Types of real estate fraud and how to prevent them

Original content by Vanderveen Law, adapted with permission

I was never attuned to frauds and scams prior to moving to the US. Not a thing in Singapore. I answered every call that came my way.

Needless to say, I fell hard and fast to scams upon relocating here. Bought a vehicle that turned out to be a lemon and couldn’t get my money refunded. Almost fell victim to a gift card scam had the cashier at CVS not prevented me from purchasing $2,000 worth of gift cards because I didn’t have my ID with me. Believed the insurance agent on the phone that “this special rate is for today only, premiums go up tomorrow”.

Today, my number is on the National Do Not Call Registry and my credit report is frozen. I have never been more aware, alert, or distrustful in my life.

Thus when I saw this article by Attorney Tim van der Veen about real estate fraud, I knew I had to share it on my website.

As Tim has written, “These [fraud] schemes are beatable. In fact, most attempts fail — not because the criminals are lazy, but because informed buyers, sellers, lenders, and agents know what to look for and how to respond.”.

Here are the most common types of real estate fraud and ways to prevent them.

May you be informed and ever vigilant. 🚨

1. Wire fraud

Wire fraud remains the most common and most devastating scheme in residential real estate. Criminals impersonate a closing attorney, lender, or real estate agent and send fake wire instructions to divert funds — sometimes hundreds of thousands of dollars — into their own account.

Here’s how wire fraud unfolds:

1. Fraudsters gain access to the email of someone involved in the transaction (often a buyer, agent, lender, or closing attorney).

2. They monitor the thread quietly, watching for the moment when wire instructions will be sent.

3. Days before closing, they strike by sending updated wiring instructions or creating a fake sense of urgency.

4. If the consumer sends funds to the wrong account, the money can be gone within minutes.

Massachusetts is not immune — in fact, New England has seen a noticeable uptick. Fortunately, most fraud attempts are intercepted when buyers and professionals confirm instructions by phone and understand the red flags.

2. Payoff and loan-fraud schemes

While buyers often grab the headlines, new homeowners and sellers are being targeted as well — particularly through mortgage payoff fraud.

Scenarios for a payoff and loan-fraud scheme:

1. A criminal impersonates the seller’s lender or servicer.

2. They send a fake mortgage assignment letter informing that the servicer of the loan has changed, and that future mortgage payments should be sent to a new address.

3. To closing attorneys, they send a fake payoff statement or “updated wire instructions”.

4. If the homeowner or attorney doesn’t verify directly with the real lender, the payoff funds could be misdirected.

3. Seller impersonation fraud

This scheme is affecting Massachusetts and other New England states at an alarming pace, especially where ownership records are public information and easy to access online.

Fraudsters typically target vacant land, inherited property, investment homes and properties where the owner lives out of state.

The playbook for a seller impersonation fraud looks like this:

1. Criminal identifies a property with an owner unlikely to be present.

2. They pretend to be the owner and hire a real estate agent to list it.

3. They push for a below-market, all-cash, quick-close transaction.

4. They avoid video calls and supply fake ID documents.

5. If no one challenges them, they could walk away with the sale proceeds while the real owner has no idea what’s happening.

Massachusetts attorneys and real estate agents have become much more vigilant about spotting warning signs. Still, this remains one of the most rapidly growing scams in the region.

Best practices to prevent real estate fraud

Fortunately, preventing real estate fraud doesn’t require complicated technology — just good habits, a careful eye, and a reliable team.

Here are the safeguards every party to a transaction should practice:

1. Recognize the voice of your real estate attorney and confirm wire instructions by phone every time

You should have spoken to your real estate attorney during the transaction - recognize that voice and do not take instructions from anyone else.

When verifying wire instructions, call the attorney’s direct cell if available, or use the number on the attorney’s website. Do not rely on a number in an email or text. Wire instructions almost never change mid-transaction.

2. Be suspicious of urgency

Language like “right away,” “immediately,” or “this must be done now” is a classic red flag.

3. Never rely solely on emailed documents

Payoff statements, wiring instructions, and changes in contact information should always be verified verbally.

4. Use secure portals when available.

Uploading financial documents via email increases risk for everyone on the chain.

5. Trust your gut

If something feels off — a tone shift, an unusual request, a last-minute change — pick up the phone. Quick skepticism beats quick regret.