Real estate deemed coronavirus 'essential service' in many areas

Here's how real estate deals are working amid social distancing

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The coronavirus pandemic has dramatically slowed the real estate market, but professionals in the industry where location is key are finding ways to continue making deals remotely.

"It takes a lot of creativity and cooperation between the parties, but at the end of the day, we're going to get it done," Sandor Krauss, a New York City-based real estate attorney, told FOX Business.

Many of the sales that Krauss has seen go through since the pandemic hit the U.S. were already in negotiations before social distancing practices went into effect in many communities. But he said there have also been deals reached with buyers who have only had virtual "visits" to their new homes — though mostly for new developments.

"When it's a new construction, you're buying that on spec anyway," he said.

Different states have set different rules as to what businesses are "essential." However, the Department of Homeland Security has deemed residential and commercial real estate services essential, and in New York the Empire State Development agency said this week that real estate functions including property showings, home inspections and residential also appraisals are essential.

In hard-hit New York state where more than 100,000 people have been diagnosed with COVID-19, many real estate industry workers are still opting to self-quarantine where possible.

Pedestrians walk a mostly empty Sixth Avenue during the coronavirus outbreak Friday in New York. (AP Photo/Frank Franklin II)

Jennifer Stevenson, president of the New York State Association of Realtors, said in a written statement that the industry must use a "safety first, work second" mantra.

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"Our priority must be to the safety of our customers, clients and indeed for ourselves, as we all continue to practice socially responsible distancing that is helping to flatten the curve during this national health crisis," Stevenson said.

Krauss said he didn't know any brokers who were still showing properties.

"I don't know anyone that wants them in their apartment, and I don't know any brokers that want to put their families in jeopardy," he said.

Even if they did want to give tours, most buildings aren't allowing it, according to New York-based real estate executive Dolly Lenz.

"For Sale By Owner" and "Closed Due to Virus" signs are displayed in the window of Images On Mack in Grosse Pointe Woods, Mich. (AP Photo/Paul Sancya)

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Inspections and appraisals have also stopped as a result of the pandemic. Lenz said that's halted some sales.

"They're all in limbo," she said. "Their contract is signed, awaiting paperwork like appraisals. And we have to wait till that’s done. But they're ready to close."

Krauss said he's seen some sale contracts with an inspection contingency. In other cases, the sale price has reflected the lack of inspection. He's also seen some of the "coronavirus clauses" that have suddenly become a mainstay in the industry, offering buyers protection in case they're unable to access a home due to a quarantine or a financial out if they lose a job.

"I think people should know that, at least my office, will do these closings if they can be done and they're not putting anyone in danger, including any employees," Krause said. "But the answer is, they can be done, and we're going to continue to do them until we can't."

On the rental side, leasing agents are also still getting contracts signed. Adam Marcus, the community manager at the Harbor Landing luxury rentals development just east of New York City on Long Island, said prospective tenants have been virtually touring units and amenities via FaceTime and other video apps.

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Marcus said people were disappointed when they first started offering only virtual tours, but they've come around as social distancing has become "the new norm."

"The virtual tours always start off with a negative impression, but they end in a positive manner because people realize throughout the virtual tour that they're really getting the same experience that they would in an in-person tour," he said.

Marcus said the number of virtual tour-takers had doubled last week compared to the first few weeks, and that they'd signed 12 of the 30 virtual tour-takers, which isn't far off from typical numbers.

But just like the sales that Krauss has seen move without an in-person visit, Harbor Landing has been renting out new construction units. Lenz said her firm's web traffic since people have been self-quarantining shows that buyers are "looking hot and heavy."

Buyers are looking at unique properties like one on Central Park West that Lenz is listing next week, trying to find them before they're "overexposed," she said.

271 Central Park West (Google Maps)

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"That's a full floor in a very grand building, so rarely available," Lenz said. "I think those are the things that people are waiting online to see [in person] … It's something that's irreplaceable."

Even with the creative solutions to provide virtual tours and closings, the pandemic has been felt throughout the real estate market. As of last week, there had been a 148 percent year-over-year increase in de-listings, according to Redfin. The number of new listings were down 33 percent from a year earlier. The number of pending home sales was down 42 percent compared to this time last year, and the median asking price for a newly-listed home dropped $21,000 compared to two weeks earlier.

With the number of COVID-19 cases in the U.S. continuing to rise — more than 278,000 as of Saturday — and calls for staying home through at least the end of the month, the full extent of the pandemic’s hit to the real estate industry likely remains to be seen.

"I think that the real estate industry is going to be hit very, very, very hard," Lenz said.

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