactions are secure.
Is that even legal? It's a question we ask ourselves on a daily basis. We ask it about our neighbors, we ask it about our elected officials, we ask it about our family and sometimes we ask it to ourselves. The law is complex and it impacts everyone all the time, and that's why we are here. I'm attorney Bob Sewell and this is season five of the Worldwide Podcast that explores that one burning question. Is that even legal? Let's go.
Speaker 2:Today's guest in the show is Angelica Dobler. She's a litigation attorney. She emphasizes her practice on real estate litigation. She's also an appellate attorney, so welcome to the show.
Speaker 2:Thank you, bob. So I want to tell you a story that's been happening or happened out there in the world and I want you to tell me what you think about it. So a sophisticated woman a few weeks ago told her story at MSNBC and her story was that she went out negotiated for a new home. It was her dream house and she was super happy that she won the negotiation. She's now dealing with the title company and she's working on closing the transaction.
Speaker 2:And she gets an email from the title company and the email says wire $400,000 to this location and at this big bank. And she says sounds fantastic to herself. She says that and she wires the funds immediately. And the next day she gets another email. This time it. She wires the funds immediately and the next day she gets another email. This time it's from the real title company. Go ahead and wire money to this account. And she says what are you talking about? I just did it yesterday and when she unwound, what happened? Apparently someone's email server probably title companies had been spoofed. There was a bad actor watching the server somewhere and they spoofed. The email made it look like it was coming from the title company, the email saying why are these funds the bad guy? Email saying why are these funds the bad guy? And she did because she just assumed it was a real transaction. So is this a real problem or is this a one-off?
Speaker 3:Oh, bob, this is an increasing problem and wire fraud, particularly within the real estate industry, continues to increase as a problem. There are numerous types of scams involved, trying to take the hard-earned funds of buyers and sellers, those involved in trying to purchase a home right. In trying to purchase a home right, it's supposed to be a happy, momentous occasion, and then they get the crushing reality that they've accidentally, inadvertently, wired it off to somebody else and that they're the victim of a fraudulent scheme.
Speaker 2:But they've been duped, right. I mean, it's not an accident.
Speaker 3:Right and usually so. These are increasing. According to FBI data, scams involving fake emails in real estate deals have exploded over the last decade. So some of the statistics from the FBI are it was about $9 million in losses to the US public in 2015 to over $446 million in losses to the US public by 2022. And that number is just projected to increase. Because, ultimately, wire transfer is akin to transferring cash and so these are difficult to track, difficult to unwind once the wire transfer is effectuated, and so, consequently, it provides really an opportunity for scammers to engage in the fraud.
Speaker 2:That's amazing and they're using this. You know, I'm assuming that this is the type the way that fraud happened. Spoofing the title company's email is pretty common. Like that's how the frauds are happening. Is that what you're seeing out there?
Speaker 3:Yeah, that's definitely a very common way in which the wire transfer fraud is occurring. It can be emails that are just a letter off from somebody else's email that you've been interacting with.
Speaker 3:It could be actually spoofed, as you said. So you look at it and it looks exactly the same as the email that you've been engaging with somebody at the title company, for instance. There's multiple ways in which these sorts of schemes manifest themselves, but they all, ultimately, are focused on giving the incorrect account number, wire transfer, routing numbers to the consumer and trying to dupe the consumer into sending the large amount of money to the wrong individual.
Speaker 2:That's terrible. This wire transfer fraud, I understand, is hitting law firms. It's hitting real estate companies. It's hitting any sophisticated business that happens to transfer a lot of money.
Speaker 3:Yeah, and so that's what you really see it. A lot in the real estate. Realm and real estate is particularly vulnerable in terms of that. It's attractive for scammers because what you have in real estate is that you have data that's readily available about property listings via the MLS or the county recorder.
Speaker 3:A lot of that information is public information and so, once again, very easy and accessible to a scammer. You also have, within real estate, you have transactions involving large sums of money. So consequently, right, making it very attractive for a scammer, because if you can get a one large sum, it's going to be worth quite a bit more than doing all the same effort for smaller sums. You also have in real estate, you have a lot of varied parties involved who are sharing information about the closing right. Like, think about, in a real estate deal, you've got the buyer and the seller, but you also have their real estate agents and brokers. You have a title company involved. Potentially you have lawyers involved, so you have up to 10 people exchanging information and emails with one another in order to try to get the deal closed.
Speaker 3:And you also have this kind of time pressure to try to get the deal closed, and you also have this kind of time pressure of trying to get the close of escrow right and getting the deal done. And so those pressures all lead to being kind of a ripe opportunity for a fraudster, never mind the fact that a lot of these fraudsters, although they might be, they're targeting potentially the title companies or the attorneys and law firms. Most of the time, what they're doing is they're targeting the buyers and sellers themselves, ie members of the public who are just really unaware about the potential for wire fraud. Right, these are potentially first-time homebuyers, or even if you know, how many homes does one does the normal member of the public buy and sell in their lifetime?
Speaker 2:This is something that's only Two, maybe three.
Speaker 3:Right, yeah, maybe you just have kind of you know, individuals who are doing an overwhelming process and the fraudster is taking advantage of the average consumer's lack of knowledge.
Speaker 2:I feel like, though, I feel like there's something we can do. I mean, well, let me just back up. In your typical romance scam, you wanna say you wanna blame the victim to some degree, right? I mean, you know it's not the victim's fault, but you're like, really, you never met this person, but you think you're in love and you're agreeing to send them money. You're not seeing this problem, you're not catching it in advance. But this is ensnaring people who aren't typically vulnerable, right? This is ensnaring the most sophisticated of us. So what do we do?
Speaker 3:Well, this is what I tell everyone you need to do a verification call, because typically this is how the scam works is that you'll get an email, potentially from the real title company, and then, like you know, an hour later you'll get a follow up or, even quicker than that, a follow-up oh, actually send it to this account, and then that's the bad email, or even the story that you opened with, where she actually got it in advance, the bad email, and then the real wire transfer email came later, right, so you can't even trust necessarily the timing. So what you need to do is you need to do this verification call where you are calling whoever it is who's requesting the funds. You are calling them and confirming the account information and you're actually talking to them on the phone. You're not just doing an email, you're not doing a text message. You are calling and talking to somebody who you have spoken with in the past about it.
Speaker 3:Ideally, right, and that's something that's also. You can't just take the email that the wire transfer information came with. Right, because of course, the scammer is going to put their own phone number in there, because they're going to say, ah, this consumer, they've been told to do a verification. So they're going to call this number potentially, but then you're just calling the scammer, who's, of course, going to verify that their false account number.
Speaker 3:So, you've got to do your own independent number verification right. Find that independent number, one that you've been using in the past, go to the whatever the bank's website, the title company's website, look it up on their actual website and call that number and get directed and in contact with that particular person and then confirm it and then send it. So it is a whole nother step on a whole lot of steps involving the real estate transaction. It's just another thing to add to the checklist, but when you're talking about the sums involved here, it is an easy step to take in order to make sure that you're not going to have just more headache down the line.
Speaker 2:Yeah, I like this idea in theory, but right, you heard that. But it's getting the information out to do this verification call. Seems to me that a lot of ignorant people to the scam out there. It seems to me that it's going to be hard to make this a regular practice and might increase times. But tell me what, tell me what you're thinking with this yeah, well, and this is this is the thing.
Speaker 3:so, those of you who are regular podcast listeners, you're obviously upper echelon individuals Of course the savviest of individuals and it might be that you know some of you are real estate professionals who are listening in, and that's something that I've seen is a lot of you know real estate agents or brokers now have as a disclaimer even within their email signatures they say beware wire fraud scams and they have these warnings and you have these warnings and you even see that in the closing packet of the documents, right Like wire frauds and issue and exclamation points and bold, big font language about that. But that's the thing is that these disclaimers aren't, as they're, easily ignored by the common consumer because the home buying process is overwhelming, let's face it. You go to closing how big's the packet closing that you get, that you have to sign and notarize.
Speaker 2:Hundreds of pages and the person explaining it. I remember when I bought a house, the person explaining it was like and this document says this? And I'm like no, it doesn't. I've read these documents before you know. Maybe not that particular one, but I've read enough of these. That's not what it's talking about. It's talking about this other law. Oh oh, it's good to know. It's like no one's read these things except for the person who drafted them.
Speaker 3:No, one's read these things, except for the person who drafted them.
Speaker 3:Yeah, so that's where I guess I call upon those involved.
Speaker 3:You know, in the real estate profession is warn your clients very specifically like face to face when you're meeting with them, especially once they've made the offer and that, look, we're going to go through this closing process.
Speaker 3:As a part of that closing process, you're going to be required to wire tens of thousands, if not hundreds of thousands, of dollars, and so this is what you're going to do.
Speaker 3:Before you do that is, you're going to call me at this number and you have that face-to-face conversation and you have your client, like you know, if your phone number is not in your, if my phone number is not in your phone right now, you're going to put it in and this is the number you're going to call to verify that this is the proper wire account information, right? You do that due diligence for your client on the front end, so the client's not overwhelmed with the whole host of paperwork and all the requirements at the moment of closing. And so that's going to help is that we got to take it upon ourselves as the professionals who are aware of these problems, who know how best to hedge against these problems and to get that out to the public. Or if you're a member of the public and you hear your friends buying a house talk to them about wire fraud, say hey, you should listen to Bob's podcast.
Speaker 2:No, I mean-.
Speaker 3:But also just like let's just hey, have you heard about wire fraud? Do you know it's an issue? Because that's the thing that really is that so many consumers just don't even realize that this is a potential scam or that there's an issue at all. And that's where fraudsters then can thrive, because they're taking advantage of ignorance.
Speaker 2:The real estate professionals have to be on their A game. The sales agent, the buyer's agent, the title companies have to be on their A game. They need to know that exists and, to that extent, real estate companies and title companies and professionals who deal with wire transfers they need to have secure servers, real professionals, real security effort on their servers and have discussions, real security effort on their servers and have discussions. I can imagine that real estate professionals typically have their go-to title company people. Right, like it says in the contract, we will use Frank Johnson at XYZ title to close this transaction. They have that written into their contracts so they know in advance. So well, frank Johnson needs to have a system. Remember, this is how it's going to work every single time. Otherwise, this is going to happen and continue to happen until people figure out that we have to protect ourselves from these fraudsters. What about insurance? Can we insure against this?
Speaker 3:You know that's going to be. Yeah, absolutely. But just because insurance exists doesn't mean that that is a whole other rigmarole.
Speaker 2:Yeah.
Speaker 3:A verification phone call solves going down that road at all, right, and so, yes, there are mechanisms you don't want all right, and so, yes, there are mechanisms. You don't want those right, and they're fail-safes in a way. But ultimately that's going to amount to real money lost and headaches and stress and non-monetary issues. So do a verification phone call.
Speaker 2:Yeah.
Speaker 3:Advise your clients to do verification phone call. Yeah, advise your clients to do verification phone calls. Prevent the issue from ever starting. Right, it's right. It's like the best Right. Prevention is the best cure, right.
Speaker 2:Yeah, the ounce of prevention, yeah, sound of cure, or something like that. Yeah, I could not agree more. There are, you know, and I happen to know there are insurance companies that will insure against this. But I can imagine the way insurance companies work that they'll insure it once and then after that they're going to drop you. You know, like you know, they're going to drop you at that point after that one time occurrence. I could imagine I don't know that for certain going to drop you at that point after that one time occurrence. I could imagine. I don't know that for certain.
Speaker 2:But if I was an insurance company and it happened once, I think I'd say I think you're done. The next time we re-upped your insurance we would say I think we're done. And because it really comes down to do, you have the assistance in place to cover yourself and if you have a track record of bad transactions, if you do it once, okay, maybe Definitely. The second time that happens, no insurance, you're uninsurable. So it's a hard thing. So let's say, angelica, I'm a victim, I've just transferred my money, I just figured out that I lost it. What do I do? What's my first step?
Speaker 3:You want to contact your bank ASAP and potentially the bank that received the wire if you know that you want to get in contact with them. Contact the fraud department of the receiving bank in particular to say I've been a victim of wire fraud. I inadvertently sent it to this account because there was a scammer who sent me the improper wire transfer information. That's the first and primary step, and the second step that you're going to do is contact the FBI. The FBI actually has an online complaint form for those who are victims of wire fraud and, in general, like internet crimes like that. They'll give you a case number. They'll investigate it. The FBI does investigate and attempts to claw back these funds. They have a 71% success rate, which is pretty good, but not a percentage that I want to take a risk on.
Speaker 2:The FBI has a 71% success rate. We contacted them. Do I contact an attorney?
Speaker 3:You absolutely could contact an attorney, especially if you're the title company real estate professional whose email was spoofed. You need to be contacting an attorney, potentially know your own liability and what your role in it was, and to make sure that you're contacting also your IT and security people to make sure that nothing's been compromised on your server's end. And so it really depends on who you are in terms of whether you're the individual who's been defrauded or the professional whose client has been defrauded. There's potential liability there and, depending on the facts and circumstances. And so if you need an attorney, I'm Angelica Dobler, I'm at Davis Miles. I'm at Davis Miles and you can call me at 480-344-4989. That's my direct line. But ultimately, act fast is the response to all of this in terms of if you've been that victim of wire fraud, the faster you act, the more likely it is that money is going to be able to be recovered. But sometimes you don't even know until it's been a day or two later. But then do it as fast as you can.
Speaker 2:Yeah, you know this wire transfer fraud is prevalent. We need to take it seriously. We need to really guard against it and shut these fraudsters down quickly. So it goes away. So, angelica, thanks for coming on the show.
Speaker 1:Thank you, bob. It's been a pleasure. I really enjoyed it to. In 100 countries and available on virtually all podcast platforms. Leave us a review, send us some show ideas and do so at producer at evenlegalcom. Don't forget, as smart as we sound and as lovable as we are, we are not your lawyers and we are not giving you legal advice. But if you need some legal advice, get some. There are some great lawyers out there and we are always ready to help. See you next advice. But if you need some legal advice, get some. There are some great lawyers out there and we are always ready to help. See you next time.