Self-Showing Lockboxes: What's the Risk? | Think Realty | A Real Estate of Mind
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Self-Showing Lockboxes: What’s the Risk?

Self-Showing Lockboxes Whats the Risk

Over the past couple years, Property Managers have been besieged with several “new technologies” of “Smart Lockboxes” that allow a prospective tenant or buyer to enter and view a vacant property without the manager present. This is really an updated version of the older practice of checking out a key, or even giving out the code for a contractor box. We are told that this is the “future of our industry,” that consumers “demand” this immediate access on their schedule, and we need to switch over to this technology, or be left in the dust. What’s really the risk? Let’s consider a few things:

Many of these services tout their track record of hundreds of thousands (or millions) of showings without incident, emphasizing the convenience to the prospect to be able to schedule whenever they want without a leasing agent present. Additionally, there is a strong push pointing out the “increased safety” to property managers, by basically eliminating the need to physically go and show a property, thereby eliminating the potential for harm to that manager. These Smart Boxes can be programmed for specific times, allowing adjustments to access, like not after dark, etc. And certainly, having the convenience of showing a property after your normal office hours, or on a weekend when you may have other plans, is unarguably a plus – the home gets shown without you having to be present!

Additionally, statistics show that rental properties do rent more quickly with these self-showing programs. Quicker rentals mean shorter vacancy losses; just as more showings mean more potential buyers making offers to purchase, both big pluses. Personally, I wish automobile dealers would use these! Think how great it would be to go car shopping, have a lockbox that you can open to pull out the car keys for that new Jaguar, and enjoy your own private test drive- without that obnoxious salesperson hovering nearby. From a property management standpoint, the saved hours and hours of drive time and showing time eliminates the need for paying an agent employee to do this, which translates into a substantial labor cost savings to a brokerage. All these are strong, valid reasons to consider instituting a “self-showing” program with your company. But, again, what’s really the risk?

In speaking with general liability carriers and errors and omissions insurers I found a much greater concern over the “self- showing” practices, with comments like, “this is extremely concerning from a liability standpoint” and, “it is our opinion that any applicant involved in such activities should be considered a hazardous risk based on sub-par risk management practices.” Translation: you may not have coverage, you may lose coverage, or you may find your deductibles and premiums raised substantially. These comments were summed up by my insurance broker with this statement that, “this practice appears to be one that creates higher risk to a firm and based on carrier responses, there could be challenges in delivery of coverage. A firm that utilizes this practice should be aware of this and have the ability to manage the risk.” That means your claim could be denied and you will be out of pocket on your own to defend yourself. Food for thought.

In Arizona, where we operate, our Department of Real Estate pointed out right away that there is a commissioner’s rule (R4-28-1101) that states: a salesperson or broker owes a fiduciary duty to protect and promote their client’s interest… a salesperson or broker shall not  permit or facilitate occupancy without prior written authorization…and shall not deliver possession prior to closing… unless instructed to do so. Several of the property managers I spoke with said that this rule refers to closings and is applicable to sales, not to property management. My opinion is that the commencement of a lease is the closing of a successful rental transaction, and the rule would equally apply. This was confirmed by the department. Providing a key or lock box code or providing access by remotely activating the access code is, indeed, facilitating occupancy. You may find similar rules and regulations in your state. Several managers I interviewed stated that their management agreements disclose their use of lockboxes, and their owners have signed acknowledging this use, so they have the required written authorization.

But, what was really disclosed in those agreements? What does the property owner really think is happening? In Arizona, our state association’s property management agreement says that the owner does authorize the broker to use a lockbox that contains a key, that the lockbox will permit access by other brokers, and that, “from time to time, unauthorized persons may have gained access to properties using lockboxes,” and that broker is not insuring owner against theft, loss, or vandalism. But, are we really disclosing all we should? Again, my opinion, is that most owners believe that this refers to the specific lockboxes, typically utilized by licensed REALTORS® when showing a property. How many of us are not disclosing that they are using a very different lockbox, one that allows and authorizes unlicensed members of the public to get a key to their home, enter without a manager present, and that we are hoping they lock up and return the key after they look? That is a wee bit different story, isn’t it? I wonder how many owners would authorize the “self-showing” boxes, if they have the full, true picture?

I’ve found several examples of how these self-showings have gone sideways: prospective tenants/buyers letting themselves in and opening doors and windows, turning on HVAC and lights, and then leaving the home open with all on. Others have simply taken the key and made a copy, returning later to remove the stainless refrigerator, or worse, to actually move their entire family into the home! We have seen online scammers gaining copies of keys, advertising homes for substantially less-than-normal rents, and renting out the homes. Their unsuspecting victims take possession- they have the right key, after all- only to find a few days later that they are now being evicted, or charged with trespassing, or all of the above. It’s happening, folks!

For a lack of true, full disclosure, if you are a licensed REALTOR®, you could find yourself in violation of the NAR Code of Ethics, Article 2, and 12, as well as your state  statute, similar to one here in Arizona, that says Grounds for Denial, Suspension, or Revocation of licenses: “pursued a course of misrepresentation or made false promises… in a transaction.” Similarly, as an NARPM member, you might also find yourself in violation of NARPM’s Code of Ethics, specifically Standard of Practice 1-1: “the property manager shall endeavor to eliminate…any practices which could be damaging to the public…” More food for thought.

Each Property Manager will make his or her own decision and live with the consequences. Can you afford to replace a refrigerator every once in a while? Sure. But what if the entire home is stripped to the slab – all HVAC, flooring, cabinets, copper, everything is stolen? Now you not only have the replacement cost to rebuild the home, but how many months of rent loss to cover also? It might be difficult for the owner to file a theft claim, when he “authorized” the access, based on your recommendation. It’s not going to be pretty. Hopefully, this article helps you balance your decision to embrace this practice of self-showings, or keep it personal with prospective clients, and show the properties yourself.