Victim of Mortgage Wire Fraud Due to a Negligent Attorney
Many people hire an attorney to verify the legality of their closing documents, review contract provisions, and protect them from things like wire fraud scams.
The last thing someone thinks their lawyer will do is send their money directly to a scam artist or the lawyer advises the client to send it to a scam artist.
Unfortunately, this happens more frequently than people realize and can result in a mortgage wire fraud legal malpractice claim against the lawyer.
Real estate lawyers owe their clients a duty to provide competent representation, which does not include sending a client’s funds or advising the client to send the funds to the wrong person.
If you suffered damages due to your attorney’s mistake, call (860) 561-0651 or contact StangerLaw LLC online today.
Our experienced Connecticut legal malpractice attorney looks forward to hearing from you.
Our Practice is Limited to Connecticut
We handle Connecticut legal malpractice claims. We won’t review cases where financial losses are less than $100,000.
What Is Real Estate Wire Fraud?
Real estate wire fraud occurs when a party uses fraud or deception to trick a lawyer, home buyer, or seller into sending a money wire to the offender instead of the other party to their real estate transaction or the holder of the mortgage (typically the bank).
Statistics collected by the FBI indicate that wire fraud in real estate increased by approximately 17% from 2019 to 2020 and cost consumers more than $213 million. Typically, the scammer creates a fake email account imitating the real estate agent, a bank or the opposing party, or the closing attorney.
Then, they send the victim an email providing instructions for a wire transfer. If the victim does not realize the person on the other end is a scammer, they can lose hundreds of thousands of dollars.
Wire fraud is a serious issue in the real estate industry and continues to grow. According to a 2022 survey by the American Land Title Association, approximately 46% of respondents said their employees receive at least one email a month containing fraudulent wire or payoff instructions.
Real Estate Wire Fraud: Who Is Liable?
Real estate wire fraud can happen to any of the parties involved in a real estate transaction.
Buyer
Consider that a home buyer receives an email near their closing date stating details regarding where to wire the funds or a last minute change to their wire transfer instructions. The email appears to be from their real estate agent, the Title Company or in Connecticut, typically the closing attorney representing the bank or the Buyer, but they do not notice a slight change in the email address.
Additionally, the correspondence may urge the buyer to initiate the wire transfer quickly or risk the seller pulling out of the transaction.
Many homebuyers wait restlessly for these final instructions and respond immediately once received. Especially if the purported closing agent says the payment needs to be made right away at the risk of losing the house.
Or the Closing Agent receives an email which appears to be from the Seller or the Seller’s attorney, telling them where to send the funds to pay off an existing mortgage which establishes or changes where to send the funds.
Unfortunately, some wire the funds to the provided account number. It is only when the seller reaches out about the wire transfer that the buyer realizes what happened. In some cases, these scams can cost buyers or sellers tens of thousands of dollars.
When this occurs, the victim of the scam should notify the involved parties and report the fraudulent transaction to the banking institution which sent the funds to the thieves. In some cases, banks can block the transfer from going through. Then, the victim can report the incident to the lawyers, broker, police, and especially the FBI’s Internet Crime Complaint Center.
Scammers can learn about pending home sales on real estate websites like Zillow and Trulia. Then, they collect as much information as possible from the parties involved in the transaction. The scammer hacks into an email account of someone involved in the transaction and waits for the right time to send their fraudulent request along with some more casual emails building credibility.
Seller
In another scenario, real estate wire fraud can happen to the seller. Whenever a party sells a property, someone typically wires the proceeds of the sale to the lender to pay off their original loan. In a real estate scam, the perpetrator will send the seller, agent, title companies (more prevalent in other states), and/or lawyers (wire instructions that direct the funds to an alternative account.
The bad actor may send the instructions from an email address that closely resembles that of a trusted party involved in the transaction. They may bypass some of those involved and send the message directly to the Sellers or the lawyer(s).
If the funds go to whomever is sending the wrong credentials, then the fraudster disappears with their funds. Because the lender does not receive the funds, they will not release the seller from their debt obligation and the buyer has purchased a home which still has a mortgage on the property. This can result in hundreds of thousands of dollars in losses for both the buyer and seller.
In some cases, the victim can file a legal malpractice claim for wire fraud if the attorney negligently sends the funds or instructs others to send the money to the wrong party. The professionals are responsible for acting appropriately to set up systems such as a verbal or written password, a special phone number, or other safety barriers to prevent transfers involving fraudsters.
Before hiring a real estate lawyer, ask them what they will do to prevent such a tragic loss. Contact our team to learn more about your options. Keep in mind that some insurance companies that are insuring lawyers who do closings are putting in exclusions in their policies on covering some of these situations.
It’s appropriate to ask your lawyer that’s helping with your closing if they have insurance, if they’ve ever had any claims or losses, and if their insurance covers such a loss if someone screws up.
When Is Mortgage Wire Fraud Legal Malpractice?
As stated above, many people hire real estate lawyers to review their documentation and streamline the buying and selling process.
Unfortunately, real estate lawyers can mistakenly wire money to a fraudster, just like a typical consumer. When an attorney’s errors or carelessness costs their client money, the client may qualify to file a legal malpractice claim against the lawyer.
An attorney commits legal malpractice when they fail to act as a reasonable attorney would in the same or similar circumstances.
Our team at StangerLaw LLC is committed to helping clients recover the losses they suffered due to legal malpractice. Since our founding in 1977, we have strived to provide our clients the highest quality of legal representation.
Call (860) 561-0651 or send us an online message today for assistance.
