Buying a home during the coronavirus pandemic might not seem ideal for many reasons. But you may not have a choice. And there may even be some advantages to buying now if you take the proper precautions. This article covers what it's like to buy a home during coronavirus lockdown. You'll learn how to complete the transaction safely while saving money.
What Is the Housing Market Like During Coronavirus?
According to the National Association of Realtors (NAR), March and April are the two months with the most real estate activity. More new listings hitting the market normally creates the most competition for buyers. "Effectively, this time of the year typically is the most competitive for housing as buyer interest peaks and sellers slowly follow suit," reports the NAR.
As March 2020 began, real estate markets looked poised to take off. For the week ending March 8, sales averaged 15% higher on average over the previous year. But that was then, and this is now. In the week ending April 5, 2020, new listings declined 31% from that week the previous year. Sellers are re-evaluating their decision to sell or are postponing their home sale. The NAR expects that home inventory will decline by double-digits as sellers pull listings.
While you as a buyer won't have as extensive a selection as you would in a normal year, there are advantages. You'll also have less competition. The Mortgage Bankers Association (MBA) reported that purchase mortgage application volume for the week of April 22, 2020, was 31% lower than that same week in 2019. And while home prices overall have not been falling, their upward trajectory has slowed from an annualized rate 4.4% in early March to 1.6% by early April.
Hands Off: How to Shop for a House Online
Technology has taken over a large part of the real estate transaction already. That's good; most of the steps in buying, financing and closing on a home purchase have both in-person options (driving around with your real estate agent and applying for your mortgage at your bank) and online alternatives (virtual tours and online mortgage shopping). So you can buy a home during coronavirus shelter-in-place and social distancing periods.
Previewing Neighborhoods
You can check out neighborhoods without violating "unnecessary trip" prohibitions many states have right now. These sites make it easy to get a look at demographics, schools, even street views.
- Median income, age, and rent (Open Census Data - use the map to zero in on a neighborhood)
- School quality (SchoolDigger.com)
- Neighborhood appearance, commute times and traffic (Google Maps with Street View)
- Crime statistics (Family Watchdog)
- Environmental concerns (MyEnvironment by the EPA)
- Climate comfort, unemployment, median income, median age, and median home selling price (Sperling's Best Places by zip code)
There are many other sites that offer specific lists, like best cities for landlords, beach bums, foodies, hikers, spectators sports, etc. You can usually find critical data and interesting facts like unemployment rates and local cost of living, too.
Checking Home Prices: What You See, What You Get
It's easy to find real estate listings online. Most large sites allow you to filter and view by price in a list or by location on a map. But while listed prices are important, actual sales prices matter. Are values overall increasing or decreasing? Trends are crucial, and your real estate agent should be able to get you recent sales data. You can also find it on your county assessor's site by searching homes in that neighborhood, or the county recorder's web site for recent sales.
Current listings are also useful, however. Which home features are in demand, and what's become less desirable? How long do properties stay on the market (average marketing time in days)?
Note: some real estate property pages have a "Contact Agent" link you can click to (supposedly) get details about the property. However, unless that link says, "Contact Listing Agent" or something similar, you're likely to get someone (a lot of someones) who bought a lead from the site and know nothing about the property.
If you click and send a message, indicate that you only desire contact from the actual listing agent, and don't provide your phone number unless you want a great deal of useless attention. Better yet, find the listing agent's name and contact that person directly.
Virtual Touring
The COVID-19 outbreak may have changed the way we buy real estate forever. Fortunately, we've already been making great use of a strong tool -- the virtual tour. The difference now is that virtual tours have to do more than highlight the best points of a home to entice buyers. Potential purchasers want genuine previews showing all of the home's virtues and vices, and don't require professional lighting and fancy editing. They want a real look at the entire place -- closet by closet, bathroom by bathroom, all those "extra" or "boring" spaces that few professionally produced tours ever included.
Today's virtual tours are just as likely to be conducted by the buyer's agent. A complete walk-through with a cell phone video as the agent describes the home. The seller or listing agent may provide the same service -- the idea being to minimize the number of people trekking through homes that don't ultimately suit them.
"I always offer any client or agent a FaceTime walk through option. This comes in very handy. It's a great way for a client to get that much more familiar with the property," says Brendan Donovan, a sales agent at Berkshire Hathaway in Incline Village, NV. "Good bad or indifferent, the normal now is to only view a house you are really interested in after photo viewing and more often than not a video walk through."
Touring a Home In-Person
You'll probably want to personally tour the homes that make your short-list. But not everyone does -- according to a recent National Association of Realtors (NAR) survey, one in four homes change hands without the buyers setting foot in them. Currently, the NAR has suspended the practice of holding open houses in most locations and "discourages" the viewing of properties occupied by owners or renters. When buyers want to tour a home, agents and sellers can allow it at their discretion. They may ask buyers to complete a COVID-19 screening form before allowing entry.
The NAR notes that state and local guidelines (including whether real estate constitutes an "essential service") supersede its recommendations and can change at any time. Agents (often at the sellers' request) limit in-person showings to prequalified or preapproved buyers. They may even require you to make an offer (subject to the property meeting your approval when you view it in-person) before entering the home.
"I have a listing that is not rented nor is it owner occupied," says Donovan. He exercises caution even with unoccupied homes. "I have hand sanitizer, bleach wipes and booties at the front door. I will suit up between showings and wipe down ALL surface's that will get touched during a showing. This includes doorknobs, light switches, counter tops etc. It's time-consuming but necessary."
Safety First
You'll probably be asked to scrub up before touring a home in-person. You may need to remove your shoes and be given some sort of paper bootie. You may be offered gloves and required to wear a mask.
If you tour a home in person, avoid touching surfaces. Normally, real estate agents have the sellers leave before you arrive (that has always been standard practice). Wash or sanitize your hands before and after touring, avoid touching your face, and if you have to sneeze, do it into your bent elbow and not on a home surface or into the air. Do not use the toilets in a home when you tour it.
Making Offers and Counteroffers
Submitting offers and counteroffers does not require personal contact with home sellers or their agents. The entire process can be managed online thanks to services like DocuSign, which authenticate participants and create e-signatures that are legal and binding.
However, most offers are subject to home inspections and appraisals. Luckily, many mortgage lenders have somewhat relaxed the home appraisal process, often allowing "desk" or "drive-by" appraisals. This is more likely in neighborhoods like tracts with similar homes. Or when the down payment is sufficient to cushion against small errors. If a property is unique or the down payment is small, expect to pay for a full in-person appraisal.
It is customary for offers to allow a final "walk-through" by the buyers or their representative before signing closing documents. You may decide to skip it or have someone do it for you. This is the time when buyers might normally check that the water faucets work, that they can plug in a hair dryer without blowing a circuit, and that the appliances work. An alternative to doing this is to request for a home warranty from the seller or buy one yourself. They cost a few hundred dollars and cover many appliances and systems.
Mortgage During Coronavirus
The mortgage process has been largely automated for years. It's easy to review your credit report, proactively correct any errors and do what you can to boost your score online. But avoid coronavirus scammers who solicit you with too good to be true deals and entice you to give them personal information. Don't respond to emails or ads from providers who don't have a license in your state. You can verify their licenses and disciplinary actions here at the Nationwide Multistate Licensing System (NMLS) web site.
It's easy to shop for a mortgage online. Lenders like the partners on this site are prepared to supply you with real-time mortgage quotes that you can compare. To secure a prequalification or mortgage preapproval, all you may have to do is authorize a credit report, complete an application, and upload some documents verifying your income, assets, address and identity. Most lenders have chat or phone assistance and many employ processors who can go through the application with you by phone and complete it as you answer the questions.
Mortgage Preapproval and Prequalification
Mortgage prequalification (or better, preapproval) is more important today than it was even a couple of months ago. Guidelines have become much tougher for some lenders because of the pandemic and economic insecurity. One national lender used to require three months of reserves. "Reserves" means emergency savings you can use for mortgage payments if you lose your income. That lender's minimum just increased from three months to 24 months!
Many conventional (non-government) lenders require 20% down these days because mortgage insurance is difficult to obtain in some markets. And you might also need a 700 FICO score. However, other lenders have announced that they are trying to support their communities and have relaxed some guidelines. So here's what it means to you:
- You'll have to contact more lenders to find the ones who want borrowers with your profile
- You'll need to compare more offers to find the best deal for which you qualify
- You may need a higher down payment, more savings, or less ambitious plans for your home
Finally, mortgage preapproval is so important because many sellers don't want unqualified people tromping through their homes right now. Often, they want a preapproval on the table or even an offer (subject to your approval of the home once you see it in person) before you can come in. This has always been customary for homes with tenants -- you need an offer before the owner will disturb the tenant. So it's nothing to worry about but you'll need more preparation before shopping.
Appraisals and Inspections
Most lenders and agencies backing lenders have reduced appraisal requirements. Per the NAR:
"FHFA has directed Fannie Mae and Freddie Mac to utilize appraisal alternatives to reduce the need for appraisers to conduct interior property inspections for eligible mortgages through May 17, 2020. Fannie Mae and Freddie Mac have provided detailed appraisal alternative guidance, including directions on using desktop appraisals and exterior-inspection only appraisals with specific language that appraisers are to use in their reports.
"FHA is also allowing desktop and exterior only appraisals, as well as VA with enhanced assignment conditions or in limited instances, a Desktop appraisal to complete the VA loan requirements in light of the COVID-19 crisis. The Rural Housing Service of the USDA is also allowing exterior-only appraisals."
Home inspectors are gearing up with protective clothing before entering. While normally buyers and sellers have the option of accompanying the inspector, today they are being asked to stay away or at least keep their distance from the inspector. Results and repair lists are delivered electronically to all parties.
Closing Online
Most real estate closings are occurring outside of title and escrow offices, says Andy Tourin, President of First Centennial Title Company in Reno, NV. "All title and escrow companies have instituted various temporary signing procedures to comply with federal, state, and local mandates, as well as company HR practices," Tourin said. "Very few buyers are signing closing papers in the title office at this time. Most signings are accomplished using either a mobile notary, DocuSign, Remote Online Notarization, or a combination thereof."
However, not all states allow Remote Online Notarization (RON). Currently, the 23 states that have enacted some form of RON law are Arizona, Florida, Idaho, Indiana, Iowa, Kentucky, Maryland, Michigan, Minnesota, Montana, Nebraska, Nevada, North Dakota, Ohio, Oklahoma, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington and Wisconsin.
Closing In-Person
Your options for closing depend on where you live. It's a good idea to get a copy of your closing documents a few days before closing so you can review them without the stress of being in an office.
"There are occasional parties that are in circumstances where they are forced to come to the office to be notarized," explains Tourin. "Prior to this visit, we encourage everyone to thoroughly read and understand their closing documents, and initial as many as possible through DocuSign, so that these visits can be kept as short as possible.
"Many companies have created 'drive through lanes' so that a buyer can be notarized without leaving their car. Other title and escrow companies have created secure, secluded areas for notarizations. Any visit to the escrow office will require the use of masks, gloves, proper distancing, and the exchange of Health Screening Questionnaires which assure each party attending the signing as to the other party's current health condition. Again, going through the closing documents with their Realtor and lender prior to signing, and just utilizing the notary for the few 'wet' signatures required by the lender is the new normal process," Tourin said.
Moving in Safely
Moving has never been fun, but the pandemic has added a few twists:
- Make sure that your building or association allows moving at this time. The federal government considers moving an essential activity, but in hard-hit areas, residents have passed other measures temporarily halting the practice
- Travel by car, not air
- Consider "contactless moving" in which you pack up and leave, and the movers come in later and transport your things. Because the virus lives only a few hours or days in most conditions, this is one way of minimizing exposure. PODS is a familiar service that has always offered this -- you load your container over time and can use it for storage on either end of the journey, offering flexibility
- However, the movers themselves may be contacting viruses in the outside world. Ask about the company's sanitation process in the truck before and after the move and if they check their employees for illness
- Ask about cancellation, schedule changes and refund policies
Companies are getting creative and using video to check the home, provide estimates online and transmit instructions and the status of the move. They may video the unloading as well. If possible, one way to minimize your exposure to coronavirus is to wait several days after the previous occupants leave and your belongings have arrived to begin living in the home. Again, the short lifespan of coronavirus is in your favor if you can plan your move this way. Practice a lot of hand washing and good hygiene as always.
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