Co-Founder and principal of The Eighty Two Group @ Compass
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Wash your hands. Wear a mask at all times. Stay six feet away from each other. These are just some of the habits that have become part of the new normal because of the Covid-19 pandemic. But what else has changed? The real estate industry has undergone some significant changes in order to adapt to the new reality during the pandemic.
New Forms, Rules And Regulations To Remember
The California Departments of Public Health and Industrial Relations have released new guidelines to ensure the safety and security of both buyers and sellers during the pandemic. In response, the California Association of Realtors has rolled out several new forms that address the situation. These include, among many others:
• Coronavirus Property Entry Advisory and Declaration (PEAD), which must be signed prior to every visit to a property. This form is an advisory to both buyers and sellers on the risks that come with visiting a property during the pandemic. It is also a declaration from the visitors that they are not afflicted with Covid-19, nor have they come into contact with anyone who is, to the best of their knowledge.
• Coronavirus Addendum or Amendment (CVA), which may be attached to a purchase agreement if both parties agree. This form may allow the extension of contingencies or close of escrow, or the cancellation of escrow, provided that either party can provide verification that an unforeseen circumstance has affected their ability to close the transaction.
Every buyer and seller should consult with their own real estate agent and/or attorney on how these new forms, rules and regulations may personally impact them and their transaction.
Banks Have Tightened Their Lending Requirements
Mortgage rates have continued to decline to historic lows, which should mean that buyers should qualify for more. However, banks have also tightened their lending requirements, which severely affects how many buyers could qualify for loans and how much they could qualify for.
In a move done to protect the interests of lenders and borrower, and to avoid the same situation as back in 2008, banks such as JPMorgan Chase and Wells Fargo have either increased their minimum credit score requirements, increased down payment requirements or both.
Employment verifications, which only used to happen twice (once early on in the process, and again prior to closing), are now more thorough and done more frequently.
It is highly recommended that every prospective buyer, especially those who are looking into jumbo loans, check with their lender to verify that they still qualify for the same loans as they did before.
The Market Remains Very Competitive Despite A Change In Sentiment
The real estate market had initially taken a hit due to the public’s increased concern for their health and safety, but all signs point to a recovery. According to a survey done by the California Association of Realtors, more buyers think that now is a good time to buy. On the contrary, the same survey shows that fewer sellers think that now is a good time to sell. This contributes to the lower volume of properties for sale on the market, which exacerbates the seller’s market that California has been experiencing for a while. At this point, home prices have stayed relatively the same (and, in certain areas, even gone up).
While it is unfortunate that many workers have been displaced due to the pandemic, professionals who are able to work from home and essential workers remain largely unaffected. Their ability to remain well qualified for loans helps keep home sales prices afloat.
The situation has also created an environment that encourages people to move. Big technology companies including Facebook and Twitter are continuing to allow employees to work remotely, thus eliminating the need for some to be close to highly expensive city centers. Renters and current homeowners who are now spending a lot more time at home are realizing that they need a dedicated home office or a bigger yard.
Even with all the shifts in procedures, lending requirements and sentiment, sellers continue to see multiple offers submitted within days, and sometimes hours, of putting their property up on the market. With people on their screens for longer hours than before, digital advertising becomes much more valuable as a marketing tool for sellers.
Now more than ever, buyers need to be more vigilant and act quickly if they are interested in a property. The staggered showings that many listing agents are implementing limit the number of buyers who can see a property each day. It is imperative that serious buyers be armed with knowledge of what exactly they are looking for, a solid preapproval letter from their lender and a personal letter to help make their offer stand out from all the rest.
We may experience more ups and downs until we are completely past this pandemic, but one thing is for sure: It is not a question of if the real estate market will recover, but when.
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