Buying a home is a big step, and so is handing over a large amount of cash for it.
Depending on the title company, these real estate transactions are conducted by paper check or electronic wire transfer. While it's more convenient, one wrong number or one spoofed email can send tens or hundreds of thousands of dollars in the wrong direction.
Moving those funds safely in the right direction is what Closing Lock wants to do. Andy White and his wife, Abigail White, founded the Austin-based company in 2017 after Abigail, who was in the real estate industry, learned that title companies often shared payment transfer instructions via email. Established a company.
“Abigail came home from work and told me that one of her homebuyers had almost lost all her money to an email impersonation scam, which was unusual in 2017,” said Andy White. told TechCrunch. “When she explained that to me, I thought it was interesting because we bought the house a year ago.”
Mr. White looked at records of how he and his wife had conducted real estate transactions and discovered that it was a random email from a title company that included account numbers and routing numbers. I understand.
He recalls not thinking much about it when he went to the bank and transferred $25,000 to the account, saying, “It was so easy for me to lose all my life savings.'' It was like a lightbulb moment for me when I realized that I couldn't do it.”
With an antiquated payment system coupled with an antiquated communication system — fax anyone? — it wasn't all that surprising that a lot of fraud could occur. In fact, one out of every 10 real estate transactions in the United States is the target of fraud. Meanwhile, according to FBI data, in 2022 he claimed more than 2,200 people were victims of real estate wire fraud, totaling more than $446 million. This number has almost doubled since 2020.
White, who has a background in computer engineering, built a real estate fraud prevention and payments portal to keep everything securely in one place. Users log into the portal and instead of being emailed their account and routing numbers, they are provided with wiring instructions. This has led title and payment company customers to seek ways to securely send documents, receive wiring instructions, verify identity, and manage payments.
The couple started their own business and have grown to 35 employees over the past six years. At the same time, revenues increased from 2 to 3 times every year. Closinglock works with thousands of payment processors across the country and has secured over $250 billion in transactions.
In early 2023, Closinglock announced $4 million in seed funding and today added another $12 million in the form of Series A capital. Headline led the investment, with participation from LiveOak Ventures and a group of strategic angel investors. The company has now raised a total of $16 million.
Mr. White plans to use the new funds to invest in product and technology development and hiring.
“About $2 trillion of residential real estate transactions are done in these simple ways, so there are a lot of different avenues that we're excited to continue to work on,” White said. “We're looking at the fintech side of things, especially when it comes to actually moving funds in real estate transactions. So we're seeing a lot of checks being written, ACH transactions going to the wrong place, wires being sent to the wrong place. We don’t deal with remittances.”