New Rules for Buying or Selling a Home During Covid-19

HOW BUYING OR SELLING REAL ESTATE HAS CHANGED SINCE OUR “NEW NORMAL

Recently, several people have asked me (from a socially safe distance, of course) if people are buying or selling homes during the Covid-19 pandemic.  Absolutely, I say! I’ve been working with lots of buyers and sellers these past two months. Other Realtors I know tell me the same thing. It’s unfortunate this happened during the time of year when people most want to sell their home, but homeowners are still listing homes and people are looking to buy their home-sweet-home even during these unusual times.

That’s not to say everything is rosy in the real estate business. Some of my clients who planned to list their home have held off until things settle down. Generally, business is down across the board. According to the March report from Columbus Realtors, new listings are down 30 percent and homes put into contract are down 22 percent from the same time last year. Once the April report comes out we’ll have a better view of the full impact of Covid-19.

Still, there’s a surprising level of activity out there for people interested in buying or selling a home, in part, because mortgage interest rates are extremely favorable right now. People are taking advantage of these low rates by not only buying homes, but also refinancing their home loans.

But Covid-19 has affected more than just real estate sales volume. It’s brought about fundamental changes in the way people are buying or selling homes. Those affected in the industry include, but aren’t limited to, real estate brokerages, title companies, mortgage lenders, home inspectors and home stagers. To better understand what some of these changes are, I’ve asked several people I know in each of these areas to talk about what home buyers and sellers can expect these days.

REALTORS

From my own experience, and talking with Realtors I know, much activity already take place online or on the phone, so in that regard, it’s business as usual. But buyer and sellers will notice a few modifications for those times when social distancing is an issue.

Home Showings. The practice of buyers driving with their Realtor to visit homes for sale has changed. These days buyers and Realtors generally their own cars. Many sellers are asking visitors to use sanitizer when entering and to refrain from touching items if possible. I’ve also heard some sellers are asking agents, before they show a home, to first conduct a video walk-thru of their home for their buyer, and if the buyer likes what they see, then they can schedule an in-person showing.

Meetings. Meetings at the Realtor’s office have been replaced by phone calls and video conference calls via Zoom, Facetime, Skype or Google Meet. Sellers interested in listing are still inviting Realtors into their homes for initial walk-thru meetings, but all are taking precautions with common sense measures like wearing masks and maintain a six-foot social distance.

Open Houses. Some Realtors are still holding open houses, but look around on any given Sunday and you’ll see far fewer than in the past. Since the pandemic, more and more sellers are shying away from having dozens of people walking through their home. Also, many Realtors aren’t comfortable being that close to so many people at one time, many who refuse to wear masks. Because of this, online virtual tours are growing in popularity. These 1-2 minute video walk-thru’s of a house give buyers a quick glimpse of a home’s layout.

For those still wanting to showcase their home to the public, Columbus REALTORS (the trade organization of all area Realtors and the manager of the local Multiple Listing Service database) has come up with an innovative solution – Virtual Open Houses. These are the live streaming, online equivalent to an in-person open house. They are not pre-recorded, stored on the internet, and viewed by anyone, anytime. Instead, they are conducted to a live “audience” at a scheduled time. Only the live, online attendees see the information at the specified time. Virtual Open Houses are organized by the sellers’ listing agent.

MORTGAGE LENDING

If you’re buying a home, the good news is home loans are still available. Now, like always, you’d be wise to shop and compare, but, these days, for different reasons as well. Interest rates have reached historic lows, but some of the biggest changes have been with credit score requirements and employment verification.

Credit Scores. Because of the pandemic’s effect on the economy, lenders have tightened their credit score requirements in order to minimize their level of risk. This is especially true with government programs like FHA, VA and USDA loans. According to Noah Brader with Union Home Mortgage, in the past, his institution’s minimum credit score for an FHA loan has been as low as 580, but recently it increased to 640. Similarly, Tom Dodrill of CF Bank says their minimum credit score for FHA loans has risen from 620 to 680. Fortunately, for non-government Conventional loans, the impact has been far less, and credit scores requirements have largely remained the same.

Employment Verification. With so many business closures, many lenders have adjusted their employment verification rules. These rules vary from bank to bank. Brian Eachus with Homeside Financial says they verify employment two days before closing. Tom Dodrill of CF Bank reports they ask for the borrower’s most recent pay stub and verify employment three days before closing. And Noah Brader says Union Home Mortgage only requires the most recent pay stub for verification. For self-employed persons, the verification rules also vary from bank to bank. This is why borrowers are wise to compare multiple programs.

Days to Close. Many banks are busier than ever right now originating and refinancing home loans. 30 days has been the norm for lenders to process and fund a home loan.  With the added volume and pressures of operating during Covid-19, that’s starting to increase. It’s quite possible 45-60 days will be the new norm for people buying or selling a home until things settle back down.

Investment Property Loans. Buyers considering investment properties like multi-family homes are likely to see the greatest changes in mortgage loan requirements. For instance, reserve requirements at CF Bank have increased from 6 months to 12. Additionally, borrowers must qualify for the full monthly mortgage payment without factoring in rental income.

An important note: requirements are changing rapidly these days for those in the mortgage loan business as they strive to best serve customers during this pandemic. To know the latest for each company, contact them directly.

TITLE COMPANY RULES FOR CLOSINGS

Before the pandemic, real estate closings for people buying or selling a home generally took place around a title company’s conference room table. While some title companies still maintain this practice with masks and hand sanitizer in place, many are coming up with solutions that provide greater social distance.

Marisa Webb with Northwest Title says 50% of their closings now take place in the car. Called drive-up closings or parking lot closings, buyers and sellers convene in the title company’s parking lot in their respective cars, and the Closing Officer literally walks the documents to each party’s car for signatures. Prior to the parking lot meeting, the Closing Officer will send each party a copy of their documents via a secure portal, then call them to review the contents and answer questions. After the parking lot meeting when everything is signed, the Closing Officer double-checks the paperwork to ensure all “i’s” are dotted and “t’s” are crossed.

Ideally, Northwest Title would like to see all document signatures and notarizations take place online, eliminating the need for parking lot closings. Numerous legal concerns need to be addressed first. Online notarization is available online in many states, but not yet in Ohio. But they are on the horizon and, someday, online closings may replace traditional roundtable closings.

HOME INSPECTIONS

Dan Durak with Cornerstone Home Inspection says business is still humming along these days. But the pandemic has forced him to adopt several new safety protocols for buyers.

Previously, buyers were welcome to join him during a home inspection. Now, he’s had to restrict that to the final 30 minutes of inspection with no more than two people in attendance. He’s also asking everyone in the home to wear a mask and to maintain 6-8 feet distance from each other.

HOME STAGING

Furniture and home accessories are tactile by nature. This makes it a challenge to stage a home while keeping it virus-free. For Felicia Frazier with Staging By Dwell, she’s modified some of her services. For the time being, she no longer stages homes that are occupied, only homes that are vacant. Also, in each home she stages, she posts a sign asking people to be safety minded and not to touch items during their tour.

Another important part of her business is DIY staging. Here, she tours a home with a seller and makes staging suggestions using their own furniture and décor items. Only now, she tours homes virtually via Facetime, and either the seller or agent uses their smartphone to walk her through each room. It’s not an ideal way to see a home, she admits, but says a good Realtors can help fill in the gaps on things she can’t see.

At the end of a job, after de-staging a home, she lets items sit in the warehouse for a day or so before disinfecting them.

SUMMARY

So, the long and short of it is, yes, the real estate industry is open for business! If you’re interested in buying or selling a home, with a little flexibility, we can make it happen. As always, if you have any questions, feel free to give me a call.

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