Home Closing Scams: How to protect yourself and your closing funds

Escrow Tip from North Orange County Escrow Corporation

Closing on a new home can be one of your most memorable life moments. It can also be a stressful experience, especially for first-time homebuyers.   Even if you are an experienced home buyer or a first-time home buyer, BEWARE.  Scammers are taking advantage of eager homebuyers by seeking to divert their down payments and closing funds into fraudulent accounts. 

The FBI has reported that scammers are increasingly taking advantage of homebuyers during the closing process. Through a sophisticated phishing scam, they attempt to divert your closing costs and down payment into a fraudulent account by confirming or suggesting last-minute changes to your wiring instructions. In fact, reports of these attempts have risen 1,100 percent and an estimated loss of nearly $1 billion in real estate transaction costs in just the last three years

While it’s easy to think that you may not fall for this kind of scam, these schemes are complex and often appear as legitimate conversations with your real estate or settlement agent. The ultimate cost to victims could be the loss of their life savings. 

Here’s what you should know and how to avoid it happening to you.

How it works

Days before you’re scheduled to close on your new home, scammers send an email—posing as your real estate agent—with last-minute changes for wiring or electronically transferring your down payment and closing funds. If the scammers are successful, it can be very difficult to get your money back.

How to avoid a mortgage/homebuying phishing scam

  • Identify two trusted individuals to confirm the closing process and payment instructions.

Ahead of your mortgage closing, discuss in person, or by phone, the closing process and money transfer protocols with these trusted individuals (realtor, settlement agent, etc.). Be cautious about exchanging any details about your closing over email.  

  • Write down their names and contact information. 

Who will be your point of contact?  Real estate agent name and phone number along with the name of your escrow/settlement company and escrow officer.

  • Before wiring money, always confirm instructions with your trusted representatives.

Beware of instructions contained in an email with last minute wiring instructions.  Verify the closing instructions, including the account name and number, with your trusted representatives either in person or by using the phone number you previously agreed to.

  • Avoid clicking links or phone number links in an email. 

Again, scammers can closely replicate the email address, phone number and format of an exchange from your agents.  Avoid clicking on any links or downloading attachments without first confirming with your trusted representatives.

  • Do NOT email financial information. 

Email is never a secure way to send financial information. 

  • Be mindful of phone conversations. 

It may be difficult to identify whether a phone call is fraudulent or legitimate.  Scammers may call and ask you to verify your personal or financial information.  When in doubt, always refer back to your trusted professionals to confirm whether it’s legitimate. 

What to do if it happens to you

  • Contact your bank or wire-transfer company immediately.

Ask for a wire recall.  Reporting the error as soon as possible can increase the likelihood that you’ll be able to recover your money.

  • File a complaint with the FBI.

Contact the FBI’s Internet Crime Complaint Center at www.ic3.gov .

While it can be easy to think you’ll never fall for a scam of this nature, the reality is that it’s becoming more and more common, and the results can be disastrous for eager homeowners. By being mindful and taking a few important steps ahead of your closing, you can protect yourself and your loved ones.

To learn more about the closing process, including how to prepare for your closing and common pitfalls to avoid, check out the website of Consumer Financial Protection Bureau at: https://www.consumerfinance.gov/owning-a-home

Information provided by Consumer Financial Protection Bureau – June 2019