Unprecedented times. Complicated legislation. Frightening headlines. The world as we know it has changed irrevocably. During this global crisis, the real estate industry, like most businesses and markets, has become highly vulnerable. While entire populations are self-quarantined, now may just not seem like the ideal time to take on the uncertainty and effort associated with a home purchase and move. However, COVID-19 has also impacted jobs and personal priorities, which may give some people strong motivations to move, such as a new job in another state or desire for a single-family home in a less dense suburban area rather than a multi-family dwelling in a crowded city. Regardless of the motivation, there are still critical reasons to buy or sell a home in New Jersey today; and thanks to persistent and resilient real estate professionals who survived the 2008 housing bubble and Hurricane Sandy, deals are still getting done.
The Department of Homeland Security has deemed residential and commercial real estate services essential, including property showings, home inspections and appraisals. While many of the sales that have closed since the pandemic hit were already in negotiations before social distancing practices went into effect, technology, creative solutions and dedicated professionals are ensuring that the real estate market does not grind to a screeching halt. In fact, here’s how new practices and procedures are adapting to sustain the New Jersey real estate market:
Virtual tours and online house hunting – Recognizing the serious safety concerns of in-person showings, most sellers and brokers are incorporating alternative options such as 3-D video tours, online “open houses,” and adding additional photographs to listings. In addition, listing and sellers’ agents may ask if a buyer is pre-qualified to purchase and limit showings to qualified buyers as well as screening individuals for COVID-19 prior to showing an individual a property.
Appraisals and Inspections – Desperate times call for desperate measures – and a good deal of flexibility. Clearly socially distancing mandates and safety concerns make inspections and appraisals challenging. However, cooperation with schedules and accommodation have made isolated inspections and appraisals possible. In this way, an appraiser or inspector enters the property individually with protective gear, with access open to all spaces, closets, and crawl spaces in order to complete comprehensive reports and provide detailed reports with photography. In some instances, drive by or virtual appraisals are utilized; however, with this may come issues with precise valuations for which buyers and lenders will need to adapt to.
Contingencies – An extraordinary event, like an epidemic or government order, that could affect a transaction is sometimes addressed in a “force majeure” clause allowing a party to suspend or terminate performance when circumstances which the parties could not have anticipated, or which are beyond their control, make performance of the contract impossible or impracticable. Some, but not all, purchase agreements may have such a clause which can help guide the parties and the transaction to move forward or not. More recently, attorneys are adding a specific “COVID-19” clause with sale contingencies or buyer provisions regarding things such as financial commitments, employment and delays that are caused by things/people beyond the control of either party. Clearly, these contingencies may have a ripple effect if a seller needs to sell a property prior to purchasing another property. In addition, many municipalities are not performing CCOs, and lenders are not requiring CCOs, which puts a post-pandemic compliancy on the buyer. To this end, the need for Compliant Affidavits are often included in the COVID-19 clause. Furthermore, many contracts are including Escrow clauses to hold funds in escrow to cover issues that may arise during these unusual post-closing procedures and possession.
Lending – With low interest rates, lenders are experiencing a high volume of refinancing applications. However, most banks and lenders are extremely responsive to the current crisis and are practicing flexibility in regards to securing financing. In fact, many banks are not requiring certifications of CCOs, smoke detectors, and other protocols that previously may have been required.
Title Insurers – Settlement agents have been the frontline heroes in getting deals to the virtual closing table. With access to nationwide online databases, NJ title companies provide a critical component to the real estate transaction. During today’s Corona crisis, the title industry’s ability to continue to provide their services ensures a smooth transaction. Together, with the brave borough clerks and municipality employees, this workforce is the lifeline of the industry.
Buying, selling or looking for a home during this unprecedented global crisis is not only challenging, but also extremely stressful and unsettling. But for some, it is also necessary and critical for one’s livelihood, financial situation or health and well-being. So as New Jersey remains an epicenter of the pandemic, its residents remain Jersey Strong, including its real estate professionals who are historically resilient. Corona may have disrupted the market and slowed the home buying process, but it hasn’t destroyed it. We will get through this together.