Wire Fraud On the Rise
Wire fraud has been on the rise in the past few years. Since real estate is an industry where large amounts of money are involved, many scammers are increasingly devoting their efforts to target home purchases. According to the FBI, cyber-criminals stole or tried to steal about $19 million from real estate transactions in 2016. That number went up to almost $1 billion in 2017. That’s a huge jump for one year.
What Is Wire Fraud?
Wire fraud is when criminals steal money by having people wire, or send, money to a fraudulent account. How do they do this? They usually find ways to pose as an agent, escrow officer, or mortgage lender. They hack into email accounts and monitor email exchanges between parties to learn important details about the transaction. Then, at the perfect moment, the criminals jump in and send doctored emails to look exactly like they came from a trusted source. They give instructions for the money to be wired to a specific (fraudulent) account. Once the sender wires the money, there’s almost no way to trace it or get it back. The money is gone forever and the scammers get away.
Close to Home
We often see or hear these stories online but it recently happened close to home. A few weeks ago, some clients of an agent in our office lost their earnest money of $20,000 to fraudsters. Sometimes, people lose hundreds of thousands of dollars.
Our agent had had multiple conversations about only writing a check for the earnest money and not wiring it. However, 30 minutes after a real email from our agent, scammers sent an email from a fake address that was very similar to the agent’s. It had all the correct formatting and contained knowledge of the transaction. The email also contained “updated instructions” for wiring the earnest money, which the buyers followed.
It turned out the buyers’ email address had been hacked and the criminals had been watching the interactions, waiting for the perfect moment to slip in. Even if it only pays off one out of 100 times, there’s lots of money to be made and little risk of getting caught.
Ways to Stay Safe
- Don’t wire money! Write a check if you can. I know it seems like we’re going backwards here, but it truly is the safer option.
- If you have to wire money, ALWAYS verify instructions in person or over the phone with a person that you already know, through a phone number that you already know. Be especially wary of wire instructions sent via email
- Make sure you have strong passwords.
- Don’t share personal information in emails.
- Don’t click on suspicious links or emails.
Please don’t become a victim of these criminals! The best defense is strong communication with your agent and being educated. The form below is something every agent should give you at the beginning of your agency relationship! Let me know if you have any questions or comments.
What is a mortgage calculator?
If you’re house hunting, then you need to know what you can afford. The first step is getting pre-approved with a mortgage lender. A pre-approval is a basically what the lender says you can afford overall, but it doesn’t tell the whole story. You’ll still want to know what your monthly payments would be. Most people use a mortgage calculator to do this. If you’ve ever used the Internet, then you’ve probably been on Zillow and/or Redfin, and you’ve probably noticed the built-in mortgage calculators they provide. These allow you to automatically see what your payments might be for a specific property.
But wait, there’s more! Online mortgage calculators might be free and convenient, but many of them don’t have all the figures you need to get a good estimate of a monthly mortgage payment. At its most basic, a mortgage calculator only has the mortgage amount, which is the price of the house minus the down payment. The calculator often defaults to a 30-year loan with an interest rate pulled from elsewhere on the Internet. The resulting monthly payment you see only includes the principal and interest on the loan. This is very misleading because there are other costs that go into your monthly payments.
Property taxes are the biggest omission. In Seattle, the 2018 property tax rate was $9.56 per $1,000 of assessed value, which is roughly 1% per year. So if your property was assessed at $500,000 (assessed value is often much lower than actual market value), then you would pay $4,780 in taxes that year. That alone is an extra $398 a month!
Other costs can include:
- homeowners insurance
- homeowners association dues (mostly for condos and planned communities, but these can also be hundreds of dollars a month)
- general home maintenance and repairs
- private mortgage insurance (usually required if you put less than 20% down)
- closing costs
These can all add up to quite a bit more per month than just the sale price of the house.
How can I get a more accurate estimate?
Find a mortgage calculator that has more than just the basic calculations of mortgage amount and interest rate. If you can adjust the figures or enter your own, even better. Many websites that provide free mortgage calculators offer “advanced” versions, so look for buttons or links to those.
Conclusion (TLDR [too long, didn’t read])
Even if you’re pre-approved and know the overall price of a house you can afford, there are other costs that go into your monthly home payments. The best way to estimate your total monthly payments is to speak with your lender. If you don’t want to bother your lender about every single house you look at and you want to use a mortgage calculator on your own, make sure the calculator you use allows you to enter in your own figures. Are you comfortable with that monthly payment? If not, then you’ll have to work with your lender to reach one that you will be comfortable paying.