Steps for buying and selling a house during the coronavirus

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Just before the coronavirus forced the country into quarantine, Jonathan Lee was about to sell his four-bedroom home in Pasadena, California, to an all-cash buyer (the highest bidder of the 10 above-asking-price offers Lee received in the two weeks it was on the market).

Lee’s house in Old Town, Pasadena’s city district, which is home to a lively art and entertainment scene, had been viewed by 100 people. The deal was nearly locked in early March when COVID-19 put Wall Street in a tailspin, forcing the buyer to back pedal.

“We were ready to close when my first-choice buyer had to pull out because he had his money tied up in the stock market. So I went down the list of people who put in an offer. The second offer backed out because he didn’t know what was happening with the economy,” Lee says. “Luckily, the third offer was still interested. It was a family that knew the location and they wanted to upsize because she was pregnant with their third child.”

Lee’s experience isn’t unique. A recent survey of mortgage industry professionals, by National Association of Realtors (NAR), shows that 73 percent reported a decline in buyer interest, 12 percent cited no change and just 3 percent saw an increase.

Like buyers, many sellers are also backing away from the market as 51 percent of people reported sellers are delaying their home sale for a couple of months, according to the survey.

“The majority of buyers and sellers are taking a pause because of health and economic reasons—at least for a few months until stay-at-home orders are lifted. People who are listing are people that need to sell. They’re going through a divorce, have a new child or just got married,” says Dr. Jessica Lautz, vice president of demographics and behavioral insights at NAR.

As COVID-19 creates a variety of problems for the real estate market—from shrinking credit availability to canceled open houses and in-person meetings, experts say it’s possible to sell your home or buy one as long as you can be flexible and open to new ways of doing things.

Here’s an overview of how to buy or sell real estate during the pandemic:

Practice safety when showing or viewing a home

  • Make sure all parties are not exhibiting symptoms and have not been in contact with people who have exhibited symptoms before in-person viewings.
  • Avoid touching surfaces in the home (ask real estate agent to open doors and cabinets).
  • Limit the number of people in the home at one time to respect social distancing guidelines which require six feet of space between people.
  • Wear protective masks or face coverings.
  • Real estate agents should use disinfectant to wipe down doorknobs, surfaces, lockboxes, handles, and any other things they came into contact with before they leave the property.

Because the coronavirus is spread through person-to-person contact via respiratory droplets, home showings have changed.

It’s critical that people keep their distance from each other; wash their hands frequently to avoid contaminating surfaces or picking up the virus from contaminated surfaces; and wear masks to stop droplets from spreading.

Real estate agents have facilitated new protocols by helping clients practice social distancing. While empty homes have become more desirable of late, they’re not always an option. For owner-occupied homes, agents are verifying that the occupants are not sick or exhibiting COVID-19 symptoms before they show the home or conduct virtual tours.

“First, we want to make sure the people living in the home are well. Next, we try to minimize traffic into occupied homes — this protects everyone: the homeowner, the buyer and the agent,” says Dana Scanlon, real estate agent at Keller Williams Capital Properties in Bethesda, Maryland.

Some sellers are more comfortable having only their agent accompany the showing rather than letting in a new agent with every new buyer, says Jeffrey H. Roberts, principal at The Roberts Group Real Estate LLC in Fairfield County, Conn.

“If that’s not feasible, buyer agents should instruct buyers to touch nothing but the floor when in the house,” Roberts says. “The Realtor should open doors, cabinets, shades, and then immediately wipe them down with a disinfectant cloth.”

Finally, as impersonal as it might feel, wearing a mask is important in diminishing the spread of COVID-19. Real estate agents, like Luisella De Angelis of Vintage Homes Realty in Tampa, says that part of being a real estate agent is upholding your clients’ trust, which currently includes making sure everyone is safe.

“You hear stories from other agents where sellers were exhibiting symptoms and so you worry about your safety and the safety of your clients,” De Angelis says. “I don’t want to be part of the spread so I always wear a mask and I ask the buyers and sellers to also wear a mask. I also make sure we don’t go into the house together to respect physical space.”

Choose an agent you can trust

  • Get referrals from friends and family.
  • Find out if they know the neighborhood and have connections there.
  • Ask them what tools they have in place to help you buy and sell while people are sheltering in place and many aspects of the mortgage process (like inspections) have changed.

When Matthew and Kayla Palm sold their house in January the couple and their 3-year-old daughter moved in with family until they could find the house they wanted. Their home search was expedited by the coronavirus. The Palms knew they had to find a home quickly; however, navigating this new real estate world was daunting.

Their search was intensified because they were looking in a specific neighborhood and didn’t want to go outside of a two-mile radius, but those homes were getting snapped up quickly.

The Palms hired De Angelis to help them find their dream house and relied heavily on her to guide them through the process.

“It was important to have a Realtor we could trust. We told her exactly what we wanted and she found something that checked all the boxes. Because of the virus and having a toddler at home, we watched a video tour of the house before it was put on the market and really looked to her for help; we wanted to make sure it was a good deal,” Matthew says.

The couple made an offer before setting foot in the home, a decision the Palms are satisfied with.

More than ever before, hiring a competent real estate agent is key, says Roberts. Word-of-mouth is a great starting point, but also find out how well the agent knows the neighborhood you’re looking in and how deep their connections are.

The fact that De Angelis was able to secure a viewing before the house hit the market gave the Palms a huge advantage. These are the assets buyers and sellers need in today’s market, where inventory is tight and resources are limited.

“Sellers should ask questions and be vigilant about getting the newest, most accurate and complete information at all times. There are many uncertainties in the world today, but a real estate transaction is one that can be less so by continuous and accurate exchange of information,” Roberts says.

Be flexible with financing

  • Lending standards are tighter, so buyers might need to do more research to find a lender who will give them a mortgage.
  • Motivated sellers should explore various financing options if they’re having trouble finding qualified buyers.

Lenders are raising minimum borrower requirements, including credit score and employment history, thus shrinking the pool of eligible applicants.

For homebuyers whose credit score is hovering around or below 660, that might mean spending more time shopping for a lender who will underwrite your mortgage. If you can find a lender, be prepared to pay a higher interest rate. Lenders typically raise rates for borrowers with lower FICO scores.

Certain types of loans are also being yanked from the shelves, such as jumbo mortgages, which can make it tough for buyers in expensive areas to get a house. The lenders who are offering jumbos are no longer taking less than a 20 percent down payment. One option for borrowers who need a jumbo loan, but don’t meet the minimum down-payment requirements is to get an 80/10/10 loan, Scanlon says.

An 80/10/10 loan allows the homebuyer to take out a first and second mortgage simultaneously, which takes care of 90 percent of the home price, so the buyer is only responsible for a 10 percent down payment.

“The lending environment has been shaken up. The jumbo loan is where we see the most lender aversion to risk. The 80/10/10 is usually an option for people who have property but have not sold it yet. When they sell their property, they pay the 10 percent loan right away,” Scanlon says.

For eager sellers, deepening the buyer pool can be a good strategy in a credit-strapped environment. One way to do this is to offer owner financing, says Marina Vaamonde, real estate investor and founder of HouseCashin.com.

Owner or seller financing basically means that the homeowner allows the buyer to make regular payments to them until the house is paid off. Homeowners will typically add interest and require a down payment. The buyer will sign a promissory note, which outlines the terms and conditions of the deal. If the buyer doesn’t uphold the contract, then they can default and end up in foreclosure, losing the money they put into the house. In some cases, the seller will keep the title in their name until the buyer pays the full amount.

“As guidelines to qualify for a mortgage become more stringent, a large group of the population who are ready to make a purchase are unable to get a loan. Being self-employed, recently changing a job, or having experienced a few credit hiccups are all factors preventing thousands from acquiring a loan,” says Vaamonde. “Offering seller financing will not only expedite the sale of the home but will also allow the seller to acquire an additional income stream. Sellers can dictate the terms of the note, and collect on interest payments for up to 30 years. Prospective buyers who have been rejected by a lender are also more willing to pay above market price for a property that comes with an owner financing option.”

It’s important for both parties to get legal or professional advice when entering into an owner financing agreement. There are pros and cons to this arrangement. For example, buyers might have to pay more in interest than if they got a mortgage through a bank, credit union or mortgage lender. For homeowners, they run the risk of a buyer not being able to keep up with their monthly payments, which can lead to a long and costly foreclosure process.

Embrace virtual tools

Sellers and buyers should be comfortable with virtual tours, video conferencing and other tools that enable remote home shopping.

Curb appeal used to mean a great front yard that people admired as they walked by. That’s changed in recent years—now it means a captivating online profile, complete with professional photography and a video tour, Scanlon says. COVID-19 has only made photos and videos even more important in the buying and selling process.

People who know how to use today’s technology to sell their home (or view homes for sale) are at an advantage. They can present their home in a way that resonates with customers and all but eliminates the physical distance between them.

Video-conferencing technology like Zoom and FaceTime have quickly become the standard method for showing homes, especially if people are still living in them. The good news is that these tools are readily available and usually free to anyone with a smartphone or computer and internet access.

Tushar Garg, CEO of Flyhomes, says that homeowners have an advantage over agents in showing their homes virtually because they know the space and can provide a level of intimacy that many homebuyers want.

“We worked with a Marina del Rey couple, Roy and Larry, who were able to sell their home without breaking quarantine—at their asking price—in just five days using only virtual open houses,” Garg says.

The couple did a few simple things that made the experience better than other virtual tours Garg had seen.

One thing they did well was to take turns holding the phone while the other walked around the space, which gave viewers a sense of scale and proportion. For example, Larry (who is 6’4” tall) was able to demonstrate how big their shower was by standing inside of it. They also did this with their vaulted ceilings, which added visual impact along with the measurements on paper.

“Larry and Roy also found it helpful to take inspiration from their favorite show on HGTV, ‘House Hunters,’ and provide constant commentary and anecdotes from their time living in the home. They learned that dead air is the enemy of a virtual home tour and providing additional information made the experience much more interactive,” Garg adds.

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