Nothing seemed awry when a South Florida real estate agent put a small residential lot for sale in the multiple listing service after taking a call from someone identifying himself as the owner. But what unfolded next illustrates the potential threat to small real estate deals across the United States.

The listing eventually attracted a prospective buyer who signed a contract, and the closing process began. About the same time, an agent for Century 21 America’s Choice in West Palm Beach not involved in the deal but familiar with the property confirmed from the true owner that it wasn’t for sale. When the listing broker found out, she had the title insurer ask the purported seller to provide identification. 

"He sent a copy of a modified passport that looked like a child had done it," Douglas Rill, broker at Century 21 America's Choice, told CoStar News. "It was that bad."

Impersonating a property owner with a bogus listing is one of the most common ways scammers prey on victims, according to a new report that underscores the importance of consumer education in combating wire fraud. Advances in technology have created more opportunities for fraud, and real estate transactions, particularly those involving houses and land, are especially vulnerable, according to the 2024 State of Wire Fraud Report by CertifID, a provider of fraud detection software that has commercial space in Austin, Texas.

Real estate fraud accounted for more than $145 million in losses in 2023, according to the latest figures from the FBI.

Property and land deals involve substantial sums of money and multiple parties, and the data is publicly available through the MLS and county records. These ingredients give scammers incentive and access to important information, industry professionals say.

Another significant factor is that real estate transactions are inherently deadline-oriented and tense, said Tyler Adams, co-founder and CEO of CertifID, in an interview. 

“In any type of fraud, one of the most common things fraudsters rely on is creating a sense of urgency,” Adams said. “But scammers don’t have to create that stress in a real estate transaction because it already has that built-in anxiety.” 

A slower real estate market puts even more pressure on buyers, sellers and their agents, all of whom may be less inclined to look for red flags because they want and need the sales to go through, Adams said. 

Those posing as buyers often use social engineering, or the use of deception or manipulation to trick victims into revealing confidential information or wiring funds to fraudulent accounts, according to the CertifID study. Wire transfers are a popular payment method because of the speed and size of transactions, but those same advantages make wires attractive targets, the study found. 

CertifID said it received more than 450 requests for help last year from victims of wire fraud. Most requests involved one of three scenarios:

• Impersonating a title agency and providing bank details so a buyer could send money to fraudulent accounts;
• Impersonating a property owner in a fraudulent listing; or
• Impersonating lender-provided mortgage payoff instructions during a sale.

Whether money lost to fraud in real estate transactions can be recovered depends on multiple factors. One is the length of time that has elapsed between when the fraud occurred and when it was discovered, according to CertifID.

The National Association of Realtors said listing and buyer brokerage agreements include information about the threat of wire fraud. The trade group said it stresses to members the importance of confirming all wiring instructions using a known phone number before transferring any funds.

"NAR encourages members to educate their clients and remind them throughout the transaction about the threat of wire fraud," Deanne Rymarowicz, NAR's senior counsel, said in an email, noting that the trade group has made this a focus for several years through videos and other resources.

Still, more education is needed, according to the results of a CertifID survey of 650 U.S. consumers who bought or sold a property within the past three years.

A quarter of respondents said they were targeted with suspicious or potentially fraudulent activities. What’s more, CertifID noted that additional findings from the survey show that consumers lack an understanding of fraud risk, with 51% of respondents only somewhat aware or not aware at all. 

Only half of respondents were aware their money could be at risk, and 60% said they received minimal or no education about fraud risks from their real estate professionals. Respondents age 65 and above were especially unsure of the risk, the results show.

In addition, 71% of respondents believed it’s another party's responsibility to teach them about wire fraud.

“The ancient concept of caveat emptor, or 'let the buyer beware,' has been a commonly held principle in the world of property sales for some time,” CertifID said in the report. “However, consumer protection is held to a higher standard when it comes to issues like funds safety.”

Just as the expectation of safety and privacy has shaped business models in banking, healthcare and other industries, “we anticipate a shift from an expectation of buyer’s responsibility to buyer’s rights when it comes to security in real estate.”

The study calls for specific steps to curtail fraud, including training for company employees and consumer education. Businesses responsible for protecting money should have an incident recovery plan, while title agencies and law firms should have their own insurance to protect themselves and their clients.

“As I’ve learned over the years, education is one of the most critical elements,” CertifID's Adams said.