A buyer closing on a townhouse in Doral receives an email two days before closing that looks exactly like the earlier messages from her title agent. Same logo, same signature block, same tone. It explains that the title company’s bank has changed and gives new wiring instructions for the down payment and closing costs. She sends the money that afternoon. On closing day, the title agent tells her the funds never arrived. The email came from a criminal who had been reading the agent’s messages for weeks, and the money was moved out of the receiving account within hours.
This is one of the most damaging frauds in real estate, and Florida, with its volume of cash and out-of-state buyers, sees plenty of it. It also creates a difficult question afterward: who pays? The answer often depends on how the transaction was handled and what insurance each party carried.
Why Criminals Target Real Estate
Real estate closings move large sums of money between several parties on tight deadlines, almost always by wire transfer. The process is predictable, many of the participants communicate mainly by email, and the people sending the largest payments, buyers, are often doing it for the first time. A single successful scheme can bring in a six-figure transfer, and once a wire leaves the account, recovering it is difficult unless the fraud is reported almost immediately.
How the Scheme Usually Works
Most incidents start with a compromised email account. Criminals gain access to the email of an agent, a title agency, an attorney, a lender or the buyer through phishing or a reused password. They watch the conversation quietly, learn the closing date and the people involved, and then send altered wiring instructions at the moment the buyer expects them. Sometimes the email comes from the real, compromised account. Sometimes it comes from a look-alike address that differs by a single character. Either way, the message fits the conversation so well that the buyer has no reason to doubt it.
Variations target sellers’ proceeds, payoff funds sent to lenders and commission payments to brokerages. Title agencies and law firms can also be tricked into sending escrow funds to a fraudulent account through what looks like a legitimate change request from a seller or a lender.
Who Ends Up With the Loss
When a buyer wires funds to a criminal, the loss falls first on the person who sent the money. Afterward, the buyer may look to the agent, brokerage, title agency or attorney whose email was compromised or who failed to warn them. Whether that claim succeeds depends on the facts, but defending it costs money either way. When a title agency or brokerage itself is tricked into sending funds it was holding, the loss is the business’s own.
Those are two different kinds of losses, and they are covered by different kinds of insurance.
The Insurance That Responds
Cyber liability policies generally cover the costs of a data breach, such as forensic investigation, notification and legal help, and claims by third parties that the business’s security failure caused them harm. Many policies also offer social engineering or funds transfer fraud coverage for money the business itself is tricked into sending, but that coverage is often sublimited and sometimes must be added by endorsement.
Crime insurance can also cover funds transfer fraud and computer fraud, again with conditions and limits that vary widely. Professional liability, or errors and omissions, may respond when a client alleges the professional was negligent in handling the transaction, but many E&O policies exclude or limit claims arising from cyber events. That is why a brokerage or title agency should look at all three policies together. Our article on why small businesses are real cyberattack targets explains the cyber side in more detail.
Policy Conditions That Matter
Social engineering coverage often requires that the business verify payment instructions through an independent method, such as a phone call to a known number, before sending funds. If the verification step was skipped, the claim can be denied. Sublimits are common and may be far below the size of a typical real estate wire. Some policies cover only the business’s own money and not client funds held in escrow. Reading those conditions before a loss is the only way to know whether the coverage fits how the office actually handles money.
Prevention Still Matters Most
Verification procedures prevent more losses than any policy. Title agencies and brokerages that tell every client at the start of the transaction that wiring instructions will never change by email, and that any change must be confirmed by calling a known number, eliminate most of the opportunity. Multifactor authentication on email accounts, secure portals for sharing instructions, staff training on phishing and a written callback procedure for every outgoing wire all reduce the risk. Many insurers ask about these controls on the application and price accordingly. Title agencies have additional escrow and fidelity exposures, which our page on title company insurance covers.
What to Do if It Happens
Speed matters. The sender should contact their bank immediately to request a recall, report the fraud to law enforcement, including the FBI’s Internet Crime Complaint Center, and notify every party in the transaction. The business whose email may have been compromised should notify its insurer right away, because cyber and crime policies have strict reporting requirements and often provide incident response help as part of the coverage.
Worth Confirming With Your Agent
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Whether your cyber policy includes social engineering or funds transfer fraud coverage, and the sublimit
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Whether that coverage applies to client funds in escrow or only your own money
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What verification steps the policy requires before a wire is sent
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Whether your E&O policy excludes claims arising from cyber events
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Whether crime coverage fills any gap the cyber policy leaves
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How quickly a suspected fraud must be reported to the insurer
This article is general information and is not legal advice.
Talk to Prestige Insurance Group
Prestige Insurance Group works with real estate brokerages, title agencies, mortgage brokers and law firms across Florida. We can review your cyber, crime and professional liability coverage together and show you where a wire fraud loss would and would not be covered.
Call the office nearest you. Se habla español.
Orlando: 407-993-2331
Miami: 305-969-8776
Stuart: 772-247-3788
Prestige Insurance Group, License L057894
