How to Real Estate in the Time of COVID-19
Updated: Mar 20, 2020
It was January, and the spring real estate market had kicked off early in Chicago. We had unseasonably nice weather, and buyers were hitting the streets. February was no different. Then, suddenly, the whispers about COVID-19 started to pick up, and over the past few weeks, things have taken a dramatic turn.
Everyone in the real estate industry is trying to adapt as quickly as possible, but it's undeniable that the market has reacted to this pandemic and subsequent quarantine, not to mention the resulting fluctuations in interest rates.
While it's every realtor's instinct to start shouting that "The market is still active! Everything can continue as usual!!", I have to sit back and think about this as if I was a buyer or seller right now. What would I do?
My first instinct is to say "why not at least try?" If I'm a seller, why not try to list my home for the amount I hope to get for it and see what happens? If I'm a seller who needs to sell in order to buy my next home, why not make an offer on that next home with a home sale contingency, which protects me if I can't sell my home by the agreed-upon date? A seller may not go for it, but it's worth a shot.
If I'm a first-time buyer, why not try to time my first purchase to take advantage of the incredible (albeit fluctuating) interest rates and buy the most house I possibly can for my money?
At the end of the day, 95% of a real estate transaction is virtual; it's handled via email and phone. But what about the actual showings, inspections, closings, etc.? I get that there are health concerns when it comes to going through another person's property or having them go through yours, and it's hard to trust that others will be as careful as you would be in avoiding the spread of the virus.
To that end, special measures must be taken, and I'd insist on them if I were a seller or buyer. I'll insist on them even in my role as a broker. Here are a few things I'd recommend:
-If possible, listing agents should record a video tour of the property to use as the "first showing", only allowing parties on site who are interested enough after watching the video to proceed further.
-For an in-person showing, limit the guest list to only those absolutely necessary. A listing agent need not be there, he or she can just leave the keys for the buyer and their agent.
-Have the seller leave all the lights on before the showing, and possibly even leave the door unlocked for the showing so that the agent and buyers need not touch light switches or any surface in the unit.
-Stay as far apart as possible from the other parties during the showing. If buyers are in the living room, the agent goes into the bedroom, and vice-versa.
-Listing agents should instruct parties not to open drawers, turn on faucets, look in the fridge, etc. This should be a visual assessment of the space only.
-For an inspection, only the inspector should be on-site if possible, and they can relay photos, videos, and write-ups to the prospective buyer afterwards.
-For closings, only the essential parties should be in the room, and others can call in on the phone. Buyers can use power of attorney to have their attorney handle all signatures without them present.
Now, even if you're able to perform some gymnastics to get through the process of buying a home, many still have concerns about the stability of the market and whether it's prudent to invest in a new home right now. While the COVID-19 situation is certainly the elephant in the room and its impact will continue to unfold in unexpected ways in the weeks to come, there are some facts to keep in mind that suggest we're not headed for a housing market crash like we had in 2008.
1. Mortgage standards have changed dramatically: lenders are no longer able to offer buyers ridiculous loan packages for which they're not qualified.
2. Home prices aren't out of control this time around. While there's been moderate appreciation, it's nothing like the soaring prices leading up to 2008.
3. We don't have a surplus of homes on the market. In most North side Chicago neighborhoods I work in, the inventory has just barely increased enough to call it a balanced market, and the COVID-19 situation has tightened inventory even further as many sellers are holding back from listing their homes.
4. Homes are more affordable for consumers today, which is a cocktail made up of home prices, strong wages, and relatively low interest rates. This means buyers aren't having to stretch so far to get into a home they really can't afford.
5. Homeowners have more equity today on average, and they're managing it more responsibly. Before 2008, homeowners had been seeing their home values skyrocketing and started borrowing against their equity for all kinds of things, leaving them vulnerable when home prices later plummeted.
So, all in all, there are lots of creative ways to stay in the real estate game during these strange times, and many reasons why experts believe it's still safe to stick your neck out and make a move. That being said, any purchase or sale is a huge decision, and each individual must make it on their own.