AN EVOLVING GUIDE AT EVERY STEP OF THE HOME BUYING PROCESS
Real estate functions will start returning to normal when you’d feel safe making out with a stranger in a bar. The pandemic is affecting every aspect of our daily lives and I believe this will cause lasting cultural shifts along with permanent changes in the way we socialize and do business. Real estate is a highly interactive business involving human, aesthetic, and emotional connections and we’re learning to adjust to a virtual environment at every step in the process.
Even during a pandemic, because real estate decisions are both financial and at least 80% emotion-driven, there will be buyers and sellers transacting due to life changes, personal desires, and opportunity. Whether you were looking for your first home, forever home, or escape home, the pandemic has magnified the significance of “home” in a way that is causing some of my buyers to move ahead full speed, some to reevaluate their position, and some to consider or fast-track escape searches outside of New York City.
So, until we’re all making out with strangers in bars again, what does it mean to be a virtual buyer from Brooklyn to the Catskills? As we’re dealing with conditions and policies that are subject to weekly and monthly changes, this information is intended as a snapshot guide that in no way substitutes counsel from your own attorney and lender. I am doing my best to help my clients navigate during this unprecedented time. Please don’t hesitate to contact me with questions.
A special thanks to the following trusted professionals who provided their insights and who are working hard to cultivate a cooperative culture to get deals done safely and effectively in a challenging environment:
- NYC Attorneys Andrea Sabian, Jon Skolnick, and Dan Gershburg(also credited for real estate returning to normal when we can “make out in bars with strangers.”)
- NYC Lender Sunny Hong, Citizens Bank
- Catskills Attorney Barbara Garigliano
- Catskills Lender Susan Boersema, Ulster Savings
HOW TO BE A VIRTUAL BUYER – FROM BROOKLYN TO SULLIVAN COUNTY CATSKILLS NY – VIRTUAL HOUSE HUNTING
We resumed in-person showings in the Catskills on June 9, 2020 and in New York City on June 22, 2020, albeit under new normal conditions with masks, gloves, cleaning supplies and social distancing. “Open Houses” are by appointment only and staggered with sufficient time between buyers to limit contact. Virtual tools including videos and 3D tours are being used more frequently to present a more detailed preview to help limit in-person showings to only the most serious and qualified buyers.
Brooklyn Notes: Sellers, check with your co-op or condo board about policies for real estate agent access and virtual showings during the pandemic.
Catskills Notes: Live virtual tours in the Sullivan County Catskills could be more limited if the house does not have WiFi or reliable cell services
Do buyers make offers and purchase properties based on virtual tours? While there is anecdotal evidence for site-unseen transactions – particularly in an uber-competitive Catskills market – most buyers still want an in-person showing before moving forward. From the date of a fully executed contract, under normal conditions, it takes 45-60 days to close a cash deal, and 60-90 to close a financed deal. Closings are taking place, but don’t be surprised if there are some delays. Buyers who want to continue social distancing in a new Brooklyn home or have a Catskills escape recognize an opportunity to get ahead of the curve if they are willing to do some extra homework as a virtual buyer.
PRE-APPROVED LETTER FROM YOUR LENDER
If you are financing, a seller will not consider an offer without a pre-approval letter. This process remains largely unchanged as lenders were already primarily communicating via email and phone. Most mortgage specialists continue to have the ability to provide loan scenarios, run credit, process paperwork, and issue pre-approval letters via email. In this new normal environment, some seller’s agents will not make a showing appointment without a pre-approval, and some buyer’s agents will not take on a buyer without one, so it’s more important than ever to get educated and prepared for the buying process.
Home inspectors are conducting inspections that adhere to social distancing practices including vacant properties, with no one home, and with safety precautions and procedures in place. Sometimes this means buyers cannot be present for an inspection, depending on the specific situation, but inspectors email thorough reports with photos.
Brooklyn Notes: While vacant townhouses or new development inspections might be easier, access to inspect common areas in co-ops and condos, such as the roof and mechanical room could be more limited if it requires a super or management company. Sellers should check with their co-op or condo board regarding pandemic policies. Anecdotally, it seems that fewer inspections are being done and that some co-op and condo buyers are choosing to waive the inspection altogether. Discuss options with your real estate agent and attorney.
Catskills Notes: Most Catskills for sale homes have lockboxes which help minimize social contact. Home inspectors also do not have to pass through common building areas or be accompanied to access the roof and mechanicals. Home inspections are not holding up deals, but home inspectors can get busy so plan ahead.
This process remains largely unchanged as real estate agents already submit offers via email, so you can work virtually with your real estate agent to prepare your offer.
This process also remains largely unchanged as communication with your attorney is usually done via phone and email, and e-signatures and wiring deposits are already frequently used to execute contracts. As offices are generally closed, there is no one to receive a check in the mail, so make sure your bank can wire money for the deposit (usually 5%-10% of the purchase price due at contract signing).
Brooklyn Notes: Obtaining due diligence materials (financials, board minutes, by-laws, offering plans, etc.) from condo and co-op buildings can cause contract delays if the management company is unable – or unwilling – to provide them electronically. Some management companies are still very “old school” requiring attorneys to make in-person appointments to review these documents.
Catskills Notes: Anecdotally, there are some minor delays but nothing significant holding up contract signings.
Cash deals are easier to close because they do not involve a bank or require an appraisal. Mortgage applications are still going through processing and underwriting. Expect some delays – perhaps two weeks slower than normal – but this will vary between banks. Add this to your due diligence questions when interviewing lenders and comparing rates and fees. Also consider closing with cash and then refinancing once you’ve settled into your new home.
Whether or not virtual appraisals are allowed will depend on your lender. Only some lenders are allowing desktop appraisals where appraisers do not actually go into the property. While in-person appraisals are possible, for occupied homes, virtual or desktop appraisals might be preferred by sellers.
Brooklyn Notes: Citizens Bank and Wells Fargo have been able to use desktop appraisals when an on-site appraisal isn’t possible. Check with your lender.
Catskills Notes: Ulster Savings is able to look at alternative appraisal options on a case-by-case basis. There are some appraisers going into certain properties with social distancing and safety precautions. Again, check with your lender
A title search scours public records to verify property ownership and reveal any claims or liens on a property. A “clean” title is required to complete a real estate transaction. Your attorney will order a title search which is performed by a title company. As long as records can be accessed online, title searches do not seem to be causing major issues.
Brooklyn Notes: Public records are mostly available online allowing title searches to be completed virtually. There is a challenge accessing documents recorded between the date of the title report and the closing date, so title companies are using different measures to protect themselves and buyers. It’s an imperfect system that they are working to improve, but it is not preventing closings.
Catskills Notes: Sullivan County records dating back to 1990 are available online. For information prior to that year, attorneys are requesting the title policy from the seller. If that is not accessible, further delays could occur.
A survey is the process of locating and measuring a property’s boundary lines to determine the exact amount of land owned. To my knowledge, surveys cannot (yet) be completed virtually.
Brooklyn Notes: Co-op and condo purchases do not require surveys, but townhouses do. While surveys are done on the exterior of the home, attached townhouses would require a surveyor to enter a home to reach the rear yard. Discuss options with your real estate agent and attorney.
Catskills Notes: Buyers usually have a property surveyed to make sure any issues with easements or encroachments are resolved before closing. Most surveyors are sole proprietors and are still working as the survey is completed outside of the home.
BROOKLYN CO-OP QUIRKS
Co-op apartment purchases require board approval, a process that varies between buildings. The purchase application can be completed virtually, but some traditional management companies and boards still require multiple hard copies, and applications can, in many cases, be 1000+ pages. The ability to submit a virtual application and virtual board interview (via video conference) will vary between buildings. Speak with your real estate agent.
The final walkthrough gives a buyer the opportunity to confirm that the property is in the condition in which they agreed to buy it and usually takes place shortly before closing. Sellers can do an in-personal final walk through, but to limit social interactions. they can be done via video conference, so buyers and sellers will need to coordinate access arrangements. Discuss with your real estate agent and attorney.
Closings usually take place at a conference table surrounded by the buyers, sellers, multiple attorneys, and stacks of paper. In this new environment, closings are more complicated but are getting done virtually with careful coordination by dedicated, smart, and cooperative attorneys (so make sure you talk with your real estate agent about securing one!). Closing day is usually 45-90 days from the date of a fully-executed contract under normal conditions. I predict social distancing practices and virtual closings will still be the new normal – or at least the preferred normal – going forward. Cash transactions are still complicated to coordinate but less so than financed deals that require an additional level of coordination with your bank. Most banks still require original documents signed and notarized, and attorneys are getting creative with “car closers” who are driving documents to buyers who can sign at a social distance. Some banks are doing virtual closings and allowing attorneys to work out alternative ways to close, so talk with your lender. As an alternative, you may also be able to give your attorney POA (“power of attorney”) to close on your behalf. Once again, talk with your attorney. The ability to wire funds (rather than mail paper bank checks) is also a critical tool in the closing process.
Brooklyn Notes: Co-op closings require additional coordination with the co-op’s attorney and management company, so the ability to close virtually will vary depending on their level of cooperation. Talk with your real estate agent.
Catskills Notes: While it is difficult to coordinate logistics, attorneys have been closing cash deals without having to meet anyone. Financed deals can also close without anyone present where buyers give their attorney POA (power of attorney) to close on their behalf.
Real estate agents have always had a critical role in helping buyers move from search to close. In a new environment requiring an even higher level of coordination to conduct business virtually, I believe it is even more important that we continue to guide, troubleshoot, problem-solve, nudge, communicate, advise, console, and celebrate with our clients and colleagues with a spirit of empathy and compassion for everyone involved. For more information, please do not hesitate to reach out with any questions as we learn to navigate this new virtual real estate world together.
Be well. Stay safe. ❤️