Property Deed Fraud Prevention

  • January 24, 2023
  • 3 min read

Over the past decade, instances of deed fraud in real estate transactions have emerged as a significant threat, capable of wreaking havoc on the finances of both buyers and sellers. In this blog post, we unravel the workings of deed fraud and offer practical steps to shield yourself from falling victim to this cybercrime.

Understanding Deed Fraud: A Financial Nightmare

Deed fraud occurs during real estate transactions when cybercriminals exploit the multiple fund transfers inherent in property deals. Typically, wire transfers are employed during closings, involving payments from buyers to title companies, disbursements from title companies to sellers, mortgage payments, and real estate commission transfers. It’s at these junctures that cyber thieves intervene to intercept communications and manipulate wire transfer instructions.

A Real-Life Example: $160,000 Lost

In a chilling example, a title company fell victim to a skilled hacker who altered the account number on a payoff statement. The unsuspecting seller, expecting $163,000 to pay off their mortgage, never received the funds. Instead, the money was diverted to a fraudulent account. This incident underscores the vulnerability of real estate transactions to cyber attacks.

Preventing Deed Fraud: The Test Transaction Method

Protecting yourself from deed fraud doesn’t have to be complex. A simple yet effective method involves performing a test transaction before executing the actual wire transfer. For instance, if you’re a buyer wiring a significant down payment, obtain the wiring instructions from the title company. Prior to sending the substantial amount, conduct a test transaction for a minimal sum—$10, $20, or $100. Confirm with the title company that they received the test wire transfer.

The Power of Repeat Transactions: Ensuring Accuracy

Once the test transaction is successful, you gain confidence in the accuracy of the provided account number. When it’s time to transfer the actual amount, go back to your bank and instruct them to wire the money to the same verified account. This repeat transaction acts as a fail-safe, minimizing the risk of errors or malicious alterations to the wire transfer details.

Enhanced Communication: Verifying the Recipient

Deed fraud often involves cybercriminals intercepting emails and posing as title companies or other stakeholders. To counter this, communicate directly with the title company through phone calls or in-person visits. Ensure that the contact details align with the legitimate information associated with the company.

The Cost of Prevention: A Worthwhile Investment

While the test transaction might incur a nominal fee and an additional visit to the bank, the investment pales in comparison to the potential loss of substantial funds. Safeguarding your life savings against six-figure losses justifies the inconvenience and added effort.

Empowering Yourself Against Deed Fraud

As real estate transactions continue to be prime targets for cybercriminals, taking proactive measures becomes paramount. By adopting the test transaction method, verifying wire transfer details, and maintaining direct communication with involved parties, you fortify your defense against deed fraud. In an era where financial cyber threats are rampant, empowerment through vigilance is the key to securing your real estate investments.

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