By Gary Tasman
Whenever a disaster like Hurricane Ian occurs, fraudsters seem to come out of the woodwork, offering to repair roofs, remove trees, or expedite government assistance. And while most of us are on high alert to these types of scams, there are many types of fraud that occur every day without our awareness. One of the most common is real estate fraud, which can impact both residential and commercial property owners, often with devastating consequences.
In 2021, real estate and rental cybercrime losses totaled $350 million, an increase of more than 64% from the previous year. More than 11,500 victims were targeted by these scams, to the tune of more than $30,000 in losses per victim.
There are multiple types of real estate fraud that bad actors can commit to dupe buyers and sellers. These include wire fraud, land fraud, mortgage fraud and rental fraud. While all of these are significant, we’d like to focus specifically today on wire fraud and land fraud, which have become two of the most predominant forms of deception in the real estate industry.
What is Real Estate Wire Fraud?
Put simply, wire fraud is a scam that involves the use of telecommunications– and in real estate, this typically means email, although it can also occur via fax, phone, or even text messaging. In real estate, the most common form of wire fraud will trick a buyer into transferring a large sum of money– such as a good faith deposit, downpayment, or closing costs– to a fraudulent bank account. One survey of title agents indicated that wire fraud attempts occurred in roughly 33% of all real estate transactions in 2020.
How does this happen? If you’ve ever purchased a property, you understand how complex the transactions can be. They can involve multiple realtors, mortgage companies, title agents, and even attorneys. As the closing date draws near, there is often a flurry of emails and calls while the final details are worked out. Scammers take advantage of this frenetic situation and send a legitimate-looking email to the buyer, stating that the wire transfer instructions have changed and offering new instructions. The buyer, eager to expedite the closing, wires the money as directed, and doesn’t realize until the next day that the legitimate account never received the funds.
Typically these scams first start through a phishing email. Bad actors will send malicious emails to realtors, brokers, attorneys, title agents and similar parties, in the hopes that someone will click on a phishing link and download spyware to their computer. “Once that email is clicked on, you might as well have invited the fraudster to sit behind you and just watch everything that you do,” says David Lanaux, President/Owner of Title Professionals of Florida. “They look at what’s going on, they see the communications getting passed back and forth between themselves and the client, and when the timing is right, because they know when the closing’s going to happy, that’s when they interject and send that client new wire instructions, new information that changes the whole course of the transaction, and before you know it, that money is gone.”
Lanaux has become very familiar with real estate fraud. On the most recent episode of our “What’s Developing in Southwest Florida?” podcast, Lanaux revealed that his company has caught nine attempts at fraud in just the last two months, although not all were wire fraud attempts. According to Lanaux, the Southwest Florida real estate market is particularly susceptible to wire fraud because close to 50% of real estate transactions in our area are cash sales, making scams like these a lucrative proposition.
What is Real Estate Land Fraud?
Land fraud can also impact both residential and commercial transactions. In this scam, a huckster represents themselves as the owner of an undeveloped property and contacts a real estate agent or broker to sell it, often at a reduced price to encourage a rapid sale. This scam is also sometimes called title fraud.
Land and title fraud are most common when the rightful property owner lives out of the country or does not regularly check on the property. An example of this happened in Cape Coral in late 2020, when an out-of-state couple purchased a vacant lot for less than $8,000, below its assessed value. The owner, who lived in France, discovered that her property had been sold out from under her when she didn’t receive her annual property tax bill. She was also bilked out of a Port Charlotte property.
Preventing Real Estate Fraud
Real estate industry professionals, as well as buyers, sellers, and property owners can all take steps to reduce the incidence of real estate fraud.
Cybersecurity needs to be a top priority, as just one malicious link can open the door for scammers. Hackers can and will target anyone involved with real estate transactions, including lenders, attorneys, real estate brokers and title agencies. The Federal Trade Commission offers a number of resources to recognize and avoid phishing scams. Professionals should also alert their clients to be wary of any email that contains wire transfer instructions or other requests for financial information.
Real estate agents and brokers should be familiar with the red flags that are common in land fraud attempts. These include sellers who appear out of the blue and are eager to unload a property quickly for less than market value. Other red flags include sellers who are located out of the country or who only want to communicate over email. Lanaux recommends asking for seller identification up front and working with your title company to verify the seller’s credentials.
Buyers must be skeptical of any email or text message they receive about wiring a down payment or deposit. If they receive an email with new wire transfer instructions, they should immediately call the purported sender and confirm before clicking any links. Additionally, buyers can provide themselves with peace of mind by doing their own independent research on a property before making a purchase. Most property records are available through their county property appraiser’s website.
Finally, property owners and sellers can register for fraud alerts, which will notify them when a deed, lien, mortgage or other land record is recorded with their county records department. Lee, Collier, and Charlotte Counties all offer this service.
Real estate fraud is a billion-dollar “business” that can target even the most careful and experienced buyers and sellers. Working with a professional team of commercial property experts can help you mitigate the risk of falling into a fraudster’s trap. Are you ready to work with a team that understands the potential pitfalls of your commercial real estate transaction? Contact the professionals at Cushman & Wakefield | Commercial Property Southwest Florida. You can reach us by calling 239-489-3600 or by completing the form below.
Are you ready to work with a team that understands you? Contact the Commercial Property Experts at Cushman & Wakefield | Commercial Property Southwest Florida. You can reach us by calling 239-489-3600 or contact-us.