Hacker’s scam, court ruling a big wakeup for industry

Friday, January 18, 2019, Vol. 43, No. 3

There is no better way to get the attention of an industry than to have a court render a $167,129 decision against one of its members.

It happened in a Kansas federal court with the jury finding a buyer’s real estate agent and his broker liable for negligent representation in a case involving a wire transfer. The defendants, a real estate agent and his broker, were found liable for $167,129.

In this case, it is important to know that neither broker nor agent had any intent of fraud or involvement in the wire transfer, and neither benefitted from the transaction.

A hacker took the money and ran, and the broker and the agent were unaware of the fraud until the monies did not arrive at the title company.

The total amount of the wire transfer was $196,622.76, and the jury found the broker and his real estate agent liable for 85 percent of that amount.

A Kansas Federal District Court later upheld the verdict, and Realtors, title companies and lenders are now screaming from the mountaintops that these hackers exist and are effective.

In the day-to-day affairs of real estate brokers, terms such as “wire transfer,” “appraisal,” “inspection,” “escrow,” “loan and the all-important “closing” would be used more often in emails than in the emails of someone in another profession. These keywords allow cyber criminals to locate real estate brokers’ emails accounts.

In the case that went to court, the cyber criminal intercepted correspondence detailing the funds required by the lender in order for a buyer to purchase a home.

Therefore, the hacker knew the amount of the wire and the amount of the funds needed to close the transaction was accurate.

Then the hacker created an email address similar to that of the real estate agent and sent an email to the buyer explaining that these are the funds required to close. The buyer then sent the funds via the instructions the hacker had specified.

There was a bank name, a routing number and an account name that sounded legitimate. The real estate agent was unaware that the email had been sent since his actual address was not included.

In order to protect consumers from this type of fraud, Realtors are being instructed to include a wire fraud warning when listing homes or when beginning to work with buyers.

Many are including this warning in all their correspondence.

In the lawsuit, it was determined that the agent and the broker had not properly warned the buyer of the possibility of fraud.

The Tennessee Realtors, the group formerly the Tennessee Association of Realtors, has created a new form that real estate firms across the state are including in all of their packages, and the warning is front and center and blatant.


A few lines down, it includes the following: “DO NOT TRANSFER FUNDS UNTIL,” and then suggests the buyer or seller actually place a phone call to the number that they have on file for the lender or the closing attorney in order to verify the authenticity of any instructions that they may have received.

This telephone call thing might change the world for one particular beloved generation of humanity that seems to have an aversion to actual phone conversation of an oral variety, but the sounds of their beautiful voices will be welcome.

Another solution? Return cashier’s checks to the process. Yes, paper checks.

Of course, those are easily replicated, but at least the title companies would be able to verify the validity of the check.

And then there is Russia, but that is fodder for a different day.

In most cases, hackers are more intelligent in cyber matters than those who use computers and transfer money. In all cases of wire transfer, make the call and read the email. Money is flying through the air at an alarming pace.

Going forward, emails from Realtors to anyone should include the warning concerning the potential for hackers, as it is real and it is here.

There are even instances in which real estate columnists are warning tens of thousands of readers in their writing as proof positive that they are doing everything possible to alert consumers of the potential for wire fraud.

This is ancient history, but there was a time when many felt Amazon, eBay and e-commerce in general would never work because no sane person would give a credit card number and all of the information on that card to a computer. It took years for the ecommerce market to blossom.

Now, e-commerce dominates, and millions, perhaps billions, make electronic purchases every day. Some know no other way to purchase certain items.

So, the population has become relaxed and comfortable with wires and purchases on the internet. Diligence is critical. Let the buyer – and the wirer – beware.

Richard Courtney is a licensed real estate broker with Fridrich and Clark Realty. He recommends that you do not wire funds to anyone at anytime until you speak directly with a person at a phone number that you have used during the loan process. He can be reached at richard@richardcourtney.com