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First and foremost, I hope this note finds you healthy and safe. We will persevere!
Plain and simple, we need more information to make any conclusions on where we are right now.
We are all processing the shock of what seems like WWIII; in survival mode, everyone’s making their best efforts to “carry on”. However, with all the typical systems disrupted, it has become a tall order to transact real estate. There are innumerable moving parts and people to coordinate making it a logistical matrix to efficiently close a deal. Consequently, everyone is bending over backwards to adapt.
Handfuls of sellers are regretting having not accepted prior offers, as some of those prices may not be seen for years. We are seeing some deals renegotiated and others where buyers are simply walking away. I believe the latter is in the minority, as transactions are indeed happening, albeit substantially fewer in number.
Here’s what we know and have experienced so far:
Currently the majority of deals that are closing are ones that had already been in progress, contract signed and/or even board approved. New deals, although happening, are minimal and I expect will further slow down until we stabilize the system and can get back to some degree of normalcy, the ability to actually show properties being the most important factor.
Showings and open houses were suspended as of March 20th. Inventory is contracting; sellers are pulling many listings off the market and new listings are being delayed. Contract signings have declined. Traditional closings at a table are not occurring. Optionally they are occurring virtually, meaning the parties pre-sign documents and exchange funds by wire. Attorneys are reading board minutes by use of cloud storage, whereby they are being given access to those documents temporarily. Notaries are happening virtually. Final walk-thru’s are being done virtually and/or scheduled for afterward. Because of recording issues with the city registrar’s office, banks have exhibited a reluctance to transact.
Prior to even getting to the closing table though are other factors. The processing of purchase applications must go through the managing agents, whose offices are closed. To alleviate traditional hard copies, PDF’s are being accepted; however, without access to offices, scanning such substantial documents is a challenge. Even board interviews are taking place virtually.
While mortgage rates have fallen and driven up refinance applications, the due-diligence has likewise been littered with obstacles. “Exterior-only” and “desktop appraisals ” are increasingly being considered; consequently, accurate valuations are questionable. Buyer’s employment status and security are increasingly a factor.
The $2.2 Trillion C.A.R.E.S. Act will help avoid a credit crisis in the near term. The government will also likely begin additional quantitative easing (QE). We are also likely to see additional fiscal stimulus. Of course, there are differing opinions on who will actually benefit most from all of these measures.
As first mentioned, until we have hard data, which lags by 3-5 months, it will be hard to understand the true impact. Seems like a lot of loose ends; regardless, we will eventually come out of this. Most need and should take a deep breath and wait for more information to filter through, while others who are already transacting, whether in contract or simply waiting to close, should try to get to the finish line. Likewise, there are tremendous opportunities for others who are better positioned to consider the risk/reward alternatives presented to them now. Everyone’s situation is unique and should be evaluated independently.
As the shock and hysteria moderates, people will acclimate with a better grasp of our new reality. This will bring the confidence we will need to indeed persevere.
Roberto Cabrera
Licensed Real Estate Broker
Brown Harris Stevens
212.906.0554
Your City, Your Broker…
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