Top Serhant Patrick Southern tends to receive waves of inquiries about fraudulent buyers. Agent in Hudson County, New Jersey. Southern doesn’t know exactly why this happens, but he has a few theories.
Patrick Southern | Serhant.
“I think scammers are just taking over the market,” Southern told Inman. “They say, ‘Let’s screw this market and we’ll roll out to the next one.'”
Southern understands the pattern so well that when it starts to happen, he says to himself, “I don’t know what to do. “There was a wave two months ago and it lasted for several days,” he said. “Of course we try to flush it out. Then it disappears.”
If Southern’s theory is true, real estate scammers are like tornadoes that fall across the market, trying to cause as much damage as possible. Southern isn’t caught in the storm, but many agents are.
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Real estate agents are increasingly on the front lines of fraud prevention. The biggest threat is wire fraud, often caused by email compromise. According to FBI data and CertifID’s State of Wire Fraud report, more than one in four home buyers and sellers are targeted by wire fraud during a transaction, with more than 13,000 victims per year.
Agents are most at risk through insecure email chains and inconsistent verification processes. The risk is increasing as fraudsters use more sophisticated techniques, such as AI-generated messages and spoofing.
Even when agents are not directly responsible, they often face reputational and legal consequences. As a result, their role is increasingly shifting beyond advising clients to proactively manage risk and act as checkpoints to ensure buyers don’t send funds to the wrong place.
The easiest way to eliminate fake buyers instantly
Fraud is a daily nuisance for agencies like Southern, and continues to increase, especially during the pandemic. Southern believes residential real estate is a prime target because the industry is often busier and more chaotic than commercial real estate.
“Residential real estate is highly transactional,” he says. “Last year there were 376 deals. But that doesn’t include the thousands of leads and inquiries on top of that. In the housing industry, the pace can be breakneck.”
Southern said scammers typically go after “low-hanging fruit” and are easy to identify if you’re aware of their attempts.
“Most of it is internet-generated and immediately looks suspicious,” he said. “For example, let’s say you have a nearly identical inquiry for multiple properties. And you wonder, ‘Why would I inquire about these unrelated properties?'”
The next move, he said, is that the scammers will immediately offer you a Zoom or Google Meet video call. Sometimes they pose as foreign investors flattered by Southern’s real estate expertise. But the biggest red flag, he says, is that they “reject real human connection at all costs.”
“The most effective defense is to always insist on a live phone conversation,” Southern said. “Then most scammers disappear instantly.”
For the South, the urgency of most scammers is also a red flag. He believes most buyers see no benefit in viewing a property right away.
“If the buyer is genuine, the first phone call is always helpful,” he said. “But a whole new, younger generation of agents is so connected to technology and text messaging that they may not care about this stuff as much.”
How scammers exploit eager new agents
Therein lies a key weakness that real estate fraudsters may try to exploit, Southern said. Younger agents may be more desperate due to lack of industry training and lack of deal flow. In Hudson County, New Jersey, the average agent sold about 3.5 properties last year, Southern said.
“The interesting thing about real estate is that reality television shows portray its glamorous nature. But what you don’t see is the extreme effort and extreme rejection,” he said.
So when a lead comes in, some inexperienced agents get an adrenaline rush that can put them in a vulnerable situation, Southern said.
“New agents are definitely more susceptible to fraud,” he says. “Residential has a lot of part-time agents who can be distracted, so it can be easy to get caught off guard if you’re green and lack deal flow.”
Southern said he has not experienced more sophisticated forms of fraud, such as “deepfakes” or voice cloning, but expects to see an increase in such techniques in the future.
“We flush it right away,” he said. “We don’t follow their links and don’t let them take it to the next step.” This mainly means that he insists on phone calls and does not agree to meet on Zoom via the link provided.
Provide every lead with vigilance
Mike Fabbri, a top luxury goods agent at The Agency in New York City and Connecticut, has seen a flurry of inquiries from similar scammers and fake buyers. “I think every agency has experienced something like this. As an industry, we’re operating more cautiously,” he told Inman.
Mike Fabbri |Agent
As a broker, Fabbri said the safety and security of his clients is always his top priority. It is also his responsibility to respond to all inquiries and not discriminate. That’s troubling, he said, and with artificial intelligence, some text-generated fraudulent inquiries can be very convincing.
“Some are better than others,” he said. “I’ve never been in any real danger or danger, but there have been times when scammers have done as much as a book screening and never showed up.”
Recently, Fabbri encountered a scammer with a complete online social profile. They sent a photo and name, which turned out to be the identity of a broker in Tennessee. He looked it up online and it was easy to sniff it out.
“Sometimes they use very common names like John Smith,” Fabbri said. “Some people may just be bored. For others, it’s hard to know their motives. This is common in online dating as well, and in any area where there is potential for relationships or deception.”
Tension, emotion, and silence
There are always some red flags that should alert Fabbri. “There is usually a lot of urgency and emotion involved in the initial communication,” he said. “The rhythm of communication is also a red flag. It’s strong at first, but then gradually emerges.”
Like Southern, Fabbri said his first goal is always to call the person or meet him in a public, neutral setting, never in a facility. “The goal is to always check and never let them in,” he said. “Let’s meet in public first before we meet at the facility.”
He said there has been a noticeable increase in fraud inquiries, which tend to occur during market downturns. Scammers may try to take advantage of listing agents who are more likely to close the deal.
However, this challenge is not necessarily new. Fabbri said there was a particular spike in fraud during the pandemic, when most screenings were held virtually.
Luxury properties are a more attractive target, but Mr. Fabbri joked that every property in New York City could be considered a luxury property. “But at the high end, we are better equipped to deal with this because we have less inbound traffic,” he said.
Fabbri said responding to fraudulent inquiries is frustrating and a waste of time, but it proves the value of real estate agents. “We are our clients’ first line of defense,” he said. “In areas like this, we can prove our worth as humans and see why agents will never be replaced by AI.”
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