Bracing against a rising tide of real estate fraud

Key Takeaways:

– Home purchases declined in 2023, leading fraudsters to increase the sophistication of their tactics
– Seller impersonation attempts and attacks targeting homebuyers have been on the rise
– Cyber syndicates took down some of the largest companies in the industry in Q4
– Fraudsters now have a treasure trove of Personal Identifiable Information (PII) and the support of AI, making them better positioned than ever
– First-time buyers are particularly at risk if their real estate firms are unable to protect against fraud
– There has been a notable increase in the breadth and sophistication of fraud attempts targeting the real estate industry
– Three trends – downstream effects of cyber theft and data breaches, widespread adoption of AI, and an increase in transaction volume – create a perfect storm for real estate fraud in 2024
– Fraud operators can combine publicly available information with stolen PII to boost the efficacy of their attacks
– AI allows fraudsters to quickly ingest and weaponize data for sophisticated fraud attacks, including impersonations and phishing scams
– Fannie Mae forecasts a decrease in mortgage rates, leading to an increase in transaction volume
– Many transactions now occur virtually, making it easier for fraudsters to exploit vulnerabilities
– Real estate companies may be underprepared to handle the increased risks and transaction volumes
– Heightened vigilance and action are necessary to prevent fraud from threatening the entire industry.

HousingWire:

Could 2024 be the worst year ever for real estate wire fraud?

As home purchases declined in 2023, fraudsters have increased the sophistication and tenacity of their tactics, preparing for the next wave of transactions. Throughout the year there was a noticeable rise in seller impersonation attempts and attacks targeting homebuyers.

In Q4, some of the largest companies in the industry were taken down by cyber syndicates. With newly tested fraud tactics, a treasure trove of Personal Identifiable Information (PII) and the support of AI, fraudsters are better positioned than ever to wreak havoc on the housing industry.

First-time buyers are particularly at risk, especially if their real estate firms are unable to protect against the types of threats that have become commonplace. As an industry, we have a window of opportunity to update our processes and invest in technology that will ensure 2024 is known for a market rebound, and not a banner year for fraud.

We have already witnessed a notable increase in the breadth and sophistication of fraud attempts targeting every aspect of the real estate industry. Things are potentially about to get much worse. From fake listings to advanced phishing schemes to wire fraud, the real estate industry is under attack. In the last six months, over half of real estate professionals have encountered a seller impersonation attempt. These attacks are not isolated incidents — in fact, they are part of a larger trend.

There are three distinct trends that, when combined, create a perfect storm that could make 2024 the worst year in history for real estate fraud.

The downstream effects of cyber theft and data breaches

In the aftermath of 2023’s high-profile cyber attacks on industry leaders, fraudsters now have an endless trove of PII at their fingertips. As we’ve seen in other industries, this data is traded on the Dark Web to improve the efficacy of their attacks. When added to information that is already publicly available — ownership records, tax records, past listing history and transaction records — the downstream impacts will be quickly felt as fraud operators combine data from multiple sources to boost the efficacy of their attacks.

The widespread adoption of AI

In the hands of fraud operators, AI is a formidable weapon for conducting attacks of all kinds. The lightspeed development of new tools, language models and raw computing power allows fraudsters to quickly ingest and weaponize data into sophisticated fraud attacks. This represents greater challenges to our industry’s ability to protect clients. Fraud operators are now using AI tools to identify likely targets using PII stolen on the Dark Web, create realistic fake identities, ownership documents and payoff instructions, use deep fakes for impersonations and deploy large-scale phishing scams to gain access to sensitive systems that they can then use to their advantage.

An increase in transaction volume

Fannie Mae forecasts mortgage rates will decrease from 7.4% to 7.1% in Q1 2024. This will lead to an increase in transaction volume fueled by buyers who have been on the sidelines and — when rates drop low enough — a jump in mortgage refinancing. This follows headcount reductions over the past few years, and many companies from title to lending may not be well-staffed to accommodate a rapid increase in volumes.

Complicating the picture even more is that many transactions now occur without even a single face-to-face meeting. It’s not uncommon for everything to happen virtually which, while a convenience (and preference) for many, also opens the door for fraudsters. And there’s more money at risk in these transactions than ever before: Redfin recently reported that one in three home purchases in the U.S. is made using all cash — the highest percentage in nearly a decade.

Fraud operators tailor their attacks to each industry’s vulnerabilities. Real estate has been under attack for several years, with cybercriminals leveraging compromised data and publicly available information. The threat could be greater than ever, as underprepared companies grapple with increased risks combined with growing transaction volumes. These trends pose an ominous outlook for 2024, underscoring the need for heightened vigilance and action to ensure that the market rebound doesn’t become a breeding ground for fraud that threatens the entire industry.

Tyler Adams is CEO and cofounder of CertifID.

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