September 30th, 2022
Every real estate transaction is a complicated process that has a lot of moving parts. And, crucially, large sums of money are being transferred. So it should come as no surprise that escrow fraud, and real estate fraud in general, are common crimes that hurt hundreds of thousands of Americans every year.
However, there are ways you can protect yourself from ever becoming a victim. That is what this article is supposed to help with – you will learn what escrow fraud is, how it works, and the actionable steps you can take to protect yourself. So let’s get to it.
In its simplest form, escrow fraud is when cybercriminals attempt (successfully or not) to get people to transfer money to them by pretending to be their escrow agent or company. After the transaction, the fake escrow agent/company disappears and the money is gone.
Another form of an escrow scam is when cybercriminals attempt to steal personal information, with the ultimate goal being identity theft. In such circumstances, you may not lose money by sending it to the scammers, but loans and credit cards may be taken out in your name or money may be withdrawn from your account.
There are three common tactics that scammers use:
These three fraudulent tactics can be used independently or in conjunction. However, the most common method that initiates escrow fraud is a fake email.
Imagine you are selling or buying real estate. You are most likely using escrow services as an intermediary for the transaction. A certain amount of funds needs to be put into escrow, such as closing costs, homeowners insurance, etc. You receive an email that appears to be from your escrow company or agent, with instructions on how and where to wire the money.
You may even receive an email that asks you to verify your bank account details, with additional links (possibly to a fake website) or attachments. These links or attachments will contain viruses intended to steal your personal information. With that information, the scammers may steal your identity for the reasons mentioned above or use it to make the escrow fraud harder to detect.
Selling or buying a house is a stressful process with a lot of moving parts, which is why real estate fraud is so common. The scammers are counting on you being preoccupied and less attentive than you would be otherwise. They will set up an email account that is similar to the one your real escrow agent uses.
For example, let’s say your agent’s address is JDillion@exampleescrow.com. You may receive an email from JDillion@exampleescrow1.com or JDil1ion@exampleescrow.com. When you are paying attention, these differences are obvious. But when you are preoccupied with other things, it is easy to dismiss them. The emails will likely also use the logo of the true company you are dealing with.
The base version of escrow fraud would be if the fake email directly asked you to wire money to a certain account. However, internet escrow scams are usually more complex. The scammers may create a website that looks legitimate at first glance. Before you receive the email, you may get a message or even a call from your escrow agent’s “secretary”.
They will inform you that your agent will contact you to verify your information and lower your guard by doing so. Because you are not being asked to send money, you don’t think much of it and do as you are instructed. In truth, the scammers hack your accounts and have access to your information and your conversations.
They can find out how much money you agreed to send to your escrow agency, by which date, and other information that should be confidential between you and your agent. In the near future, you get a follow-up email directing you to transfer the money before the agreed date.
It may be because the buyer has gotten another offer and the deal will fall through unless you hurry. Their goal is to rush you and stress you out so that you don’t do your due diligence. Because they hacked your accounts, they know the exact amount of money you agreed to send.
As the amount and initial date are correct (as well as other information you shared with your escrow agent), everything seems legitimate at a cursory glance. They tell you the account you should wire the money to and, in fear of losing the property, you do it.
The scammers will withdraw the money as soon as it is sent and close the account. By the time you realize what has happened, the scammers are long gone. Now, you may think that escrow fraud sounds so simple that it could never happen to you. But don’t be so certain – practice has shown that escrow fraud happens often and should not be taken lightly.
First and foremost, be extremely careful when giving out your personal or financial information, particularly in the course of a real estate transaction. Further:
In case you do fall victim to escrow fraud or even suspect a scam, there are government entities you can contact:
The easiest way to avoid escrow fraud is to hire an escrow company you trust. Lightspeed Escrow can help make all of your transactions run efficiently and quickly. You will be provided with an escrow agent that will guide you through the process. They will always be available to you for whatever questions you need answered.
Contact us if you wish to know more about our escrow services.