Real estate sales and leasing, because of the nature of the business, faces unique challenges resulting from the Coronavirus pandemic and the resulting social distancing and shelter in place orders.
In certain ways, real estate professionals were well positioned for operations during the current pandemic. A few weeks prior to the COVID-19 outbreak and before shelter in place orders came into effect, when we did not yet appreciate how quickly life would be changing for us, I attended a networking meeting where a San Fernando Valley-based real estate broker shared how much the business had changed in just the past 10-15 years as a result of technology and online real estate listings. Gone were the days of picking up clients and driving to look at 5 to 10 houses for an afternoon. Now he communicated with clients mostly by text, his clients already knew which properties they were interested in, had reviewed the specs and pictures, and documents were signed electronically.
In early March, as the population became more aware of the severity of the pandemic, many real estate agents began voluntarily halting open houses and instituting safety measures such as hand sanitizer and minimized face to face contact. Following Governor Newsom’s stay at home order issued March 19, 2020 and Los Angeles Mayor Eric Garcetti’s order of the same date, many real estate professionals by and large understood this to bring real estate sales and leasing to a halt.
This changed on March 28, 2020, when Christopher Krebs, director of the U.S. Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA), issued an Advisory Memorandum adding “real estate services” to the list of the nation’s critical infrastructure sectors. The Advisory Memorandum specifically lists as essential “Residential and commercial real estate services, including settlement services.” As a result of that guidance, real estate services were given the go-ahead in California, as the Governor’s stay at home order incorporates the federal government’s list of essential infrastructure sectors.
The same day, March 28, 2020, the California Association of Realtors (C.A.R.) issued guidance to its members regarding the addition of real estate to the list of essential services, advising that “[n]otwithstanding this new development, all real estate licensees must take into account the health and safety of their clients and fellow licensees” and setting forth health safeguards and protocols to be observed by licensees.
Specifically:
- No open houses should be held.
- Showings should be done virtually, if at all possible.
On March 31, 2020, C.A.R. issued robust Guidelines for Real Estate Best Practices for its licensees that interprets the Governor’s stay at home order as updated by the federal Advisory Memorandum.
The list of recommended best practices in all instances is extensive, and includes, among others:
- Showings should be done virtually, if at all possible.
- All activities should be completed electronically, if at all possible.
- Only a single agent and no more than two other individuals are to be in a dwelling at the same time during a showing. If other persons are necessary for a showing, they should wait outside or in their vehicles to observe the social distance guidelines.
- Agents should read and understand the recommendations from the Centers for Disease Control and Prevention (CDC) on how to protect yourself. This is critically important!
- Any persons on the property must agree to adhere strictly to the social distancing guidelines at all times by remaining at least six feet apart per the recommendations established by the CDC.
- Any person entering a property shall provide by declaration that to the best of their knowledge, they are not currently ill with a cold or flu; do not have a fever, persistent cough, shortness of breath, or exhibit other COVID-19 symptoms; have not been in contact with a person with COVID-19; and will adhere to and follow all precautions required for viewing the property at all times. All persons visiting a property will agree to wash their hands with soap and water or use hand sanitizer prior to entry, and to wear disposable rubber gloves and a protective face mask, if one is made available. In addition, sellers must disclose to all persons who enter the property if the seller is currently ill with a cold, flu or COVID-19 itself, or has a fever, persistent cough, shortness of breath or other COVID-19 symptoms, or has been in contact with a person with COVID-19. Further, if anyone who enters the property is later diagnosed with COVID-19, the person who is diagnosed must immediately inform the listing agent, who will then make best efforts to inform everyone who entered the property after the person diagnosed, of that fact. Showings should be done virtually, if at all possible.
The Guidelines also include best practices for various categories of real estate transactions, such as entering a seller’s property, conducting pre-marketing and marketing activity, drafting and acceptance of contracts, and completing a transaction. For example, to the extent agents are conducting physical (as opposed to virtual) showings, agents should not leave out physical brochures and flyers and should instead transmit this information electronically. Agents should discourage anyone who doesn’t need to view a property from attending a showing. No driving clients to properties and individuals should follow CDC guidelines, including maintaining a minimum six foot distance apart. Limit showings to so-called “serious” buyers only. Lockboxes, keys and doorknobs should be disinfected, and parties should refrain from touching any surface during a showing. Discussions following a showing should be conducted via telephone or videoconference in order to avoid physical conversation where maintaining proper distance can be difficult. Staging and de-staging of properties should be virtual, not physical.
In connection with the above, C.A.R. has released two new forms:
- Listing Agreement Coronavirus Addendum or Amendment (RLA-CAA) – this form is for sellers and listing agents to sign, and
- Property Viewing Advisory and Declaration (PEAD) – this form is to be given to and signed by the seller, buyer, agents and anyone else who will be entering a property.
The fact is, real estate sales are still happening and licensees are helping their clients during a time of tremendous uncertainty. At the same time, there is no crystal ball as to what the real estate market will look like going forward. Some home buyers who have been severely impacted by the drop in the stock market may be prevented from moving forward with transactions. Others will benefit as interest rates have remained low. Looking at the longer term, virtual open houses and virtual staging may become the norm which could be crushing to the home staging industry. I’ve also seen speculation that homeowners, now aware that quarantining at home is within the realm of possibilities, will seek larger homes. It seems entirely possible that homebuyers will be looking for more space for home offices and gyms, and this may bring to an end the “tiny house” movement.
If you would like to discuss how these new developments may affect your business or contracts, please reach out to me at laine@eanetpc.com or (310) 997-4185.