Articles Posted in Real Estate Sales

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The Supreme Judicial Court of Massachusetts is expected to decide a case that will have a resounding impact on the way real estate is handled under Massachusetts law.

The case, Monell, et al. v. Boston Pads, LLC, et al., will address whether the lower court judge properly exempted the real estate industry from the requirements set forth for independent contractors in Mass. G.L.c. 149, § 148B.

In the initial case, the plaintiffs worked for a real estate company, in which they were paid by means of commission. However, their positions were allegedly controlled and directed in a manner more commonly carried out in a typical employer-employee relationship. Such control included such factors as a dress code.

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According to a prominent Boston news outlet citing to the mortgage giant Freddie Mac, earlier this month mortgage rates hit an almost two-year low of 3.73 percent.

The volume of home sales are reportedly slightly lower than they were at this time last year. Despite the volume of actual home sales being lower, December sales data reflected that home sales agreements and prices are both rising since last December. The median price of a single family home rose 4.1 percent, from $319,900 to $333,000. Additionally, the number of home sale agreements signed (though not yet closed on) also rose from  2,406 to 3,096 during the same time period (December 2013 compared with December 2014).

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The landmark decision reached by the U.S. Court of Appeals for the First Circuit, in Real Estate Bar Association (REBA) v. National Estate Information Services (NREIS), 459 Mass. 512 (2011), affirmed not only the mandatory presence of but the substantial participation and involvement of a Massachusetts attorney in real estate closing proceedings.

The issue in the case was the legality of the NREIS’s actions related to providing so-called “drive by closing attorneys” and all the necessary required documents as part of its services. NREIS provided nationwide services for closings, and it had a list of contract attorneys who would arrive at closing proceedings to provide limited services and in order to meet the attendance requirement under Massachusetts law.

The justices in the case cited a lack of information necessary to determine whether the NREIS was engaged in the unauthorized practice of law, but they reaffirmed that the conveyance of real property and the various corollary documents associated with the transfer did amount to the practice of law, and therefore the situation required more than the mere presence of an attorney.

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Buying a new home can be an incredibly exciting and simultaneously stressful situation. It is not difficult to imagine the potential hassles that can arise when the property that you saved up for years to purchase, and continue to work hard to afford, begins to show signs of problems that were not fully disclosed at the time of purchase.

Generally speaking, since the buyer and seller are by the very nature of the transaction in a conflict of interest, there is no special fiduciary relationship, and thus sellers do not owe much of a legal duty to disclose information to buyers at the time of the sale.

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Towns Assess Impact Fees on Developers  to Fund Infrastructure

If you are buying a home in a new development, your purchase price may reflect fees paid by the developer to fund the paving of the street in front of your house, and other municipal services. The developer may be able to contest such fees, saving you money. Many towns are assessing impact fees on developers to mitigate the additional costs associated with development, considering options for funding new roads, water and sewer facilities, street lighting, schools, and other support structures.  Impact fees are typically imposed upon developers or builders at the time the municipality issues a building permit. The fees are then used to finance needed capital improvements and the expansion of existing facilities. In Massachusetts, Home Rule authority under the state constitution as well as state statutes provide the basis for cities and towns to assess fees in connection with the provision of municipal services. Impact fees to pay for such civic enhancements have been held constitutionally valid.

Courts Scrutinize Who Benefits from Impact Fees

Pursuant to Emerson College v. City of Boston, Massachusetts courts apply an impact fee analysis that limits the ability of municipalities to allocate the public infrastructure costs associated with new residential development. In that case, on appeal from a property owner’s protest at being charged a fee by the City of Boston for enhanced fire protection, the Supreme Judicial Court of Massachusetts struck down the impact fee, ruling that it was not voluntary and provided no particularized benefit to the payer of the fee. In the 20 years since Emerson College, Massachusetts courts have continued to strike down these fees.

In the case of Greater Franklin Developers Association v. Town of Franklin, the Appeals Court considered the developers’ challenge to a “school impact fee” charged to them when they applied for permits to start construction on a new residential project. The Town of Franklin asked the court to find that the need for additional classroom space was directly related to projected growth. The court declined to do so, finding instead that the Town’s argument failed the Emerson College test, since the “benefit of expanded school facilities is not particularized to the fee payers” but enhances “the entire community.”

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Massachusetts Real Estate Market Cooling Down

The Massachusetts housing market, particularly in the Boston area, has finally started to cool down after a blazing hot summer that saw relentlessly rising home prices. Although the fall and winter are traditionally slow for real estate sales, this year is seeing an unseasonable reduction in home prices. This is good news for home buyers, especially since interest rates are still at historic lows but are predicted to begin an upward climb due to financial analysts’ belief that the Federal Reserve Bank will allow interest rates to rise by sometime next year. Now is definitely the time to buy.

The third-quarter downward trend showed in a number of areas as diverse as Cape Cod and the Berkshires. The market is transforming from a seller’s kingdom to the realm of the buyer, in both high-end and more humble parts of the Commonwealth. Sellers are enticing buyers with ever-improving deals, including steep price reductions. The online real estate site Zillow.com has published data indicating that 42.7 percent of all home sellers who listed their property for sale reduced their asking price at least once during the three-month span ending Sept. 30, 2014. Sellers reduced their asking price an average of five percent. In the second quarter of 2014, sellers had only reduced listed prices in 33 percent of homes for sale, and the average price cut was slightly less than in the third quarter, at 4.3 percent.

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Closing a real estate transaction can be a difficult process. One or more of the parties may change their minds or try to sabotage the deal for various reasons. Trying to negotiate, even with a formerly trusted business associate or partner, may become an agonizing fiasco. In such a situation, the services of an experienced real estate attorney are invaluable to assure a successful closing.

The Supreme Judicial Court of Massachusetts, in the case of K.G.M. Custom Homes, Inc. vs. Stephen J. Prosky & others, No. SJC-11449, on May 29, 2014, issued a decision to try to remedy an unraveled real estate development deal. The main issue the court had to sort out was the proper damages for the aggrieved party, since there was no way to salvage the actual deal itself.

The Proskys are three siblings who own a fairly large piece of undeveloped land in Norton. In 1999, they talked to their real estate broker, David Joyce, about the possibility of selling the land to a developer. He suggested the property might be attractive to someone who wanted to build affordable housing. The broker referred the Proskys to K.G.M., a husband and wife real estate development company.
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A prospective purchaser of property may discover that there is an easement giving a non-owner, whether a person, company, or public entity, the right to use a portion of the property. An easement is usually a passageway between two properties, possibly for a driveway when one property does not have direct access to a street, or for power or telephone lines.

An easement may be negotiated between neighbors regarding their adjacent properties, during the course of their ownership. The issue may then be raised or contested by subsequent owners of what is called the servient estate, the property on which the easement exists.

The existence of an easement may be shown in the property deed, or in a subdivision plan, or both. Verbal agreements are not favored by the courts, but if they are well verified, they may stand up, if there is additional evidence that both property owners intended to create the easement.

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The Federal Aviation Administration (FAA) has taken an aggressive stance against using aerial drones – unmanned aircraft – for commercial purposes. The FAA has jurisdiction over U.S. airspace, which gives it the authority to prohibit anyone from flying drones for commercial purposes. This has brought the agency into conflict with farmers, for example, who want to use drones to monitor their crops and fields.

The regulations have also created a huge quandary for sellers of real estate, who have discovered that aerial photos and videos are incredibly effective tools for showcasing properties, whether vast country estates with extensive grounds or cozy cottages in leafy neighborhoods. The use of aerial drones to obtain such images is an inexpensive alternative and therefore quite cost-effective. The FAA prohibition, which companies interpret as precluding use of photos and videos taken by drones, has had a direct impact on this type of marketing for real estate.

The FAA recently investigated a New York area real estate company it suspects of using video footage from drone overflights to market its properties listed for sale. The agency asserts that it will not tolerate the unpermitted practice of using unmanned aircraft to take photos and videos of properties for sale.
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As home prices have been rising, the number of underwater homeowners has dropped below ten million for the first time in more than three years. An underwater home is one in which the homeowner owes more on their mortgage then the home is actually worth.

9.7 million, roughly 19.8%, of homeowners were underwater in March of this year. That number is down from 12.1 million at the end of 2011. The negative equity in the United States has decreased from $631 billion in December to $580 billion in March.

Home prices have risen 12.1% from April 2012, this increase has lifted 1.7 borrowers above water. If prices continue to increase, it is likely that more homes will be placed on the market for sale. This is also helping to bolster the economy.

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