Although home transaction volumes are falling, real estate professionals still are considered “essential” during the coronavirus lockdown. To keep the housing market moving, federal regulators are working hard to create new ways to transact from a distance, including virtual showings, completely electronic closings, and remote inspections.
And if your state does not consider your services essential, they’ll have to speak with the federal government. Unlike many industries that have been deemed essential in some states and not in others, the Department of Homeland Security itself declared “real estate functions” to be an essential part of the economy. Those functions include property showings, home inspections, and appraisals for commercial and residential properties.
Unfortunately, although the federal government has declared real estate services essential, not all parties are cooperating. Many brokerages and private appraisal services have closed, and sales are falling through due to lack of inspections. “Coronavirus clauses” are increasingly common, protecting buyers’ and sellers’ interests in the event they cannot access a home due to quarantine and providing exit options in the event that one or both parties lose their jobs and cannot close the sale.
Lending Slows but Sales Continue
The biggest issue for most real estate professionals is not whether or not to physically show a property (most buyers and sellers agree they would prefer a virtual tour) but instead whether a lender will provide financing under the currently uncertain market conditions. While short-term financing used by real estate investors is still largely in place, albeit with lower loan-to-value ratios than had previously been the norm, more traditional mortgage financing has stalled in many cases because lenders are concerned about their ability to identify a clear value for the collateral property. This is due in part to stalled inspections and appraisals, but also to an uncertain housing market.
“They’re all in limbo,” said New York real estate executive Dolly Lenz. “The contract is signed, awaiting paperwork like appraisals. And we have to wait until that is done.”
New-construction sales are moving a little more smoothly simply because there is less uncertainty about the process and buyers feel confident about moving into a never-before-inhabited home.
“When it’s new construction, you’re buying that on spec anyway,” pointed out real estate attorney Sandor Krauss.
When it comes to existing and inhabited homes, however, he said things are moving remotely or not at all.
“I don’t know anyone that wants [other individuals] in their apartment, and I don’t know any brokers that want to put their families in jeopardy,” he said.
Residents and Home-buyers Happy to Shop Online
Although the pace has slowed in most housing markets, all indications are that Americans already growing used to the concept of sheltering-in-place are also getting used to the idea that their next “nest” might be one they see only online prior to move-in. According to a survey from Realtor.com, two-thirds of Americans believe a recession is either already underway or will “hit” within three months. This possibility is not dampening potential buyers’ interest in homeownership, however.
“Surprisingly, a majority of consumers believe that a recession will not change or will not increase the likelihood they will purchase a home,” said Danielle Hale, chief economist at Realtor.com. “Their optimism likely comes from expecting low mortgage rates and fewer other buyers to compete with as well as the possibility of home price declines. Some of these expectations are more realistic than others.”
About a third of respondents in the survey said they would be more likely or “somewhat more likely” to purchase a home once a recession has clearly begun. Fewer than one in 20 said they would be “a lot less likely” to buy, fewer even than said this at the beginning of March 2020.
Do you see your real estate business as essential at this point in time? How are you responding?
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