Buying a home is a big step, and so is handing over a big chunk of cash to do it.
Depending on the title of the company, real estate transactions like this are done on paper by check or by electronic transfer. While this is more convenient, a wrong number — or a spoofed email — can send those tens or hundreds of thousands of dollars in the wrong direction.
Safely moving these funds in the right direction is what Lock 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 home buyers almost lost all their money in an email spoofing scam, which was kind of new in 2017,” Andy White told TechCrunch. “When he described it to me, I thought it was interesting because we had bought our house a year before.”
White reviewed his records of how he and his wife had made the real estate transaction and discovered it was through a random email from the title company that included an account number and routing number.
He remembers not thinking much about it as he went to the bank and wired $25,000 into the account, and how that “was a moment for me how easily I could lose my savings,” he said.
Using antiquated payment systems in conjunction with antiquated communication systems — fax machines, anyone? — It was not too surprising that a great fraud might occur. In fact, one in 10 real estate transactions is targeted by fraud In the US, meanwhile, more than 2,200 people claimed to have been victims of real estate fraud in 2022 amounting to more than $446 million, according to FBI data. This number has almost doubled since 2020.
White, who has a background in computer engineering, created a real estate payment and fraud prevention portal to house everything in one place securely. Users log into the portal where they will be provided with wiring instructions instead of being emailed account and routing numbers. This evolved into title company and settlement customers asking for a way to securely send documents, receive wiring instructions, verify identities and manage payments.
The couple started by bootstrapping the business and have since grown it to 35 people over the past six years. At the same time, revenues were doubling or tripling every year. Closinglock works with thousands of settlement agents across the country and has protected over $250 billion in transactions.
In early 2023, Closinglock announced $4 million in funding and today is adding another $12 million in 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 plans to use the new capital on product and technology development and hiring.
“About $2 trillion in residential real estate transactions move through these unsophisticated methods, 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, especially when it comes to actually moving money for real estate transactions, so we’re not cutting a bunch of checks, dealing with ACH transactions or wire transfers going to the wrong place.”
