Updated: Mar 14, 2024

How to Protect Yourself Against Down Payment Wire Fraud

Learn about one of the biggest scams that target home buyers who are about to close on their purchase: down payment wire fraud.
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Your eagerness to close the purchase on a new home could make you susceptible to an increasingly common type of fraud: down payment wire fraud.

Victims of elaborate home purchase transaction email schemes range from first-time homebuyers to veteran home purchasers.

They have one thing in common:

They send a bank wire transfer to someone pretending to be their escrow company or bank.

Here's the sad part:

In most cases, the money is not recoverable.

Down payment wire fraud is the fastest growing form of real estate cybercrime in the United States and even large corporations are not exempt from falling prey.

The crime exploded in fiscal year 2017, according to the Chicago Tribune. In fiscal year 2016, the FBI counted $19 million in wire transfer fraud affecting homebuyers.

That number in 2017 was $969 million, just shy of $1 billion.

Although with new precautions more money is being recovered, criminals involved in these schemes are becoming increasingly sophisticated.

Why Wire Fraud is a Huge Problem

The fraud is alarming because unlike other types of smaller-size transaction frauds, a down payment wire fraud is a large sum of cash.

For many home buyers, a home down payment may be an entire life's savings, an inheritance, or the proceeds of the sale of another property.

The fraud costs almost nothing to implement and the payoff is huge. One successful crime may be the financial cash-in of a lifetime.

The best way to ensure you do not have to deal with the nightmare of a real estate down payment wire fraud is to take every precaution in the purchase process.

Know some of the basic ways this fraud occurs, and what to look out for.

Be prepared to verify emails with phone calls, to confirm details regarding money transactions are accurate.

What You Need to Know

If you are buying a house, you need to know that you are vulnerable, and you are a potential target and victim.

Be alert!

Be cautious about posting about the transaction of social media, as scammers are casting a wide net, trying to find out about pending real estate purchases across the country to attempt to intercept large sums of money that will be transferred via wire transfer.

Who is the real culprit

Before you think it is impossible that this crime could happen to you, know that this crime may have nothing to do with your escrow officer, your bank, or your real estate agent.

The truth is:

Most likely, they will have no knowledge of the scam, or that someone is impersonating them, to try to gain access to your funds.

This is a crime of opportunity, and criminals do not discriminate against victims. Almost all of the victims have at least several thousand dollars, if not much more.

Sketchy emails

Watch out for emails coming from “free” email accounts.

Emails with your mortgage officer or bank may be encrypted, but communications with your real estate agent or escrow office may be much less secure.

In some cases, criminals have followed up with homebuyers via phone, to inform them an email was sent, and verify new wire instructions are accurate.

Be careful!

Here's a snippet of what escrow officer would have in a bold font, bright red warning in an email signature :

Be aware! Online banking fraud is on the rise. If you receive an email containing WIRE TRANSFER INSTRUCTIONS call your Escrow Officer immediately to verify the information prior to sending funds.

This fraud is often called “down payment wire fraud” or “mortgage closing fraud” but it is not unique to mortgages, it can happen with a cash sale or any transaction that involves a wire payment.

Wire transfer details

One thing to keep in mind throughout the purchase processes:

Once you send a wire transfer, the money is gone for good.

When you are sending a wire, you are authorizing the money to leave your account and go directly to the recipient, whether it is the escrow office or a criminal, where they may withdraw it and will likely vanish forever.

Once out of your account, the money is extremely difficult to recover because you authorized the transaction.

How It Works

Fraudsters monitoring the progress of your transaction know that you likely have a large sum of money in a bank account somewhere, and that you will be moving it.

Watch out for any email with wire instructions, and be especially cautious of any email or phone call with changes to instructions.

Picture this scenario:

Becoming a fake

A fraudster may contact your escrow company to initiate a contact.

They may ask rates, request a quote, or even pretend to offer a service.

Or, in an elaborate scenario, they may initiate fake escrow so that they can get their hands on a copy of the escrow office’s wiring instructions.

The goal is to get an exact replica of the escrow company’s email – so that they can steal it. This contact with the intent to recover information is called “phishing” (pronounced “fishing”).

Gaining your trust

A fraudster may have multiple email communications with you to gain your trust.

They will impersonate your escrow officer or real estate agent.

They may hack into their email account, or create a similar email address that’s slightly different.

They may pretend to be an assistant or colleague of your “real” contact.

Stealing your money

In the final step of the fraud scheme, the fraudster will then provide you with “updated” wiring instructions that will change the recipient of your funds, from your legitimate escrow company to the criminal.

The funds will likely go to an offshore account, and be gone faster than you can pick up the phone.

Smart Steps to Take Before Wiring Funds

Never, ever wire money without double checking the wire instructions.

Even if you are given a short deadline to wire the funds, take the time to call the escrow office or bank and verify the transaction.

Beyond calling the number in the email with the wire instructions, look up the escrow office independently.

It’s possible that the scammer created a fake phone number listed in the email, even using the same area code, to intercept your due diligence verification call.

Be smarter and look up the escrow office’s main phone number.

If you simply call the number in the email, you may be calling part of an elaborate fraud ring, who will have someone available to confirm the wiring instructions.

It may seem unlikely that multiple people would collaborate together on a crime, but this is common. Each of the individuals in the crime will work together and receive a percentage of the payout. In June 2018, the FBI busted 23 people involved in an international email fraud scheme in Florida.

Be Email Smart

Pay close attention to emails.

If anyone involved in your transaction contacts you from multiple email addresses, this is a red flag.

Although many fraudulent communications seem legitimate and authentic, in some cases there are subtle warning signs. Some signs of suspicious emails to watch for:

  • “Urgent action required” in the subject line
  • Link to a fake website or “page not found”
  • Unofficial “from” address
  • Vague subject line
  • Generic greeting such as “Dear Member” or awkward language, repeated use of the word “please”
  • Spelling errors, poor grammar, or part of the email simply doesn’t make sense.
  • Incorrect company website domain such as “chicagoezcrow.com” instead of “chicagoescrow.com”

Verifying the authenticity of an email can be done with a phone call to the recipient.

Look up their phone number individually, or get from them in person if possible.

Call the individual and ask them to verify they sent the email and the specific time you received it.

Investigation of Email Fraud Crimes

Unlike other attempts of crime, where a criminal maybe prosecuted for an unsuccessful attempt (attempted fraud), unsuccessful attempts to perpetuate the crime are often ignored, possibly reported as spam emails, but further actions is usually not taken.

Agencies responsible for investigating email fraud crimes include the Justice Department, the Department of Homeland Security, the Treasury Department and the US Postal Inspection Service.

In some cases, you may need to contact local law enforcement.

If You Become A Victim

If you or a loved one becomes a victim, it is important to shift the focus to recovery, healing, and prevention of a repeat occurrence.

It is also important to report the crime.

Providing financial information helps the FBI in locating funds for possibly recovering the money and assists in preventing others from being further victimized.

  1. Report the scam to your regional FBI office. Say that you’re a home buyer and that you’re a target of a “down payment wire fraud” or “email account compromise” in which a fraudulent individual instructed you to wire down payment money to a fraudulent account. Once you provide all information to the FBI, the bureau may be able to help return or freeze the money.
  2. File an online complaint with the FBI’s Internet Crime Complaint Center known as IC3.
  3. File a complaint with the FTC by selecting Scams and Rip-offs, then Impostor Scams.

If you do make the critical mistake of sending a wire to a criminal in a down payment fraud scheme, recovering funds lost to wire fraud can be difficult to impossible, and may require you to retain an attorney and file a lawsuit at your own expense.

In many documented instances, large sums of money have been transferred via wire, never to be recovered.