Staying at home isn’t easy if you’re trying to sell your home.
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As coronavirus progressed from an outbreak to a pandemic at the beginning of 2020, the real estate market slowed down significantly by early March. As mortgage rates declined, despite a general fear of the unknown in terms of public health and the economy, there was still some activity with motivated buyers attending open houses and looking at property. But since social distancing and shelter in place orders were mandated around mid-March in most states, real estate activity hasn’t come to a halt entirely, but it has slowed down in a way the industry hasn’t experienced in a very long time.
However, with mortgage rates still low and sellers generally willing to make concessions, if all parties can consent to a showing either in person or virtually, or buyers are willing to make offers site unseen, it’s a good time to get a deal.
Real Estate In Los Angeles During COVID-19
Prior to stay at home orders, some Los Angeles agents including Steve Chetelat of Compass were incredibly busy. “In the weeks leading up to lockdown, I had many buyers making offers on homes that were seeing as many as 26 offers at one time. The competition was intense due to a lack of inventory and an incredible amount of active buyers,” he tells me.
But then, one at a time, his clients started to shift their focus on the uncertainty of the pandemic and decided to hold off on purchasing. However, weeks later, there is finally some movement again. “The interesting thing happening now is that deals on many of the homes that my clients loved have fallen apart for different types of reasons and we are getting a fresh chance to come back and resubmit new offers. So we are back in the game with less competition and my clients are getting a second chance to own the home of their dreams,” he says.
Still, showings are few and far between, despite the fact that the rate of coronavirus in Los Angeles is lower than other parts of the country. “The rules have been changing almost daily and are different for the city of Los Angeles compared to Los Angeles County. But the shelter in place order [recently] clarified that showing a vacant property is now allowed with proper masks, booties, gloves, etc, with no more than two people in the house,” Shelton Wilder, who is the CEO and founder of Shelton Wilder Group at Compass in Los Angeles tells me.
However, some eager buyers are taking advantage of opportunities and making offers on properties site unseen. “Sellers have actually been giving virtual Zoom or FaceTime tours of their homes, in some cases. We are being very innovative and pivoting to abide by the rules,” she says.
During normal times, sellers generally have no involvement in showing homes (other than leaving prior to the showing), but these are far from normal times.
So, while business has slowed, there’s still quite a bit of movement, at least for Wilder. “This is about half of where we were in 2019, but there is still activity. We had a listing go into escrow within 48 hours with multiple offers over asking. People still have life changes where they must buy and sell. That will never change in real estate.”
Coronavirus Hits The New York City Market Hard
But the challenges are far greater in the New York City market, where showing property is nearly impossible because the rates of the virus are so high. “I don’t know of any brokers showing in person anymore,” says Allison Chiaramonte of Warburg Realty. “We have been using pre-recorded video tours for the inquiries we are getting, but the request to see apartments is slower than usual.”
Even if an apartment is empty and buyers are willing, that doesn’t necessarily mean they will be allowed access. “We have one or two empty listings where we could go into the apartment (with proper precautions to conduct a Zoom or FaceTime tour) if necessary, but for better or worse, most buildings are not allowing brokers in. It so happens that the empty listings haven’t been requested yet in any of the buildings that would allow access,” she tells me.
It’s not smooth sailing for transactions currently in process either, with buyers forcing sellers to make last-minute concessions. Hope Khouri of Halstead had a listing in contract and was representing the seller. Then coronavirus hit and she received a call from the buyer’s agent who said her clients were considering walking without a price concession. “Obviously my seller didn’t want to lose money, but these are all-cash buyers and it’s a condo, so she didn’t want to chance anything. She lowered the contract price by $50k. The buyers also saved an extra $10k as the contract price was now under a million, avoiding the mansion tax.”
Another issue is that while it’s more than understandable why buildings aren’t allowing visitors, New York’s notoriously difficult co-op boards have made the final steps of closings almost impossibly difficult. “While they are willing to conduct board interviews over Zoom, they aren’t allowing anything but virtual walkthroughs for the buyers,” says Bill Kowalczuk of Warburg Realty.
Buying Site Unseen
But if an agent can make magic happen, sellers are willing to negotiate. On April 15th, the Wall Street Journal reported that a Peruvian family spent nearly $27 million on eight luxury condos in a new development located on the Upper West Side. With the developer giving them a seven percent discount, they felt their money was safer parked in real estate than the bank right now.
But, Chiaramonte says that this is very much the exception to the rule. “I can see how [buying site unseen] can happen if it’s a good price and a buyer knows the building/line well. But, it’s really rare that a buyer will make a major investment without someone seeing the unit in person on their behalf, even if it’s their broker or another representative. We have had a few rental offers based on videos, but so far a caveat of signing the contract would still be an in-person viewing of some sort.”
Banks Are Cancelling Loans
While rates were declining prior to the pandemic, some banks have left buyers and sellers in a lurch they could have never anticipated. “I have had buyers who started the process of looking for a home before the lockdown began. The loan program they were on allowed them to have a minimum down payment, say five to ten percent,” Yawar Charlie of CNBC’s Listing Impossible tells me.
But as the economy rapidly declined, certain loans were no longer a possibility. “We were literally days away from the close of escrow and the lender they had been working with for months went out of business overnight. Suddenly the loan program that was available to them one day was gone the next. The buyers had to go back to more traditional lending options, meaning a larger down payment. One of the situations ended with the transaction closing and the other one falling apart because the buyer could not come up with a larger down payment.”
What About The Rest Of The Country?
Then there are people who have no choice but to relocate. “Movers are deemed essential and so some people are still moving,” says Wilder. “In some cases, moving is necessary. For instance, we have a seller that needs to sell, as their job is moving them to Nashville and the buyers are pregnant and need a new home. So this transaction makes sense for both parties. We negotiated a leaseback until the end of May and everything is moving forward as scheduled.”
But as expected, the pandemic has hit the moving industry hard. “Our business is down 40 percent nationwide, but it varies by market,” says Nick Friedman, who is the co-founder and president of College Hunks Hauling Junk & Moving. While the first two weeks in March were the busiest in the company’s history, by the time shelter in place orders were mandated, everything started to come to a standstill.
Movers have also had to abide by social distancing regulations as best they can— wearing face masks and gloves while staying six feet apart. They’re also checking their temperatures daily. Customers are advised to stay in different rooms while the movers are working.
But for the most part, activity is contingent upon location. While the College Hunks franchise in Westchester, New York has ceased operations, the Long Island franchise is operating, albeit at a far lower rate than normal. Other highly impacted markets include Chicago, Kansas City, Flint, and Indianapolis. But areas including Renton and Gig Harbor Washington, Virginia Beach, Jacksonville, Nashville, and Bend have been impacted least by the pandemic, at least in terms of moving.
As for the future, no one knows for sure, but Wilder remains optimistic and is even predicting a strong third quarter. “Sellers have to sell and buyers have to buy and homes have never been more important. I predict the third quarter will be very busy, similar to the spring market notwithstanding the shelter in place. However, the fourth quarter could be affected by the election which happens when people tend to pause”.