Real Estate
fall 2018

With bump clauses, sellers can shop for better buyers


Keep your bird in the hand while continuing to search for others in the bush. That’s what you get with a bump clause.

In home sales, a bump or “kick out” clause lets sellers enter into a contract while continuing to seek out alternate buyers. If the sellers get a better deal, they can bypass the original buyer.

Typically, bump clauses are used when the buyer has a home-sale contingency. Buyers sign a contract and submit a down payment and then have a certain amount of time to satisfy the contingency. In the meantime, the sellers continue marketing the property.

If the sellers get a better offer before the deadline, the original buyer gets a final chance to waive their contingency. Bump clauses may also be used in cooling real estate markets when sellers still want to hold out hope for a better offer.

Before bumping an offer, do your due diligence. Make sure the second offer is really stronger than the first and that the second buyer is more likely to be able to close.

Buyers subject to a bump clause should think carefully before waiving a contingency. Be sure you can complete the deal with financial security. You risk losing your down payment if you can’t complete the purchase.

No matter who requests the bump clause, enlist help from an experienced real estate attorney to draft the agreement. Pay attention to the timeline a buyer has to satisfy the contingency and what, specifically, qualifies as a better offer.

Disagreeable neighbors? Legal options vary

It’s one of the facts of community living: Where you have neighbors, you can have problems. There are some things you can do about annoying neighbors and some things that could land you in legal trouble.

Start by talking to your neighbor. Share what’s bothering you. Keep your composure and try to approach the conversation from a place of kindness and curiosity.

You could even help rectify the situation, if you’re willing. For example, if you’re really bothered by someone’s weedy flowerbeds, offer to help. You might find out that something is going on in your neighbor’s life (an illness, for example) that’s preventing them from taking better care of their yard.

If you feel the situation is too dangerous to attempt a conversation on your own, consider involving the police or your local code enforcement department. Either one can help you evaluate whether the situation falls under their jurisdiction.

If your neighbors are renters, you might also start by reaching out to their landlord. You can find this information by looking up local land records online or visiting your county assessor’s office. The landlord may have no idea that problematic behavior is occurring and could rectify the situation with the threat of eviction.

Here are some guidelines for dealing with certain neighborhood challenges:

  • Barking dog: If conversations get you nowhere, you might call the local police with a nuisance complaint. Then again, barking dogs may not be a priority for law enforcement. If that fails, you could enlist help from a lawyer to file a suit (or threaten one) for nuisance behavior.
  • Blocking your view: Unless protected by a local ordinance or subdivision rule, you do not have a right to your view. Neighbors are free to plant trees or erect permitted structures that block your favorite sightline. If tree trimming would improve your view, you may offer to pay for it. Never conduct the work yourself or hire someone to conduct it without written permission.
  • Flying a drone over your backyard: Find out if your state has drone laws covering hobby users. If not, you may still have a legal case for trespass, private nuisance, or invasion of privacy.
  • Messy backyard: Check your local laws. There may be regulations regarding trash or unkempt lawns. Once you alert your local officials, your neighbors could be fined for non-compliance.
  • Constant partying: Your immediate remedy for loud music and yelling is to call the police. Repeated complaints to local authorities can help you build a case for a nuisance suit.
  • Ugly fences: Unless your community has a local statute regulating fences, you generally can’t force your neighbors to replace an unsightly fence or other fixture in their backyard.

Talk to your local police department and local municipal staff about how to address a nuisance neighbor. They can help you strategize ways to solve the issue, with appropriate support.

Neighborly conversations are generally advisable as the first course of action. If the problem persists, consult a lawyer to review your options. Mediation might also be appropriate, before you head to court.

Cryptocurrencies, blockchain, and real estate: The basics


Blockchain and cryptocurrencies are evolving technologies that could transform the financial industry and, by extension, the real estate industry. Only time will tell how significant the impact will be. But as you’re probably hearing these terms more and more in the media, it’s a good idea to get an understanding of the basics.

Technology fundamentals

A cryptocurrency, such as bitcoin or ethereum, is a digital currency exchanged over the internet. These currencies provide a secure way of exchanging goods, and keeping a record of the transaction, outside the traditional banking system.

The blockchain is a public ledger, of sorts, and it’s the underlying technology that makes cryptocurrencies possible. The technology is a chain of records, or blocks of information. Information is never deleted or altered — new records are simply added to the chain.

As a distributed database, a blockchain isn’t housed in one place. Data is stored, duplicated, and synced across the multiple systems used by anyone who has made a transaction on the blockchain. Because the data is duplicated in copies around the world, it’s considered hack-proof. You can’t tamper with the data because the data isn’t held in one centralized location.

Private cryptographic keys allow users to access only the information they own. These same keys allow people to exchange data ownership or value.

Today, blockchain technology is allowing parties to trade goods and services outside our traditional monetary system. You can use the blockchain to transfer value without assistance from a bank or broker. The technology records transactions, verifies identity, and establishes a permanent record of a contract, all without involvement from financial services.

A cryptocurrency, such as bitcoin or ethereum, is a digital currency exchanged over the internet. These currencies provide a secure way of exchanging goods, and keeping a record of the transaction, outside the traditional banking system.

Applications in real estate

Bitcoin is already being used to buy and sell real estate. (Although in reality, investors in these transactions typically convert bitcoin to cash, thereby bringing traditional currencies back into the equation.)

Now, more startups are working to trade real estate on the blockchain. The technology provides a way to trade value as well as keep track of contracts, escrow, and property records.

Blockchain technology also enables the use of smart contracts. These are applications that run without human interaction, once the programmed conditions have been met. It’s like a workflow management system — one action automatically triggers the next step in the process, permanently recording each step until all the conditions are met.

As more information becomes accessible in the blockchain, computers can basically qualify users and verify information automatically, dramatically simplifying review and record-keeping processes.

In the future, contracts, identity management, and a host of complicated transactions could be carried out with a blockchain public ledger system. Theoretically, title companies could become obsolete, now that there’s an un-hackable record of ownership transfer. (Sweden, for example, is testing a national blockchain title registry and is asking for volunteers to participate in blockchain land title transfers.)

Blockchain technology has the potential to reduce fraud in the real estate industry (e.g. forged documents, false information, rental scams). The technology could also make real estate investing more affordable by creating new opportunities for fractional ownership.

There are numerous ways blockchain technology could shake up the real estate industry. Some experts suggest it’s less a matter of whether the technology will transform the industry and more a matter of how long it will take.

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Smart lock tech enables keyless home entry

Smart lock technology is changing the way realtors show your home. These Wi-Fi or Bluetooth enabled locks allow users to lock and unlock their door remotely, using a mobile app. As a homeowner, you can use a smart lock system to manage guest access, giving people digital power to unlock your door for a single entry or an extended period of time.

Similar technology has been designed for the real estate industry. The Prempoint mobile app integrates with smart locks, allowing realtors to control who accesses a property. The app acts like a key to open the door and integrated software helps agents schedule showings.

TOOR, another smart lock company serving the industry, uses a smart lock box and a traditional set of keys. App technology allows potential home buyers to open the lock box at a scheduled time. Extra features allow users to monitor the location of the keys and to track how long visitors stay in the home.

These tools, and other products like August Home and Amazon Key, help agents save time by providing stagers and prospective home buyers with instant, keyless access. With keyless entry comes the option to allow home buyers to conduct their own, unguided house tours.

iBuyers such as Opendoor, in fact, use this kind of technology to allow would-be buyers to tour homes unchaperoned. Motion sensors may be used for added security and to track how visitors move throughout the house.

Whether used by iBuyers or traditional real estate agents, smart lock technology could generate more competition for a property, simply by making it easier for buyers to conduct a tour.

iBuyers: How technology is changing real estate

iBuyers are investors who use technology to make a fast offer on your home, sight unseen, based on a proprietary valuation model. iBuyers, such as OfferPad, Opendoor, and Zillow Instant Offers, provide an alternate sales model for people who want to sell their home fast, sometimes in as little as three days.

color_logo-rgb-01-1024x322How it works
iBuyers operate in select major markets. Sellers request a home offer, and then these investors use public information, seller-supplied information, and their own data algorithms to come up with a purchase price. If a seller accepts, the iBuyer finalizes the purchase, maybe makes improvements, and re-lists the property.

For sellers, the advantage is a quick, assured sale without the hassle of showings and negotiations. OfferPad, for example, claims an average closing period of just 22 days. Sellers may not get as much money as if they sold their home on the open market, but they do get their money faster.1200px-zillow_logo-svg

Convenience and cost
When selling to an iBuyer, home owners can expect to lose some value in exchange for fast liquidity. While reports are mixed, the cost of such sales can account for 7 to 10 percent, or more, of your home’s fair market value. That compares to the 5 or 6 percent commission taken by a traditional agent.

static1-squarespaceAs reported by Inman, a real estate news source, a representative for Zillow’s Instant Offer service says that 90 percent of sellers who tried their platform decided against the offer and went with a traditional agent instead. Zillow is partnering with select real estate offices to share such leads.

Other iBuyer-realtor partnerships may be coming. Home owners may choose to shorten listing periods with traditional agents and then opt to sell to an iBuyer if the standard process doesn’t yield a fast sale. Others may opt for the immediate, lower-stress option iBuyers provide.

This newsletter is designed to keep you up-to-date with changes in the law. For help with these or any other legal issues, please call today. The information in this newsletter is intended solely for your information. It does not constitute legal advice, and it should not be relied on without a discussion of your specific situation with an attorney.