The State Of Home Buying In The U.S. – COVID-19 Impacts on Real Estate
Home buying has always been a popular topic, especially during the busy season. However, in light of recent events like COVID-19, the local real estate market has become a highlighted industry of possible change and evident contention. The COVID-19 impacts on real estate markets and consumers alike is widespread. Find out in this article how you can still navigate through the barriers and around the obstacles to minimize the effects of COVID-19 on your local real estate market!
Face to face communication and physical boundaries have been two areas that have altered drastically even in the short time the United States has been affected by this global crisis. Masks, gloves and hand sanitizer have been flying off the shelves quicker than they can be stocked. Potential buyers even have to sign contracts before entering open houses to ensure the health and safety of those looking after them are kept safe.
Curious as to how the current climate may cause serious changes to the home buying process? Here are several key COVID-19 impacts on real estate that may gain traction in the market after the devastating effects of a global pandemic.
Home Buying Pre-Pandemic:
Meeting With Your Realtor
At the beginning of your real estate venture, you’d usually do some online research on possible local real estate agents based on reviews, or you’d go with someone who was recommended to you through a family or friend. Then, you would meet with them to go over exactly what you can afford and what you might be looking for in a home.
Whether it was meeting in their office or grabbing a cup of coffee at a local shop, this was the first time you were able to get a good impression of your realtor. It’s vital that you and your realtor mesh well on a professional level, seeing as buying a home is no easy task and can take quite a long time.
Your Realtor is responsible for multiple things while you are working with them. The first, and perhaps most paramount, is communicating on your behalf to the seller’s agent. If you both aren’t on the same page, mistakes will likely occur.
An agent also has fiduciary duties to fulfill. They include loyalty, confidentiality, obedience, disclosure, competency and accounting. Let’s take a closer look at how each will affect the agent-client relationship:
- Loyalty means that your realtor will act in your best interest as a buyer, regardless of how it may affect them in return.
- Confidentiality is a must due to the amount of sensitive information you disclose as a client, including key financial details like salary or employment.
- Obedience is imperative due to the strict stipulations that are often put in place while buying or selling — your realtor shouldn’t be offering more than you can afford or accepting less than you would like.
- Disclosure deals with a realtor’s overall knowledge of property, buyer and seller; A realtor is obligated to disclose any information that may affect a sale or the wellbeing of either party.
- Competency means that the agent is trained and knowledgeable of what exactly is done during home buying transactions.
- Finally, accounting is the agent’s ability to manage your funds, assets and property management fees that you may encounter during the representation.
It’s clear that being a realtor is much more than showing houses and knowing a lot about surrounding neighborhoods. This is why meeting with your agent has been such an important step in the home buying or selling process for many prospective clients.
When you think of buying a house, what’s the first thing that comes to mind? Thanks to popular TV shows, you may consider house hunting before anything else. House hunting is shown as one of the most exciting parts of the home buying process. Luckily, it’s true!
Being able to find a home you like through an online listing and then walking through it to get an idea for the unique look and feel for the place is a fundamental piece of the puzzle. Typically, many people describe their a-ha moment as the first time they step through the front door. The thought of potentially losing this in the future could be a devastating blow.
Furthermore, physical walk-throughs allow a buyer to truly assess the state of a home. By getting an up-close and personal view, you can delve deep into the nitty-gritty areas like basements, attics and even the garage or shed. This will help you evaluate what exactly has gone into the home, what exactly is still left to be done and the estimated associated costs.
To add, you may be able to see the state of a home under different circumstances with a physical walk-through. For example, if it had rained recently and the home has any structural issues like a leaky roof or unsealed basement, this is a sure-fire sign that owning that particular home could be an expensive undertaking. Or, in contrast if you visit a home on a beautiful, sunny day you will be able to see how much sun hits the surrounding area and help you envision any exterior projects you have been considering.
Being Present At Closing
Point blank, real estate is a business deal. And you want the most competent people present so you aren’t facing any obstacles later on in the process.
Rounding out your experience and settling on the fine print allows you to move on with your life soon after and look forward to the future you will have in your new home. Somehow, a digital signature just doesn’t give the same zest as signing your John Hancock on a formal document would.
Not only that, but those present also have certain obligations that they need to fulfill. The buyer is required to sign major documents like the deed, bill of sale, affidavit of title and transfer tax declarations. They are also responsible for paying the closing costs which amount between 2-5% of the total sale of the home. These costs cover the price of the attorney, credit report, inspection, loan origination, survey and underwriting fees, as well as escrow deposits.
The seller is also in charge of signing and paying certain things during closing. The certificate of title, deed of sale, loan payoff, statement of closing costs and statement of information must be signed by the seller. In addition, the seller must pay title insurance premiums, transfer taxes, recording fees, prorated taxes, HOA dues and home warranty premiums.
Being present for the closing gives each party piece of mind when handing over a physical check rather than trying to make these transactions digitally. Rather than toss and turn at night, wondering if your financial information has been compromised by hackers or internet fraud, both parties being able to attend the closing can make for a much more secure transaction.
What To Expect Post-Pandemic:
Taking Your COVID-19 House Hunt Online
Similar to the dinosaurs, the days of meeting, greeting and shaking hands may too become extinct. No one really knows just yet how the social norm will be altered but one thing is for sure, handshakes will probably be the first to go. Therefore, getting used to using online real estate services will be of utmost significance after these trying times. You can expect this and other changes as the COVID-19 impacts on real estate become more clear.
Luckily, there’s plenty of research and online guides that will show you exactly how to buy a home. In today’s digital age, it’s easier than ever before to browse available houses on the market with the introduction of real estate websites. Your new home could be yours with just the click of a button!
Many popular sites include useful information that takes your house hunt a step further as well. Up to date ratings of local schools, the surrounding neighborhoods and projected property values are all things included on these sites that you should consider when looking for a home. After all, you’re not just buying the house! You’re becoming part of a community, meaning you will play a much bigger role than simply being a homeowner.
While you may be able to take your house hunt online, working with a real estate agent is still one major benefit that’s not likely to be electronically replaced any time soon. Realtors have access to their own listings before anyone else and they’re able to rely on relationships they’ve built over time within the industry to help secure opportunities that otherwise would not be available to you.
On top of it all, you may not even be able to enter the home before purchasing. Buying a home sight-unseen presents many risks. You won’t be able to get a feel for the home or decide if there is ample space for you or your family. Even though realtors’ duties will remain intact, this burdensome pitfall could make or break your buying experience.
Getting Mortgages Virtually
As technology advances, more and more opportunities are available for consumers to purchase things online. In fact, the average millennial consumer buys more than 60% of their goods online. With that staggering figure, it’s not surprising that financial institutions and lending companies are joining in on this trend in the new age of cyberspace.
But, it’s not always crystal-clear what steps you need to take to get a loan online. While some websites promise an easy process, secret terms and conditions could thwart your efforts to borrow effectively. And if you’re looking for a mortgage or a loan to help pay for major home renovations, you should ensure that you know exactly what you’re signing up for, considering these options tend to require a longer payment period.
You wouldn’t settle on the first house you saw when entering the real estate market, would you? The same applies to browse rates. There are plenty of sites that supply up-to-date mortgage rates that you can compare and contrast based on several factors.
Some things that you should keep in mind when considering loans are the type, term and interest rate. For example, for those with low credit, it may be more viable to obtain an FHA loan that is backed by the government so if you default, the lender has assured compensation in the form of your home.
Supply and demand is a common concept in numerous professions. Currently, COVID-19 has created a seller’s market due to high demand and a low supply of houses in various communities. Typically though, the goods or services being purchased are not quite as big of a commitment as buying a home. In truth, for many people, a home will be the biggest purchase they will make in their entire lifetime. Therefore, buying a home, let alone a fixer upper, in a seller’s market can be an extremely stressful ordeal.
For some buyers, rolling up their sleeves and getting their hands dirty is the ideal route to take for a couple of reasons. Fixer-uppers typically sell for much less than completed projects which means you can put the extra funds saved toward renovations. Over time, the home will build equity that you may be able to cash in on later, either when selling the home or utilizing other avenues like a home equity loan.
Additionally, property taxes are assessed at the point of sale, meaning you can get a lackluster property in your ideal neighborhood without your taxes increasing after you spruce up the place. This is huge if your family plans on putting down some roots in a particular area since the amount your property taxes are deemed the same for the duration you live in the home.
Final Thoughts on COVID-19 Impacts on Real Estate
At this point, it’s fairly unclear just how much the United States will change in terms of culture and business due to COVID-19. However, after viewing the short-term effects that have arisen immediately after life is starting to function again, there are several key takeaways to note in regard to the real estate market.
While nothing is guaranteed, one thing that is for sure is that many people, home buyers, sellers and local buyers agents included, will have to adjust to a new normal to keep everyone safe, happy and healthy!
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