Housing Boom Hit by Scam Tornado

(John F. WasikRealClearInvestigations) When Jeff, a retired marketing consultant from Chicago, was closing on his home sale, he received a new set of instructions at the last minute on where to send several thousand dollars in closing expenses. At first blush, the email looked legit with an official-looking logo and professional language specifying the amount owed and itemized expenses.

But one thing caught his eye: The email address looked strange. Just to be safe, he called his mortgage broker.

“Don’t do that!” his broker told him in an alarmed voice. It was a scam. If he hit “send,” his closing fees would go to a thief who had been monitoring his emails. “I was a keystroke away from losing thousands of dollars,” Jeff recalled.

As the housing market sizzles across the country – with nearly 6 million homes bought last year – scammers have been finding new ways to tap into this once-secure market. Real estate transactions still demand reams of paperwork and regulations involving lawyers, brokers, title insurance companies and banks, but the fact that much of this work now takes place online gives thieves countless opportunities to exploit vulnerable buyers.

Last year, more than 11,000 homeowners were scammed out of more than $220 million in closing funds alone, according to the American Land and Title Association, a trade group that represents professionals who perform property transactions.

Closing-fund theft is one of many real estate scams that have emerged and proliferated over the past two years or so. The main lure is to get people to send money to fake addresses. They include:

Fake Rentals. Scamsters post rental ads – either for real properties they don’t own or “spoofs” they have created with photographs – on major sites like Craigslist. Typically they ask for below-market rates,  get interested parties to put down a deposit, then disappear.

Fraudulent Foreclosure Relief. Pioneered during the housing market crash in 2007-2009, this scam involves thieves promising a service that would end foreclosure proceedings. Thieves collect a fee of several hundred dollars, then disappear with the money.

Moving Scams. Most people don’t actually meet their movers before they hire them, which enables fraudulent operators to either take an upfront fee and not move clients’ possessions or hold furniture “hostage,” demanding a higher fee and refusing to complete the move unless they are paid more. Usually these bogus movers are pitched through moving “brokers.”

The pandemic has helped fuel the boom in real estate scams.  More people working from home translates into more valuable information being sent over less secure personal Internet connections lacking firewall and other protections that offices might provide.

The housing boom fueled by COVID – which has sparked demand but constrained new construction – has led to greater competition in many markets, leading increasing numbers of buyers to purchase homes sight unseen. The real estate company Redfin reports that 63% of homebuyers last year made an offer on a property they hadn’t seen in person. In addition, the rise of cryptocurrency makes it harder to trace bogus transactions and easier to launder ill-gotten gains.

The rise in real estate scams is part of a larger increase in crimes involving emailed funds. According to the Internet Crime Complaint Center (IC3), in 2020 the agency received 19,369 “Business Email Compromise (BEC)/ Email Account Compromise (EAC)” complaints with adjusted losses of more than $1.8 billion.

Scammers prey upon victims with a number of deception tools. They use “phishing” emails to mine valuable personal or financial information, claiming to falsely “verify” bank account or Social Security information. Or they may “spoof’ consumers into thinking that an email, text or call is from a real financial company, online retailer or the IRS.

Many of these scams originate overseas, yet because the perpetrators can create and shut down fake emails and websites quickly before regulators catch up with them, they are hard to trace and catch.

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