Even chaotic times can bring some positive lessons to learn from. Here’s how COVID-19 might change the real estate industry and how homebuyers can benefit from the situation
This is the time of year when our market usually takes off. Most agents in my area would earn three-quarters of their yearly income within the next six months. That’s our normal trend. We plan all year for these next two quarters.
This year will not be normal. Many agents won’t see a paycheck for several months. It seems hopeless right now. But even with the negative changes, there are some positive aspects to this strange situation. It’s likely that consumers will benefit from the extra stress dumped on the industry this year. Here are three ways I see homebuyers benefiting from the COVID-19 crisis.
1. Less inexperienced Realtors in the marketplace
This problem has been increasing over the past few years. Because it’s fairly easy to get licensed as a Realtor, many people try it.
Is there any harm in this? I think there is.
If you are searching for homes online and you decide to reach out to an agent for help, the chances of that agent being inexperienced are very high. Being a test subject for a new agent can cost clients thousands of dollars. Not to mention, it sours the reputation of the entire real estate industry.
When more than half of the agents in the MLS are not selling homes every month, many of them will not get the experience needed. When they are broke, their motivation to close a deal becomes compromised. The quality of service in our industry seems to go down as the agent count goes up.
Real estate agents have less than an 80 percent success rate during their first year in business. It’s likely that this time of quarantine will flush out those agents who would never make it anyway. This is a good thing for both consumers and agents.
The amount of transactions that consumers have with inexperienced agents should go down. This will help increase the customer service of the industry as a whole. It’s a much-needed purge that will benefit homebuyers.
2. Increases in home prices may slow down
We’ve had an increase in sales prices for eight years straight. Prices are getting out of hand. We work with buyers who are barely able to get into a home that they only marginally like. Buying a home should be fun. It’s a privilege. Instead, for many, it feels like going to war.
Homes will have 10 to 20 offers within the first few days in the median to lower price ranges. The last few years have been very hard on first-time buyers, which make up the largest group of those shopping for a home.
As I reach out to my clients and ask them how they think this pandemic will affect our market, most are hoping for price drops. Homebuyers are stressed out by the constant year-over-year price increase.
Because people have lost their jobs during this pandemic, there will be fewer folks who are ready to buy a home when the quarantines are lifted. This will leave a window of time for buyers who are ready to take advantage of the drop in demand now.
With increased supply and decreased demand as a result of the pandemic, it seems likely that home prices will drop a bit. It may only be for a small window of time, but that’s still a glimmer of hope that homebuyers will gladly welcome.
3. The listing and closing processes are being refined
Thanks to this quarantine, marketing techniques like 3D tours and videos that have been around for years are finally being utilized by agents. They didn’t have the motivation to use them before this. Now they do. Pictures alone aren’t enough anymore. From here on out, you’re going to see more 3D tours, as well as fully narrated walk-through videos. This will be great for homebuyers searching online. More content means more clarity.
Also, title companies have adapted as well. Digitally streamlining the closing process has been an “idea” for many years. Now it’s become a necessity.
To have digital closings, title companies need remote online notarizations. This is not legal in many states right now. States have been scrambling to pass legislation that would allow for remote online notarization.
There are people in the industry who have been operating under the same routines for decades. COVID-19 is shaking them up. It’s likely to create better online listings and remote closing processes moving forward. This is great for homebuyers!
As the national real estate market gets shaken up, loose limbs will fall. Pruning is coming. Brokerages, mortgage and title companies, appraisers and home inspectors will all feel the pinch. The weak businesses will be purged, and the strong will take more market share. This is the nature of business.
As all this plays out, keep an eye on the companies who emerge and those who fade away. Success leaves clues. Let’s learn from this and build stronger businesses in the future. As business become refined, the experience will be better for homebuyers nationwide. It’s a win-win for homebuyers and the industry as a whole. It’s just hard to see the silver-lining today. Keep your heads up! We’ll be stronger once this is over.