Earlier this week, I wrote a blog for Sellers. Today, I’m talking to people who are in the process of buying or thinking of buying a home during COVID.
Before we begin, I want to repeat: the best advice for right now comes from our Public Health officials and Prime Minister: Stay Home.
But it isn’t that simple when it comes to real estate and shelter.
Legitimate reasons you NEED to buy a home right now:
- You’ve already sold your current home but haven’t bought your next one
- You’re a tenant and gave notice (or were given notice) to vacate before COVID-19 began
- Personal circumstances like divorce
Reasons to Pause, Watch and Wait:
If you just WANT to buy right now, we strongly recommend you Pause, Watch and Wait. While we don’t know what the future holds and it’s impossible to predict what will happen to the market and prices, it’s just not worth putting yourself and others at risk, health-wise or financial-wise. We think you should Pause, Watch and Wait if:
- You’re looking for a deal and hoping Sellers are desperate (they aren’t)
- You’ve got time on your hands and like house hunting (this isn’t a hobby for your REALTOR)
- You think you’re invincible and immune to the virus (you’re not)
If you find yourself in a position where you NEED to buy right now, know that REALTORS across Ontario are working hard to figure out how to make it happen – but it’s not business as usual for anyone. Given how fast things change these days, we’ll be updating this blog as things evolve.
Here’s what to expect (March 27, 2020)
In an environment where banks are deferring mortgage payments and mass layoffs are already occurring, obtaining financing is fraught with complications and uncertainty:
- Interest Rates: Interest rates have been fluctuating, affecting how much Buyers can borrow.
- Approvals: With most people working from home, everything is taking longer, including getting pre-approved for a mortgage.
- Financing Lenders have the right to confirm employment and other financial details right up until the closing date (we have always counselled Buyers to NOT make any financial changes between a purchase and their closing for this reason). In the current environment, almost anything could happen in between, and if you buy a house and lose your job, there’s no guarantee the lender will follow through in providing you with a mortgage. Our ability to predict is almost zero, increasing risk exponentially.
- Appraisals: Appraisals are another financing concern. Banks depend on appraisers to go into homes to estimate and confirm value. Appraisers were recently directed by their governing body NOT to enter homes physically, limiting the appraisal process to photos, information supplied by agents and MLS listings, computer models and literally “looking in the window.” The impact of this on mortgages and closings, as well as timelines, is still unknown.
- Deposits: The traditional deposit procedure—bringing a paper bank draft from your branch to a real estate office—is suddenly complicated, as real estate offices are closed, with reduced staff working remotely. Of course, digital options are available (wire transfers being most common), but there can be other knock-on complications, such as breaching the standard 24-hour window within which you must supply the deposit.
PRO TIP: It’s important to remember that while your mortgage broker works for you, they also have a duty to inform the bank of any information they are aware of that could impact the mortgage contract…in other words, as soon as they are aware that (for example) you’ve lost your job, they must tell the lender. The same obligation exists for your lawyer too.
PRO TIP #2: Some banks (at writing, TD and Scotia included) continue to insist that mortgage documents be signed in person, on paper, with your lawyer. Considering we are not supposed to be leaving our homes much less meeting to sign documents, a smart Buyer should keep this in mind when picking a lender. Ask your mortgage rep if they will accept electronic signatures before you commit.
Listings and Sales
I’m sure it comes as no surprise, but listings and sales are down right now.
Our good friend Andrei Novikov is tracking daily sales during COVID (you can follow the sales live here):
With the shutdown of all nonessential services and the strict guidelines surrounding social and physical distancing, seeing a home that’s listed for sale has changed significantly:
- Most Sellers don’t want to let anyone into their homes right now.
- Agents abiding by the Public Health and Ontario Real Estate Association guidelines are no longer meeting clients in person. This means that, except in unusual circumstances, most of your real estate search will, by necessity, be done online, using photos, floor plans and virtual tours.
- Video walkthroughs are also being experimented with, where either the Seller (if they are still in their home), or the agent (for vacant homes) tours potential Buyers through the home.
- Condominium buildings are increasingly restricting visitors to residents, which means that it may not be possible to see a condo that’s for sale until this is all over. We expect this trend to continue and expand.
- Open houses are no longer happening in the GTA during COVID
Offers present their own unique challenges, as Buyers may NOT have had the opportunity to actually tour a property in person. Legal wording is being developed to allow for situations where buyers are buying homes “sight-unseen,” with provisions to deal with eventual discrepancies when those Buyers eventually have the opportunity to visit the home. This is far from ideal, of course, and while this helps mitigate risk, it does not in any way eliminate it.
Typical offer conditions designed to protect Buyers, such as home inspections, status certificate reviews, and financing all present challenges in an environment where inspectors, in the interests of public health and safety, are not (or should not be) working. Condominium management and boards are also closed and may not be reachable, meaning status certificates—an essential part of a condo purchase—may be unavailable. It’s not clear when that might change.
Can You Pause, Watch and Wait?
The home buying process during COVID-19 is not for the faint of heart. At the present time, we do not recommend buying a home unless you need NEED to buy. For the vast majority of Buyers, we feel it’s just not worth the risk.
But soon….we hope very soon….things will start to return to normal and we’ll all be able to buy homes again. In the meantime, stay home and stay safe.