Recent Trends in Real Estate Escrow Fraud
Real estate transactions have always been a prime target for fraudsters, but the sophistication of their schemes has reached alarming levels. Earlier this year, we encountered a fraudulent seller situation—our first involving impersonation. Thanks to the vigilance of our team and escrow company, the scheme was detected and stopped before entering escrow. This experience taught us the importance of understanding the trend of such fraud to protect our clients.
To gain deeper insights, we asked for guidance from the Title Guaranty Escrow team, Matt Takata/Senior VP, Devon Kikukawa/Kona Branch Manager, and Rhett Thomas/Account Manager. Here’s what we learned about the current trends in real estate fraud and how to safeguard the transactions.
The Growing Threat of Real Estate Fraud
Escrow fraud has become increasingly prevalent. Cybercriminals typically target vacant lot properties, especially those lots that don’t belong to well-known subdivisions, to avoid detection by neighbors. A recent trend in Hawaii involves fraudsters impersonating Japanese property owners living in Vietnam and American sellers residing in London, often with forged notaries and Apostille documents.
In our case, the fraudulent seller posed as the vacant lot owner in an older Kona subdivision where the transaction is very rare. He was very convincing, but careful scrutiny and collaboration with the escrow officer helped uncover the deception before actual harm. The authorities from the mainland got involved, as well as real owners and attorneys. It is much more complex than I imagined to identify a property owner who lives on the other side of the continent and whom you have never met!
Evolving Tactics of Cybercriminals
- Business Email Compromise (BEC):
BEC crimes are among the most common forms of escrow fraud. In 2023 alone, BEC-related losses in real estate transactions totaled $446 million. Criminals manipulate email communications to redirect funds, exploiting property transactions' complexity and high stakes. - Seller Impersonation:
Fraudsters are now using AI tools to impersonate individuals convincingly. Title Guaranty warns that voice and video deepfakes can be created with just seconds of audio or video footage. We have entered an era where voice is easily cloned. A tip: during video calls, ask participants to move or interact with objects to confirm they are real.
1. Verify Communication Channels:
- Double-check email addresses for subtle changes, such as a legitimate name followed by a Yahoo or Gmail domain. Title Guarany Team said they see this type of scam all the time. We use the Compass domain. Title Guaranty uses the TGHAWAII.com domain. Please be careful when professionals use Yahoo or gmail.
- Never use contact information from a suspicious email; independently verify details by contacting trusted parties. Call your agent if you think something is off.
- Stay vigilant for unexpected changes in contact information or payment instructions. The wire instructions and escrow numbers never change during the transaction. There will never be sudden changes. When in doubt, call your agent or escrow officer.
2. Secure Communication Practices:
- Avoid free Wi-Fi for sensitive discussions. Instead, tether to a mobile device or use secure, private networks.
- Use unique passwords for each platform—real phrases work best for memorability and security, according to the cyber security expert I met (not verified info). Make passwords unique.
- Enable two-factor authentication (2FA) for added protection.
3. Confirm Wire Instructions:
- Always call your escrow officer to verify wire instructions before transferring funds. Or call the agent so we can alert the escrow officer.
- After the transfer, confirm receipt directly with the escrow company.
4. Explore Secure Payment Alternatives:
- When possible, hand-deliver cashier’s checks instead of wiring funds. While challenging in Hawaii due to remote transactions, this method remains an option for local clients.
- Consider remote online notarizations (RON) with multi-step identity verification, which Title Guaranty believes to be highly secure.
Fraudsters thrive on urgency and confusion, so take your time to verify all information before proceeding with financial transactions. If something feels off, trust your instincts and consult with your real estate agent or escrow officer. By staying informed and cautious, you can protect yourself and your investments from becoming victims of these schemes.
We will do our best to take all precautions to protect our clients.
Thanks for your invaluable insights and information, Mahalo, Matt, Devon, and Rhett.
Here are some good online articles about the topic.