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Dirt lawyers: help guard against elder abuse!

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My company recently sent out a memorandum about elder abuse in the financial and real estate industries that made some interesting points.

My father died last September and, although he was as sharp as a tack until the end, he had difficulty hearing and his reactions had slowed. As a result, my brother and I had to carefully and repeatedly (and loudly!) explain to him every move we were making with regard to his care and finances. If he had needed to enter into any type of real estate transaction in the last months of his life, the real estate lawyer should have had antennae up!

Elderly persons should be treasured, not abused! And, as real estate lawyers, we may be in a particular position to guard against abuses.

Elder abuse often happens at the hands of family members or “friends” who, because of the vulnerabilities associated with age, such as mental impairment, are able to employ methods such as theft, fraud, forgery, extortion and the wrongful use of powers of attorney to separate an elderly person from property or funds.

Reflect upon the numbers of stories you have heard in your community about elderly persons falling prey to telephone scams. Those same individuals would not have succumbed in their prime. Even with all mental facilities in place, they don’t hear as well, they don’t keep up with changes in technology, and they are unable to keep up with fraud trends we all hear about every day.

Here are some signs of elder financial abuse that you may be able to detect in your office:

  • Sudden changes in an elderly person’s estate planning documents;
  • Changes made in the title to properties in favor of a “friend;”
  • Home health aide, housekeeper or other person is added to the accounts of an elderly person or is receiving an assignment of proceeds;
  • Family members or trusted “friend” discourages or interferes with direct communications with an elderly person involved in a transaction;
  • The older person seems unable to comprehend the financial implications of the transaction;
  • The older person signs documents without seemingly knowing or understanding what is being signed;
  • A power of attorney is involved. I’ve told this story many times, but we had a wonderful claims attorney with our company who routinely called powers of attorney “instruments of the devil”. Powers of attorney are extremely useful tools in our world, but we should always exercise caution when they are used, especially when an elderly person is involved;
  • Anyone seems to be forcing the elderly person to act;
  • Numerous unpaid bills may be a clue that someone is diverting the money designated for the daily living of the elderly person;
  • Promises of lifelong care in exchange for property;
  • The elderly person complains that he or she used to have money but doesn’t understand why the money is no longer available;
  • The caregiver is evasive about the specifics of the transaction in the presence of the elderly person;
  • The elderly person seems fearful or reticent to speak in front of a family member, friend, loan officer, real estate agent or anyone involved in the transaction.
  • The accompanying family member or caregiver attempts to prevent the elderly person from interacting with others.
  • The elderly person and the family member or caregiver give conflicting accounts of the transaction, the expenditures or the financial need.
  • The elderly person appears disheveled or without proper care even though he or she has adequate financial resources.

Be mindful of these common-sense suggestions when any of your real estate transactions involve elderly persons. Think of them as you would want someone to think of your parents or aunts and uncles. Be careful to protect their interests. Proceed with caution!

Elders may also be the victims of predatory lending. Elders who own their homes and have built up equity over time become targets of predatory loan originators who pressure them in to high-interest loans that they may not be able to repay. Older homeowners are often persuaded to borrow money through home equity loans for home repairs, debt consolidation or to pay health care costs. These loans may be sold as “miracle financial cures” and are often packed with excessive fees, costly mortgage insurance and balloon payments.

Always discuss transactions directly with your elderly clients. Ask them pointed questions to make sure they understand the transaction.

And, as always, employ your instincts and your common sense.

“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!

HOA seeks to oust orphan from age-restricted neighborhood

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HOA grandparents grandson

Image from KOLD.com (News 13), Tucson, Arizona

 

A fifteen year-old California lad lost both of his parents last year. Collin Claybaugh’s mother, Bonnie, died in the hospital from a long-term illness. And his father, Clay, took his own life two weeks later.

What do good able-bodied grandparents do in this situation besides grieve the loss of their children? They take in their grandson, of course. That’s what Randy and Melodie Passmore did. The Passmores are both in their 70’s and live on a small pension plus social security. They own their home in The Gardens at Willow Creek, a 55-plus community in Prescott, Arizona.

The age restriction apparently has a limited exception for residents who are 19 years of age and older. But a 15-year old boy is definitely not allowed by the rules.

The Passmores received a letter from the homeowners’ association advising them that Collin must move out. The letter said that the board must balance the interests of all parties involved, not just the Passmores. The HOA board said they are concerned that if they fail to enforce the age restriction, they could endanger the ability for the development to remain an age-restricted community.

The Passmores’ only alternative is to sell their home and move, which they believe will be difficult considering their age and financial position. They do not have funds to mount a legal battle.

My husband and I would love to downsize at this point in our lives, and we would be interested in living in a community where the exterior and grounds are maintained by someone else. But this story convinces me to stay clear of age-restricted communities.

How do you think this story would play out from a legal standpoint in South Carolina?

Motley Fool: “Zillow Plans to Do to Real Estate What Amazon Did to Retailing”

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Zillow Offers is not available in South Carolina yet, but it may be a matter of time

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This blog has promised to keep South Carolina dirt lawyers informed about the growing phenomenon of home “iBuying”. Please take a look at two recent articles from Motley Fool linked here.

One of the articles, entitled “Zillow Plans to Do to Real Estate What Amazon Did to Retailing”, indicates Zillow is aggressively taking on the neighborhood real estate broker. The other article, entitled “Why Zillow Wants to Pay More for Homes” indicates iBuying is a scale game, meaning the number of homeowners who accept Zillow’s offer increases dramatically with relatively small increases in price.

Zillow has been planning for this game for years. It already has a massive amount of traffic on its site and has accumulated an enormous amount of data. Go take a quick look at the data Zillow is showing about your own home!

To date, according to Motley Fool, Zillow faces intense competition from Opendoor, which leads the iBuying industry, already serving more than 40,000 customers. But Zillow is working hard to catch up. Opendoor operates in 21 markets. Zillow is in 17 of those markets, four additional markets, and plans to open in five more by the middle of 2020.

In early 2017, Zillow dipped its toe into the process of selling homes by launching a product it called “Instant Offers”. The product was initially tested in Las Vegas and Orlando and was described as a method for homeowners to sell their homes for a discounted price without the traditional complications of repairing, listing, staging and allowing for open houses.

The process started with a homeowner providing basic information via Internet about the home (square footage, number of bedrooms and bathrooms, and remodeling information) and uploading photos. The Zillow product then connected the homeowner with investors who buy homes in the area, and, typically, an all-cash offer was made by one or more of the investors. The homeowner paid no fee for the service and was not obligated to accept any offers. Zillow touted the product as a method to alleviate the seller’s stress and to allow the seller to close in a shorter time frame.

Other companies, Opendoor and Offerpad were already operating in this space at the time of the Zillow launch. The launch was called another example of technology disrupting the process of closing real estate transactions.

Real estate agents, of course, met the news with alarm. They said sellers would be suckered into making mistakes that might cost them the education of their kids, vacations or just the ability to sleep better at night because they have more money in their bank accounts. An online petition was initiated, asking the National Association of Realtors to threaten Zillow with being removed from access to listings. The NAR responded that it could not sponsor or encourage such a boycott.

Zillow has always stated publicly that it is not in the business of getting rid of real estate agents. Its executives called Zillow a media company, not a real estate company, and said it sold ads, not real estate. Even the Instant Offers program encouraged sellers to use a realtor even while avoiding the traditional listing and sales process. The question then became the amount of commission the real estate agent would earn for reduced services. When real estate agents initially complained about Instant Offers, Zillow responded that 70% of its revenue came from working with real estate agents.

In early 2018, however, Zillow announced that it would begin buying homes directly from sellers and then turning around and selling them. With this announcement, Zillow began selling ads and houses. Two test markets were announced, Las Vegas and Phoenix. Zillow said that when it buys homes, it will make the necessary repairs and updates and list the homes as quickly as possible. Zillow said local real estate agents would represent Zillow in the transactions. Zillow also announced in a press release that the vast majority of sellers who requested an Instant Offer ended up selling their homes with agents.

So far, nothing is in the works for South Carolina as far as we know, but since it is just next door in Atlanta and Charlotte, how long can it be?

Stay tuned for more news on this topic. Real estate lawyers will need to figure out how to remain in the game whether properties are sold through the Internet or not!

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.

What’s first: flying cars or instant home ownership?

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This headline is blatantly stolen from this article that I recommend for your reading pleasure. This blog, written weekly since late 2014, has two goals: (1) to keep South Carolina real estate lawyers out of trouble; and (2) to keep South Carolina real estate lawyers in business. This article, about the future of home ownership, is recommended to advance the second goal.

Julian Hebron, the author of this article, is the founder of The Basis Point, a sales and strategy consulting business for consumer finance and real estate companies. He has extensive experience in real estate, lending and financial services. Investopedia touts itself as the world’s leading source of financial content on the web. Investopedia commissioned Julian Hebron to explore what home buying, improving and selling will look like in the next twenty year, and he said he jumped at the chance.

The article describes a vision of home buying for consumers in the future:

  • Pull out your phone and search for homes.
  • View homes using full 3-D modeling and video so you can truly “tour” the home right on your phone.
  • See every specification about the home, neighborhood, schools, restaurants, crime, taxes, etc.
  • Tag the homes you like to stay organized.
  • Get notified over time on sales and price changes of homes.
  • Make an offer on a home by pushing a button.
  • Avoid long appraisal process because the home’s value is verified by date and 3-D modeling/video, and this automated valuation method is accepted by all lenders.
  • Close on the home instantly because your loan is always approved via your secure blockchain wallet with realtime income, asset, debt, and credit score data. All you do is schedule licensed and reviewed local movers and contractors to facilitate your move.
  • Schedule moving day food delivery from recommended restaurants in your neighborhood.

And here is the description of home selling in the future:

  • Fill out a short form on your phone saying you’d like to sell your home.
  • Receive a home purchase offer in 1-2 days, and close in as little as seven days.
  • Or shop and hire a licensed and reviewed local realtor to list your home if you don’t like the instant offer.
  • Get asked if you’re purchasing a new home, and, if so, get prompted to follow the home buying steps above.

How close are we to this vision? The author isn’t sure but plans to write future installments to dig deeper into each player in the vision.

Can we stay in the market if this vision comes true? 

I believe we can. I believe our closing law firms should establish strong systems to document processes and keep them current in an effort to be able to nimbly adjust to the changing market. I believe we should stay on top of changes in technology because technology will certainly be a huge driver in these changes. I believe we should continue to establish strong relationships with the players in the real estate industry, particularly the real estate agents. We will all be fighting for business as the market changes, and keeping current on the available information and the current players will be vital to remaining in the game.

This blog will continue to provide South Carolina real estate lawyers with current information to support these efforts. Watch this space!

The Law Firm of Your Dreams

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Say Goodbye to Your Boss, Say Hello to the Law Firm You’ve Always Dreamed of

JFisher Book 2Readers of this blog know I am prone to write a book report from time to time, but only about books that I think will benefit South Carolina real estate practitioners. I’ve blogged previously (twice!) about John Fisher’s The Power of a System; How to Build the Injury Law Practice of Your Dreams. John Fisher has a new book that I also recommend for dirt lawyers.

By the way, John was a speaker at our Chicago Title annual seminar on October 14, and he did not disappoint. If you missed him, I highly recommend that you begin following what he writes and that you seek out the opportunity to hear him speak.

His 2019 book is entitled The Law Firm of Your Dreams; Say Goodbye to Your Boss, Say Hello to the Law Firm You’ve Always Dreamed of.

In the formative days of his medical malpractice firm, Fisher wished for a step-by-step manual for running a profitable practice because, like the rest of us, he was not taught strategic planning, goal setting, business metrics, managing employees, managing clients, and marketing in law school. He later developed that manual for his firm, not just technical systems for running a business, but also the managerial and entrepreneurial principles to keep a constant stream of new cases and clients coming through the pipeline.

Those systems were covered in his first book, and numerous lawyers have said the book provides a roadmap for accurate and precise business development for any lawyer in any practice anywhere!

The 2019 book starts with the premise that the lawyer’s mindset is the most important aspect of creating the ideal law firm. Without the right mindset, the author says, the best policies and systems won’t do you much good. He recommends becoming a “specialist” even though that word is a “no no” under our ethical rules. John believes that if you don’t specialize in something, you will be marginal in everything.

I have a lawyer friend who has learned to specialize. He practices in the area of residential real estate closings in a coastal area. He is a sole practitioner, and he very narrowly defines the scope of his work. He seeks to make buyers, sellers, real estate agents, and lenders happy in connection with their closings. For that reason, he will not write what I call “nasty lawyer letters”. He refers that work to a friend. He will also not do any kind of work that will slow down the very well-oiled machine that keeps him churning out his closings in a timely and accurate fashion.

He may set up a simple LLC for a closing, but he refers out complicated entity formation, complicated trust formation and anything to do with estate planning. He may draft a simple set of restrictive covenants, but he refers out complicated subdivision development and commercial real estate closings of any type. His clients, lenders and real estate agents are happy and return again and again. Fellow lawyers love that he refers complicated work to them, and they refer residential closings to him in return. Win. Win. Win. John Fisher would approve of his system.

John Fisher recommends that a lawyer should delegate almost everything, both professionally and personally. He says, “your career (and life) will be chaos if you answer every phone call or email during your work day. You will never go home in time for dinner or attend your kids’ ball games if you insist on being everything for your clients. That’s why you have to delegate everything you can and do only those things you cannot delegate.”

And the best thing you can do for your career, according to this author, is to devote as much time and energy as you can to marketing and growing your law practice. A large part of both books is devoted to marketing.

I am a huge fan of the ideas and step-by-step instructions of this thoughtful lawyer and author. I invite you to read his books and follow his advice to improve your practice and your life!

Holy Statute of Frauds

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Can text messages create binding real estate contracts?

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South Carolina real estate practitioners, do you remember that old case from law school where a contract was created on a napkin?  That case made me imagine drunken parties in a bar passing a napkin back and forth as drinks came quicker and caution evaporated.

That simple case is seen in a new light, however, as courts across the country struggle to apply the ancient statute of frauds to the evolving world of electronic communications. Telegrams, faxes and emails have all been found to satisfy the statute of frauds in some situations.

We haven’t seen a South Carolina case on the topic of text messages and binding contracts, but The Southern District of New York and a Massachusetts Land Court recently found that text messages may be sufficient to serve as evidence of the existence of binding agreements between negotiating parties.

In the New York case, the plaintiff real estate broker relied on a series of text messages to show the existence of a binding fee agreement. The court held that the text messages satisfied the writing requirement of the statute of frauds but failed to satisfy the signature requirement.

The Massachusetts court, on the other hand, found that a series of text messages did satisfy the signature requirement of the statute of frauds because a signature of a sort was included within multiple text messages between the parties. Some of the texts contained typed names of the parties beneath the substantive messages.

Real estate practitioners should caution their clients in the use of texts and other non-traditional means of communicating. Advise clients to refrain from typing their names under text messages. Better yet, advise clients to include disclaimers to the effect that no agreement involving the subject matter is final until wet signatures are applied to a physical document.

And even better than that, caution clients that texting and negotiating real estate contracts may be almost as dangerous as texting and driving.

While text messaging can’t be surpassed, at least in 2019, when it comes to speed and efficiency, a new and different level of caution may be needed when engaging in negotiations through such seemingly informal means of communicating.

Do you and your employees work remotely?

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Check out these network tips for remote employees

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Our office has been involved in workflow studies for the offices of our attorney agents, and one point that comes up often is that allowing employees to work at home increases employee satisfaction and retention. We’ve witnessed many paralegals permanently move to remote locations and successfully retain their jobs. Telecommuting seems to work successfully in many instances.

In our own office, all our employees have the capability to work remotely. We learned when our office building suffered a fire in 2012 that the ability to access our network from remote locations allowed us to continue our business without interruption. The day after the fire, we disbursed the funds for a large commercial transaction for an agent from my kitchen at home!

And since South Carolina routinely finds itself within the maze of the spaghetti models during hurricane season, the ability to work remotely is important if not necessary to maintain contact while taking care of school children and hunkering down at home.

American Land Title Association (ALTA) published an article on September 5 attaching The Center for Internet Security, Inc. (CIS) Telework and Small Office Network Security Guide.

This 25-page paper provides useful, up-to-date guidance on keeping your networks safe when employees are allowed remote access. The guide provides recommendations for buying equipment, setting up networks, setting up devices, securing home routers and protecting against digital threats.

The ALTA article refers to a Forbes study that found 38 percent of teleworkers lack the technological support they need to do their jobs. Securing devices and networks that allow telecommuting is critical. The guide includes a network security checklist and tells users how to map security configurations to provide cybersecurity protection at remote locations.

Thanks to ALTA for pointing us to this valuable resource, and thanks to CIS for publishing it!

A glimpse into the future of residential real estate sales

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Here’s what may happen when iBuyer companies enter our market place

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I read an interesting article from Forbes recently by John Wake entitled “The Surprising Way Real Estate Agents are Adapting to ‘iBuyers’ Buying Houses Directly From Sellers.” I invite you to read the article in its entirety here.

The article focuses on residential real estate sales in the Phoenix market which the author calls “ground zero for the iBuyer explosion.” What does he mean by that? Apparently, the largest iBuyer companies, Opendoor, OfferPad and Zillow Offers, either started their operations in Phoenix or concentrate their efforts there. He estimated five to six percent of houses that change hands in that market are sold to iBuyers.

The article focuses, as its title suggests, on how real estate agents are adapting to this disruption in their market. But I find the article instructive to South Carolinians on the topic of how these internet sales are orchestrated and how they might affect sellers in our market when this disruption migrates east to us.

The author says that a homeowner who seeks to sell a house via an internet company must first complete an online form. An offer is typically made within two or three days. If the homeowner accepts the offer, inspectors will be sent to the house and will come back with a list of repairs and estimated costs for the repairs that the buyer requests before the closing.

As in our current process, the seller can agree to make the repairs, to reduce the price of the house to cover the cost of the repairs, or to terminate the contract.

The author suggests that real estate agents commonly complain that iBuyers tend to offer less and to ask for more repairs than traditional buyers. In other words, the seller makes more money in traditional sales involving local real estate agents.

The flip side of that coin is, of course, that closing with one of the iBuyer companies is more convenient than the process in our marketplace. A seller doesn’t have to get the house ready to sell, stage it, keep it clean for showings, or leave home for showings and open houses. The closing date may be more flexible, and there probably will not be contingencies for appraisals and financing.

How are real estate agents in Phoenix adapting? According to Mr. Wake’s article, real estate agents are assisting sellers by obtaining multiple iBuyer offers, analyzing and explaining the offers, discussing the options of accepting one of the iBuyer offers or beginning to market the home in the traditional manner, and coordinating everything with the iBuyer or traditional buyer, including repairs.

In short, real estate agents are attempting to become iBuyer experts in addition to traditional home sale experts.

Real estate lawyers, we need to be ready for this disruption when it hits us. We will want to be able to explain the changes in the market to our clients as well as to educate our real estate agents on how to stay in the game. Let’s keep our eyes and ears open! I’ll help!