While artificial intelligence (AI) can boost productivity and innovation and decrease errors and inefficiencies, it also comes with a darker side. Cybercriminals have used AI to perpetrate fraud in the financial services industry, eCommerce, insurance, and, more than ever, real estate. It is impacting industries and individuals alike.
Experts predict that overall AI-related fraud losses could approach $40 million in the United States by 2027, a notable 32% growth rate from just four years earlier. According to a recent report on internet fraud, real estate scams are on the rise. The Federal Bureau of Investigation’s Internet Crime Complaint Center received 9,521 reports of business email compromise in the real estate industry that led to losses of more than $145 million. Likewise, real estate and rental wire fraud ranked 7th out of 30-plus types of fraud that the Federal Bureau of Investigation Internet Crime Complaint Center tracks.
Title companies and real estate agents can better support their clients and reduce fraud by educating themselves on the power and dangers of artificial intelligence.
How sophisticated cybercriminals are infiltrating real estate
Scammers are more sophisticated than ever, employing advanced AI tools to impersonate real estate agents, generate fake property documents, and deceive both buyers and sellers. Here are some of the most common fraud tactics impacting the real estate industry today:
- Deed or title theft: Cybercriminals can now fake identities with the goal of selling a property they don’t actually own. The Spelling Manor, a Los Angeles mansion built by TV producer Aaron Spelling and listed for $137.5 million, can’t actually be sold because of a fraudulent deed filed by two scammers with no claim to the property. Graceland almost fell victim to a similar scam. In April 2024, nearly 20% of insurance companies reported at least one impersonation fraud attempt, and the FBI recently warned of a 500% spike in vacant land deed fraud from 2020 to 2024.
- Fake documents and videos: In addition to deed theft, the latest generative AI tools can produce a variety of realistic documents and videos readily available for purchase online. Fraudsters can fake everything from emails to loan documents to driver’s licenses. Likewise, deepfakes of agents can trick buyers into believing they are connecting with a local real estate agent via a Zoom call rather than a bad actor thousands of miles away. A video call with a deepfake “CFO” convinced one Hong Kong-based financial services professional to wire a whopping $25 million to cybercriminals.
- Phishing scams: AI-produced emails are increasingly being used to impersonate real estate agents and trick clients into sharing sensitive information such as personal bank account details, wire transfer instructions, and Social Security numbers. Criminals often use email addresses that appear to be legitimate but have a slight variation from the owner’s actual account. They often express urgency and encourage quick action, preventing clients from taking further verification steps. Artificial intelligence can also effectively change the details of a listing.
While these tactics represent the dark side of the real estate industry, the good news is that there are concrete steps that both title companies and real estate agents can take to help avert the dangers of AI fraud.
How you can help protect customers and properties from AI fraud
Red flags are sometimes subtle when it comes to deepfakes and real estate scams, but savvy industry professionals can often spot them when taking a closer look.
To reduce fraud in real estate, consider the following tips:
- Pay careful attention: If a potential seller refuses to meet with you in person or complete an ID verification and doesn’t seem to know much about the property they want to sell, these could be signs of potential fraud. Many title companies leverage technology to verify identities against non-public data sources, which bad actors don’t have access to.
- Verify, verify, verify: Ensure your verification procedures are diligent and thorough and all documents are authenticated. Regularly review and update company security procedures to prevent unauthorized access to sensitive information and ensure all employees are trained on encryption processes and monitoring tools. Secure communication channels such as emails and apps are necessary when sharing confidential or sensitive information.
- Research: Check county property records to ensure documents are authentic and review maps to confirm property location details. A little research can pinpoint potential issues and prevent a lot of headaches down the road.
- Educate clients: Let clients know what AI fraud in real estate looks like, and encourage them to verify, verify, verify as well. Acknowledging that fraud can happen at any stage in a real estate transaction is essential, especially vacant properties, which are often targets for title scams. A small dose of awareness can go a long way toward preventing property scams.
- Connect: When real estate agents, title companies, IT providers, and consumers work together to effectively share information and prevent fraud, everyone benefits. Collaborate with other industry partners to share best practices and the latest technology and tools while supporting broader fraud prevention.
The more industry professionals are aware of the potential of deepfakes and other industry scams, the more they will be on the alert. Education is critical.
The latest fraud prevention technology for the real estate industry
To learn how Closinglock can protect your business from fraud, streamline operations, and make your job easier, request a demo with a member of our team. Closinglock is a fraud-prevention software revolutionizing the real estate industry’s transfer of funds and information. Title companies can send wire instructions, securely exchange documents for e-signing, and receive payments from one secure platform.