Buyers are less interested in buying homes right now
Selling your home in the middle of a pandemic is challenging without a doubt given that buyers expect to buy at lower prices. The National Association of Realtors (NAR) from the US conducted a survey in early April which collected over 5,800 responses. From the survey, 90% of respondents reported a drop in interest from real estate buyers and 63% said that buyers expect a drop in home prices due to COVID-19. However, 72% of respondents said that sellers will not lowering the prices of their homes.
Not all hope is lost if you have to sell a property right now for whatever reason, especially if delaying the sale is not an option. We will provide some tips on selling fast, tools that real estate agents are using to make the process more efficient and the risks involved with selling right now.
5 things you need to know when you're selling your home during a pandemic
1. You may have to price your home below market value.
This is hard to accept but having a below-average price will attract more buyers as well as investors who are looking for a good deal during this time. Although a lower house is not favorable, we suggest this strategy if the original listing price does not attract any buyers. It is becoming a reality for many Canadian sellers who are accepting a price below asking if they want to sell now.
2. It will likely take much longer to sell your home compared to January and February.
Trying to have patience during this time might be one of the hardest tips during this time. You will need to understand that it may take longer than first anticipated to sell your home and that buyers may put different conditions before a firm deal is in place. In a hot market, it’s scary to have your home unsold for weeks and you may begin to worry about your listing becoming stale. As it becomes harder for people to view homes and the pool of buyers has shrunken, buyers will understand that your property is being affected by the pandemic and not necessarily its lack of curb appeal.
3. Consider asking for a larger deposit from your buyer.
Asking for a large deposit from a signed buyer may help ease some worry of that buyer having to back out. If all conditions of the home have been met and the buyer backs out of the deal you are still entitled to the deposit. From the NAR survey, over 30% of respondents who were experiencing delays in closing were due to financing.
4. Interview at least 3 real estate agents before picking one.
Having a real estate agent during this time is crucial as they can help screen potential buyers and promote your home to other agents who may have buyers who are desperate to buy during this time. It’s important to interview at least 3 real estate agents to find the right person who knows how to maximize online tools to market your home. Lastly, new rules and regulations are constantly being announced when it comes to how real estate can be conducting so having a real estate agent who is continually being updated by their governing board will make sure you are kept up-to-date with all the latest information.
5. There may be no buyers: According to the NAR survey, the majority of buyers have decided to put buying a home on hold until the pandemic is over. Unfortunately, this would mean that you need to have a plan in case you are unable to sell now.
Learn more about how the impact that the Coronavirus has had on home buyers and sellers in our article called How The Real Estate Industry Is Responding to The Coronavirus COVID-19 Pandemic.
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Risks of selling your property during the Coronavirus COVID-19 pandemic
- Selling at a lower price: You may have to sell your home slightly lower than it could be sold during the normal home-buying season. If you are in a position where you can hold off on selling your property it is recommended that you wait.
- Not knowing your buyers’ health conditions: If you have buyers view the property you do run the risk of not truly knowing if buyers are free of the Coronavirus. Make sure you have enough cleaning supplies to be able to clean up after people who come see your home. You can also let your real estate agent know what certain rooms are off-limits and you can leave the doors open to those rooms for showings.
- Unexpected delays in closing: You may experience closing delays that are beyond your control due to businesses being shut down or operating under reduced hours. Real estate agents, lawyers and mortgage services are still listed as essential services in Canada and homes can still close during the pandemic. However, many businesses are operating with shorter hours and buyers are putting clauses into the offer in case closing gets delayed if more businesses are forced to close. See the clauses that buyers may put into the offer due to the Coronavirus.
What real estate agents are doing to sell homes faster
More time is being spent on qualifying buyers
Agents are the first line of defence to letting anyone in the home for a showing. They can confirm that buyer is serious and is pre-qualified for financing before any showings are booked. Many real estate agents also have precautions in place of only allowing customers who have signed a buyer’s viewing document stating they have not travelled; they are not feeling flu symptoms and more before they can enter the home.
Virtual tools to increase the exposure of the home
Agents are getting creative in the way they are helping to market sellers’ home. The real estate industry has been slow to adopt but with the recent times, they have now been embracing new tools and resources to help their clients. They are providing more virtual tools to their seller clients. To help people see homes without seeing them in person, real estate agents are including 3D virtual tours, virtual open houses, and videos of the property to show to potential buyers.
Other things to consider when selling your home in 2020
1. How long are you planning to sign a contract with your real estate agent?
Before your home goes on the market, you will need to sign a listing contract with your real estate agent. Your contract terms are negotiable and you can decide how long you may wish to be in a contract for. As the conditions for selling become more uncertain, real esatate agents may ask you to sign a longer-term contract because homes are not expected to sell as quickly. This could mean a six or 12-month contract. If you are ok with putting your home on the market and seeing what happens over a long period of time, that term may work for you. However, if you are uncomfortable with having your home on the market for a long period of time, then you may want to ask for a shorter contract term of 90 days. Have the conversation with your REALTOR® on an appropriate contract length, it’s wise to set these expectations upfront before your property goes on the market.
2. If you are selling your home, do you have a new place to live?
Since it may not be as easy to obtain financing if job security is a concern, selling your home now without a place lined up could be risky. There are many condos in Toronto that are being rented out fully furnished right now as Airbnb owners try to find a source of long-term income. If you are in a situation where job security is a concern and you have to sell, then renting may be something to consider. If you are in a position to buy a home, read about all the things buyers need to consider when purchasing a home during the pandemic.
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Fivewalls Certified Agents' predictions on home values after the pandemic
Three real estate agents on what they think will happen to home prices because of COVID-19:
"2020 started very strong and was a seller's market with huge buyer demand and limited inventory. I personally had a lot of buyers call me in the first few months of this year ready to house hunt as they have been waiting out the market for a while and were enticed with the new lower mortgage rates and more relaxed mortgage qualification with the Stress Test. However, since COVID-19, some of these buyers now want to wait to see how the market goes because of the uncertainty of the economy and job stability. Hard to predict where we will go from here but whatever happens I do think the market will recover as there is always a need to buy and sell, with a potential delay of our typically strong Spring market to the Fall instead."
"No one can forecast what will happen, there are 2 ways that things may go: 1) Value of homes will keep going up because of the high existing demand and lower inventory and continue to be a Sellers’ market. or 2) The demand will eventually drop down because of the financial crises and prices will drop."
"First, let’s take a look at the Q1 2020 data as it stands in isolation. The average median sales price of a home in Guelph increased by nearly 14% vs. the same quarter a year earlier – an increase of over $65,000! In contrast, median sales prices only increased by 3.2% comparing Q1 2019 vs. Q1 2018, and so the pricing growth over the past 12 months is certainly dramatic. Not only did Q1 2020 see substantial price increases, but also a much higher sales volume. The number of homes sold increased by an astounding 27% vs. Q1 2019, from 453 to 575. Particular strength is attributed to the detached housing form, with a 37% increase. The overall number of properties listed for sale increased year-over-year as well, but at a much lower rate – a 3.2% increase. With heightened buyer demand in a market with relatively stable supply, considerable median sales price increases were inevitable."
For more information about the impact of COVID-19 on the real estate market, we have gathered a list of frequently asked questions that get updated as the situation changes. You can find the FAQs about COVID-19 and the real estate market here.