Home Agent Homebuyers Sue REX After Losing $140K In Wire Fraud Scam

Homebuyers Sue REX After Losing $140K In Wire Fraud Scam

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The complaint alleges negligence and breach of fiduciary duty after an unknown third party impersonated the brokerage’s title company and sent the buyers fraudulent wiring instructions.

In what may be a harbinger of similar suits as wire fraud becomes ever more common, homebuyers are suing discount brokerage REX Real Estate after they lost more than $140,000 to a scammer impersonating their title company.

According to a July 28 complaint, Harold Michael Carter and Carol Lynn Carter agreed to purchase a property at 121 Spoonbill Point Court in St. Augustine, Florida, in March for $635,000. REX was the listing broker for the property. The complaint alleges that REX required the Carters to use its wholly-owned subsidiary, Iron Crest National Title Agency, as the closing agent for the transaction.

Before the March 10 closing date, the Carters “received communication” purportedly from Iron Crest with wiring instructions for $140,599.43 in closing costs for the deal.

“In [reality], the communication was sent from an unknown third-party that had acquired all information relating to the Closing and the Transaction,” the complaint said.

“On March 8, 2022, the Carters, acting in reliance on the information provided, wired the Closing Funds to the unknown third-party.”

After discovering the fraud, the Carters attempted to recover the funds from their bank, but to date have been unable to. The Carters did buy the property later in March but had to pay the closing costs a second time in order to do so.

The complaint accuses Iron Crest and REX of negligence and adds a breach of fiduciary duty allegation against Iron Crest.

Iron Crest and REX “owed the Carters a duty to maintain all information relating to the Transaction in a secure and confidential manner and to timely notify the Carters of any breaches in the electronic security system that could impact the Carters confidential information,” the complaint said.

“Defendant Rex owed a duty to the Carters ensure its wholly owned subsidiary, Defendant Iron Crest, was utilizing appropriate steps to prevent and detect … unauthorized access to its electronic data,” the complaint added.

The complaint alleges that REX breached its duty to the Carters by allowing an unknown third party to access the Carters’ confidential information, failing to “timely” detect and then notify the Carters that the third party had gained access to Iron Crest’s and the Carters’ confidential information, failing to perform proper due diligence before choosing Iron Crest as the closing agent, and requiring the Carters to use Iron Crest as the closing agent “when it knew or should have known that it was not utilizing appropriate steps to protect its electronic data from being accessed by third-parties.”

The suit demands a jury trial and seeks damages to recover the lost funds, with interest.

Wire fraud scammers target 1 in 3 real estate transactions, according to a 2021 American Land Title Association (ALTA) survey.

According to real estate agent, lawyer and Inman contributor Rich Hopen, who lost his mortgage payoff of $239,000 to wire fraud, real estate deals are “ripe” for thieves.

“Each transaction involves multiple parties working under pressure to meet the closing deadline,” Hopen wrote. “Many of the parties share information over unsecured email accounts that can lead a savvy criminal to the wiring instructions.

“Homebuyers and sellers are vulnerable. As a real estate agent, it’s no longer enough for you to include a wire fraud warning on emails or have customers sign wire fraud disclosures. At a minimum, every seller and buyer should know about the risk of real estate wire fraud and how to prevent it.”

More software companies are taking on the problem of wire fraud, including CertifID, which recently raised a Series A funding round of $12.5 million.

REX did not respond to a request for comment.

Read the complaint:

Email Andrea V. Brambila.

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