Buying and Selling a Home During the Coronavirus Pandemic
If you’re anything like the average American, you’re settled in at home and are practicing social distancing by working remotely. If you’ve lost your job or been furloughed, it’s an especially difficult time, even if everyone around you remains healthy.
For many Americans, Spring 2020 was the calendar date for buying a first home or buying a forever home. As often happens in a robust economy, the housing market seemed strong at the start of year -- and then came the face masks and the relay races down the grocery aisles.
On March 3, mortgage rates hit an all-time low, which would normally boost home sales. However, low mortgage rates as an incentive may not put people’s minds to rest about the long-term impact the coronavirus may have on the real estate market. This uncertainty is slowing down sales and purchases of homes.
Some economists are predicting that, like the housing boom of 2009 (a year after its collapse in 2008), smart buyers will continue to take advantage of the situation and invest heavily in real estate. They think that interest rates will continue to drop along with the stock market, causing investors to pull out of the stock market altogether and put their money in the relatively safe real estate market. Others fear that the aforementioned real estate boon will be short lived because we are only in the initial phases of the coronavirus crisis. Whether or not potential buyers will shift their priorities is yet unknown.
In short, everything is uncertain. However, homes are still being bought and sold, so if you’re committed, hang in there. We have some frequently asked questions about buying and selling a home during the coronavirus crisis below.
Should I Be Concerned About Coronavirus if I’m Selling My Home?
Generally speaking, it’s currently a buyers market and the coronavirus has made it even more so by dropping the 10-year treasury to the lowest level in history. Many sellers are selling their homes for less than they originally wanted or they are taking their homes off the market, hoping things will change. But the low prices are a benefit to some sellers at a time when there’s very little inventory.
It’s always a good idea to speak with a seasoned real estate agent if you’re considering selling a house. An agent will know better how the market is behaving in your area.
However, note that most lenders are preparing now for a U.S recession so they will be thorough in making lending decisions. With people facing layoffs, there’s risk of people not making mortgage payments. Already, banks and other lenders are looking to make payment holidays or mortgage modifications to keep people in their homes. Even though mortgage rates are low, lenders are raising them back up slowly, for fear of losing liquidity.
How Do I Sell My House with the Quarantine in Place?
First, make sure your home is insured, even if it’s not currently occupied. There’s always the chance that a prospective house buyer or agent may get injured while visiting the property. As someone who owns property, you should always be wary of lawsuits.
Second, you’ll need to find a good agent who is nimble enough to get offers on a home when many people are unwilling to go out and see property. Keeping purell in the landing won’t be enough. Currently, many agents, like those with Redfin, Re/Max, Douglas Elliman and other brokerage firms, have cancelled open houses because of the coronavirus. Redfin has even stopped making instant offers.
On the flip side of it, some very motivated buyers are buying homes unseen, often based on photos. Increasingly, realtors are turning to virtual tours. If you are selling your home but hesitant due to contagion, remember that this option is available. And yes, people are buying homes based on virtual tours. Let’s face it, 3-D tours are not a new trend at all, just not the one most people use as the first inspection.
Private in-person tours are still another viable option, perhaps when a buyer shows enough interest to warrant taking a risk.
Will Homes Sell at a Lower Price?
Yet another unknown, many economists are predicting that prices will not plummet the way they did in 2009 because, unlike the previous decade, there is now a housing shortage, with more buyers than there are reasonably priced homes. The only way prices will go that low again is if there is a prolonged recession and the economy doesn’t bounce back from the COVID-19 panic.
However, buyers have more room to negotiate for a better price because many people are hesitant to buy right now. Beware that closings will probably take longer than normal. Many people are also refinancing, to take advantage of the especially low mortgage interest rates, which will leave lenders inundated with paperwork.
If you have a good home that is priced reasonably, you can sell it. Do not take your property off the market. People do have more time to look right now. It just may be a slower process. Closings are the real challenge, with people needing to gather in one room while municipal buildings are closed. However, you can make it work.
Will I Have a Harder Time Buying a Home During the Coronavirus Pandemic?
Lenders are looking at the most qualified buyers with higher credit scores, stable incomes, lower debt and more savings.
If you’re one of the lucky ones and see the process through, make sure you don’t neglect home inspections and appraisals, which may be delayed but are as important to have done as ever. Some appraisers have canceled these services but many are still working through the crisis.
The one challenge you will find is low inventory. If you’re willing to deal with a slower close on a home and find the right one in the small mix, you may be able to haggle down the price.
Avoid backing out of deals because there is a very real financial cost to it, namely the appraisal cost and possibly attorney fees.
In some states, like Massachusetts, you may have to wait for weeks to close because laws about smoke detector certificates will be delayed due to worker shut downs. Other such technicalities may also delay a close. But, it’s still a great time to buy because of the low mortgage interest rates. Here's more on buying a home remotely.
Getting Insurance for a New Home
Whatever you do, do not let your lender choose a home insurance plan for you. Their priority is to protect their asset (the home technically belongs to them, not you, until you’ve paid it off). They will not be comparing prices for the best deal, which is something you should do. Getting a better price for home insurance doesn’t mean you’re buying inferior protection either. Let SmartFinancial help you find the right agent and the right homeowners insurance at the best price available. Their agents are working around the clock to keep you covered.
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Every year, thousands of Americans receive surprise letters notifying them that their carriers won't renew their homeowners insurance once their coverage expires. Insurers don't renew these policies for a variety of reasons.
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