Notifying buyers and sellers of the potential for wire fraud

QUESTION: I just heard a terrible story about a buyer in my marketplace who was tricked into wiring over $100,000 in closing funds to a fraudulent bank account. It seems that the fraudster sent an email to the buyer that looked like it was from the buyer’s real estate agent that contained bogus wiring instructions.  It also appears that the fraudster had hacked the buyer agent’s email account some time prior to sending the bogus email. The buyer’s funds are apparently irretrievable.

Should real estate agents be notifying clients who may be sending or receiving wired funds about the potential for fraud?

ANSWER: Yes, they should. To that end, the NC REALTORS® has just released a new Wire Fraud Notification Addendum (form 780) that is designed to be attached as an addendum to a listing or buyer agency agreement.  The Addendum advises buyers and sellers to communicate directly with the closing attorney regarding any wiring instructions in a manner ensuring they are communicating with the closing attorney and not an imposter. The new form is available in PDF format in the forms library on the NCR website and will be available soon in zipForm®.  A sample is available by clicking here.  (A recommendation is also being made to add the capitalized wording appearing inside the box in the new form to the Offer to Purchase and Contract.  If the recommendation is approved, the change likely will take place effective July 1st.)

Although educating your clients about the risks of wire fraud is important, it is also very important for agents to take reasonable measures to protect against their email and other accounts being hacked.  Suggested measures include employing strong passwords, using different passwords for different accounts, and changing passwords periodically.  Agents should also avoid sending any sensitive client or transaction information via email unless absolutely necessary, in which case consideration should be given to using encryption technology.