Nearly every industry has been impacted by the global COVID-19 pandemic and real estate is no exception. Because the cornerstone of buying or selling a home is face-to-face interaction, the way we do business has been altered. Open houses and showings have been cancelled, conducting inspections and funding loans have become trickier, and even tasks like having documents notarized have created delays. Consequently, sellers may pull their homes off the market, while buyers may suspend their search. However, if we’ve learned anything from America’s ongoing toilet paper panic, it’s that adjusting to life amid COVID-19 requires us to prioritize rational analysis over gut impulse.
If you’re thinking about buying or selling a home – now or in the near future – you don’t necessarily have to abandon your efforts. By staying informed and working with experienced industry professionals, such as agents, attorneys and financial advisors, you can still achieve your real estate goals with a few strategic adjustments. Start by asking yourself the following key questions to determine how you might best navigate the real estate market during this (or any) global crisis.
Should I withdraw my home from the market?
Many sellers have withdrawn or are thinking about withdrawing their homes from the market because they don’t want to accumulate more days on the market when they are unable to conduct showings. A “withdrawn” status means that a home is not currently being shown, but the seller is still actively engaged with their agent.
There are multiple variables you should consider before withdrawing or deciding not to list your home at this time. Remember that a spike in withdrawn listings results in a reduced supply of homes, which could create an increase in buyer demand.
While the impact of COVID-19 has forced some buyers to walk away from deals, other buyers may be undeterred or even incentivized by current events. Those who work in essential industries or are undergoing job relocation may also be particularly motivated to buy.
Ultimately, though catalysts shift with current events, it’s important to remember that people have to buy and sell homes in any market. While things are still changing day-by-day, several areas are still leaning toward a seller’s market, due to fewer homes being listed.
Is it wise to buy a home during a pandemic?
Whether or not it’s wise to buy a home right now depends on your individual situation. Potential buyers may have to reassess their financial reach post-COVID-19. If you have lost wealth in the stock market and you don’t have another source of income, it may not be wise to stretch yourself further by purchasing a home at this moment. But if your income is stable or has increased, you might be able to strike a better deal on a home now than you could have just a few weeks ago.
Though the coronavirus pandemic is unlikely to incite many fire sales any time soon, the market is beginning to experience some price adjustments. Buyers who aren’t attached to a particular home and are willing to explore different options may be able to negotiate with sellers for more favorable terms, such as a longer escrow.
Since more homes are being withdrawn from the market, buyers may start to feel discouraged – especially if a property they were excited about was withdrawn. However, just because a home was withdrawn doesn’t mean the seller isn’t still planning to sell their home. Since consumers don’t have access to important information regarding these status changes, working with a strong real estate agent is even more vital now than ever before.
How will COVID-19 impact pending transactions?
If you’re already in the process of buying or selling a home and cannot fulfill your contractual obligations because of hardship imposed by COVID-19, you may be able to renegotiate a transaction’s terms using the force majeure provision. Force majeure provisions allow concessions for unforeseeable events or “acts of God” which may, according to the specific clause outlined in your contract, include a pandemic. Not all states have a force majeure provision automatically included in their agreement, so it’s important to engage an experienced real estate attorney to get clarification.
Social distancing regulations will very likely have an impact on the cadence of your real estate transaction. Expect delays that may result in more than just an inconvenience; for example, those who have experienced a change in employment status may have difficulty providing verification of employment before closing escrow. We are also seeing lenders reevaluate jumbo loans, down payment amounts and credit score requirements, which may impact a pending transaction.
Some buyers have had to press pause for thirty days or switch lenders mid-escrow in order to move forward. You may also need to negotiate a longer escrow period in order to accomplish all of the necessary home inspections that may not be possible while social distancing regulations are in place.
What is the long-term outlook?
Though the coronavirus pandemic is unlikely to drastically alter the real estate market in the long term, it might have a lasting impact on the features buyers find most appealing. Accessory dwelling units (ADUs), for example, are already proving to be worth the investment, because they add longevity and multi-generational flexibility to a home. They may be in even higher demand, post-COVID-19, because of the ease with which they allow healthcare workers, frequent travelers, college students and elderly or ailing family members to socially distance themselves if necessary.
Because real estate is a tangible asset, it may become an even more attractive option for a diverse range of investors in the wake of COVID-19’s impact on the stock market. You may want to take this time to educate yourself on the basics of real estate investing, because it is never too late to begin building wealth with the right team and strategy in place.