Getting ready for your home closing? Make sure you know where that email on where to send the money is coming from.

Getting ready for your home closing? Make sure you know where that email on where to send the money is coming from.

Scammers send massive numbers of malware-embedded emails containing real estate settlement subject lines such as: “URGENT There is a problem with your settlement.” Innocent home buyers fear something may have gone awry with their settlement and open and/or click on the infected email. (iStock)
Scammers send massive numbers of malware-embedded emails containing real estate settlement subject lines such as: “URGENT There is a problem with your settlement.” Innocent home buyers fear something may have gone awry with their settlement and open and/or click on the infected email. (iStock)
Published Jan. 6, 2020 at 9:00 a.m. EST

As if buying, selling or refinancing your home were not stressful enough, consumers must now be aware of an increasingly insidious form of email-based real estate fraud. The FBI categorizes this crime as Business Email Compromise (BEC). In 2018, it is estimated that 11,300 consumers lost $150 million to BEC crimes.

 

BEC crimes begin when scammers induce email recipients to open or click on a link in an infected email.

 

When the recipient inadvertently opens or clicks on the fake email, a malware program is installed on the recipient’s computer. Once that malware embeds itself, it allows the scammer to monitor the recipient’s emails for words like “settlement date,” “wire instructions” or “cashier’s checks.”

 

At just the appropriate time, the scammer, impersonating the title company, will send out a fake email instructing the victim to wire funds to a bank account that turns out to be the scammer’s own account. Thinking it has received official title company wire instructions, the victim willingly wires their funds.

 

There are numerous techniques scammers use to get real estate settlement parties to click on fake emails.

 

One technique is to spoof the legitimate sender’s email address. Scammers send fake emails from accounts that are nearly identical to the legitimate sender’s email addresses. For example, law firm email addresses that contain the word “law” are spoofed when scammers change the word law to lavv. On a mobile device, distinguishing a “w” from a “vv” can be almost impossible.

 

Another technique uses social engineering by appealing to the recipient’s sense of urgency, fear or curiosity.

 

Scammers send massive numbers of malware-embedded emails containing real estate settlement subject lines such as: “URGENT There is a problem with your settlement.” Innocent home buyers fear something may have gone awry with their settlement and open and/or click on the infected email.

 

From that point forward, the scammer can access all transaction details. These emails are referred to as “phishing” emails since they are designed to hook their recipients into clicking on a link in those emails or even just opening them.

 

Increasingly, scammers are targeting specific recipients by taking advantage of all the publicly available information about a real estate transaction. They “phish” the listing agent, and if successful, they gain access to that agent’s email.

 

With that access, the scammer obtains information such as the names and email addresses for buyer, seller settlement company and lender as well as the loan amount and the proposed settlement date.

 

Armed with this data, scammers pose as the settlement company and email the buyer well before the settlement date and falsely instruct them to wire their “cash to close” immediately. Unwitting buyers comply. It is only later, when the real settlement company contacts the buyer, that the horrible truth is discovered. By then, it is too late for law enforcement to trace the funds or catch the scammers.

 

“Scammers send us phishing emails every day, and sometimes numerous times in a day,” said John Cotter, president and CEO of Passport Title Services in Rockville, Md. “It is imperative that before consumers wire settlement funds, they scrutinize the sender’s email address. We no longer accept wiring instructions via email unless verified by a phone call.”

 

With this much at risk, the real estate industry has embarked on a public education campaign to raise awareness of these crimes. The American Land Title Association (ALTA) launched the Coalition to Stop Real Estate Wire Fraud with consumer resources at www.StopWireFraud.org.

 

If you do become a victim of BEC crime, “immediately call your bank and ask them to issue a recall notice for your wire, report the crime to BEC.IC3.gov and call your regional FBI office and police department,” said Justin B. Ailes, senior vice president of policy at ALTA. “When these steps are followed within 24 hours of the wire transfer, the FBI’s Internet Crime Complaint Center’s Recovery Asset Team has recovered 75 percent of compromised funds.”

 

To avoid being victimized, the public should carefully examine the sender’s email address to confirm it is coming from a legitimate sender. If in doubt, do not reply; rather, forward the email back to the known email address.

 

Do not use phrases like “wire instructions” in the subject line of your emails. Call and confirm all wire transfer instructions by phone using a previously known phone number or by accessing the title company’s website.

 

Do not call the phone number in the suspicious email. Minimize the number of people who get copied on real estate settlement-related transactions by sending transaction details only to those on a need-to-know basis.

 

Start a new email thread each time you email anyone involved in the transaction, especially when communicating about the financial part of the transaction.

 

Harvey S. Jacobs is a real estate lawyer with Jacobs & Associates in Washington. He is an active real estate investor, landlord, settlement attorney and lender. This column is not legal advice and should not be acted upon without obtaining your own legal counsel. Submit your questions to: Ask@theHouseLawyer.Com, or call Harvey at 301-417-4144.

Hawaii’s volcanic eruption could stop a home sale. Read the fine print.

Hawaii’s volcanic eruption could stop a home sale. Read the fine print.

June 8, 2018

Q: I’m about to close on a home purchase on the Big Island of Hawaii.

Because of recent volcanic activity, I am concerned about the value, and even the continued existence, of the house we are about to buy. Our contractual contingencies have all been met. We are just waiting for the final approval from our lender, which is expected any day. As volcanoes are unpredictable, who knows if Kilauea will settle down shortly or spew gases for the next 50 years?

[River of lava destroys hundreds of homes in Hawaii, including one owned by mayor, officials say]

I am wondering if anything in my purchase agreement is renegotiable this late in the process, and what do buyers do when they are about to close on a property, and say a natural disaster were to strike, such as a major volcanic eruption?

— Hot in Hawaii

Hot: The event you are referring to, Mount Kilauea’s eruption, is what we lawyers often refer to as a “force majeure event.” Force majeure means “greater force.” The legal concept of a force majeure is derived from the French Napoleonic Code. This clause provides that the parties’ performance under a contract is excused if an unforeseeable event beyond their reasonable control occurs that prevents their performance. Force majeure events are often defined in the contract to include political events such as wars, insurrections, riots, strikes, lockouts, terrorist threats or actions, or explosions. It also applies to acts of nature such as hurricanes, floods, earthquakes, landslides, tornadoes, tsunamis, volcanic eruptions, sinkholes and storms. It would appear that Mount Kilauea’s eruption is a classic force majeure event.

[Graphic: Where the Earth is erupting on Hawaii’s Big Island]

A force majeure clause is a contract provision that allows a party to delay or extinguish the performance of its contractual obligations when certain circumstances beyond their control arise, making performance inadvisable, commercially impracticable, illegal, or impossible. Sometimes this is also referred to as an act of God or act of nature.

You should examine your purchase contract to see if it contains a force majeure clause that may delay or even excuse your performance under the contract. These clauses are also sometimes identified as “Risk of Loss.” The standard Greater Capital Area Association of Realtors contract contains a damage or loss clause that reads: “The risk of damage or loss to the Property by fire, act of God, or other casualty remains with Seller until the execution and delivery of the deed of conveyance to Buyer at Settlement.” If your Hawaii purchase contract contains a similar clause and your property is damaged or destroyed by the lava flow, your obligation to pay for your home will probably be excused.

If you still wish to go to settlement on the home, but just not at the original price or terms, you may also use a force majeure event to renegotiate price or terms as well. This means that if the home is damaged before settlement, because of an unforeseen force majeure event, the seller will be responsible for that damage and any diminution in value caused but that damage. You should be able to proceed to settlement, with a new price and terms.

Hopefully, the seller has a homeowner’s hazard policy that covers volcanic eruptions. The seller can then sell the home to you at its “after-eruption value” and presumably recover their loss from the insurance proceeds covering the damage. The situation gets complicated if your seller has an existing loan that must be paid off, before they are able to convey clear title to you. This can get tricky. I recommend you consult with a member of the Hawaii State Bar Association who is familiar with real estate contracts.

Harvey S. Jacobs is a real estate lawyer with Jacobs & Associates Attorneys at Law in Rockville. He is an active real estate attorney, investor, landlord, settlement attorney and licensed real estate broker. This column is not legal advice and should not be acted upon without obtaining your own legal counsel. Contact Jacobs at jacobs@jacobs-associates.com or ask@thehouselawyer.com.

READ THE FULL STORY PUBLISHED IN THE WASHINGTON POST HERE

Copyright © Harvey S. Jacobs, Esq. 2019