COVID-19 and Real Estate Agent Services
The Government of British Columbia has deemed “Real Estate Agent Services” a COVID-19 Essential Service. However, that certainly doesn’t mean the industry should continue on as usual, as we all have to do our part to flatten the curve. As a team, we have received quite a few questions recently related to COVID-19 and its effect on the real estate market, and so thought we would take some time to compile a few thoughts, as well as some resources, to help you navigate this unprecedented pandemic. However, we first wanted to mention that we hope everyone reading this and those closest to you are remaining healthy and in good spirits. We also wanted to relay our sincere gratitude to all the medical professionals, hospital staff, first responders, grocery store workers, delivery drivers, and all other essential service providers who are putting their own health at risk for the benefit of the rest of society.
What precautions are being taken by Realtors to help prevent the spread of the novel coronavirus? The list here is extensive, so in the interest of your time, information provided here will highlight some of the measures taken.
Firstly, before any showings occur, initial buyer meetings and consultations can happen remotely through videoconferencing or by way of a telephone call. From here, once the search has begun, the most effective way to help reduce the spread of COVID-19 is to avoid physical showings. With various technologies such as 3D walk-through tours, Google Earth, etc., it is fairly easy for the realtor and client to conduct virtual showings and neighbourhood tours from the comfort of their respective homes. If a buyer has serious interest in a home and there are no virtual tours or suitable properties to facilitate a virtual tour, the Realtor could help facilitate a virtual tour by visiting the property using technologies such as FaceTime, as long as the Realtor meets a set of qualifications, such as confirming they have not recently travelled outside of Canada, do not have any concerning symptoms, have not had contact with anyone with symptoms, or come in contact with any presumptive or confirmed COVID-19 cases in the last 14 days. If a buyer narrows down their search to a single property but is not comfortable offering on the property without physically viewing it, and the Buyer has consulted government and health authority guidelines and is comfortable assuming the risks of a physical visit, then the Realtor can attempt to make the necessary arrangements to ensure the safety of the Buyer and the home’s occupants. This would start with confirming in writing that both the buyer and seller meet qualifications outlined above that a realtor would need to meet to tour a property (confirming they have not recently travelled outside of Canada, had any concerning symptoms, had contact with anyone with symptoms, or come in contact with any presumptive or confirmed COVID-19 cases in the last 14 days.) The seller would be asked to leave all lights on and doors open to help reduce the need for any physical contact. Some measures taken during the showing to reduce the potential spread of COVID-19 would include, but would not be limited to the following: Realtor and client meeting at the property, no physical contact on greeting, limiting showings to only those who would be listed as Buyers on the contract, not sharing electronics, disinfecting hands immediately prior to entry, not touching surfaces and keeping hands in pockets, and ensuring at least 2 meters distance between the Realtor and clients at all times. Again, this list is not exhaustive, and will be modified as the health authorities' guideline’s change. The showings will be conducted as quickly as is possible, and any follow-up discussion, correspondence, and working through offers should be done remotely.
The best way for sellers to avoid risking contracting or contributing to the spread of COVID-19 is to avoid listing their homes. However, for some due to their life circumstances (job transfer, marriage breakdown, financial pressures) waiting is not an option. If this is the case, then at the onset of the initial conversation, the realtor should verify with the seller that they have not recently travelled outside of Canada, had any concerning symptoms, had contact with anyone with symptoms, or come in contact with any presumptive or confirmed COVID-19 cases in the last 14 days. Assuming this is the case, then every attempt should be made to determine a listing price for the home remotely. Technologies such as FaceTime, WhatsApp, etc., will facilitate the Seller virtually walking the Realtor through the home, so in addition to reviewing past listings, having the seller take videos or photos, as well as being available to answer any questions about the home, its construction, materials, size, measurements, etc., the Realtor should be able to guide a fairly accurate discussion with the seller about the value of the home. If this is not possible, then the realtor should arrange to tour the property and home independently and avoid coming into close contact with the seller. The listing agreement can be signed remotely using an online signature program. From here, arrangements will be made for various marketing partners (photography, floorplans, videography, 3D tours, etc.) to be completed. In Nanaimo some of the regular providers of these services have temporarily closed, so for the ones that remain open, the Realtor would confirm that they meet the qualifying criteria to enter the home (described above), and reconfirm that none of the home’s occupants’ situations have changed related to travel, health conditions, possible exposure, etc. Assuming all is good, the marketing partners would visit separately while the seller is out of the home, and all would take the necessary precautions such as disinfecting their hands and touching nothing, among other measures. With a solid marketing platform featuring 3D walk-through tours, video, floorplans, professional photography, etc., physical showings can be kept to a minimum. If a Realtor does request a physical showing, both the Realtor and the potential Buyers would have to confirm in writing that they meet the qualifying criteria (have not recently travelled outside of Canada, had any concerning symptoms, had contact with anyone with symptoms, or come in contact with any presumptive or confirmed COVID-19 cases in the last 14 days), and specific instructions would be provided to help prevent the potential spread of COVID-19. Showings would be restricted to only those whose names would appear on the contract, and the Sellers would need to leave on all lights, open doors, etc, and would need to be out of the home for the duration of the showing. Following showings, any offers received would be reviewed and negotiated remotely. Due diligence such as inspections or appraisals, would be done following the protocols in place for those professions to help reduce the potential spread. Home inspections, for example, are completed by an on-site visit by the Inspector and followed up with a call or video chat with the Buyer and Realtor.
Again, what has to be emphasized is that this list is not exhaustive, it simply provides some measures intended to serve as an example of how serious the COVID-19 threat is being taken by the real estate industry, and also hopefully giving you an idea of what you could possibly expect if you absolutely needed to transact in real estate in the near future.
Why would someone want to put their own health and the health of others at risk in order to buy or sell real estate? Can’t people just wait until the COVID-19 concerns calm down and the officials declare it safe for society to return to more of a normal way of life? Unfortunately, there are some people who don’t have a choice and this is why the Government of BC has deemed Real Estate Agent Service an COVID-19 Essential Service. For example, there are those that have sold a home and need to find a place to live, there are those who have purchased a home and need to sell their place to fund their purchase, and there are those who received a job transfer or accepted a new job and gave notice at their previous job prior to the COVID-19 pandemic unfolding. There are also unfortunate circumstances such as a messy divorce or extreme financial hardship that necessitate sales. The reality is most of these people would most likely prefer to be in a situation where they weren’t having to put their own health or the health of others at risk, unfortunately, timing didn’t work in their favor, so the real estate industry at large has implemented procedures and protocols to help deliver this essential service for the benefit of this small segment of the general population who need to complete a real estate transaction in the spring of 2020.
I was planning to purchase a home this spring. Should I put my search on hold? Each individual’s circumstances are different, so we cannot make any specific recommendations or blanket statements without knowing the facts. What we can say is that for the vast majority of buyers, yes, absolutely you should be putting your home search on hold, and doing everything you can to help flatten the curve. If you must buy or you absolutely insist on buying, please take every precaution to reduce the need and if at all possible, avoid physical showings. With that said, if you are comfortable completing a transaction 100% remotely, have strong job security, and aren’t fearful that the home you are purchasing may see its value decline short term, then you may be a candidate to help a seller in need of finding a buyer. However, if you can limit your exposure to COVID-19, help prevent the spread to others, and likely find yourself in a position where market conditions are softer in the coming months on the heels of mass layoffs and therefore reduced buyer demand which may result in you having more negotiating power or being able to buy at more attractive price points than you could right now, it seems like a fairly straightforward decision to wait unless you have an urgent need.
I was planning to list my home this spring. Should I hold off? As discussed above, each individual’s circumstances are different, so we cannot make any specific recommendations or blanket statements without knowing the facts. What we can say is that for the vast majority of sellers, yes, absolutely you should be putting your home sale on hold, and doing everything you can to help flatten the curve. If you absolutely need to sell your home to fund another home purchase that is already under contract or have another urgent need to sell such as a job transfer, then the industry has measures in place to help manage the COVID-19 related concerns. However, what you should discuss with your realtor is the anticipated demand for your home, as this will vary for different styles, neighbourhoods, and price levels. There are currently 345 single-family homes on the market as of April 8, which is up from 288 at the end of March. That is to say that the drastically reduced buyer pool has a decent amount of homes to choose from, so you have to realistically consider how probable a sale would even be in this market, and whether it is worth exposing yourself or others to the risk of COVID-19 if the prospects of a sale are unlikely. That is not to say homes are not selling. We received 4 offers on a home listed just last week, but this was a quality offering at a price level where there is still relatively strong buyer demand. The home was also vacant and there was a strong marketing plan, including a 3D walk-through tours available, so buyers didn’t necessarily need to visit the home, and if they did, each showing was not exposing the sellers to a new risk of infection. On that note, if you do have a vacant property that you NEED to sell this spring, as long as all necessary precautions are taken, it is a rare situation where you are likely better positioned to sell than an owner-occupied or tenant-occupied property, and of course this eliminates the health risks to the owner or tenant that would follow every showing.
If I do hold off on selling, could home values be down substantially by the time it is deemed safer to list? In terms of possible decreasing home values and whether holding off on listing now may cost you, the reality is short term it could. On the other hand, there is the possibility that it won’t. There are so many unknown variables. The government has already taken massive action to help mitigate the damage to the Canadian economy and we don’t know what further measures will be implemented to best position Canada for a quick recovery. We don’t know how long this health threat will persist, how many jobs will be lost, and how many people who are absolutely redlining their finances will be pushed into unmanageable territory. We don’t know how accommodating lenders will be with approvals for those that have seen their incomes reduced or received a temporary layoff. The list goes on and on. While we don’t have a crystal ball, collectively our team has a fairly extensive list of academic credentials and past work experience that positions us strongly to be able to interpret the ever-evolving narrative and help our clients make informed decisions. With that said, outside of all of these unknown variables such as government intervention, recovery timing, etc., supply and demand is a good place to start in trying to form an idea of how pricing may be impacted. From a demand perspective, ask yourself, are we more likely to have more demand or less demand whenever the current situation ends? Remember, all those extremely motivated and qualified to buy are doing so. From our perspective, the longer this drags out, the more jobs that are lost and businesses that see their temporary closures become permanent closures, the more people who eat into their down payment funds just to pay the bills, the more credit is utilized, all of this points to reduced buyer demand. If there are not enough buyers for the volume of homes for sale (which could very well increase substantially with so many intending to sell holding off), that is when we start to see motivated sellers start to drop their prices, and prices will ultimately adjust until they reach the point of equilibrium where demand equals supply. From the supply side, ask yourself the same question? Are we likely to have more supply or less supply a number of months from now? The difference between demand and supply is that despite intentions, demand can be eliminated beyond the control of the intended buyer due to factors such as job loss or a reduction of downpayment. The supply side is not affected in such a way. If a seller wants to sell, they can list their property. Fear of declining values in the future or reports of declining values (if this does occur) may prompt owners to list, increasing supply. Supply and demand considerations are certainly something we’ll be monitoring closely, and we will be doing so not just considering the overall market, but demand and supply at different price points, in different neighbourhoods, and for different categories of real estate.
What is interesting is that of late we have heard all sorts of chatter from other Realtors about how the market with all of this pent up demand from the delayed spring market is going to result in a very hot market when the COVID-19 concerns lift. It’s a nice thought, and likely helping to ease the fears of the realtors who have seen their spring earnings drastically reduced, if not eliminated, but let’s be realistic… In order to buy a home, you need to either be paying cash or have a mortgage approval. Unless you are independently wealthy, for a good percentage of the population, either of those options may be in jeopardy depending on how long this plays out. Consumer confidence also plays a factor, is there going to be rebound in COVID-19 cases, could another pandemic strike?...If people aren’t already, 2,3,6 months from now many will be very much living in fear, fear about their health, their job security, their income, how they are going to make their next payment. Fear does not generally trigger people to commit to major purchases and substantial mortgage payments. As time plays on intended spring buyers and their urgency of demand is likely to trend more towards a “wait and see” approach, especially for those living in fear of making a major commitment. When you couple this with all those who will have lost their ability to qualify for financing or who have reduced their down payment below what they need to purchase, you can make a reasonable argument that overall demand will be substantially lower than the realtors expecting a buoyant, 2017-style competitive market are calling for.
What is this unexpected interruption to the spring market going to mean for market conditions? At this stage, it is too early to tell. As detailed above, there are certainly too many unknown variables. The longer the self-isolation period continues, the longer and more widespread the economic slowdown is likely to be. If the B-20 stress tests or the implementation of the Foreign Buyer tax, speculation tax, or any other government measure that was implemented in early 2018 can have the cooling effect on what was a screaming 2017 market, then ask yourself what the effect of the whole country basically shutting down for a number of weeks if not months, with mass layoffs may do? The government understands this, and certainly the role that real estate plays in our economy and net worth statements of Canadians. It would be surprising if they didn’t take aggressive action to try to protect the economic impact of the industry, home values, and to try to mitigate the risks of household debt levels, but to what extent and ultimately how effective will any measures be is difficult to predict. As such, we take a wait and see approach, turn off the negative new cycle, and rely on trusted, credible experts and our own market expertise and understanding of economics, to interpret and apply in our advisory approach to helping our clients navigate the ever-changing real estate market.
When would you expect the real estate market to get back to normal? Before tackling this question, what should probably be addressed first is an acknowledgement that we may never return to the “normal” we knew prior to the onset of COVID-19. When you look back at the catastrophic events of September 11, 2001, we get a reminder every time we go through airport security that we are living in a “new” normal with heightened levels of fear and government regulations, and air travel is not ever going back to what it was pre-9/11. However, human beings are incredibly resilient, so while society will likely be different post-COVID-19, we will adapt and find our way, with the economy eventually strengthening, as it always does.
Moving on, to address the question which is more narrowly focused on the real estate market, again, without the crystal ball and with so many unknown variables, it would be foolish to suggest we could make a prediction with accuracy. The answers to the two previous questions provide some insight into some of our thought process in interpreting the market, but the timing question is just so challenging. Sometimes you will hear the suggestion of looking at past economic events as a good indication of what may be to come. While we certainly don’t disagree that there could be some value in this approach, we’d suggest doing so with caution, as the world is changing so rapidly that past timelines are becoming less and less indicative of likely future outcomes. Take for example the news cycle and the prominence of digital and social media in our society. Dissemination of information happens quicker, is around the clock and is unavoidable, good or bad. Currently, much of the population is glued to their TV waiting for the latest update. Market sentiment fuels market activity. If economic news is positive, recoveries are quicker, if it is negative, again, more drastic immediate action is taken. When the health concerns dissipate, the initial few months and the real estate market activity will certainly have an impact on market psychology. If the market is better than expected, you’ll hear about it in the news, confidence will grow, buyers may not want to miss out on a good buying opportunity. On the flip side, disappointing market activity will likely lead to increased fear that “the sky is falling”, in which case buyers will take caution and sellers may try to get listed “before it is too late”, resulting in a demand/supply imbalance. Government intervention is a second major factor that wasn’t as prominent pre-2008. Within weeks of the growing concerns of COVID-19 in Canada, the Bank of Canada overnight lending rate had been cut by 1.5%. Sitting at .25% there is no more room to accommodate here, but what else does the government have in its arsenal to help mitigate the economic damage? You can’t argue that they haven’t been quick to act with the various policies, subsidies, benefits, etc., that have been introduced in a very short time period, which again serves to set the stage for a potentially accelerated recovery, depending on what is introduced, and how it is managed. So how about COVID-19 itself? Not enough is known about the virus or its growth curve for the experts to be able to make any reasonable predictions on timeline, so it would be laughable to think that a group of realtors could even take a stab at it. Could there be a second wave? It all factors into the recovery timing conversation.
Here are some other factors outside of the real estate market statistics that we will be watching to help us formulate a more accurate opinion on recovery timeline: Employment levels, credit supply, changing lending guidelines, interest rates, household debt levels, construction and new housing supply, consumer confidence, GDP, financial market performance, tourism activity, transit volume such as ferry traffic, airport arrivals etc., international arrivals, and more.
Do you think I can get a better deal if I hold off on buying for a while? If you have had the patience to continue on reading to this point, you should have a pretty good idea at how we may tackle this question...1. We don’t have a crystal ball. 2. There are too many unknown variables and it is too early to tell. 3. There are indicators that we are watching that will help us formulate an opinion, but this information and the various data points are ever-evolving. 4.There is some fundamental economic theory that we can use to assist in interpreting the market.
On this note, let’s look at a few different economic scenarios, particularly related to supply and demand considerations. If it takes 2, 3, 6 months for the COVID-19 concerns to cool down, at that stage we can have less buyer demand, similar buyer demand, or more buyer demand? Remember to factor in that buyer demand is not just about intention, it is also about qualification. With rampant job loss, businesses likely to close, credit utilization increasing, and consumer confidence taking a hit, ask yourself how strong do you expect buyer demand to be when we emerge from this? Similarly, ask yourself the same question about supply. Do we have more homes on the market, a similar number, or more listings? As time goes on in the first few months of the economic recovery, does supply outpace demand, or demand outpace new supply? We’ll refrain from making any bold predictions here, as I’m sure from what has been written above you likely have a decent idea of how we may answer if we had to make a call. What we will do, is outline how you may be able to use this information to assist in formulating your own conclusions. So here it is... In general with all else being equal, in a scenario where demand exceeds supply, there is upward pressure on pricing, when demand is roughly equal to supply pricing should be relatively constant, and when supply exceeds demand eventually there is downward pressure on pricing.
OK, ok, I know you probably are hoping for more than us essentially telling you to figure it out...So if we had to make a call, we would say, yes, there will likely be opportunities to secure a better deal than you could in March or April of 2020 in the coming months. Timing-wise we don’t know when, location, category and price points-wise, we won’t attempt to get into specifics, but our expectation would be that there will be some opportunity here. What I do want to make clear is that we are not suggesting that all categories, locations, or price brackets will see opportunities for a “better deal”, as all have their own demand and supply profiles that may be affected to a lesser or greater extent by current world events. What we’d suggest may be a prudent use of the next few months is for buyers who were intending to purchase this spring to really spend the time to immerse themselves in understanding the market they are intending to buy into. That way if and when good deals start to emerge, you will be in a position to act. Also remember, most listings on the market currently are not casual listings. Most sellers are motivated or they would not be subjecting themselves and others to the health risks if they didn’t have a need to sell. As time goes on without a sale, this motivation only increases. Eventually when sales happen, these become the new comparables that are relied upon to price homes and negotiate offers.
Helpful Resources: Here are some resources that may be useful to keep you informed and help navigate the COVID-19 crisis:
Coronavirus (COVID-19) - Health Link BC
Information on Novel Coronavirus - BC Centre for Disease Control
Coronavirus disease (COVID-19): Outbreak Update - Government of Canada
Public Health Agency of Canada - Government of Canada
Information for Real Estate Consumers on COVID-19 - Real Estate Council of British Columbia
COVID-19 and Tenancies - Government of British Columbia
Supporting Renters, Landlords during COVID-19 - Government of British Columbia: Municipal Affairs and Housing
Coronavirus Disease (COVID-19) - Government of Canada - Employment and Social Development Canada
Canada Emergency Response Benefit - Government of Canada - Department of Finance Canada
Additional Support for Canadian Businesses from the Economic Impact of COVID-19 - Government of Canada - Department of Finance Canada
Canada’s COVID-19 Economic Response Plan - Government of Canada
BC Hydro Announces Bill Help - BC Hydro
First National: 1-888-488-0794
Stay safe, do your part in flattening the curve, and we wish you and all those close to you the best of health!
For a (virtual) consultation specific to your situation, or if you have any questions about market conditions, please contact us at firstname.lastname@example.org and we would be happy to help.
Disclaimer: The information presented is intended for general information purposes only and should not be construed as Real Estate advice. Each client's situation is unique and therefore we recommend consulting directly with your professional advisors (Realtor, Accountant, Lawyer, Investment Advisor, etc.) prior to making any real estate decisions. Not intended to induce breach of an existing agency agreement or solicit properties currently listed for sale or individuals currently under contract with a Brokerage.