Note: FSBO market time now 70+ days, broker assisted 14 days.
Post-COVID society has changed the rules across the board when it comes to listing real estate. It should be no surprise that the impact of the virus as well as the face to face impacts have hit the real estate market hard.
Or has it?
It has hit extremely hard if you are selling your home for sale by owner. As the stay at home order locked potential buyers in. The reason is the world in as less than 3 months changed from a phone call to schedule in person showings to 100% no visit virtual tours. During the shutdown, homes were still selling like hotcakes, but not a soul visited the properties. Check your email, that document will require your electronic signature versus your pen-in-hand signature.
As states reopen for business in stages, every industry wants priority. One approach is to prioritize those that can best jump-start local economies, such as businesses involved with residential real estate. Home sales have a ripple effect, leading to more work for contractors doing renovations and for local retailers, whether they sell mattresses, furniture, or appliances.
But, even in stages, brokers will not send buyers the way if the FSBO owner due to the possibility of contracting the virus. Either the brokers themselves or their buyers. In fact some attorneys will not allow them to close without seller inspections and surveys of the property for sale.
Some states have put into their rules:
- Any showings, inspections, appraisals, photography or videography, or final walk-throughs must be performed by appointment and must be limited to no more than four people on the premises at any one time. (Including the owners)
- No in-person open houses are permitted.
- Private showings may only be arranged for owner-occupied homes, vacant homes, vacant land, commercial property, and industrial property.
The Orders do not specifically address a For Sale By Owner (FSBO) situation where someone is selling their home without a broker. But the gotcha is that with various stay-at-home orders and the different severities across the State, any place with gatherings of any number of people, not part of a single household (not living at the home) could be a misdemeanor. This would seem to broadly limit, if not prohibit, FSBO showings.
Even when states had not designed real estate brokerage activities as an essential service, agents were still helping their clients while following stay-at-home orders.
The North Carolina REALTORS put guidance for brokers in how to show vacant homes but tended to stay on the side of caution with showing occupied homes as little as possible. In some cases having the owners taking the photographs until a professional could be scheduled. The COVID Crisis left FSBO without a way to show their homes – as brokers will play it safe for several years post-COVID.
At the same time, everyone needs to adhere to the physical distancing measures recommended by the Centers for Disease Control and Prevention (CDC) in addition to any applicable state and local health-related restrictions. Six Feet apart, wear a mask, sanitize surfaces, barrier methods of contact.
But how can you sell your house?
Over the past few years, even before the coronavirus, real estate brokers have increasingly been integrating the use of technological tools into the sale of homes. Examples include:
- On-line listings
- Virtual presentations for attracting prospective clients, such as for new listings
- Remote virtual tours
- Direct interaction using 2-way real-time audiovisual technology, such as Zoom, Skype, and FaceTime
- Electronic execution and delivery of documents
Many brokers were able to apply these tools to facilitate transactions after social distancing rules went into effect. In fact online companies are coming back with their ibuyer and iflipper services.
Companies like Zillow buy your house for substantially less, do these same items broker performs, then upcharges over $25,000 on average to new buyers. On a $250,000 house, you gave up over 10% of your in-pocket profit because you didn’t want to spend 6% on a broker commission.
Not convinced? Now that we have a couple of years in this Guaranteed Offer system – let’s recap what they do.
- They purchase a house for less than market value.
- They charge 5-10% to you to pay brokers, and agents.
- They will renegotiate their offer after inspections.
- If you don’t play their game, they will walk away at any time.
So your $250,000 home may get an offer for $199,000 and after the inspections are done and they determine it needs a roof and repairs, they may come back and offer $179.000 and then deduct 10% additional for a broker to do the paperwork.
The coronavirus pandemic has created many new legal risks for home sellers and real estate brokers. The risks vary depending on whether or not the home is under a purchase contract.
It has also created plenty of SCAMS. Title Scams, Mortgage Default Scams, Payment Scams – you name it – there are plenty of actors out there after money. And as always one SCAM is to come to your home, case it for money, drugs and guns, and when you go to the store – they break in.
Sellers with a signed purchase agreement run an increased risk that they may not be able to complete their home sale transaction due to buyer default for reasons including:
- The buyer may not have sufficient time to satisfy their lender’s financing requirements
- The buyer may have lost their job due to the pandemic
- Lender guideline changes based on credit scores leading to denial of mortgage
- The buyer may have suffered a steep decline in net worth due to the recent sharp decline in the stock market
- The house might not appraise for the purchase price value depending upon how the real estate market reacts to the ongoing crisis
Any of these types of unanticipated factors may cause the buyer to default, leading to: (A) home sellers being unable to close the sale of their home; and (B) brokers being unable to collect their sales commissions.
Home sellers and real estate brokers also run the risk that they may not be able to complete their home sale transaction due to seller default if the seller refuses to permit an inspector or appraiser to enter their home due to coronavirus-safety-related concerns.
For home sellers where a home listed for sale is not yet under contract, a challenge may arise when a seller refuses to permit the home to be shown to potential buyers due to coronavirus-related safety concerns. Open houses are no longer an option. It would be extremely challenging for a listing agent to effectively screen potential buyers for the coronavirus prior to permitting them to enter a seller’s home for a showing, a risk that doesn’t change with the new rules.
At a minimum, showings could be limited to pre-qualified. buyers. Additional protection would be provided if buyers were required to wash their hands with soap and water or use a hand sanitizer, remove or cover their shoes before entering the house, wear a face covering when inside the home, and not touch any objects during the showing.
At maximum, contact Matt Price from Smith Group Realty to walk you through options.