The situation with COVID-19 is changing each day in both the USA and other countries around the world. The coronavirus has cast a dim shadow over the world’s economy, affecting virtually every industry. Because the nature of your work as a real estate professional requires you to have a lot of human contact, the virus poses significant challenges and risks to your business. And with the rising number of cases, combined with an increasing reluctance of people to venture out of isolation, it’s expected to get worse before it gets better.
Here are some tips to manage the impacts in these uncertain conditions.
Be Prepared to Adapt How You Sell to Survive
So far there has been little effect on the real estate market in terms of market strength. But real estate professionals should expect a slowdown, as the number of cases of COVID-19 rises and people step back from pursuits that are considered “non-essential” in times of crisis.
Looking back at the impact of the virus on the Chinese property market gives some insight into what the United States can expect. Their commercial real estate sector was hardest hit at the height of the crisis, as retailers, tourism and hospitality-related businesses were forced to close their doors when residents were asked to self-isolate.
The uncertainty we currently face in the real estate market here in the United States is unprecedented. Inventory could slow, with fewer people placing their house on the market. We could see steep decreases in buyers, because many people are now worried about job security and the impact of quarantine requirements if they or a family member become infected with the virus. Additionally, school closures are causing stress around childcare arrangements. The government’s new emergency relief package to introduce paid sick leave to workers will not apply to everyone in the workforce.
Recent interest rate cuts should certainly help the market, yet there is no indication right now as to when this pandemic will be over. You must start to plan how to adapt how you sell now — in order to cope with this potentially volatile and changing market.
Selling Activities: Use Virtual Tours
One way to adapt to changing market conditions is to increase your use of virtual tours instead of traditional open houses. COVID-19 is causing some reluctance among sellers to allow prospects into their homes for viewings, due to risk of transmission of the virus. Likewise, many prospects looking for a home are reluctant to attend non-essential events or meetings at this uncertain time. Some potential buyers are also finding they need to prioritize their affairs, as they now face other challenges such as unemployment/underemployment or job uncertainty.
Virtual tours are a highly effective alternative to face-to-face meetings with prospects. They reduce the risks for both buyer and seller. Buyers can see the property’s features from the comfort of their own home on any device, while sellers needn’t worry about multiple strangers coming into their home on a regular basis.
If you do plan to sell through virtual tours, be sure to add to the contract that closing is contingent upon a final walk-through.
Mark Carlson, California Real Estate Attorney had these considerations for transactions that are moving into the contract stage:
“When a party is about to enter into a contract to purchase real property, thought must be given to COVID-19 and the potential impact upon performance of the contract. Lender’s ability to lend money could change in the weeks ahead. A buyer’s necessary cash to close could be impacted by a radical change in the stock markets. Infections of either party could impede the ability to sign documents required to close. When writing a contract, agents should discuss these matters and assure that appropriate contingencies are in place. The parties should seek legal advice to determine if COVID-19 impacts the transaction, do they want the ability to cancel or just to continue all deadlines until that impact subsides.
A party to a pending contract where contingencies have already been removed but who wants to cancel the transaction over COVID-19 concerns must identify either a contractual provision or law that excuses performance. The RPA-CA does not contain a term that expressly relates to illnesses or fear of illnesses of the buyer or seller. The RPA-CA does not contain a Force Majeure clause either. For example, in California the CA Civil Code Section 1511 allows for performance of a contract to be excused if such performance is prevented or delayed by “an irresistible or superhuman cause. The law is not clear whether COVID-19 is such a cause. However, even if it is considered to be such a cause, performance must be impossible, not just more difficult.
If a particular transaction is touched by the effects of COVID-19, agents should immediately recommend that the buyer and seller obtain legal advice. The situation is novel and constantly changing. Obtaining professional advice is the only way a buyer and seller can reduce the impact of COVID-19 on the significant investment of purchasing or selling real property.”
It is encouraged to check local state regulations and watch for local updates around real estate considerations. Additionally, buyers should remain in close contact with banks and lenders to ensure they plan for changes in lending and timing on loan funding.
Business Continuity Planning
Protecting your own health and that of your team (if you have one) is paramount in times like this. However, it’s necessary to plan for the worst and think carefully about what will happen to your business if you or your team are not available for a period of time. What will you do if you or your family contract COVID-19 and need to quarantine? What will you do if the pandemic goes on for months? What if you need to care for your children at home long-term while schools remain closed?
If you don’t already have a business continuity plan, now is a great time to establish one. This plan will help you visualize how your business can run without you or key staff, how challenges beyond your control can be managed, and how you can remain nimble to these external changes.
If possible, reduce the risks now rather than waiting for things to escalate. Can you and your team work remotely as much as possible? Can you introduce social and professional distancing measures? Can you explore virtual closing opportunities?
Implementing strategies today will help you to better manage COVID-19 and reduce the impact on your real estate business in the future.
Increase Hygiene in All Aspects of Business
Hygiene has never been so important. Step up your cleaning and hygiene practices to protect yourself and your clients. Consider the following strategies which can help:
- Have hand sanitizers available at open houses and inspections
- Encourage clients viewing a property not to touch surfaces such as drawers and cupboards
- Ramp up hand washing and ensure you wash your hands before and after every showing and meeting
- Avoid touching your face, because the virus can be transmitted from your hands to your mouth, nose or eyes
- Deep clean your office and don’t forget things such as light switches, benches, door handles and other surfaces. Clean your phones, computer keyboards, ipads, fax machines/printers, copiers, and any other devices regularly.
- Communicate with clients and prospects and encourage the cancellation of meetings if one party is unwell (or explore virtual options as an alternative)
Remain Flexible and Keep Informed
One of the most important things you can do at this time is remain flexible and keep informed about COVID-19 updates and developments. It’s essential that you keep on top of changes which could further impact your real estate business.
The Centers for Disease Control and Prevention is currently providing daily updates weekdays about the virus. News reports are also coming out frequently each day about statistics, government directives and other issues relating to the coronavirus.
If You Need Help
When in doubt about how to handle a disclosure or contingency, CRES customers can contact our ClaimPrevent® Legal Hotline to consult with a fully qualified real estate attorney. Our legal advisory service is available 7 days a week.
Not a CRES customer? Contact us at 800-880-2747 for a confidential discussion to explore how you can benefit from CRES E&O + ClaimPrevent® and protect your real estate business. Our friendly team can customize an insurance solution to suit your specific needs.