The risk of real estate wire fraud is a growing concern in NJ. Here's how to avoid it

Imagine your offer on your dream home finally gets accepted. But after all of the work you put in to save money, tour properties and make offer after off, your down payment gets stolen.

That's what happened to one Bergen County couple, who unknowingly wired their $32,500 down payment to a scammer after what they thought was a legitimate email conversation.

"At first I was in shock, then it was really upsetting," said Jessica Madalena, 31, of Wood-Ridge. "Everything we had worked for was just gone." They've been trying for two years to get it back.

These wire scams, also known as real estate wire fraud, are becoming increasingly common across the nation. In just the last few months, another New Jersey couple in Randolph almost lost $25,000 , while couples in Southern California and Denver lost down payments of $160,000 and $100,000 , respectively.

According to the FBI's latest cybercrime report , the agency received more than 21,489 business email compromise complaints that totaled more than $2.9 billion in losses in 2023. For this and other similar types of wire fraud scams, New Jersey residents saw the sixth highest loss in funds last year at $441.2 million.

Tom Cronkright, co-founder and executive chairman of real estate fraud protection company CertifID , said that while wire fraud is an overall pervasive issue across the country, it is particularly dangerous in the real estate industry because of the amount of public information available for these transactions.

"It's easy for real bad actors to monitor in real time opportunities for them to pursue. Literally minute by minute something is hitting an MLS across the country. Their ability to glean into public property information and their ability to look into who the representatives are on each side is just a phone call or email away," he said. "From there, they'll look into the email string as the transaction is going through its normal life cycle. Then ultimately, somebody's going to send money in, they harvest those details, impersonate a trusted party and then off they go with diverting the funds."

These types of scams are also becoming increasingly popular because most victims are first-time buyers. Cronkright said that because it is the first time they've been involved in a real estate transaction and likely the first time they've ever wired money, first-time buyets may not know exactly how the process is supposed to go.

As a result, they rely on real estate professionals to guide them. And if they get a message or email from who they think is a real estate professional involved in their transaction, Cronkright said they may not question it.

"This is likely the largest transaction of their life, couple with the fact that it's an emotional purchase and there's no inventory right now," he said. "So I think this has almost a disarming effect that overrides the curiosity or skepticism that they might otherwise have in the communication. And they'll do anything because if they're being asked to wire money, and the message says that if they don't then they might lose their house, then they may fall for it."

How it happened to a couple in Wood-Ridge

Madalena and her fiancé, Daniel Pietschnig, began their home search in July, 2022. After finding their three-bedroom, two-bathroom home a month later, the couple signed a contract on Sept. 1, 2022 to buy the property for $540,000, originally listed for $562,900.

On Sept. 7, Madalena said they received an email from their attorney with a timeline of dates, stating that their down payment was due on Sept. 19 and closing was set for Nov. 7.

"The following day, we got another email from what we thought was the attorney, but turns out it was a fake email — where they changed one letter of the email — saying there's been a change in the down payment due date and that the money needed to be wired right away," she said.

After a string of emails between who she thought was their attorney, the seller's attorney and their realtor, Madalena said they were told the due date was moved to Sept. 13. Nothing seemed strange, she said, because their realtor responded, from her real corporate email address, stating she spoke to the mortgage company and that the funds should be wire transferred.

So the couple made the wire transfer on Sept. 9, and it wasn't until their attorney emailed them 10 days later that they realized there was a problem.

"About 10 days later, we got an email from our attorney, from his real email, saying the down payment was due today. We were confused because we already sent it, so we sent all the proof over and he called us," she said. "That's when we realized that it was all a scam and that we lost our money. By that time, it was already like 10 days later, so it was already gone."

Once they realized they had been scammed, the couple filed a police report. But they still needed the money to buy their home, so Madalena said her parents gifted them some money and they were able to save the rest in time for closing.

Who is responsible for these scams? How can people avoid becoming victims?

In the case of this Bergen County couple, Madalena said that all of the parties involved — including their attorney, seller’s attorney and the real estate agency — have denied responsibility for the scam.

But real estate brokers, closing attorneys and title companies bear some responsibility, said Cronkright.

“There is liability you could face if you just sit on the sidelines and do nothing," he said. "The courts are looking at it like yes, the consumer voluntarily sent the money. But they’re also going to look at how all of these trade associations have been talking about this issue for so long, but yet they didn’t think it was worth mentioning to the consumer?”

Cronkright said that it’s important for real estate professionals to focus on educating consumers and making them aware of the possible risks homebuyers face when it comes to wire scams.

He said that while it’s nearly impossible to prevent scammers from impersonating people involved in the process and attempting these scams, industry professionals like mortgage lenders, real estate brokers and title companies need to do a better job of making consumers aware of these risks.

“Most consumers are not aware that this is a real risk they could face," he said. "They have no idea what success looks like as it relates to successfully transferring money. And there is certainly not an identification that they could lose their life savings as part of this transaction. So I think education and awareness will always be that best line of defense.”

On the consumer side, Cronkright said buyers should be asking as many questions as possible throughout the homebuying process. This includes clarifying things like when and how you’ll be asked to provide your down payment and closing funds, as well as what protections your real estate professionals have in place in the event that there is a scam.

The FTC also recommends consumers to never wire money to someone who pressures you into paying immediately or who says wiring the money is the only way to pay.

What to do if you become a victim of a wire scam?

If you become a victim of a wire scam, move fast, said Cronright.

“I don’t think you should ever count your money as gone, but you have to act quickly,” Cronkright said. “The window for any meaningful chance of recovering a diverted wire is within an essentially 48-hour period.”

You could read out to CertifID, which has a full Fraud Recovery Services Division that operates 24/7. Cronkright said you should also call your bank so they can alert the receiving bank that whoever is receiving these funds did it through a fraudulent transfer so they can put a fraud marker or freeze on those funds. Then, contact your local FBI or Secret Service office. They have divisions set up that can help move communication along between banks.

You should also immediately report the fraud to the FTC at ReportFraud.ftc.gov and to the Internet Crime Complaint Center at IC3.gov . And if you sent the money using wire transfer companies like MoneyGram, Ria or Western Union, you should report the fraudulent transaction to the company right away and ask them to reverse the transfer.

“Just never ever trust any requests to send money that it coming through an email or text message without independently verifying that information, no matter what the message says or no matter the threat of losing the transaction,” Cronkright said. “When it comes to that decision point of setting up and approving a transfer, you simply cannot act on it without independently verifying who it’s coming from and if it’s authentic versus something that’s a scam.”

Maddie McGay is the real estate reporter for NorthJersey.com and The Record, covering all things worth celebrating about living in North Jersey. Find her on Instagram @maddiemcgay , on X @maddiemcgayy , and sign up for her North Jersey Living newsletter. Do you have a tip, trend or terrific house she should know about? Email her at MMcGay@gannett .

This article originally appeared on NorthJersey.com: The risk of real estate wire fraud is a growing concern in NJ. Here's how to avoid it