Wire Transferred Out of Home-Ownership

Office people on computers

The Facts

Sigmund hired real estate broker, Juliana to find and purchase his first home. Sigmund found a house he was interested in purchasing within a few days of meeting with Juliana and wanted to close on the home right away. Juliana informed Sigmund that as part of closing, he would need to pay the title company, Alfredo Title Inc., in order to fund the purchase of the home.

Later that afternoon, Sigmund received an email from Juliana. The email contained wire transfer instructions1 which directed Sigmund to wire transfer $250,000 to Alfredo Title Inc. Sigmund completed the wire transfer that same day2 but Alfredo Title Inc. never received the funds.

When Sigmund realized he had been a victim of deceptive transfer, he filed a complaint against Juliana. Juliana immediately contacted her insurance carrier who authorized a forensic investigation. The forensic team was able to confirm that Juliana’s email was not compromised and that Alfredo Title Inc. was most likely responsible for the breach.

Sigmund was able to recover all but $70,000 after discovering the wire transfer instructions were fraudulent.

 

The Result

Sigmund filed suit against Juliana and the third party title company, Alfredo Title Inc., for $70,000. 

Given the suit did not allege that Juliana experienced a network security failure, which was confirmed through the forensic investigation, and since there was no allegation that she failed to properly manage, handle or otherwise control personal information, the insurance carrier denied coverage with respect to the complaint against the real estate broker.

The Risk Factors

Risk Factor #1

The real estate agent should separate themself from any involvement in fund transfer requests and make both the purchaser and buying agent sign off on any transfers between the buyer, seller and title company. Many closing agreements now have standard language that releases the real estate firm from fund transfer liability.

Risk Factor #2

If the firm is going to be involved in the fund transfer process they should make the buyer, seller and title agents aware that it is standard practice to make a phone call to the party requesting the wire transfer, to authenticate the validity of the request, prior to making the fund transfer.


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