By now, you have undoubtedly heard about this thing going around called the coronavirus. According to the Center for Disease Control, the virus has been identified as the cause of an outbreak of respiratory illness first detected in Wuhan, China.
As of today, the virus has been confirmed in over 95,000 people across the world and is being directly tied to the deaths of more than 3,000 people.
Depending on who you are listening to, the fear of a pandemic is either very real or being blown out of proportion and causing unnecessary panic.
No matter which side you’re on, there are some very real discussions going on amongst real estate industry professionals about what affect the virus may have on the industry. As you may know, real estate agents have very strong opinions on just about everything, and this topic seems to be top of mind.
This is leading to talks on the effect of the stock market drop on home sales. When the market dips, people tend to become more conservative and hold on to their money. That could certainly translate into fewer home purchases, people staying put instead of moving up and also the slowdown on remodeling and improvements due to lack of disposable income. Cash buyers also do not want to sell stocks at a potential loss to cover a close of escrow, and some are even canceling transactions and forfeiting earnest money as a result.
The weaker financial markets do cause less stability in the real estate markets, but some will look at the positive and discuss the opportunity for investors with money to scoop up properties that may not appreciate as quickly as when the financial markets are strong. Some would-be investors may finally pull the trigger on purchasing an investment property.
Impact on the rental market
The interesting component that wasn’t necessarily part of the discussion during the last financial market downturn is the presence of investment properties used solely as short term rentals. The Airbnb craze has led to a number of investors purchasing for the short term rental market, especially in areas that are heavily traveled and vacation destinations.
As we see warnings about the spread of COVID-19 and airport advisories being issued regarding travel, could vacationers stop vacationing? I have a trip planned for Europe this summer, but that is under review right now as Italy is third behind China and South Korea in terms of known cases of the virus.
With the potential for summer vacation plans being canceled, owners of Airbnb, VRBO and other short term rental platforms facing cancellations could be in a quandary. Much of the income derived to pay off debt on investment property comes during the summer, and if those plans do not manifest into actual stays, what happens to the mortgage payment?
Impact on how agents represent clients
I live in Scottsdale, Arizona, where the month of March is filled with winter visitors enjoying 80 degree days without a cloud in the sky. The population nearly doubles over the winter months, as this is a second home destination. This is also a very good time to be in real estate. Many of the first time visitors are loving the weather and talking about coming here every year.
That’s great for the long term rental market, the short term rental market and the purchase market, as people come year after year and eventually decide to buy their own place instead of renting.
This entire scenario brings me to my next question, and one that has been floating around in social media posts by agents: “Has fear of the Coronavirus changed how you are representing your clients?”
Although most agents have indicated they are not altering their representation of clients, they have been commenting on the changes they have made to the manner in which they represent clients, specifically regarding open houses.
Many agents have stated they are handing out mini bottles of hand sanitizer at open houses, and explaining as people enter that they are not shaking hands as usual. There must be a huge run on Clorox disinfectant wipes at the store, as many agents are also suggesting wiping down surfaces after patrons leave the open house. Some have commented that they are taking disinfectant wipes into properties they are showing buyers and using them on doorknobs and other direct to hand surfaces.
There have even been suggestions to require those entering an open house to put on a mask, booties and gloves, but those are few and far between. The dilemma of whether to hand out business cards, or worse, to require people to sign in using the same pen everyone else does, is real.
My favorite comment so far has been an agent who advised in one of the forums that “agents should all stay home” and that she will be “happy to take care of your clients during the crisis!” As agents contemplate putting distance between themselves and their clients out of health concerns, the situation brings up a larger question: How personal is real estate at this point?
Last week, I closed on a house in Boise, Idaho without ever having seen it in person. Now I’ve been in this business for almost 30 years and have more knowledge about what to look for than most, but as I went through the process I started wondering how much personal interaction is really necessary nowadays.
I used a very good agent in Boise whom I have known for years, and she did an excellent job doing all of the things a typical buyer would need and never once did the fact that I was not present affect her representation or fiduciary duties.
The house is for my son who attends Boise State University, and he was there for the whole process and sent me videos of the neighborhood. My agent and I poured over the home inspection, and I watched the videos she sent of every aspect of the property and it was actually a very simple process.
So, if I can get everything I need information wise online and through the participation of my agent, do I ever really have to meet her in person and expose myself to things like COVID-19?
I remembered back when I was actively representing clients in the mid-’90s. There was no Zillow, no instant information about sex offender registries and other due diligence items, no e-signature platforms and also, no iPhones. While working in Scottsdale, I represented a variety of second-home buyers from the midwest. I would frequently make videos – yes, with an actual video camera – and send tapes through the mail to my clients back in Chicago to see the homes they were interested in.
I really don’t see any difference today, other than it’s much easier now. My agent in Boise Facetimed me whenever she was at the property and even from her office when we needed to discuss certain ways to proceed.
Could COVID-19 lead to a change in the real estate industry and create a new process for purchase that does not involve up close and personal interaction?
The technology landscape has made it feasible to instantly communicate, watch 3D videos of properties and the surrounding areas, perform lifestyle searches and even place your existing furniture in a property online. Maybe we don’t really need to see it in person before we buy it! We do that now when we book Airbnbs, or even hotels, for that matter.
On the other hand, most of us understand that real estate will always require personal contact and experience. If you don’t physically interact with the property, how can you tell if there are smells in the house, barking dogs next door or if the neighbors have the flag flying outside of a rival football team?
COVID-19 has already affected the stock market, travel, the food industry, the real estate industry and, in some regards, how we maneuver through everyday tasks and life itself. Whether it will permanently cause a change in how we do business is yet to be seen.