Real estate agents get creative with technology to keep helping those who must buy or sell.
Canada’s real estate industry, like so many others across the country, is dealing with a whole new normal as provincial governments declare states of emergency amid the COVID-19 outbreak, shut down all non-essential businesses and urge the public at large to halt or limit any face-to-face contact.
In Ontario, real estate services have been declared an essential service, but agents and homebuyers are being asked by real estate boards to avoid face-to-face contact and to cancel in-person showings and open houses.
This comes as the housing resale market had a strong start to the year.
“We started off the spring season doing phenomenally,” says Angela Mandalas, a real estate agent with Johnston and Daniel in Toronto, Ont. Now that activity has taken a hit.
“We were super-heated before this all happened,” adds Doug Adler, a real estate agent with Chestnut Park in Toronto.
But the economic shutdown has had an impact.
Sally Cook, a real estate agent with RE/MAX/Hallmark in Toronto, says sales dropped 36% in one week, and of course, showings are dropping sharply.
Toronto listings in the week after March Break — considered the official start of the spring real estate season — fell 26% this year compared to the same week in 2019, says Mandalas. Listings were up 20% year-over-year in the last week of February. Data for Canadian March sales won’t be released until early to mid-April.
“If people can hold off, they’ll wait to list their home for sale and that will mean a decline in house listings over the next few months,” Mandalas says.
Mandalas is advising her clients to hold off on looking for a home right now.
“I can’t in good faith encourage them to make an offer on a home not knowing what will happen with the sale of their home. I wouldn’t be able to predict what their home would sell for,” she says.
On the finance side, the outbreak of COVID-19 and a sharp drop in the price of oil led the Bank of Canada to cut interest rates by a whopping 150 basis points last month — dropping its key lending rate to 0.25% from 1.75% at the start of March.
That’s also led Canada’s big banks to drop their prime rates to 2.45%, a change that affects current variable rate mortgages and home equity lines of credit.
Ratesupermarket.ca shows current 5-year variable rate mortgages as low as 2.29%. Fixed rates for a 5-year mortgage can be found from 2.19%. However, some fixed rates have been rising as the banks prepare for potential stress from struggling households amid layoffs due to the economic shutdown.
In reality, how do you buy or sell a house — one of the biggest and most emotional decisions a person or family can make — when you can’t go see it?
“Everything has been transitioned to technology,” says Mandalas.
That means all in-person meetings with clients or other realtors are cancelled and instead phone or video calls take their place. House showings are being done via video as well. All documents are being signed electronically.
“It’s quite a change in the market because obviously when someone wants to purchase a home they want to go into the home and they want to see the home,” she says.
“The industry is trying to work within the constraints placed on it, but that doesn’t make it easy,” says Cook, a real estate agent with RE/MAX/Hallmark in Toronto.
“Buyers want to see [a home in person] and how do we facilitate that as safely as we can for everyone?” she says. “I think everybody is trying to be creative.”
Adler has a condo listing right now — which came out prior to the shutdown — and he had to tell all visitors that there had been a case of COVID-19 in the building. Now some condos simply aren’t letting in anyone but condo residents.
That listing can’t be shown. But Adler hopes the agents who were able to see the property prior to the shutdown can recommend it to their clients.
But bringing out a new listing right now? “I don’t think it’s wise,” he says.
The best avenue for some is just to pause.
“We’re encouraging people to wait if they can, however, sometimes people can’t wait because of life circumstances,” says Mandalas.
Some people have been caught by the economic shutdown — they already bought a new house before the virus took hold and now must sell their current home or vice versa. Others are completing transactions and have a move-in date in the next few weeks. Looking ahead, some people may be forced to sell if they’ve lost their jobs and can’t afford their mortgage — or if their tenant is unable to pay.
“That’s going to be the tricky one,” says Adler. “I feel so bad for those kinds of people.”
In those cases, real estate agents are doing showings on a client’s behalf by going into a house while on a video call with the potential buyer. Then everything that has been touched is sanitized afterward.
“We’re doing things like that for people who absolutely need to move at this time,” Mandalas says.
Adler says some exceptions include purchaser visits prior to closing, as that’s part of the purchase agreement. He has a house closing in late March that includes a visit by the buyer first, and then everything will be sanitized afterwards.
Real estate contracts are also including clauses allowing in-person inspections after a purchase and giving options to extend closing dates.
A big concern is how well the industry will recover. Buyers will be more hesitant due to the hit the economy has taken and that will shake consumer confidence. People might pull out of the market if they lost their job or worry about their job security.
“We’re in unknown territory here,” says Cook. “How long is it going to take to improve? How bad is it going to get before it improves?”
After the 2007-2008 financial crisis, it took six months for the market to bounce back, she says. “I think this is going to be worse.”
Adler is hopeful that the market will come back quickly once the shutdown lifts. “I think there is going to be a lot of inventory after this is all done — at lower price points.”