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Buying a home during coronavirus: How a contactless sale works

Erik J. Martin
The Mortgage Reports contributor

Buying a home during coronavirus is still possible

If you were planning to buy a home this year, you may be asking yourself: is it still a good time to buy? Is it even possible?

Rest assured that the real estate industry has not shut down. It’s still totally possible to find, tour, finance, and close on a home virtually anywhere in the country.

In fact, buying a home during the coronavirus can be a smart move.

Think about it: There are fewer shoppers to compete with, and mortgage rates remain near record lows.

But you need to be prepared for a more careful and touch-free process. This may involve more reliance on technology and social distancing.

Verify your home buying eligibility (Oct 28th, 2020)

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House hunting during COVID-19

Many changes are now in effect that could actually make buying a home easier, safer, and quicker for many. For others, these changes could be more challenging or frustrating.

“At the moment, the new norm is more of a semi-contactless process,” explains Eric Fontanot, president at Patten Title Company.

“Social distancing and stay-at-home orders have forced the real estate industry to adopt what measures they can to continue to conduct business while keeping the safety of customers, clients, and employees at the forefront.”

You may not be able to walk through a home for a private showing or open house. This will depend on social distancing rules in a given community.

For starters, you may not be able to walk through a home for a private showing or open house.

This will depend on social distancing rules in a given community. If allowed, some agents and sellers will let you and another person physically tour a home for sale — provided you wear gloves and a mask and maintain social distancing.

In other cases, you can take a virtual tour of the property.

“This involves viewing online photos and videos of the home, including 360-degree views. The virtual tour may also include an interactive floor plan that uses arrows and graphics to educate you about the home’s features,” says Christopher Sullivan, a real estate attorney in Dallas.

Getting a mortgage online

Finding and applying for a mortgage is simple during the pandemic, even though many brick-and-mortar banks are closed. You can easily shop for lenders and apply and qualify for a loan online.

In fact, there are plenty of mortgage companies that specialized in end-to-end digital mortgages, even before it became necessary.

>> Related: The best online mortgage lenders

Many digital lenders can pull your financial information online, directly from the source. And some let you e-sign documents so no physical signatures are necessary.

In this way, online mortgages are both safer and often faster to close than “traditional” mortgages.

Virtual inspections and appraisals

Home inspections and appraisals generally need to happen in person. After all, inspectors need to actually inspect the house for issues, and appraisers typically need to see a home in person to gauge its value.

But there are workarounds to make these processes safer for all the parties involved.

Many property inspections are being done virtually. So instead of accompanying an inspector, you are given a video report of what they inspect and discover.

When it comes to appraisals, “many appraisers can inspect the property via drive-by,” notes Fontanot. In other words, they determine the value of your desired home without leaving their car or from a distance and without entering the property.

Contactless closing

In a typical closing, you arrive at the office of a title company or attorney. There, you usually hand-sign a stack of crucial documents, shake hands, and walk off with the keys to the property. But nowadays, things are different.

“Closings right now are often a hybrid of sorts. Today, buyers sign off on contracts via electronic signatures at safe distances from the professionals involved,” Fontanot says.

For example, Cook & James attorney Kara Cook has recently conducted closings “on people’s front porches, in their garages, and even by the pool or tennis court of the condo complex. We can also deliver documents to your preferred location and set up a video call to watch you sign.”

“Today, buyers sign off on contracts via electronic signatures at safe distances from the professionals involved.” –Eric Fontanot, President, Patten Title Company

Drive-by or curbside closings are popular, too.

“In a typical curbside transaction, the seller’s and buyer’s attorneys review the loan and closing documents. Buyers and their agents show up in separate cars,” says Sullivan.

“The parties are met outside by a title company closer who walks everyone through the documents and obtains the necessary signatures.”

Physical signatures and notarization

Also, many closings today involve remote online notarization (RON). This enables a notary public to complete electronic notarizations from a remote location with the help of audio/visual technology. A camera allows you and the notary to observe the needed signings/stamping.

“In states where RON isn’t allowed, there are still ways to keep this process digital,” says Max Simkoff, founder and CEO of States Title.

“We can use out-of-state notaries who conduct the transactions on a RON platform. The borrower confers special power of attorney privileges to us, the title company, using RON. This allows us to wet sign the note in the borrower’s name, scan it in, and send it to the county recorder’s office.”

Fontanot notes that many lenders still require physical signatures and notarizations on certain documents. This allows them to sell the loans on the secondary market.

But if you are required to hand-sign any documents, the parties involved will ensure that you are protected by making everyone wear a mask and gloves and maintaining social distancing.

Challenges of buying a house during COVID-19

Everyone is working hard to keep you safe. And houses are still on the market. But you can expect some challenges as a home buyer today.

First, there may not be a lot of housing stock to choose from. One study shows that 55% of home sellers are delaying the process by at least a couple of months.

Second, it may feel risky taking a virtual tour and choosing a home without the benefit of closer physical inspection.

Also, it may be more difficult to obtain financing right now if you’re self-employed, aiming for a jumbo loan, or have a lower credit score. That’s because mortgage lenders have tightened their lending standards in the face of economic uncertainty during COVID-19.

“Plus, there is always risk with adoption of new processes,” cautions Fontanot.

“Drive-by appraisals can alter the appraiser’s opinion of the value of your property. A virtual inspection could miss a defect that might be critical. And a RON closing may make positive identifications harder to confirm.”

Potential perks of buying a house right now

Yet the benefits of buying now may outweigh the risks and challenges involved.

“Mortgage rates remain enticingly low, giving you more purchasing power,” says Sullivan. “Home prices may decrease, too, allowing you to get a bigger home.”

In fact, housing affordability was recently at its highest point in three years.

“Mortgage rates remain enticingly low, giving you more purchasing power.” –Christopher Sullivan, Real Estate Attorney

As mentioned, there could be less buyer competition in some markets, as well.

Additionally, “these digital, contactless processes could reduce risk because they take the human element of error out of the transaction,” says Suzanne Hollander, a Florida International University real estate faculty.

“There likely won’t be last-minute arguments at the closing table between buyer, seller, broker, or attorney. That’s because they won’t be sitting at the closing table together.”

Should you buy a house right now?

Of course, the decision to buy a house right now depends on your unique situation. It only makes sense if you have dependable employment and financial security.

But for those that do? Right now could be a uniquely good time to buy a home.

“You have the opportunity to take advantage of low rates and good financing options,” Fontanot says.

“Right now, we are seeing the market favor buyers. So those looking to purchase might want to consider this as a unique time to shop.”

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