So COVID-19 has had an effect on every aspect of our lives, including our real estate plans. There are still Sellers listing their property for sale, and Buyers purchasing properties right now, albeit much less than we would normally see at this time of year. Considering that a couple weeks ago just about every listing was receiving multiple offers and we were seeing an overall increase in price, it’s a good opportunity for Buyers to find something without as much competition and for a potentially good price, depending on just how keen the Seller is to sell.
With this pandemic currently in full swing, we’re seeing new Government Protocol that can affect your plans to buy, in addition to unexpected changes to your own lives, so during this time you have to be prepared for the unexpected.
Here’s a quick, non-exhaustive and non-specific list of some things all Buyers should consider if they are still interested in purchasing a property at this time. This is not a substitute for professional legal or financial advice, so work with your Realtor, Mortgage Broker and Lawyer to ensure you understand your obligations, rights and worst case scenario.
(1) Review Property Documentation, Floor Plans, Videos and Photos Prior to Viewings
In an effort to ensure everyone is doing what they can to be socially responsible, Realtors are trying to ensure that viewings are for serious Buyers. Make sure you do some due diligence on the property prior to scheduling a viewing. Realtors will likely have all Buyers and showing attendees sign a Waiver Form indicating that they, nor their Seller, are responsible if you end up infected with Covid-19 after the viewing.
(2) Tenanted Properties Carry Some Uncertainties
The Government instituted a new rule, effective March 30 2020, that Landlords are not allowed to give their tenants a Notice to End Tenancy for any reason (beyond a few health and safety situations). This means that Prospective Buyers cannot ask the Seller to give the Tenant the standard 2 full months notice to end the tenancy, which means that Prospective Buyers will not know the date they can actually move into the property. The Government hasn’t yet given an end date for this new Eviction Protocol, so it’s impossible to know when Landlord Sellers will be able to give vacant Possession to Buyers.
There are a couple ways around this, including:
- Requiring that the Seller come to a Mutual Agreement to End Tenancy with the Current Tenant prior to any Buyer making their purchase official. This Mutual Agreement to End Tenancy would specify a certain date. Buyers have to be aware that if the tenant agrees to a Mutual Agreement to End the Tenancy and then chooses not to vacate the apartment, that getting the tenant to leave via may be difficult.
- Adding a clause in the contract that would continue to postpone the Completion Date until an appropriate time following the Seller’s ability to give the Tenant official Notice to End Tenancy (once the Government cancels the halt on evictions). Buyers have to be aware that the Completion Date can be postponed for months and they need to ensure their financing and housing needs won’t be affected.
(3) Ensure your Mortgage Lenders are Committed before Making the Purchase Official
Buyers should have mortgage pre-approval in place prior to starting their search. This means a mortgage lender has approved the Buyer to purchase a home up to a certain dollar amount, and are waiting to approve the property the Buyer is interested in purchasing. Pre-approvals only last a certain amount of time before they expire and in this period, lenders can ask for updated financials from the prospective Buyer (including recent paystubs, updated investment portfolios, etc). Once lenders are satisfied with the Buyer and the property, the lender will often submit a “Commitment Letter” which means the Lender is committed to the situation and can’t back out (unless the Buyer was deemed to be lying). Buyers should ensure that they should not remove subjects on any offer to purchase without an official commitment letter from the lender just in case the Buyer’s financial situation changes unexpectedly between subject removal date and the official completion date. In normal real estate markets, it was common for Buyers to remove subjects prior to receiving an official commitment letter, but knowing that they had lenders interested in their file.
(4) Be Prepared to be Flexible
At this point all essentials services relating to a real estate purchase are allowed to continue working. This includes Realtors, Mortgage Brokers, Lawyers/Notaries and the Land Title Office. In addition, Movers and those in the construction industry are still allowed to operate, though you never know if someone will fall ill with Covid-19 and needs to cancel or postpone their services, so have a Plan B in mind. For Buyers hoping to purchase new furniture and things for their new space, keep in mind that companies have may have closed their stores and/or may be delayed in delivering furniture. Buyers should try to give themselves an extra few days between the day the move into their new place and the day they need to move out of their current place, just in case.
If you are a Buyer starting your search, and want to ensure you’re getting appropriate, up to date advice during these trying times, don’t hesitate to contact me to chat about your current situation and real estate goals: [email protected] or 778-387-7371.