Page 17 - Home Buyers and Sellers Guide - Hawaii

BEWARE OF WIRE FRAUD

According to the Federal Bureau of Investigation (FBI), in 2024 victims of business email compromise
reported losses over $2.7 Billion.

The Internet Crime Complaint Center (IC3) receives, on average, more than 2,000 complaints per day (FBI,
2024).

Cybercriminals are sending fraudulent wiring instructions to real estate agents, title companies and clients, Preliminary Report
so it’s important to remain vigilant.

How to Protect Yourself

· Be wary of free, web-based email accounts; they are easily hacked.
· Always verify changes in payment instructions and confirm requests for transfer of funds.
· Carefully evaluate any requests for secrecy or pressure to take action quickly. PRELIMINARY REPORTS — SOME BASICS
· Call, don’t email. Confirm all wiring instructions by phone before transferring funds. Use a trusted After months of searching, you’ve finally found it: your perfect dream home. But is it perfect? Will you be
phone number provided by your title company or closing agent. purchasing more than just a beautiful home? Will you also be acquiring liens placed on the property by prior
· Be suspicious. It’s not common for title companies to change wiring instructions and payment info. owners? Have documents been recorded that will restrict your use of the property?
· Confirm it all. Ask your bank to confirm not just the account number but also the name on the
account before sending a wire. The preliminary report will provide you with the opportunity, prior to purchase, to review matters affecting your
· Verify immediately. You should call the title company or real estate agent to validate that the funds property which will be excluded from coverage under your title insurance policy unless removed or eliminated
were received. Detecting that you sent the money to the wrong account within 24 hours gives you before your purchase.
the best chance of recovering your money.
· Forward, don’t reply. When responding to an email, hit forward instead of reply and then start typing What is a preliminary report?
in the person’s email address. Criminals use email addresses that are very similar to business email
addresses used by legitimate companies. By typing out an email address, you make it easier to A preliminary report is a report prepared prior to issuing a policy of title insurance that shows the ownership of
discover whether a fraudster is after you. a specific parcel of land, together with the liens and encumbrances thereon which will not be covered under a
subsequent title insurance policy.
If you think you might be a victim:
What role does a preliminary report play in the real estate process?
1. Using a previously known phone number, call the supposed sender of the email to authenticate the
change request – don’t call the number on the email. A preliminary report contains the conditions under which the title company will issue a particular type of title
2. If you suspect fraud, immediately notify the financial institutions and escrow agent involved in the insurance policy.
transaction.
3. Contact your local law enforcement authorities, and file a complaint with the FBI’s Internet Crime The preliminary report lists, in advance of purchase, title defects, liens and encumbrances which would be
Complaint Center. excluded from coverage if the requested title insurance policy were to be issued as of the date of the preliminary
report. The report may then be reviewed and discussed by the parties to a real estate transaction and their
06/2025 | Sources: ALTA, FBI agents.

Thus, a preliminary report provides the opportunity to seek the removal of items referenced in the report which
are objectionable to the buyer prior to purchase.

When and how is the preliminary report produced?

Shortly after escrow is opened, an order will be placed with the title company which will then begin the process
involved in producing the report.

This process calls for the assembly and review of certain recorded matters relative to both the property and the
parties to the transaction. Examples of recorded matters include a deed of trust recorded against the property or
a lien recorded against the buyer or seller for an unpaid court award or unpaid taxes.

These recorded matters are listed numerically as “exceptions” in the preliminary report. They will remain
exceptions from title insurance coverage unless eliminated or released prior to the transfer of title.

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