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Scammers target homebuyers’ closing costs: Here's how to protect yourself
Bill Moak, Consumer Watch Published 4:00 a.m. CT June 14, 2019
Closing the sale of a home is an exciting, nerve-wracking process. Especially if it’s your first home, the terrain can be unfamiliar and full of surprises. But as you near the end of the process and are anxious to get in to your new home, scammers may take advantage by trying to get you to divert money intended for closing costs.
The Consumer Financial Protection Bureau recently issued a warning to consumers to watch for this scam, which has risen more than tenfold in the past three years. According to the CFPB, scammers stole about $1 billion in real estate transaction costs in 2017 alone.
The scam relies on the urgency of getting closure to the buying process by sending you a phishing email to get you to change your wiring instructions for closing costs. These cash-rich transactions are enticing to scammers, so they have focused their attention on them in the past few years. Once funds are wired, they are often unrecoverable, and many people have had their life savings wiped out with a keystroke.
Be cautious with email when buying a home, to avoid
Be cautious with email when buying a home, to avoid getting scammed out of closing costs. (Photo: David Sacks, Getty Images)
Typically, the consumer gets an email purportedly from their real estate agent or closing attorney, saying “urgent: new instructions for wiring your settlement funds”, and saying that there are last-minute changes to the process for submitting your closing costs. The email contains false instructions for wiring or electronically transferring your settlement funds.
Scammers are doing their homework to identify parties in real estate transactions, and may use the email addresses of realtors, closing attorneys and other real estate professionals to make the email look legitimate.
Tips to avoid becoming a victim
To avoid being a victim, the CFPB has this advice.
Know whom you can trust. “Identify two trusted individuals to confirm the closing process and payment instructions,” the CFPB advises. “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.).”
In addition, be careful about exchanging any information over email. “You may want to use this opportunity to also create a code phrase, known only by these trusted parties, if you need a secure way to confirm their identities in the future,” notes the agency.
Before wiring money, always confirm instructions with your trusted representatives. Don’t follow instructions in an email. 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 using phone numbers or links in an email. Like all phishing email scams, this scam relies on the recipient clicking on links or calling specific numbers.
Don’t email financial information. Email can be hacked or monitored. If it’s required that you submit documents, the agent or closing representative should give you access to a secure service to submit them electronically.
Be mindful of phone conversations. Scammers are pretty good about making themselves believable over the phone; this is where a keyword or code phrase can protect you.
If you’re a victim, contact the bank or wire-transfer company immediately and 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. You should then immediately file a complaint with the FBI, which you can access at www.ic3.gov
To learn more about the closing process, the CFPB has published a Mortgage Closing Checklist at https://www.consumerfinance.gov/documen ... cklist.pdf