Today, risk is everywhere in real estate. From wire fraud to commission fraud, the challenges continue to increase; however, so do the ways in which these risks can be mitigated. At the Risk Management Issues Committee: Legal Hot Topics session, held during the REALTORS® Legislative Meetings & Trade Expo on May 15, these topics were discussed, among others risk-related obstacles the audience brought to light.
The biggest unresolved challenge? Wire fraud.
“We’ve been talking about wire fraud for at least five years now,” said Katie Johnson, general counsel and chief member experience officer for the National Association of REALTORS® (NAR). “We as an industry have been trying to educate consumers about the real risks and to provide them with information about avoiding that risk, but the problem has gotten worse.”
Wire fraud continues to be a prominent challenge in the industry, indicated by the show of hands in the audience of those who have personally experienced it in a real estate transaction.
So, what can industry professionals do to lessen the instances of wire fraud? According to Johnson, it all begins with the consumer.
“Through our efforts with the FBI and other associations in real estate, we understand that consumer awareness is the No. 1 most effective key to avoiding wire fraud,” said Johnson.
Here are a few simple steps brokers and agents can take to protect against fraud:
- Tell consumers to be on guard from the outset to any emails they receive.
- Ask practitioners to avoid sending wire instructions via email.
- Tell consumers to confirm the validity of any wire instructions they have received by calling the practitioners before sending any money.
- Ensure agents have a secure transaction management platform .
- Avoid Friday closings, as those perpetrating the fraud would have two additional days at their disposal over a weekend.
If fraud is suspected or has been confirmed, vulnerable parties should:
- Immediately contact their financial institution
- Contact their local FBI office
- Report all instances of fraud to the clearinghouse IC3
For consumers and real estate professionals alike, NAR provides the following resources regarding fraud protection and prevention:
- A wire fraud email notice template
- A How to Avoid Wire Fraud video
- FBI, BEC: The 12 Billion Dollar Scam
- Local FBI offices
- A Cyber and Fidelity Insurance Report
- Information on how to create a data security program for a brokerage
In order to combat fraud, the FBI and NAR have partnered with several trade associations, forming a work group among the real estate, title, mortgage and baking industries to inform consumers of the dangers of fraud and how to protect against them.
“The group has decided that if all the factions involved in the real estate transactions agree to the language that will be provided to consumers—so that when they go to their real estate professional or their title and mortgage professionals they are given the same exact message—it will emphasize the importance of it and let it soak in,” said Johnson.
“We have to be savvy for all instructions for payoff,” she added.
Liz Dominguez is RISMedia’s associate content editor. Email her your real estate news ideas at email@example.com.