Coronavirus clamps down on real estate business

Zach Kocian of Southwest Greensburg might be one of the less lucky homeowners in Western Pennsylvania who is trying to sell his home this spring.

Kocian, a behavior specialist at a private school, put the Stanton Street house he bought three years ago up for sale with the hopes of selling it by mid-spring.

But no sooner had he placed the house on the market than Gov. Tom Wolf ordered a shutdown of real estate activities that the state has deemed “non-essential.”

“We’re shut down. We can’t do anything ourselves,” said Janice Smarto, who is manager of about 120 agents at Berkshire Hathaway HomeServices’ office in Unity. “We can’t show houses; we can’t put a lockbox on a house; we can’t have open houses.”

Inspectors aren’t permitted to go inside a house that is being offered for sale, Smarto said.

Kocian is biding his time until the restrictions are lifted, when he hopes to sell his house so he can buy another one in the Greensburg-­Latrobe area.

Although those associated with the real estate business can’t come inside his house, agents can list a house using photos homeowners have taken, the measurements of the rooms and any videos they have made, Smarto said.

“We are selling houses through virtual tours, sometimes with contingencies that depend on the home inspections,” said Howard W. “Hoddy” Hanna III, chairman of Howard Hanna Real Estate Services in Pittsburgh. In some cases, a buyer agrees to buy a house they had seen prior to restrictions preventing Realtors from showing houses, said Hanna, who oversees the largest family-owned and operated real estate firm in country.

While it does not happen often, Smarto says “there are people who are buying a house sight unseen,” having just seen pictures and watched a video, without ever stepping inside.

Kocian, however, doesn’t expect to find a buyer in that manner.

“People want to see the house,” Kocian said.

During this time of agents being banned from bringing buyers to see a house, Hanna said he recommends prospective sellers to spruce up the house to make it ready when the activity resumes.

“They can do landscaping, painting,” Hanna said.

Fighting restrictions

The urgency to lift the ban for those relying on a real estate transaction for their livelihood is obvious — Realtors work on commission, so no sales means no pay.

The governor issued an emergency declaration on March 6 and then closed “non-life-sustaining businesses” on March 19. In-person activities — inspections, appraisals and title insurance activities — are permitted only for transactions signed before March 18, with a closing on March 18 or later, according to the Pennsylvania Department of State.

Online work by agents is permitted.

Hanna said his company has been doing some virtual closings, where customers are sent the closing documents and then sign them electronically.

But, like all others, the in-person activities of inspections, walk-throughs and title insurance activities are banned on deals signed after March 18.

“You really, really are impacting people’s lives” by placing a ban on real estate activities, said Rick Schweikert, who owns Your Town Realty LLC in Pittsburgh.

He has a seller ready to buy another house in Pittsburgh who can’t close on the deal. The person buying his house asked for and received a reduced price, which in turn triggered the initial seller to get a reduction in the price of the house he was buying. About $10,000 was lost in the deals.

“You are upending three families’ lives here,” Schweikert said, noting how delays in closings have hurt people.

In an effort to lift the binds tying down the real estate business, the Pennsylvania Association of Realtors is seeking to overturn the governor’s ruling that real estate agencies are non-essential business. The 35,000-member trade group filed a “friend of the court” brief with the Pennsylvania Supreme Court in support of a lawsuit three businesses filed against Wolf and Health Secretary Rachel Levine.

“The buying and selling of real estate is a critical part of the continued flow of life,” even during the covid-109 pandemic, the association said in its brief. The governor’s order is preventing the acquiring of shelter, the association said in a statement when the brief was filed April 3. If the ban is lifted, the permitted activities would be conducted with all the social distancing practices in mind.

The association said it had not received a response as of Friday to its request for a waiver from the ban.

But one area Realtor is concerned the association is pushing for them to return to selling homes as soon as possible, before the spread of the virus has been halted.

Joseph Weaver of Acme, a Realtor with One Choice Real Estate of Murrysville, said agents could get sick while showing a house to a prospective buyer who may be contagious without having symptoms.

“They’re making us (like) canaries in the coal mine,” said Weaver, who has been in the business for 26 years.

The phrase hearkens back to the days mine foremen would bring a caged bird deep into a mine to determine whether there was a deadly buildup of methane. If the bird lived, it was safe for the miners.

But even by wearing gloves to protect themselves from germs on a countertop or doorknob, a person could breathe an airborne virus from someone who has been in the house, Weaver fears.

“I don’t understand the urgency to get back right now,” Weaver said. “Ninety percent of the people (buyers) are just switching houses” and can wait.

But once those restrictions are lifted, he expects all agents will jump back into the market, regardless of their hesitancy.

Weaver said that he, and likely the other Realtors, have some buyers and sellers “in their pocket,” just waiting for the day when the restrictions are lifted.

Rebound expected

Prior to the shutdown of real estate activities, the real estate market in Westmoreland County was going great, Smarto said. The year looked promising, with a strong economy and interest rates low.

“As soon as you put a house on the market, it got sold. You got multiple buyers” making offers, Smarto said.

Hanna is expecting a boom in the market, once the restrictions are lifted on the real estate activities, in large part due to the low-interest rates on mortgages.

“We’ve had a shortage of houses on the market. I think we will see a lot of first-time buyers” entering the market, Hanna said.

Those living in close quarters in apartments may be looking for more space to call their own, Hanna said.

While unemployment by one estimate could reach 18% in the seven-county Pittsburgh region, Hanna is hoping that most of those will come back in time and buyers will have confidence to take on a mortgage.

“We think there will be a spurt in price,” Hanna said.

Schweikert does not share Hanna’s optimism.

“I think there will be a huge downturn in the market,” Schweikert said. He does not expect a large inventory of houses will come onto the market once the economy rebounds.

The rise in the real estate market, when it comes, will be slow, Schweikert predicted, because “we were carrying way too much debt when the coronavirus hit.”

With college-educated young adults burdened with student loan debt, Schweikert believes the rental market will flourish. That will create investment opportunities for the commercial side of the market.

The economic impact of hundreds of thousands of Pennsylvanians filing for unemployment compensation as they have lost their jobs has caused one laid off buyer to lose a deal to buy a house, Weaver said of one of his customers.

“The market will not be ‘business as usual’ when we get back. People are going to be ‘wading into the water’ gradually,” when it does reopen, said Bill Festa, a Philadelphia area Realtor and president of the Realtors’ association.

Those interviewed did not anticipate that the coronavirus shutdown slamming the real estate market like the recession of 2008-2009, which triggered the collapse of the market.

“The underlying economy (before the coronavirus) is much better than it was in 2008” when there were so many foreclosures, Hanna said.

“We could show a house any day of the week in 2008, but we could not find a (qualified) buyer for six months,” Weaver said.

The long-term impact of the coronavirus shutdown on Realtors could result in more agents working remotely, Hanna and Smarto said. Meetings with agents can be handled remotely, rather than in-person.

Fears over the spread of the virus in the coming months also probably will make sellers hesitant to have open houses for buyers who will be walking around their homes, Hanna said. That could linger for a year or so, Hanna said.

“This is really going to change our business,” Hanna said.