You made an offer on the house of your dreams, which the seller accepted … but things have changed since then. Namely, you’re under “shelter-in-place” orders for your state because of the COVID-19 threat. So what does that mean for your real estate closing?
Source: (Lukas / Pexels)First: Do some research
Before making assumptions about how COVID-19 will impact your closing, do some research. Look up the current status in your state or city — if there are shelter-in-place orders, or if the state calls real estate an essential service.
If your state deems that real estate is an essential service, closings will continue, but the title and escrow company will take certain precautions. Either all parties will sign documents in separate rooms, or if your state allows online notarization, you could be able to close entirely online. These details are going to affect how you can and should deal with the rest of the closing process.
Now, more than ever, you’ll need a qualified agent on your side. With weekly — sometimes daily — changes to the situation, they can stay on top of it for you.
COVID-19 addenda and delays
Many state’s Realtor associations have distributed a standard COVID-19 addendum for buyers and sellers. Justin Woodall, an agent in Georgia who’s worked with 87% more single-family homes than the average agent in Athens, says that his state’s addendum “defines a COVID-19 related event, and in the event that the closing cannot occur when scheduled due to an event, the affected party shall notify the other party of the event and its resolution.”
If you haven’t already, strongly consider adding a coronavirus addendum to your existing contract. Even if you’ve already signed a purchase agreement, it can be changed with an addendum.
Kelly Warren, Esq., a real estate and family law attorney at the firm of Willenbring, Dahl, Wocken, and Zimmermann, PLLC, explains that “a contract for the sale of real estate can always be changed by the mutual written agreement of the parties.”
Suggest attaching an addendum to your existing contract to deal with possible closing delays due to issues that could arise from the pandemic. The addendum could extend the time to close, contain contingencies that address what would happen if any of the parties get sick, or provide alternatives for each stage of the closing process.
Inspectors may not be able to inspect a home depending on what the rules are in your state; a home inspection always requires an in-person visit. An appraiser could struggle to obtain an accurate value, particularly if the market has slowed down significantly or the home you’re buying has unusual features. If there is a shortage of staff at the county recorder’s office or title company, it could delay title research.
In some cities, condominium boards have passed provisions prohibiting people from moving in or out during the pandemic. They want to limit the possibility that a new tenant could bring the virus with them. Since neither party — buyer or seller — wants to end up homeless, if you’re buying a condo, see what provisions can be put in place.
Amending purchase agreements to address COVID-19 protects both the seller and buyer from the unexpected during these uncertain times.
Source: (La Miko / Pexels)Inspections
In states with stay-at-home orders, if real estate is considered a nonessential service, you won’t be able to get a home inspection. They have to be done in-person by a licensed inspector, and virtual inspections aren’t allowed.
If an in-person inspection does happen, it still won’t be business as usual. Right now, in Minnesota, agent Jason Gorman says that neither agents nor buyers are necessarily attending inspections. They’re using tools like Zoom to attend the inspection or review the findings after-the-fact virtually.
In other states, though, sellers might be reluctant to let an inspector through the house. Obviously, it increases the current owners’ risk to have a stranger in their home. More than 53% of contracts in February had a home inspection contingency. Gorman says that if a seller refuses a home inspection and “the buyer is still in their due diligence period, they would have the option to terminate the contract with no penalty.”
You probably don’t want to waive an inspection, though you could if you really needed a place to live. The reason many states consider real estate an essential service is because people need housing. If your current home has already closed, you’re relocating for work, or you’ve already given notice on your apartment, you might have to roll the dice and forego an inspection. If this is your plan, you might ask the sellers if they’d be willing to help pay for a warranty for the house so that you can still feel good about closing the sale.
Another option is to have the inspector walk through the house wearing protective gear, such as a hazardous-materials suit, to keep both the sellers and the inspector safe. Sellers can always ask that inspectors suit up before entering the house.
If you can, try to bake in some extra time for you to get the inspection done (and back out of the contract while keeping your earnest money if something is wrong with the house).
Appraisals during a pandemic
The FHFA will allow alternative appraisals in the wake of coronavirus through May 17, 2020: either a desk or hybrid appraisal.
With a desk appraisal, the appraiser looks at comparable sales (comps) and other market data, but does not visit the house; with a hybrid appraisal, the appraiser will either drive by the house or look at it via video chat.
According to Tom Cullen of Cullen Real Estate and Appraisal, “there has been an increase in the number of requests for alternative appraisals, where in some cases there is no physical inspection of the subject property.” Experienced, licensed appraisers will still appraise your house — but they probably won’t come inside.
Source: (bongkarn thanyakij / Pexels)Title research
As long as government offices remain open, or are accessible online, your title company or attorney will likely be able to still conduct necessary title research for any outstanding liens or claims on the home.
If the home does have any outstanding liens, it could be harder to get them cleared up. A lienholder’s office might not be open, or they could have sold the debt. It may be even more important for buyers to think about securing their own title insurance right now, just in case something slips through the cracks.
Some states allow online closings, but it depends on if the state allows remote online notarizations. Others don’t and insist upon in-person notarization. The National Association of Realtors is asking the government to do something about this. In the meantime, see what your state offers; you can find details through the National Notary Association website.
Closing can be done remotely, and according to Woodall, agents have done this before COVID-19. If a seller lives in another state, is selling an investment property, or has already moved and doesn’t want to come back, “an agent can email or FedEx them documents that have to be signed in the presence of a notary and sent back.” While it could take a few extra days, your COVID-19 addendum could build in that extra time.
In states that don’t allow online closings and where you also won’t be allowed to meet in person, you might have to delay closing until you can meet in-person — or take extra precautions. In Gorman’s case, he’s had one post-coronavirus closing where the client worked in healthcare.
To make the closing happen, “she signed over power of attorney to her husband, and her husband met with the closer.” He’s also had closings where everyone is given and leaves with their own pen. People sit at least six feet apart, or in separate rooms, and the company sanitizes the closing room before and after the transaction.
Even though it was once common, he says that right now, you’re “not having the group setting where you have six people in the room.” At the moment, agents don’t attend either closings or home inspections; everything is done to minimize contact.
Closing on a house will look different during the coronavirus pandemic, but it can still happen. If you’re not sure what to expect, talk to your agent about how real estate services in your area have been affected by the coronavirus, and make sure you ask about an addendum if and when you go under contract.
Header Image Source: (fran hogan / Unsplash)
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