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September 25, 2017

Should IoT Stay or Should It Go?

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Should IoT Stay or Should It Go?

Where sellers see smart-home technology as personal property, buyers see it as a built-in feature. How can real estate professionals help clients on both sides of the transaction navigate the process securely?
IoT appliances

Smart-home technology is part of more and more real estate transactions, and it’s bringing along some new terrain for agents. The recent Smart Homes & REALTORS® survey conducted by the National Association of REALTORS® found that consumers’ awareness about smart-home technology is still in the growth phase — only 15 percent of respondents reported their clients had asked about it. Knowledge of the available technology is also low, with 52 percent saying their clients were not familiar with what the smart-home technology marketplace had to offer.

Of the systems that are on clients’ radars, smart locks topped the list as most important. This resonates with James von Gillern, an agent at Coldwell Banker Mid-America Group in West Des Moines, Iowa, who says homewide security systems are among the most popular smart-home technologies in his market. “They’ve been a part of home technology history, but recently they’ve become more available to the masses,” he explains. “You can control them from your phone or computer without the need for ongoing service and other monthly fees.”

The Security Risks of Smart-Home Tech

What Is IoT? Learn more about the intersection of real estate and the internet of things.

That same convenience of controlling these tools from one’s phone also makes some sellers less likely to want to leave them behind. Unlike traditional systems, where programming is entered locally and stored within the unit, today’s smart-home devices are web-enabled, making them a part of the internet of things (IoT). That means security risks — particularly when transferring ownership of a home — are a greater concern.

That’s why you shouldn’t allow your clients to think of, say, a Nest thermostat as just another device that controls the AC, according to Chad Curry, managing director at NAR’s Center for REALTOR® Technology. “We’re still treating them as the objects they were,” he explains, stressing that consumers should view these devices as gateways to personal information. “We’re not thinking in terms of making sure they’re secure.” Smart-home platforms are essentially computers, he says, with hazards similar to what might exist if a laptop was included as part of a sale.

Curry says there are numerous real-life examples of these systems being compromised. “We’ve heard stories of people who have purchased refurbished cameras, installed them in their homes, and other people had access to their feeds,” Curry says. In some cases, sellers have inadvertently retained control over thermostats and even door locks.

The data stored inside a thermostat seems innocuous on its face, but few people want others outside their inner circle to know what time of day they’re likely to be away from home. John Carter, head of communications at smart-home technology provider Canary, says sensitive data unrelated to the function of the device may also be on offer if smart-home devices aren’t properly secured: “It could be financial information, such as your credit card number, or personal information in the form of a cell phone number that was used to set up the account.”

An Opportunity to Embrace the Role of Trusted Adviser

Of course, just because these devices present a greater data security risk than their unconnected counterparts doesn’t mean sellers should insist on taking them to their new homes. To help aid the transfer of these devices, the Online Trust Alliance and NAR have teamed up to create the Smart Home Checklist, a best-practices tool for buyers and sellers involved in a transaction where connected devices are included in the sale.

Carter’s first bit of advice for sellers who want to leave their devices behind in a sale is to separate themselves from the home they’re putting on the market. “Thermostats, climate monitors, and home security devices are often set up through a personal email address instead of a separate account for the location,” Carter explains. This leads to a potentially sticky situation during a sale, when the devices are transferred to the buyer but they’re still linked to the previous owner’s phone or online account.

As a listing agent, you can help your clients by setting up a free email account with the listing’s physical name address (like 123mainstreet@gmail.com) that they can transfer these smart-home device accounts to when the home goes on the market. When the sellers get to the closing table, give the email address login information to the buyer, who can then reset the password and securely gain access to all the smart-home accounts at once.

You will also want to include a whole-house reset as part of your sellers’ transaction checklist, making sure they understand that simply deleting an app from their phone isn’t enough to secure their data from others. “The best advice is to direct clients to the manufacturer’s website for each device, so they can reset them to the factory defaults,” Curry says, noting that each maker has its own protocols, some more intuitive than others. “With devices like locks, if a reset isn’t completed, any virtual keys that were given out — to family, friends, or trusted vendors — may still provide access to the home,” Curry explains. A factory reset severs the relationship with the door hardware, wiping out connections the hardware may retain to data stored in the cloud or on a handheld device.

Smart Tech: Take It or Leave It?

Until the technology becomes more ubiquitous, determining how to treat smart-home devices during a home sale is best done on a per-case basis. “Security systems from major providers may include leased equipment, so the seller will want to confirm if it needs to be returned to the vendor,” Cheryl Liss, a real estate agent in Coldwell Banker Residential Brokerage’s Bedford, N.H., office, gives as one example. In other cases, consumers might not even think about how to gain access to smart-home features until after the closing. “Buyers want to know they have the remote control for the pellet stove, but the remote for a smart-home system might be a dedicated tablet that also has personal applications on it.”

Sellers will rarely want to leave something like that behind, creating a situation where a home may boast a system but no controller. “If they take the device that makes the system work, the buyer will have to start from scratch,” Liss says. It could put the sale in jeopardy or lead to legal wrangling over what is and isn’t in the contract. Liss encourages agents to avoid surprises by working with clients to hammer out the details early in the process.

The trend of smart-home technology has been growing, but it isn’t something agents encounter in every transaction, as is clear in NAR’s recent survey. While 42 percent of REALTORS® said their clients were interested in smart-home devices, a similar number — 41 percent — reported their clients had no interest.

But von Gillern believes demographics may be changing that balance soon. “It is becoming more prevalent with the millennial generation,” he says. That’s why forward-thinking agents can seize this opportunity to serve as trusted advisers when it comes to protecting clients’ interests during transactions that include smart-home technology.

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