Not many people were expecting real estate sales to boom during the coronavirus pandemic, but that’s exactly what has happened. Not just in the northern New Jersey area, but across the U.S. With mortgage rates dropping and sales spiking, many people are wondering when it will end and whether it’s a good idea to buy a home during COVID-19. Below I’ll tell you more about current real estate trends, tips for buying in the current environment, and when a Passaic County real estate lawyer might be able to help.
Home Values Rise as Mortgage Rates Drop
Across the U.S., home values started rising in majority of U.S. metro areas as far back as April and May. This was true of many areas across New Jersey, from Atlantic City to the northern part of the state. Part of the continuing boom is due to people fleeing crowded and expensive NYC for more space and cheaper homes. This is even more true as people continue to work from home, with many planning to work remotely for the foreseeable future if not permanently. Needless to say, New Jersey’s sprawling lawns and spacious and affordable homes are incredibly appealing during this time.
In response to the pandemic and the recession that followed, the Federal Reserve dramatically lowered real estates, with average mortgage rates dropping from 3.75 percent to less than 3 percent just a few weeks after the pandemic began. For many people, this turned the dream buying a home into a reality, since a buyer could suddenly afford a home with a higher price tag while making the same monthly payments they had been making.
While all of this sounds like great news, there are still issues plaguing buyers in this market. For one, it has resulted in a very low supply of homes for sale. Home sales are also more precarious because usual processes have been significantly slowed by stay-at-home and social distancing recommendations. And as new processes arise, legal requirements for contracts have changed, so be prepared for a slower process and potential legal complications.
Changes to Closing Procedures
In an era of social distancing, most real estate companies have changed their closing procedures dramatically. In-person closings are being limited to only essential participants. Title companies are holding curbside closings where escrow officers bring documents that need to be signed to people’s cars. Mail-in closings are more common, where buyers and sellers complete documents in advance and have them delivered on closing day. In addition, real estate attorneys are appearing on behalf of their clients during closings.
In some cases, all of this causes complications for buyers. For one, getting closing documents notarized in-person, a key part of the home buying process, can be difficult. In response, New Jersey Governor Phil Murphy signed an emergency law, New Jersey Assembly Bill 3909, allowing notaries and authorized officials to temporarily notarize documents remotely.
For some this is incredibly convenient, so buyers will ask their real estate lawyer to ensure this remains an option. It's also crucial to remember legal conditions must be met for the notarization to be considered valid. This can be tricky because the process is still new. In many cases, a NJ real estate attorney can help ensure all closing documents are valid and submitted on time.
Delays in Purchase and Sale Agreements
Another issue to be on the lookout for is delays in the buying process. If you are planning to buy, it’s best to start working with a lender as soon as possible. With many employees working from home, everything from appraisals to closings are moving more slowly than usual.
In addition, as you're negotiating any purchase and sale agreement, leaving enough time in case of a delay is important. Experts predict COVID-19 cases could skyrocket during the fall and winter months, which could potentially result in stay-at-home orders being resumed and businesses and government agencies that are key to the buying or selling process shutting down. It could also cause problems with inspections of properties, making them difficult or even forbidden for consultants or surveyors. If government offices are closed, it could cause problems for zoning consultants and delays to zoning permits. It's also always a possibility someone involved in the purchase and sale will need to self-quarantine due to illness, thus delaying the process. In general, it's a good idea to discuss automatic extensions of deadlines with your lawyer in case this happens.
Additionally, if your purchase agreement requires the seller to make improvements to the property before a closing and there are delays, buyers will want to put a cap on how many days COVID-19 can delay work completion. In general, although purchase agreements do not typically include force majeure clauses, adding one could be a way to cover any scenarios where the pandemic could cause delays that would affect the contract. It’s best to work with a real estate broker and lender earlier rather than later to ensure your purchase agreement is sound.
When to Talk to a Lawyer
Whether you are experiencing an issue due to a COVID-19-related delay that is affecting your closing or simply want to make sure you are prepared for any issues that could arise, Bavagnoli & Bavagnoli is here to discuss these issues with you and address them in a timely manner. We have been helping clients in northern New Jersey navigate the complications of real estate deals since 1997 and we may be able to help you as well.
Get in touch with us at (973) 785-9522 for a free consultation.