Maybe you’ve accepted a job in Los Angeles. Maybe you’re living with the person you’re divorcing. Maybe you find yourself in a situation, where, in spite of the deadly pandemic that has brought LA to a near-halt, you’re shopping for a house.
Homebuying has been deemed essential under the city’s and county of LA’s “safer-at-home” orders. But with strict social distancing guidelines in place due to COVID-19, the local real estate market—and the process of buying—looks much different now than it did just three weeks ago, when the restrictions kicked in.
“We’re still doing business, but it’s like it’s half-time,” says Compass agent Marc Hernandez. “There are stragglers out there, but almost everybody is off the field.”
Still, business has not dried up, and buyers aren’t totally out of options. Just this week, Hernandez listed a two-bedroom, two-bathroom house with a wood deck and small yard in Highland Park for $799,000, above the county’s median home price of $620,000 in February.
Have prices come down since then? What’s the market like? Are there (finally) good deals out there? Will I be able to get a loan, or are banks tightening up? How can I safely view a property? If you’re in a tough spot and are trying to navigate these unchartered real estate waters, answers to these questions and more are unpacked below.
What’s the market like? Are prices coming down?
With millions of Californians suddenly out of work and a steady stream of paychecks drying up, the typically vigorous spring real estate market has been reduced to a simmer.
But it’s too early to say definitively whether prices are falling. Some agents say they’ve submitted offers above asking in the past couple of weeks, others below. Whether you’ll get a good deal very likely depends on the motivation of the seller, says Hernandez.
If a seller thinks the “sky is falling” and the economy will not rebound, they might be more inclined to sell right away, before things get worse.
“I’ve got a seller that did get a lowball offer recently, and she came down a little toward them, and then they really tried to stick it to her, and she said, ‘You know what, I don’t need to sell right now…I know I’m going to be fine.”
One thing is certain, says Compass agent Tracy King: There is less competition.
Buyers who are sitting on piles of cash (thanks, grandpa!), have financing lined up, or kept coming up against multiple offers and losing out when the market was brisk, might decide now is a good time to commit.
“Buyers have a rare opportunity to make offers on properties without as much competition as they was before,” King says.
Should I consider buying?
If you’re an opportunistic buyer looking to take advantage of a bad situation, an agent very likely might discourage you to buy.
“Many times I have found that the inclination to buy and sell right now has more to do with fear and emotion rather than an actual critical need,” says Kendyl Young, owner of Montrose-based Diggs Realty.
That type of buying could endanger the community. But if circumstances are dire, and you really need to buy, you might find a good deal.
How can I view houses right now?
In the city of Los Angeles, your only option right now is to view the property online, as in-person showings are now prohibited. You can look at photos and virtual tours. But you will very likely need to make an offer without actually stepping foot onto the property.
There are agents who are still allowing buyers to tour properties, especially when they’re vacant, and a spokesperson for the California Association of Realtors says it might be okay for a buyer to contact a seller directly—with no agent involvement—to arrange to view the property.
But that probably violates the spirit of the city order and would put both parties in possible harm.
Elsewhere in Los Angeles County, agents have followed the advice of the realtors association and canceled open houses. But individual tours are still allowed.
Can I get a mortgage?
It depends on your financial situation. Banks are tightening up, but if you have a steady paycheck, a savings, and a good credit score, you’re in a good position to get financing, says Daniel Arias, a team leader with We Fund LA, a division of Finance of America Mortgage, LLC.
“Non-traditional mortgage products have been suspended, and it’s going to be harder to qualify for a loan if you don’t have the ability to show that you are continuing to work,” he says.
That could pose a huge hurdle to Angelenos, many of whom work in creative industries that have been walloped by the novel coronavirus.
But that does not mean that if you work in the entertainment, hospitality, or service fields, you’re automatically disqualified. Arias offered up an example of two clients, both of whom are hair stylists who have had to shutter their shops amid the pandemic.
One had 12 months of a normal mortgage payment in savings, good credit, and very little debt. The other had very little money in the bank, a history of high credit card usage, and a credit card score that was not strong.
The loan’s underwriter asked what the odds were that either would ask for a forbearance on their payments two months from now. The answer was the second hairdresser, but not the first.
“They’re looking at the totality of the borrow’s profile,” Arias says.
What should I know before making an offer?
First, the process is taking more time. Contingency periods in the bustling spring markets usually shrink to seven to 10 days, but now buyers are asking for longer periods. Because of social distancing restrictions, it’s taking longer to do everything, from inspections to appraisals to loan approvals, says Sotheby’s International Realty agent Olga Crawford.
If you want to make an offer on a property and are not able to visit it first, agents can write an offer to bring you into escrow—but giving you the option to back out once you physically view it. Agents say that in the city of Los Angeles, where in-person showings are banned, once you’re in escrow, you’re allowed to step foot on the property.
The California Association of Realtors has also come up with a clause known as the “coronavirus amendment” that postpones the close of escrow by up to 30 days or more to accommodate unforeseen circumstances or hold-ups due to COVID-19.
At that point, either party can withdraw from the deal, and your deposit will be returned.
“Even though they’ve deposited their money into escrow, they still have that addendum in case something goes incredibly wrong, like with their financing, so that’s a really helpful tool,” says Crawford. “Buyers can still have some confidence going in.”