At the beginning of March, all indications seemed to be that the spring real estate market would be incredibly strong. The housing market activity kicked off early with many new listings by the end of January. However, as each day of March passed, news of the coronavirus global pandemic seemed to worsen, and understandably, the real estate market did too.
According to realtor.com, the week ending March 28, showed a 34% decline in newly listed properties relative to the prior year. The week ending March 21, showed a 13% decline. Concerned that there would be too few buyers in the market, some home sellers decided not to list. Others that had listed their homes canceled their listings, preferring to wait until market conditions stabilized.
With the home selling process upended, a new real estate market trend has emerged: the coronavirus clause. Here’s what you need to know.
What’s changed in the real estate market due to the coronavirus
1. Open houses have gone virtual
Homebuyers are used to perusing photos and videos of properties online. In fact, according to the National Association of Realtors, potential homebuyers look online throughout the homebuying process. At the start of their search, 44% of all buyers check the Internet and look for properties. As it turns out, taking open houses virtual due to social distancing restrictions was a natural extension for most real estate agents. Because NJ Executive Order 107 prohibits open houses outright, virtual open houses are now the new normal.
Whether it’s via Facebook Live, FaceTime, IGTV, or cellphone video uploaded to websites or YouTube channels, realtors are doing virtual open houses to ensure potential homebuyers can get a detailed look at the interior and exterior of a home. Serious buyers can still physically walk through a house one-on-one with an agent.
2. Municipal offices are closed and inspection procedures modified
As part of the home sale process, homeowners must get a Fire Certificate or Certificate of Smoke Detector, Carbon Monoxide Alarm and Fire Extinguisher Compliance, which requires an inspection by the town. For new construction, a Certificate of Occupancy is required, also issued by the town. In some municipalities, many inspectors are performing their roles solo and requesting that the homeowners not be present. In some towns, requirements for the Fire Certificate and Certificate of Occupancy have simply been waived.
The New Jersey Department of Community Affairs Division of Fire Safety has issued further guidance, “…in lieu of inspection, a certification that one or more smoke alarms and carbon monoxide alarms, as applicable, have been installed and tested in accordance with N.J.A.C. 5:70-4.19,” is acceptable. However, waivers and affidavits do not necessarily benefit homebuyers who may prefer to have physical inspections.
3. The notary process is still in person but may change
- have personal knowledge of the individual along with proof of ID
- reasonably confirm that the two parties have the same document in front of them
- keep an audio and visual recording of the procedure
Should this bill go through, the notarial process could go virtual along with so many other aspects of the home buying process.
4. Buyers are adding coronavirus clauses to contracts
In the current real estate environment, many factors may delay a timely closing, including the ability to get a mortgage, title, notarized document, home appraisal, or timely home inspection. As a result, homebuyers are adding coronavirus clauses to contracts that permit them to postpone a closing or cancel the contract without penalty if the delay is due to circumstances related to COVID-19.
Coronavirus clauses specify that the ability to delay a closing is permissible due to the current health crisis, so there is no debate as to whether the circumstances surrounding coronavirus fall under more pedestrian contract clauses such as “acts of God.” Coronavirus clauses typically protect a buyer from losing their initial deposit should the transaction fall through due to COVID-19 related events.
Despite the complexities of the current real estate market due to COVID-19, buyers are still purchasing homes, and sellers are selling them. If you have an immediate housing need, I would love to assist you and answer your questions. Contact Victoria Carter at (973) 220-3050 or email email@example.com. My team looks forward to seeing everyone in person when we get to the other side of this crisis, and until then, stay safe.