HOW TO PREVENT WIRE TRANSFER FRAUD IN REAL ESTATE TRANSACTIONS TIP 1 The best defense is communication. At the start of the transaction walk the parties through your process and why you have it. TIP 2 Be wary of wire instructions sent via email, especially changed instructions. Look to make sure it is from the correct email address. Wire transfers typically involve fees that vary from about $15 to as much as $50, depending on: Whether the transfer is incoming or outgoing. Whether the transfer is domestic or international. An average of over $13,000. USA Today ran a story this year detailing the average costs of closing on a home in the U.S. And the figures aren’t for the faint-hearted. They report an average of $13,357 for homes with a median value of $210,200 and $4,985 for important home preparation projects.
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Wire transfers are a very common aspect of a real estate transaction. Wires are sent from the client’s bank directly to the title company’s bank via the Federal Reserve bank. Because of this, wire transfers meet the Colorado Good Funds Statute and are considered immediately available upon deposit into the title company’s account. Wires are efficient and safe as long as the bank and account information is accurate.
The Wire Process
Most domestic wires are completed within 2-4 business hours from ordering.
Sending Bank
- Reviews Wire
- Runs through OFAC (Office of Foreign Assets Control)
- Sends to Federal Reserve
- Receives a FED ID (also known as OMAD or IMAD #)
Federal Reserve
- Reviews Wire
- Sends to Receiving Bank
Receiving Bank
- Reviews incoming wire
- Runs through OFAC
- Deposits funds in the title company account
Real Estate Transactions In Pa
What Your Clients Need to Know
- All banks have different requirements and your client needs to have a conversation with their bank early in the transaction process:
- Are there any fees involved to wire funds? Most banks will have fees for both outgoing and incoming wires.
- Verify how many days prior to the closing the wire should be ordered for funds to arrive in time.
- Can wires be ordered on the bank’s website or does the account holder need to be present in a branch to order?
- International wires typically involve an intermediary bank and additional time.
- Educate your clients about wire fraud and how to prevent it (see below).
- Wire instructions must be confirmed by calling the closing office using a known number such as the contact information on the title commitment.
- When ordering the wire, be sure to reference the Title Company’s file number, closer name and property address (found on the wire instructions form).
- After a wire is initiated at the sending bank, the buyer needs to notify your closing team via phone that the wire was sent.
What Could Slow Down a Wire
- Extra approvals may be needed at each institution if funds are over $1 Million
- If the review by the Office of Foreign Assets Control (OFAC) raises a red flag e.g. a common name on the wire that matches a name on a government list. The bank may need additional info from the individual such as date of birth, location of birth etc.
- Incorrect information (e.g. missing or incomplete bank information, file #, closer name, property address).
How to Track a Wire
Occasionally a wire needs to be tracked. In order to locate a wire a FED ID number is needed. The client will need to contact their sending bank to obtain the FED ID number.It will always start with the date, followed by letters then numbers. E.g. 20190912QMGFT0000000000. Give the FED ID number to the title company (via phone) to aid in tracking the progress of the wire.
Wire Fraud Prevention
From day one, inform your client on how you will be communicating with them throughout the real estate transaction and how any other parties involved in the
transaction (i.e. title company) will be contacting them. Let them know you will never ask them to send sensitive information via email.
- Do not open suspicious emails, click on any links or open attachments.
- Be wary of emails purporting to send new wire instructions or demanding funds several days or even weeks before closing.
- Make sure to change your usernames and passwords frequently and never use passwords that are easy to guess like password or 123456.
- Do not save wiring instructions on your desktop and send to the client. Land Title always sends the instructions via a secured email.
- Always double-check and verify the phone number contained in the email for the intended recipient of the wire.
- If in doubt call the title company directly using a known number, such as the number on the title commitment.
Why Is Money Wired In Real Estate Transactions Based
Rest assured, Land Title and their in-house IT team have implemented measures to ensure that all sensitive information a client provides is encrypted and protected on secure sites throughout the real estate transaction. Our closing team will also be in continuous communication with all parties involved in the transaction from beginning to end of the closing. Transferring funds via wire can be a safe and secure process, as long as all parties involved maintain communication and use simple security protocols to ensure that the funds arrive safely and on time.