ALTA/NSPS Survey Standards have been revised

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Changes will take effect February 23, 2021

Almost every commercial transaction requires an ALTA/NSPS survey, so commercial practitioners are familiar with the most recent 2016 guidelines. Those guidelines are reviewed every five years, and a new version will be in effect beginning February 23, 2021.

You can review the new standards in their entirety, including a red-lined version, here.

The changes were made primarily to make the standards easier to understand and to correct a few inconsistencies. One change was made as a result of the 1995 U.S. Supreme Court case, Gutierrez de Martinez v. Lamagno, which held the word “shall” is a false imperative that actually means “may”. As a result, the word “shall” in the standards was changed to the word “must” to indicate an obligation or imperative.

Section 5.E was revised to clarify that the surveyor must only note observed evidence of easements, servitudes and other uses which are “on or across” the surveyed property instead of those which affect the surveyed property. This section also changes the necessity to locate utility poles within ten feet of the surveyed property from the prior requirement of five feet.

A change to Section 6.C states that if the surveyor becomes aware of a recorded easement not listed in the title evidence, the surveyor must advise the title company (in our case, the closing attorney) of the easement. If evidence of the easement isn’t provided to the surveyor, the easement must be shown or explained. This section was also revised to allow the surveyor to omit matters of record that are not survey related from the summary of title matters.

The introductory paragraph of Table A optional items has been revised to clarify that the wording of a Table A item may be negotiated. Item 6 of Table A was modified to clarify that zoning information must be provided to the surveyor. Item 11 regarding underground utilities has been simplified to two choices: (a) plans and/or reports provided by the client; or (b) markings coordinated by the surveyor pursuant to a private utility request. Item 18 (wetlands) was deleted. If a wetlands delineation is required, it must now be negotiated as an additional Table A, item 20. Item 19 was revised to allow for off-site easements appurtenant to be surveyed in their entirety.

We have a couple of weeks to become fully familiar with the new standards.

South Carolina REALTORS® announces record year

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South Carolina real estate practitioners, if you thought 2020 was outrageously busy, there was an excellent reason for that. In the middle of a global pandemic, our state had a record year in home sales.

South Carolina REALTORS® (SCR) recently issued a press release reflecting the market data as of the close of 2020, stating that the number of sales closed in South Carolina in 2020 was 101,500, representing a 20% increase in closed sales, an increase in median price sales of 13% and a decrease in inventory of 40%.

SCR’s press release touted its efforts in fighting for real estate to be deemed an “essential service”. We want you to be aware that Chicago Title fought for that designation, too.

Despite these phenomenal numbers, it was clear that inventory was an issue through 2020 and remains an issue in early 2021. SCR’s press release states that as of the end of December, there were only 16,480 active home listings in our entire state, compared to 118,667 at the end of 2019.

And we all know that home prices were up. It was indeed a seller’s market! SCR reports that the overall median sales price increased in South Carolina by 12% to $245,000, and that sellers received, on average, 98% of their original list price. This represents a year-over-year improvement of 0.6%.

As we prepare for 2021, it appears to us that the trends of low inventory and higher prices in housing will continue at least through mid-year.

We’re hoping for continued good news in our marketplace as our population gets vaccinated and we are all able to move around more freely.

Here’s wishing for each of you a healthy, happy and prosperous 2021. And here’s wishing for the end of COVID for all of us sooner rather than later!

South Carolina is one of three states without remote online notarization

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This HousingWire article really caught my attention this morning. South Carolina is one of only three states without an online notarization option.

Efforts have been in progress to pass Remote Online Notarization (RON) legislation here for a couple of years, but the Council of the Bar’s Real Estate Section opposed the legislation on the theory that RON would challenge the control South Carolina licensed lawyers currently enjoy. Many other lawyers disagree with that position, but the legislation stalled.

Other states have used a variety of permanent and temporary solutions to allow for remote online notarization during the COVID-19 crisis. But, at this moment, California, Oregon and South Carolina are the only states with no solution.

What’s your opinion, South Carolina real estate lawyers? Would RON be a good solution to facilitate closings in South Carolina or would it erode your control? The legislation is likely going to be discussed in the next legislative session. Your opinion matters!

iBuyers are jumping back into the water: does that mean the market is safe?

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In March, the disruptive iBuyers announced that they were no longer buying homes in the midst of the pandemic. They said they were unable to pinpoint house values to the extent to make them comfortable in proceeding with their market model. And they said they were unable to insure the health and safety of their employees, partners and customers.

Some economists projected these companies would completely go out of business after losing such substantial momentum in the midst of the various shelter-in-place orders.

But now, just weeks later, the iBuyers say they’re back!

Offerpad, Redfin, Zillow, Opendoor and others have announced plans to resume operations after verifying health safety procedures. More of the processes will be handled remotely, and, as we are all doing, there will be more sanitizing, mask and glove wearing, and hand washing. They will likely offer digital methods for appraisals and for home viewing by potential buyers. Some will offer self-service listings.

One of the companies has discussed a safe, on-demand, and fully digital experience to buy and sell homes. They believe the experience is needed now more than ever.

As this blog has discussed previously, although these market disrupters have made it to markets in Georgia and North Carolina, we have not seen them announce operations in The Palmetto State. But my colleague, Martha McConnell, said she saw a Redfin “for sale” sign in her neighborhood in southeast Columbia last week.

So the iBuyers may be closer to us than we think!

Are RON closings now allowed in South Carolina?

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After a tease from our Supreme Court on Friday, the answer is still “no”

For about 15 minutes on Friday afternoon, May 1, those of us involved in real estate transactions in South Carolina got excited. An Order* from the South Carolina Supreme Court hit our in-boxes. The order was entitled “RE: Participation in Closings of Real Estate Transactions”. We collectively thought South Carolina may have moved into the 21st Century with an authorization for Remote Online Notarization (RON) closings.

Then we read the order.

You can read it here.

By way of preamble, the Court said, “we find that the public health emergency created by COVID-19 requires changes in the usual operation of the Rules of Professional Conduct in terms of the normal functioning of real estate transactions.”

Then the order stated that until August 1, lawyers may “participate in and supervise the closing of a real estate transaction by way of a video conference.”

Fair enough, but I think most South Carolina transactional lawyers believed they could already ethically handle closings via video conference.

Most lawyers definitely believed they can ethically handle “mail away closings.” Were we wrong? Ethics Advisory Opinion 05-16 states that an attorney may ethically conduct real estate closings by mail as long as it is done in a way that: (1) ensures that the attorney is providing competent representation to the client; (2) all aspects of the closing remain under the supervision of an attorney; and (3) the attorney complies with the duty to communicate with the client so as to maintain the attorney-client relationship and be in a position to explain and answer any questions about the documents sent to the client for signature.

To meet this test, according to the EAO, clients must have reasonable means to be in contact with the attorney, by telephone, facsimile, or electronic transmission. The EAO further states that there is no legal requirement that a client attend the closing, but that it must be the client’s decision not to attend the closing.

Ethics Advisory Opinions are, of course, not binding on the South Carolina Supreme Court. But if we rely on the EAO and handle mail-away closings, why can we not also handle closings via video conference, as long as we comply with all of our ethical obligations to properly represent our clients? Technology has changed since 2005!

Setting that issue aside, let’s look at the real problem. The primary obstacle to any closing that is not conducted strictly in the presence of the lawyer is the proper notarization of the recordable documents. According to South Carolina Code §26-1-5, the notary must be in the physical presence of the signatory. For this reason, clients and their lawyers must employ notaries in the client’s location when the client and the lawyer are not in the same location.

Did the May 1 Supreme Court order fix the notary problem at least temporarily? Lawyers who have spent the last four days debating this question via listserv and Facebook have decided that it does not. But did the Court try to help? Maybe.

The Order goes on to say, “necessary persons to a real estate transaction may, under the direction of the supervising attorney, similarly participate in the real estate closing by way of a video conference, provided any necessary person so consents; further, the supervising attorney shall ensure that the attestation of a recordable instrument is accomplished, which may be satisfied by use of real-time audio-visual communication technology, provided the identity of the necessary person is confirmed and a notary attests the signature of any necessary person.” (Emphasis added.)

Giving the Court the benefit of the doubt, perhaps the Justices did not attempt to fix the notary problem but, instead, believed they must address the professional responsibility aspects of the closing process to allow the legislature and governor address the statutory notary issue.

I think I am going to go with that interpretation. Otherwise the Order is useless.

And, I have another concern. Anyone of us who has read and struggled with the facts in the notorious Quicken** case knows that the Court by implication blessed dividing the various aspects of the closing that must be handled by an attorney among many attorneys. But the final sentence of this Order reads, “This order does not suspend any other provisions of the Rules of Professional Conduct, and nothing in this order is intended to relieve an attorney of his or her obligation to assume the full professional and direct responsibility for the entire transaction.” (Emphasis added.)

I am so confused!

 

*Order 2020-05-01-01, South Carolina Supreme Court.

**Boone v. Quicken Loans, Inc., 420 S.C. 452, 803 S.E.2d707 (2017).

Tips for doing business … when we can’t do business as usual

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Our company has a remarkable network of intelligent, creative, caring agents in South Carolina. I asked our staff to pass along to me the innovative methods they are hearing that our residential closing attorneys are using as they continue to do business in this world infected by COVID-19, a world where business as usual is impossible.

I’m sharing this list with you to pass along some new ideas for your business and request that you share your innovative ideas with me. Let’s talk and continue to figure out ways to keep our clients, our staff and ourselves safe and well.

Some have asked why real estate closing services are considered to be “essential”. The technical explanation is that closings are an ancillary service of financial institutions, and financial services are essential. A better explanation may be that our industry allows access by our customers to the equity in their homes. If consumers are unable to sell or refinance their properties in a time of financial difficulty, then they are denied an avenue to prevent or delay financial difficulties. The same concept can be applied to commercial clients. They need access to their properties during difficult financial times more than ever. Never doubt that our closing services are essential in this environment.

Here are some ideas that our agents are using to conduct safe closings:

Communicate, communicate, communicate!

We have heard that clients are often surprised by the changes to closing procedures. Don’t let that happen. The new rules you establish should be clearly communicated with clients. You can’t control this unusual situation if you don’t clearly communicate the innovative methods you are using

  • Add the new rules to your email signatures.
  • Add the new rules to your engagement letters.
  • Use attractive signs inside and outside your office.
  • Make telephone calls!
  • Add video chatting to your website, Facebook pages and other social media venues.
  • Make sure your real estate agents and lenders understand the new procedures. They deserve extra communication during this time, too!
  • Let clients, real estate agents, lenders and other real estate professionals know about county office closures and other inconveniences that may affect closings.

Move closings to different locations:

  • Close at the client’s car. Allow the client to remain in the vehicle. Hand the client a pen to keep. Watch the execution from a distance and witness signatures at that same distance. Some lawyers are calling these closings “curbside service” and “drive-through closings”.
  • Close on the trunk or hood of the client’s vehicle.
  • Rope off parking-lot spaces for closings. Use attractive signs to mark the designated spaces.
  • Use a tailgating tent in your parking lot or other outdoor location. Fresh air is a huge advantage!
  • Buy colorful, plastic tables and chairs for this purpose.

Limit contact with individuals who are not necessary for closings:

  • Don’t allow real estate agents, lenders and others who are not needed for signing documents into your office.
  • Don’t allow children in your office. If parents must bring children, have one parent remain outside with their children while the other parent signs, then switch.
  • Clearly communicate that extra individuals are not allowed during this difficult time.

Limit the individuals who come into your office for any reason:

  • Don’t allow walk-ins during this time.
  • Stagger closings.
  • Have clients call from their vehicles to check in. Then call them and ask them to come into your office only when they can enter without encountering other individuals.
  • Set up separate waiting rooms if you have space.
  • Separate buyers and sellers.
  • Use video conferencing for activities other than actual closings.

Keep your office de-cluttered and cleaner than usual:

  • Buy pens in bulk and allow one-time use only. Give clients the pens they use.
  • Clean all surfaces clients touch, including conference tables, chairs, doorknobs, elevator buttons, stair railings, restrooms. Cleaning should take place between closings.
  • Use effective, antibacterial cleaning products.
  • Communicate additional cleaning requirements with the individuals who clean your office after hours.
  • Keep hand sanitizer and wipes at convenient locations throughout your office.
  • Remove children’s play areas.
  • Remove magazines and other extraneous items from waiting rooms and conference tables.
  • Wear masks and gloves. Encourage visitors to wear masks and gloves. Consider providing those items to your visitors.
  • Ask visitors to clean hands at the door.
  • Encourage pre-and post-closing hand washing.
  • Pack up glasses and cups. Use only disposable items. Limit food and drink sharing.
  • Clean after visits from delivery services.
  • Increase ventilation by opening windows and adjusting HVAC systems.

Other ideas:

  • Designate drop locations for documents and checks. These locations may be on porches or lobbies. But don’t forget security! We added a new, locked drop box to the exterior of our office.
  • Mail or wire all funds. Don’t allow anyone to wait for checks in your office.
  • Sadly, don’t allow hand-shaking or hugging!
  • Advise anyone who feels sick to stay away! This includes your valuable staff members.
  • Use powers of attorney.
  • Use open spaces for meetings.
  • Use Plexiglass to separate individuals.

All of these ideas, of course, are not useful for every office. Use your best efforts! I heard a horror story about a closing office where staff members came to work despite feeling ill. The result? Individuals from twenty closings were infected. Don’t allow a horror story to occur in your office.

Please share ideas with me. I would love to add to this list to benefit everyone!

Stay safe and well out there!

Congress is working on online notary legislation

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Please see the linked March 22 article from HousingWire that outlines the bipartisan movement in Congress led by Sens. Mark Warner (D-VA) and Kevin Cramer (R-NC) to allow for remote online notarization nationwide.

While most of our agents seem to support this effort, we understand some oppose the South Carolina remote online notary law (RON) because they believe they would lose control of closings if it passed. I understand that concern, but point out that neither the state nor federal proposals would change our unauthorized practice of law precedent. In fact, the senators working on the federal version indicate it would not impede consumer choice nor change any state law governing the practice of law.

The federal bill is entitled “Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020.” Currently about half the states allow for RON at this point, but South Carolina is not one of them.

Please pay attention to this movement and contact your congressmen whether you support or oppose the legislation.

“Curbed” article outlines the experience of iSellers

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iSeller may not be a “thing”, but iBuyer definitely is. I invite you to read the February 7 article by Jeff Andrews on curbed.com. This article outlines the experience of sellers who deal with Zillow, Opendoor and similar iBuyers. By extension, this article provides insight to real estate lawyers who want to remain in the real estate closing game after iBuyers make their way to South Carolina.

“iBuyer” is short for “instant buyer.” iBuyers buy houses for prices determined by their respective algorithms in the markets where they operate. The article contains a map showing those locations. South Carolina is not among those locations, but Atlanta, Charlotte, Raleigh-Durham, Jacksonville, Birmingham and Nashville are. How far behind can we be?

Selling a home through an iBuyer can be much simpler than the market we currently occupy. The homeowner opens the iBuyer’s website, enters their address and some basic information about the house. Within a few days, the iBuyer will make an offer.

The seller doesn’t have to clean the house, stage the house, store excess furniture, board pets, leave home for open houses, or any of the other indignities suffered under our current system. It’s a much easier process.

What’s the catch? The seller may be leaving money on the table. The offer will be less than the amount the homeowner could receive if all the games are properly played on the open market.

According to this article, if the offer is acceptable to the seller, he or she will schedule a time for a representative from the iBuyer to visit and asses the home. If maintenance issues are spotted, the seller may choose to complete the repairs or to allow the iBuyer to complete them at the seller’s expense.  At that point, a final offer will be made.

The seller is allowed to select a closing date, typically within 60-90 days. The closing date is typically flexible and within the seller’s control. There is no worrying about the contingency of the buyer to sell their house or obtain financing.

While the real estate agents in normal closings might charge a total of 6 or 7 percent for commission, the iBuyer might charge a transaction fee of 7.5 percent. According to this article, the iBuyer makes most of its money in these transaction fees. The houses are subsequently sold on the open market, so there will be a profit, but the iBuyer is not a home flipper. Substantial repairs are not made, and substantial profits are not made.

So the dichotomy for the seller seems to be convenience vs. price. If the amount the seller loses in price is worth it because of the convenience, then the seller is a prime candidate to do business with an iBuyer.

We’ll pay attention as this phenomenon grows, and we’ll definitely report when it hits South Carolina!

A sign of the times?

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Zillow begins to market title and escrow services

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A November 12 article in the “Title Report” states that Zillow has begun testing its own title and escrow services in a handful of markets.

After making significant strides in revenues in the third quarter, Zillow is testing the waters in our arena. But, thankfully, we aren’t yet seeing these activities in South Carolina. Zillow had previously used third party title and escrow agents for its transactions. It continues to use third parties in most markets.

A Zillow spokesman told the “Title Report”, “We are also building title and escrow services in-house as a part of our long-term goal of delivering a true, seamless, end-to-end transaction experience for consumers.”

Zillow told the Title Report that more than 80,000 homeowners requested offers in the third quarter. It purchased nearly 2,300 homes and sold more than 1,200 homes in the same time frame. The spokesman said the company believes these results demonstrate that the business model to mechanize real estate transactions is gaining traction as consumer demand reveals people want an easier way to buy, sell, rent and finance homes.

stay tuned

This blog has previously suggested that the role of the local real estate agent may change to assisting sellers in analyzing the various offers they receive from iBuyers plus managing inspections and other steps in the real estate closing channel. As long as closings remain the practice of law in this state, our local dirt lawyers will remain involved in the closing process.

We promise to keep you informed of developments! Watch this space.

SC DOR announces implementation of tax lien registry as of Nov. 1

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SC tax liens will no longer be filed in individual Counties

This blog previously discussed tax lien legislation effective March 28, 2019 that will change the way titles are examined in South Carolina. The South Carolina Department of Revenue has announced that the change will be effective November 1.

The announcement indicates the statewide tax lien registry will have a similar look and feel to the Mississippi Department of Revenue Lien Registry, which can be accessed here.

The legislation, an amendment to South Carolina Code §12-54-122, is intended to allow the Department of Revenue (DOR) to implement a statewide system of filing and indexing tax liens centrally, that is, “accessible to the public over the internet or through other means”. Once the new system in in place, the clerks of court and registers of deeds will be relieved of their statutory obligation to maintain newly filed tax liens.

The new law states that it is not to be construed as extending the effectiveness of a tax lien beyond ten years from the filing date, as set out in South Carolina Code §12-54-120.

When the new system is implemented, the law requires a notice to be posted in each county where liens are generally filed providing instructions on how to access the DOR’s tax lien database.

We will keep you posted as more details become available. Title insurance company underwriters will certainly weigh in on this issue.