New Jersey firms connected to real estate transactions say they see cybercriminals purloin cash totals that would make real estate agents selling the most top-dollar of megamansions blush.
And the costs just keep moving north for those in the industry, who have continued to layer increasingly high-priced protections on the work they do in an effort to thwart scammers.
Levi Kelman, founder and CEO of Clifton-based multifamily developer and property manager Blue Onyx, said the sector has had a target on its back for some time, even compared with other industries contending with a proliferation of pandemic-spawned attacks.
“I think these cybercriminals consider themselves businesspeople in a sense, so they look at the size of an industry, and the money moving through it — and it’s a numbers game,” he said.
Across the many firms that interact with New Jersey’s real estate industry, Kelman said there’s been a wide awareness that fraud attempts have been on an upward trend since 2020. Firms such as his have built out more robust digital platforms, heightening the need for protections, including stronger firewalls, outsourced information technology experts and cyber liability insurance.
“In discussing with an insurance broker on how to approach insuring a new (digital and electronic payment) division, I got quite a lesson on where the industry itself is,” Kelman said. “The breaches that are happening have become more costly and larger. The settlements paid out have gone up, which insurance companies are on the hook for. So, the premiums have totally skyrocketed.”
The fact is, data published by credit rating agency Fitch Ratings show reported cyberinsurance claims rose by 100% annually beginning in 2019, with claims spiking in 2021.
The consequence is that costs for that insurance have doubled, tripled or sometimes even quadrupled compared to what they were in pre-pandemic times, Kelman said.
At the same time, the fast-modernizing industry is paying more to train its staff on possible scams to fend off fraudsters.
The problem? Where there’s turnover, there’s an endless churn of more training that’s needed. That’s one of the recognized vulnerabilities about the sector, according to Kelman.
“We, as an industry, particularly in multifamily, have at least a 33% employee turnover rate,” he said. “That’s 10 to 15% higher than other sectors. And that turnover makes the training more challenging.”
Kelman said that’s just one of the reasons that this industry is such an attractive target to cybercriminals.
“My opinion and observation is that, in general, real estate seems to be a very fractured market,” he said. “There are very few large brands nationally recognized. There’s so many owners, property managers. When you’re in such a fragmented market, it’s difficult to maintain best practices across the board.”
Real estate deals in particular invite several different parties into tractions, said Fran Turchi, co-owner and president of National Integrity Title Agency.
“So, we have to have so many layers of protection, between the contracted-out IT and internet security and other firewalls,” she said. “We’re even contracting out an independent third party to help us really educate outside buyers and sellers about where we can’t protect them.”
Each time Turchi thinks she might be frightened enough by the seriousness of these digital intruders, she finds more frightening reasons to put resources into training and threat filtering.
Scammers have gotten bolder. Within the past few years, fraudsters started jumping into email chains to impersonate real estate professionals and run off with wired funds. Now, they’re involved in complicated cons that utilize fake identification to sell off vacated homes.
“You have scammers selling vacation homes out from under snowbirds who have a residence in New Jersey and a second home in Florida,” she said. “Every time we think we’ve stopped seeing new scams, the latest and greatest comes along.”
While industry professionals might be familiar with legitimate identification and know how to verify it, Turchi said, they’re not FBI agents.
No matter how much they pay to get out in front of these scams, becoming a victim of the latest trickery feels more like an inevitability each day to those in real estate.
It goes without saying: The scammers wouldn’t keep trying to scam if that weren’t true.
“You wonder why those email scam Nigerian princes are still around,” Kelman said. “They’re still finding more and more people to defraud and people they can take advantage of.”