House Buying Scams Are On the Rise: Here‘s How to Protect Yourself

As a cyber security expert with over a decade of experience securing sensitive data, I‘ve seen firsthand how scammers are increasingly targeting the real estate industry. The huge sums of money involved in buying a home make it a lucrative opportunity for fraudsters. And with more of the home buying process moving online, hackers have even more avenues to exploit.

In fact, the FBI‘s Internet Crime Complaint Center (IC3) has reported a steady increase in real estate fraud losses every year:

Source: FBI Internet Crime Report 2021

As you can see, both the number of victims and the total dollar losses jumped dramatically from 2020 to 2021, even as the overall number of real estate transactions declined due to the pandemic. This tells me that scammers are getting smarter and more aggressive in their tactics.

So how exactly are these cyber criminals pulling off their house buying scams? And more importantly, what can you do to avoid becoming their next victim?

How Scammers Use Technology to Trick Buyers and Sellers

Gone are the days when most real estate scams were as simple as a fake classified ad in the newspaper. Today‘s fraudsters have a sophisticated playbook of tech tools to make their cons more convincing. Here are some of the most common techniques I‘m seeing:

Phishing Emails and Malware

One of the most insidious types of real estate cyber attacks starts with a phishing email. The scammer sends a legitimate-looking message to someone involved in a transaction, like a real estate agent, title officer, or mortgage lender. The email contains a link or attachment that, when opened, secretly installs malware on the recipient‘s device.

The malware allows the hacker to spy on the victim‘s email account and monitor upcoming closings. Near the closing date, the scammer sends a spoof email to the buyer, pretending to be their agent or title company. The message claims there‘s been a "last minute change" to the wiring instructions and provides fraudulent account details. If the buyer takes the bait, their down payment gets diverted to the scammer instead of the escrow account.

Fake Online Rental Listings

With more people finding their next home via online listing sites, scammers have taken to posting fake rental ads and "for sale by owner" listings. Using bot software, they instantly respond to inquiries and pressure victims into sending deposits or application fees for properties that aren‘t actually available.

To make the listings look legitimate, scammers often scrape photos and descriptions from real ads. They may also spoof the email address or phone number of the property owner to further fool their targets.

Some fake landlords even set up showings for renters — except when the renter shows up, the scammer is long gone with their money. According to real estate fraud investigator Bob Nygaard, fake rental scams now account for a whopping 44% of so-called "consumer property crimes."

Spoofing Trusted Professionals

Another way scammers exploit technology is by impersonating the various professionals a buyer or seller might encounter in a real estate transaction. Using apps that let you "spoof" phone numbers or email addresses, a fraudster can contact victims and pose as a mortgage lender, title company rep, real estate lawyer, or anyone else with a role in the deal.

The scammer takes advantage of the trust and authority these professionals have to convince the victim to let their guard down. Claiming to need information to "verify the transaction" or "update their records," the fraudster gets victims to reveal sensitive personal and financial details they can use to commit identity theft.

Tips to Protect Yourself from Real Estate Cyber Scams

So what can you do to avoid falling prey to these increasingly prevalent house buying scams? As a cyber security expert, here are my top tips:

1. Secure your email account with a strong, unique password and multi-factor authentication. This makes it much harder for hackers to infiltrate your inbox and intercept transaction details. Consider using a password manager to generate and store complex passwords.

2. Be extremely suspicious of any last-minute changes to wiring instructions. If you receive an email claiming the account info has changed, contact your representative by phone using a number you trust to verify it‘s legitimate. Never call the number listed in the email itself.

3. Google the names, addresses, and phone numbers of any unfamiliar people or companies involved in your transaction. Look out for red flags like multiple listings with different contact info, or non-existent addresses. If a purported "agent" or "title company" doesn‘t have a website or online presence, that‘s a major warning sign.

4. Carefully scrutinize photos on online rental listings. Look for signs the same photos have been reused for different properties, or for visual clues that images have been photoshopped. Ask to do a video tour to make sure the listing is real.

5. Before applying for a rental or sending any money, ask to see a copy of the landlord‘s ID and proof they own the property. A legitimate landlord should have no problem providing these documents. You can double-check property records with your county assessor‘s office.

6. Have any legal documents like sales contracts, mortgage documents, and leases reviewed by a licensed real estate attorney before signing. It‘s worth the extra cost for an expert eye to catch any red flags or inconsistencies that could point to fraud.

7. Consider purchasing enhanced title insurance that covers cyber crimes, as well as cybersecurity insurance to mitigate losses from online fraud. Standard policies may not protect you from all types of real estate cyber scams. Read the fine print and ask your insurance broker about expanded coverage options.

What the Industry Is Doing to Combat Real Estate Fraud

Fighting back against the rising tide of real estate cyber crime requires efforts from both individuals and industry stakeholders. Here are some of the ways the industry is stepping up its game:

• The National Association of Realtors (NAR) now offers a "Cyber and Wire Fraud Insurance" program to help members recover losses due to online scams. They‘re also providing cyber security training and resources to educate agents on the latest threats and prevention strategies.

• Major title companies like First American and Stewart are investing heavily in more robust IT security measures, such as encrypted communication tools, multi-factor authentication, and advanced threat detection software. They‘re also training employees to spot and report phishing attempts.

• Mortgage lenders are implementing stricter verification processes to confirm borrower identities and account information before releasing funds. For example, Fannie Mae now requires lenders to verbally verify wire transfer instructions with borrowers using a trusted phone number.

• Online rental platforms like Zillow and Trulia are using AI-powered algorithms to detect and remove fraudulent listings. For example, Zillow‘s "Rental Listing Quality Assurance" program automatically flags suspicious listings for human review based on indicators like duplicate photos and fake addresses.

• The FBI‘s IC3 is partnering with the real estate industry to investigate and prosecute cyber criminals. In 2021, they launched "Operation Stolen Promise" to target pandemic-related fraud, resulting in over $1 billion in recoveries and restitution.

While these industry efforts are a step in the right direction, the unfortunate reality is that cyber criminals will always look for new ways to exploit vulnerabilities. Ultimately, it‘s up to individuals to stay informed and vigilant in protecting themselves.

The Bottom Line on Protecting Yourself from House Buying Scams

Buying a home is stressful enough without having to worry about losing your hard-earned money to faceless cyber criminals. But by being aware of the most common types of real estate scams and taking proactive steps to secure your information and transactions, you can minimize your risk of becoming a victim.

Remember, if a deal seems too good to be true, it probably is. Trust your instincts and don‘t let anyone rush you into sending money or signing documents without doing your due diligence.

When in doubt, pick up the phone and call someone you trust — like your real estate agent, loan officer, or attorney — to verify any suspicious requests or changes. Taking a few extra minutes to confirm details can save you a lifetime of financial hardship.

As cyber criminals get savvier, it‘s up to all of us — buyers, sellers, and industry professionals — to stay one step ahead. By working together and looking out for each other, we can help ensure the dream of homeownership doesn‘t turn into a nightmare of fraud.