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Real estate offers during COVID-19 pandemic, and the process.
March 27,2020 | Posted By Flavia Brown in Real Estate
The following explains how real estate offers are being made during the Covid-19 pandemic, and a brief explanation of the process – from when an offer is made to close of escrow.
Because of recent society restrictions caused by the Covid-19 pandemic, prospective buyers are now making offers “site-unseen” (or “blind offers”). The buyer’s agent (officially called a selling agent) presents the offer on behalf of the buyer to the listing agent, and the offer doesn’t include any upfront earnest money deposit (EMD). This is a huge breakthrough for buyers. Since new rules read that EMDs aren’t due until within three days after an offer is accepted and ratified, there is no longer any required upfront money when making an offer. If an offer is accepted, or countered and eventually accepted by the seller, the buyer has 17 calendar days to investigate the property (inspections, seller’s disclosures, reports). Within the 17 days the buyer can negotiate with the seller over who will pay for repairs, or accept the physical condition of the property, or cancel the contract and get the entire deposit back. Because of the no upfront EMD, some buyers make offers on two or three properties at the same time. When one offer is accepted, the buyer cancels the other offers. Then the 17 days investigation begins. The first thing the buyer does is order a professional property inspection. In a day or two the inspector presents an inspection report to the buyer and the buyer’s agent. At that point the buyer does more investigating, studies the seller’s required disclosures, studies the HOA disclosure packet if a condo or a townhouse, and decides whether to negotiate the cost of repairs with the seller, or accepts the physical condition of the property, or cancels the contract if there isn’t an agreement reached between the buyer and seller. Most often the buyer will present a Request for Repairs form to the seller, who will either accept the request, counter it, or reject it. Then the buyer either accepts the seller's counter, counters the counter, or cancels the contract and gets the deposit back within a day or two. If the buyer and seller come to an agreement the buyer formally removes all contingencies and proceeds with the transaction toward close of escrow. The common contingencies are property condition, loan, and appraisal.
To your good health, wealth, and success,
Flavia Brown, Realtor
A landlord and real estate investor client of mine wrote: “
Thanks for this review. Have you seen any prices coming down? Do you anticipate that happening?
” My response:
Yes, but it depends on the specific area, price range, and type of property. Areas in high demand, like close to the ocean and other upscale areas haven't seen much declining prices (at least not yet). However, there is a paradox (not two doctors:) Some high-end home prices are declining because there aren't as many potential buyers like there are in lower-priced markets. Regarding type of property, multifamily properties haven't lost value (at least not yet). Income properties in much of California are the best hedge against a recession because rent demand is much greater than supply, The "experts" predict that rentals will continue to be in high demand for a long time. California is already 3-4 million housing units behind demand, and it will take years to catch up. Meanwhile, landlords rule.
Wikipedia has an interesting article (California housing shortage) Here is the link:
Scroll way down to “Quantifying the shortage.” Here is the last sentence:
“In April 2018, state Senator
, author of several bills to reduce the housing shortage,
estimated it at 4 million units
Nobody can be sure to accurately predict the future, so we don't know how the COVID-19 pandemic will affect real estate. But based on history, prices have always been cyclical. Prices have always gone back up after a decline. If landlords are concerned that their duplexes or other multi-units will lose value, they shouldn't sell. Just hang in there, enjoy the income, and wait for prices to increase.
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