Buying a home is a big step, as is handing over a large chunk of cash in order to do it.
Depending on the title company, real estate transactions like this are done on paper with a check or through electronic wire transfer. While that is more convenient, one wrong number — or one spoof email — can send those tens or hundreds of thousands of dollars in the wrong direction.
Moving those funds in the right direction securely is what Closinglock wants to do. Andy White and his wife, Abigail White, started the Austin-based company in 2017 after Abigail, who was in real estate, learned that title companies often share payment transfer instructions via email.
“Abigail came home from work and told me that one of their homebuyers almost lost all of their money in an email spoofing scam, something that was sort of new in 2017,” Andy White told TechCrunch. “When she described it to me, I thought it was interesting because we had bought our house a year prior.”
White looked through his records of how he and his wife had made the real estate transaction and discovered it was via a random email from the title company that included an account number and routing number.
He recalls not thinking much of it as he went to the bank and wired $25,000 to the account, and how that “was a lightbulb moment for me how easily I could have lost my life savings,” he said.
Using outdated payment systems coupled with outdated communication systems — fax machines, anyone? — it wasn’t too surprising that a lot of fraud could occur. In fact, one in 10 real estate transactions are targeted for fraud in the U.S. Meanwhile, more than 2,200 people claimed to be victims of real estate wire fraud in 2022 to the tune of over $446 million, according to FBI data. That figure has nearly doubled since 2020.
White, who has a background in computer engineering, built a real estate fraud prevention and payments portal to house everything in one place securely. Users log into the portal where wiring instructions would be provided instead of being emailed account and routing numbers. That grew into title and settlement company customers asking for a way to send documents securely, receive wiring instructions, verify identities and manage payments.
The couple started out bootstrapping the business and have since grown it to 35 people in the past six years. At the same time, revenue doubled or tripled each year. Closinglock works with thousands of settlement agents across the country and has protected over $250 billion of transactions.
In early 2023, Closinglock announced $4 million in seed funding and today it adds another $12 million in the form of Series A capital. Headline led the investment and was joined by LiveOak Ventures and a group of strategic angel investors. The company has now raised $16 million in total.
White intends to deploy the new capital into product and technology development and hiring.
“About $2 trillion in residential real estate transactions move through those unsophisticated methods, so there are a lot of different avenues we are excited about continuing to work on,” White said. “We are looking at the fintech side of it, especially when it comes to actually moving the money for real estate transactions so we are not cutting a bunch of checks, dealing with ACH transactions or wire transfers that go to the wrong spot.”
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