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May 14, 2020All the Details about Buying and Selling a Home in this Pandemic
OUR MOST BURNING QUESTIONS
1:Is now a good time to buy?
Every person who dreams of owning a home has to answer that question individually based on a variety of factors — ranging from their personal financial picture to what’s available in their market to how long they plan to stay in one place.
While searching for and buying a home during the COVID-19 pandemic presents some challenges, with mortgage interest rates at an all-time low, for some it may be an ideal time to buy. Thankfully, the real estate industry has quickly adapted to the current circumstances and is leveraging technology that allows buyers to continue their home search virtually and close transactions using safety precautions or remote online notarization.
One of the biggest challenges buyers have faced in the last several years is a shortage of inventory. With the health crisis and stay-at-home orders, some sellers have pulled out of the market or delayed listing their properties, which only exacerbates the inventory challenge.
If you are a buyer in today’s marketplace, make sure you’re working with a Realtor®, a member of the National Association of REALTORS®. Realtors® understand the local market and can help guide you through today’s unique challenges, leveraging creative solutions to help make your dream of homeownership a reality. Kirsten and Colleen are both members of the National Association of Realtors!
2: Is now a good time to refinance?
Historical data, going back 50 years, shows that mortgage interest rates have never been lower. So, it sure sounds like a good time to consider refinancing, but this is a question to discuss with a lender or qualified financial planner.
If you do decide to refinance, be prepared: Lenders I’ve talked to are managing a high volume of applications, so you’ll need patience — along with outstanding credit. More than 2 million borrowers have sought forbearance on their mortgage payments as a result of the current situation. Some lenders have responded by tightening credit standards, including raising minimum credit scores. So make sure your financial house is in order, you’re continuing to pay bills on time, and you’re keeping debt manageable.
3: What is the best place to find information about how COVID-19 is affecting the home-buying process in my area?
Contact a Realtor®, a member of the National Association of REALTORS®. Realtors® can provide insights into how your local market is affected by COVID-19 and can help you understand how stay-at home orders, and other local, state and federal government actions and recommendations, are impacting the home-buying process.
4: Is it currently more of a buyer’s or seller’s market? Is COVID-19 shifting these?
Every market is different, so it’s a good idea to talk with a Realtor® to learn what’s going on in your area.
That said, in the past few years, many areas have been experiencing inventory shortages, in part due to insufficient home building and increased tenure in home. On a national basis, a thriving economy combined with low interest rates and limited inventory have led to 97 straight months of home price increases. Generally, low inventory and increasing prices indicate a seller’s market, but historic low interest rates have helped keep homes affordable for buyers in most markets (with notable exceptions, like San Francisco).
NAR data shows Realtors® are experiencing significant slowdowns in their business as a result of COVID-19, but that hasn’t necessarily shifted the market to a buyer’s market. In fact, the national median existing-home price for all housing types in March was $280,600, up 8% from March 2019.
5: Would it be better to wait longer to see if prices will drop before purchasing?
It’s difficult to predict what will happen in the future. One thing that’s certain is that building equity in a home over time is one of the best contributors to long-term financial security. Talk with a Realtor® — along with a local mortgage lender and financial planner — to determine the right time for you to buy.
6: What about “bubbles”? Are they going to burst now?
In 2008, when the subprime mortgage bubble burst, it sent property values down in most parts of the country. Values took several years to recover, but they did recover. Economists say we’re dealing with very different circumstances today as a result of the strong economy that was in place when the pandemic hit. The COVID-19 pandemic will have a significant impact, according to NAR’s Chief Economist Lawrence Yun, but when social distancing is lifted and there’s an end to the pandemic, businesses will rehire, and the economy will rebound with pent-up demand for everything from hair salons to restaurants to housing.
7: With uncertainty in the job market, is it a bad idea to put so much cash into a down payment?
That’s an individual decision. A qualified financial planner can help you decide what’s right for you.
8: How will the housing market/property value in major cities be affected by COVID-19?
It’s difficult to predict whether there will be any long-term effects on major cities’ housing markets due to COVID-19. Some prognosticators have suggested that people will be drawn to lower-density suburbs and smaller cities. Others have said public transportation will become less popular. But it’s too soon to say whether these predictions have a basis in reality. Once the pandemic is over, major cities will still offer advantages that are likely to continue to attract people, including cultural attractions, major sporting events, and educational and job opportunities.
9: I’ve heard that mortgage payments can be deferred due to COVID-19. Is that true, and if so, how can I find out if I’m eligible?
If you’ve experienced a loss of income as a result of COVID-19, talk to your mortgage servicer (the company to whom you send your mortgage payment each month) to see if you’re eligible for forbearance or a deferment. Here’s an explanation, from realtor.com, of the difference.
While it sounds tempting to get a break from paying your loan, it’s important to recognize that neither forbearance nor deferment equals forgiveness of the loan. Your lender will Iikely expect you to make up all the payments, either all at once at the end of the forbearance period or by tacking the payments on to the end of your loan.
The most important thing you can do is to call your lender as soon as you realize you’ll have trouble making a payment. Don’t just stop paying. Otherwise you may give up the relief lenders are offering borrowers during this crisis, like waiving late fees.
Finally, if you’ve heard anyone pushing forbearance as a strategy — “get a mortgage and you don’t have to pay for the first three months” — walk away. It doesn’t accurately represent the purpose or consequences of forbearance. Forbearance should be a last-resort option when you have no other way to make your mortgage payment.
10: I’ve heard mortgage rates are low. Does that make it harder to get approved for a mortgage? Have lending requirements changed due to the uncertain market?
Interest rates don’t inherently affect your ability to get a mortgage. Lenders look at your credit history, your ability to pay, and the appraised value of the property. If anything, when rates go down, it improves your buying power. Check out HouseLogic’s step-by-step guide to buying a home and the Consumer Financial Protection Bureau’s tools for homebuyers to learn more.
Lending requirements have changed as a result of the COVID-19 pandemic. Some lenders have announced they’re requiring credit scores above 700 and 20% down payments. By comparison, in 2019, the median down payment was 12% for all buyers, 6% for first buyers, and 16% for repeat buyers, according to a research report recently released by the National Association of REALTORS®. However, lenders aren’t uniform in their requirements, so talk with several lenders — or connect with an experienced mortgage broker, who can provide a range of options.
Good news: Credit reporting agencies Transunion, Equifax, and Experian are currently offering free credit reports each week to help you keep tabs on your credit score and correct any misinformation.
11: Before COVID-19, I heard wire fraud was an issue for sellers and buyers to be aware of. Has that changed?
Great question. Electronic money transfers are a huge convenience, but it is important to be aware of the wire fraud scams in the real estate closing process. These scams, often perpetrated by cyber criminals sending fake wire instructions through email, have caused buyers to unknowingly transfer large sums of money to cyber criminals.
The National Association of REALTORS® offers a handy, downloadable guide on how to avoid wire fraud and what to do if you suspect fraud. The most important step you must take: Whenever you receive wire instructions, always verify the instructions by speaking with a trusted source before sending any money. And, don’t use the phone number provided in an email to verify the wire instructions, or you may unwittingly end up verifying the fake wire instructions with the cyber criminals.
12: Are new protocols due to COVID-19 adding any extra costs I should budget for?
Additional costs in the purchase or sale of real estate might include the cost of temporary shelter in the event of a delayed closing or the cost of deep cleaning. I haven’t heard of any changes in typical transaction costs.
13: I’ve heard that banks are swamped with applications to refinance. How does that affect my mortgage application to purchase? How can I prevent myself from getting lost in the shuffle?
It’s true that mortgage refinancing has soared in 2020, as owners look to take advantage of the lowest rates in 50 years to save money on their monthly payment or pull out equity. The volume of applications may indeed cause a slowdown in the process.
Federal regulators have given lenders the go-ahead to provide temporary flexibility in the appraisal process to try to keep loans in the pipeline moving. In some cases, a lender that’s planning to keep a loan in its own portfolio (rather than selling the loan in the secondary market) might even be willing to defer an appraisal until after the closing.
Your best bet is to have all your paperwork in order — you may receive several requests throughout the process to verify your income or other information — and work with a mortgage lender or broker you trust, who can help keep your refi application on track.
14: Are new safety precautions being implemented in the home-buying process in light of COVID-19?
Yes. State and local executive orders issued across the country dictate whether and how real estate services may continue to be provided during this time. Some orders permit in-person services to be provided, while others allow virtual only or require certain precautions be taken. Even where such executive orders permit real estate services to be provided, the National Association of REALTORS® strongly encourages Realtors® to use virtual showings and to limit in-person activity in all other aspects of the transaction as much as possible during this crisis.
When real estate services are conducted in-person, Realtors® are implementing recommendations from the Centers for Disease Control and Prevention to keep themselves and their clients and customers safe, such as enforcing social distancing measures, requiring clients to wash their hands or use hand sanitizer before viewing a property, removing shoes or wearing booties, and covering their face with a face mask.
In addition, a growing number of buyers are relying on virtual tours and making offers on properties without a physical tour, according to surveys that NAR is conducting each week to gauge the pandemic’s impact on real estate.
Online closings are also becoming more common. Twenty-three states currently have remote online notarization laws, which make it possible for parties to complete the transaction entirely online. The National Association of REALTORS® and other industry groups are advocating for a federal law that would allow nationwide use of RON. The Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020 (“SECURE”) was introduced in the U.S. Senate in March.
15: What’s the best platform for finding a Realtor® right now so meeting in person may be avoided?
Whether you’re buying or selling, it’s a good idea to take two approaches: seek personal recommendations and use the Internet to find agents with a professional online presence.
A personal recommendation can be a great way to find an agent who goes above and beyond, but the internet also provides a great deal of information about potential agents. Kirsten and Colleen are both Realtors®, members of the National Association of REALTORS®, who serve your area. Once you’ve selected us as to handle your real estate needs, you can review our personal or company websites to get a feel for our style and experience.
When you’re ready to talk, reach out. We’re here! Good luck!
16: How am I able to view a property in person while social distancing?
Realtors® around the country are implementing safe practices to allow buyers to see properties. Many are offering detailed virtual showings, virtual tours, and virtual open houses. Where in-person showings are permitted, Realtors® are taking many precautions, including:
• Having sellers turn on all lights and open all doors and windows before the showing.
• Having buyers remove their shoes before entering the house.
• Having all parties at the showing observe social distancing (keeping at least six feet apart) and wear gloves and masks during showings.
• Disinfecting high-touch areas before and after showings.
Talk to your agent about virtual tour options and the precautions they are taking if you are going to any in-person showings to ensure you’re comfortable with the preparation.
17: Are home inspectors and appraisers able to provide their services at this time?
It depends on the language of the state’s executive order, and whether home inspectors and appraisers are considered essential services that may continue to be provided while the order is in place.
Even though sellers in most states provide a property condition disclosure, a whole-house inspection is an important step that gives you peace of mind. Occasionally, sellers conduct a pre-sale inspection, so they know what repairs are needed before they put the house on the market. That’s a great selling point and may offer some items for bargaining, but buyers should still hire their own inspector. Ask inspectors what steps they’ve put in place to ensure COVID-19 safety.
Before you can get a mortgage loan, an appraisal is typically required. Federal regulators have relaxed appraisal requirements — allowing “desk appraisals” or “drive-by appraisals” for so-called conforming loans (those that will be purchased and sold in the secondary market), but not all lenders are relaxing standards. That’s because if they sell a loan, they’re on the hook if the borrower doesn’t perform.
Like inspectors, appraisers who are working today should be putting COVID-19-safe practices in place, like asking sellers to open all doors and windows and turn on all lights, enabling them to walk through the house without touching anything.
18: Loan applications are traditionally very paper-heavy. Is that still the case?
There are a lot of papers to be signed when you close a loan. The Consumer Financial Protection Bureau, a federal government agency that’s dedicated to making sure you’re treated fairly by financial institutions, offers a homebuying guide that includes information on loan choices as well as a closing checklist.
19: Does a closing need to happen in person or can they be done digitally now?
It depends on your state’s laws and regulations and the practices of the lender and title company closing your loan. All states allow electronic signatures today, and more and more are adopting remote online notarization, enabling transactions to be closed online.
Even where digital closings aren’t possible, many title companies are adapting by conducting “drive-through closings” or making house calls where both parties wear gloves and masks and bring their own pens.
20: How does a virtual closing work? Don’t some documents still need to be signed originals?
All states allow electronic signatures today, and more and more are adopting remote online notarization, which theoretically would enable the entire transaction to be closed remotely using a secure online platform. However, many lenders may still require a wet signature on some documents. Talk with your real estate agent and lender to find out about the law and practices in your state.
21: Are there any special considerations I should keep in mind surrounding COVID-19 before submitting a purchase agreement?
Yes. Borrowers are using addendums to proactively address common issues related to COVID-19. Be sure to speak to your legal counsel to review the purchase agreement and to make sure your transaction Is properly protected in relation to these potential issues. Some states require an attorney review; others, like California, do not.
22: When should I start talking to a Realtor® if I want to buy a house in the next 12 months?
Websites like ours make it easy to search for a home online before selecting us as your agents. However, the purchase of a home is infrequent and complex — and even if you’ve done it before, the process and the market are always changing. So we recommend you consult us early in the process. That way, when you find the right home, you’ll be ready to make an offer. And, of course, as Realtors, we operate by a strict Code of Ethics.
