COVID-19 and Real Estate - How it impacts in Washington state?
From the beginning of the March 2020 we faced a new virus we have never faced before - #COVID19, a type of coronavirus family. It is very easily spreadable and therefore exploding very quickly in number of infected people at a time. In order to stop spreading it some measures are needed, usually very restrictive to be effective. As of today, Washington reported to have 3,207 infected people, from which 147 died.
To help prevent the spread of COVID-19 (#Coronavirus), effective midnight on Wednesday, March 25th, Governor Inslee issued a statewide "Stay Home, Stay Healthy" order. The Order will initially last for two weeks and requires the closure of all "non-essential critical infrastructure businesses." Workers that are considered non-essential and who do not have in-person contact with others, can continue to work remotely from home only. The #Order may be extended and may be modified.
Are real estate brokerage services considered “essential”? No, not at this time. Real estate brokerage services are not on the list of essential services. Real estate brokers may:
Provide services to their clients remotely from their house; and
Use technology services that enable remote business, including online forms, electronic signatures, virtual tours, videos, and similar tools that can be used from home.
Real estate brokers may not:
Conduct any business outside of their home, including physically showing or previewing properties, conducting in-person listing presentations, taking property photos, staging homes, etc. Any #broker who violates the Governor's order not only puts himself/herself and his/her family at great personal risk, but also puts the broker’s real estate firm and his/her clients at risk.
Real estate firms can continue to process payroll and benefits, preserve equipment, ensure security, and support brokers’ ability to work from home. Social distancing guidelines must be followed. This exception is to continue only basic, minimum business functions for identified essential workers. This is not an exception to the prohibition against a broker leaving home to provide real estate brokerage services.
The “Financial Services Sector" has been deemed essential, though. This includes workers who are needed to process and maintain systems for processing financing transactions and services and insurance companies including mortgage lenders, escrow and title insurers. Because the Financial Services Sector is considered essential, real estate transactions that are under contract may be able to proceed to closing. Of course, there could be delays, which is why the parties should use the new Force Majeure and Closing Addendum.
What is Force Majeure Addendum?
"Force Majeure" is a French term that translates as "superior force" and a "force majeure event" is an event or effect that can be neither anticipated nor controlled. Many contracts contain a "force majeure clause" allocating risk between the parties if performance of the contract becomes impossible or impracticable in the event of force majeure. Common examples of force majeure events include acts of nature (floods, earthquakes, hurricanes), acts of people (war, riots, strikes), and epidemics (a widespread occurrence of an infectious disease). Events and occurrences associated with the recent COVID-19 (coronavirus) epidemic may qualify as a force majeure event that may excuse or delay performance of a contractual obligation.
Currently, the most common example of a force majeure event related to COVID-19 (coronavirus) is a delay in recording the closing of a sale due to staffing limitations of a county recording office. This is an event that is beyond the control of the parties and could not have been avoided, making performance of a timely closing impossible.
While no one can predict what other force majeure events may arise, other examples may include certain government directives (e.g. a shelter-in-place order) that would prevent a buyer from timely completing an inspection of the property because the selling broker, buyer, and/or inspector are unable to lawfully access the property. Similar issues could cause unavoidable delays in appraisals being timely completed and other financing matters. There are likely a myriad of other issues that cannot be contemplated in advance by the parties.
Parties to an existing purchase and sale agreement should consider amending their agreement to include ForceMajeure Addendum. Buyers and sellers who are not yet under contract, should consider using FM Addendum with new agreements for the foreseeable future.
Can inspectors conduct home inspections during the Stay Home, Stay Healthy Order?
Currently, no. Inspection services are not considered essential. Washington Realtors and NWMLS are awaiting clarification from the Governor’s office regarding certain activities for pending transactions.
Can buyer brokers conduct “buyer walk-throughs” prior to closing during the Stay Home, Stay Healthy Order?
Currently, no. Real estate brokerage services are not considered essential. Washington Realtors and NWMLS are awaiting clarification from the Governor’s office regarding certain activities for pending transactions. Note that the Force Majeure and Closing Addendum (Form 22FM) extends the buyer’s time period to complete the walk-through, which would extend closing.
Can brokers retrieve house keys and provide to a buyer after a closed sale?
Currently, no. If keys to the property are not otherwise available to a buyer at closing, a broker in the transaction may make arrangements for a seller to leave a set of keys for the buyer at the property, observing social distancing guidelines.
As always, brokers have a duty to refer their clients to experts regarding matters in which the broker lacks expertise. Particularly in matters affected by COVID-19 and the Stay Home, Stay Healthy Order, it is unlikely that brokers will have expertise and should advise their clients to seek the advice of an #attorney.
Can brokers continue to physically preview or show properties in any fashion – even alone?
No. In-person previewing or showing properties is in direct violation of the Governor’s order. In addition to property photos, brokers and buyers should utilize virtual tours and videos that were created before the effective date of the order.
Can real estate brokers list new properties during the Stay Home, Stay Healthy Order? What about property photos?
Real estate brokers are permitted to input #newlistings – from their home. However, real estate brokers may not physically visit #theproperty to take photos, create virtual tours or videos, stage the home, or meet with the seller. Likewise, professional photographers are not permitted to visit the property to take photos or create virtual tours or enter the property for any purpose. However, the order does not prohibit a seller from taking pictures of his or her own property and sending those photos to the listing broker.
Can moving companies move buyers into a property and move sellers out of a property?
Currently, no. These services are not considered essential.
I believe it is a great time to encourage #buyers to make an offer without seeing the property. Not many buyers will feel comfortable doing this so, but the few who are would take advantage of the situation to be the only or one in few offers sellers will receive. A real esteta broker can always write the following contingencies to the offer:
This offer is contingent on buyer having access to tour the property within the next 2 weeks of mutual acceptance.
Buyers inspection period will not start until property is available for touring. If the buyer finally tours the home and does not want to purchase they can terminate agreement.
Form 22FM should be used in the offer as it applies to both contingencies if time lines go beyond two weeks of mutual acceptance.
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