Yes, you can buy a home during the coronavirus pandemic in Minnesota. When Governor Walz issued restrictions real estate was declared an essential service. Life’s basic needs are food, water, and shelter. Since real estate is providing shelter, it seems logical real estate should be an essential service.
The photo above shows a buyer ready for her final walkthrough. Her whole purchase process transpired in March and April 2020, when it seemed like coronavirus announcements and shutdowns were taking place almost daily.
How does this whole process work during the COVID-19 situation?
Most people start their home buying process by dream searching online. That hasn’t changed. Zillow reported that online searching in Minnesota was strong before March 11, 2020, then took a nosedive March 16, around the time public gathering spaces and restaurants were closed… then spiked up again by double digits in mid-April. Buyers are looking!
In a traditional market, a buyer’s next step is often to visit open houses. In the coronavirus world there are no more traditional open houses in Minnesota, but there are some virtual open houses where you can tour the home with the agent via some form of live stream video chat. Virtual open houses are indicated in the listing the same way that traditional open houses were listed in the past.
When you are ready to move past the dreaming stage and really become a homeowner, most home buyers still choose a Realtor to help them through the process. It’s more complicated than ever with coronavirus protocols, and there is still a shortage of homes for sale. Working with a Realtor can be the key to getting the keys to your new home.
The basic steps to buying a home haven’t changed, although some of the procedures have.
Securing your financing is still the single most important step in the whole home buying process. Without it, you cannot make a legitimate offer. Contact a lender before you seriously look at homes, most mortgage applications can be done online. To obtain pre-approval expect your lender to check your credit history and ask for documentation of income and assets you plan to use for your purchase. Your lender will be able to answer your questions about changes happening almost daily due to coronavirus… including requirements impacting minimum credit scores, minimum down payments, more reserves, interest rates, etc.
You will learn what price home you qualify to purchase and will be given a pre-approval letter when you make an offer. Good news is interest rates continue to be great! Here is a link to posts on financing.
2. Finding a home
The process of finding a home has changed. No longer do you go on a home tour with your agent. Now you dig into the listings online, which often have more online photos and information than ever before. Immersive 3D tours are becoming more and more common especially for larger homes, as the goal is to enable buyers to experience homes listed for sale without leaving the safety of their own home.
To gain access to as much information as possible be sure you are getting information directly from the professional MLS, not just another site fed by listings from the MLS.
- Choose a Realtor you trust and sign a representation contract. Have them set up a custom search for you to continuously scour the MLS for new and changed listings matching your criteria.
- Choose listings that interest you and dig deeper into the online information.
- Talk to your Realtor about listings of highest interest for insights and even more information that can help you eliminate or heighten your interest in a property.
- Do a driveby of homes of highest interest. You can tell a lot about how you feel about a home through a driveby. You learn not only about the house itself, but also about the setting and neighborhood. If the home passes that test it is time to contact your Realtor to see the interior.
- Schedule a showing. Showing guidelines are set by the seller, so can vary from home to home. Most often personal showings are allowed as a last step before deciding whether or not to make an offer. No overlapping showings are allowed. Usually only 1-2 people are allowed at a showing, with no children. Masks and hand sanitizer/gloves are required, with minimal touching. Occasionally personal showings are not allowed, only interactive video tours with either your agent or the listing agent. You may also choose yourself to not visit personally, rather via interactive video such as Facetime with either your Realtor or the listing Realtor.
3. Writing an offer
When you have decided on a property, usually buyers and agent each go to their own home/office and work together to compile a written offer in the form of a digital purchase agreement signed online. Today most purchase agreements include a COVID-19 Addendum to allow more time if needed in case anyone or any part of the process is affected by the coronavirus.
Even in today’s coronavirus market, it is still very possible you might be involved in multiple offers on the same property. Here are some tips for getting your offer accepted. Once buyer and seller come to an agreement, the purchase agreement becomes binding and the buyer submits earnest money (usually at least 1% of purchase price) online through TrustFunds to be held by the listing broker until closing (date set in agreement, usually about 5-6 weeks out), when it is applied to the purchase.
3. Home inspection
Most Twin Cities purchase agreements are contingent upon a private home inspection, often including sewer line and fireplace inspections and a radon test. The buyer chooses the inspector and is responsible for payment at time of the inspection. After the inspection the buyer can choose to move forward, ask the seller for repairs or other compensation for items raised by the inspection, or cancel the agreement and have earnest money fully refunded.
In the past, inspectors often invited buyers to be present at the inspection to learn about their new home. Under coronavirus protocols, only the inspector is present at the inspection. The inspector will, however, thoroughly discuss findings and provide a detailed report. Home inspection protocol update
4. Locking into an interest rate
The interest rate for a mortgage cannot be locked in until after a signed purchase agreement is in place. It is up to the buyer to lock in the rate to protect against market fluctuations. It creates a contractual agreement between buyer and lender for a specified length of time based on closing date. Be aware that if the closing date is extended it could affect this contract and interest rate.
Discuss locking your interest rate with your lender, considering the effect that coronavirus could have on the process timeline.
The lender usually orders the appraisal once the buyer gives authority after passing inspection. The lender typically requires payment for the appraisal at this time. The appraisal provides an opinion of the market value of the property. If the appraised value comes in below the sale price it usually requires some kind of re-negotiation or could even cause cancellation of the purchase agreement.
The appraiser usually visits the property inside and out. However, due to coronavirus some appraisals are being allowed to be conducted by driveby only.
6. Title work and title insurance
The buyer’s title company conducts a title search and if any title defects appear (common one is unrecorded loan satisfactions), it is up to the seller to clear the title. If the seller has an owner’s title insurance policy the insurance will take care of it. Buyer must purchase title insurance for the lender, has the option to also purchase an owner’s policy. It is a one-time fee which remains in effect until the property is sold.
7. Home owner’s insurance
Buyers make arrangements with their own insurance company for hazard insurance, with the first year paid as part of or prior to closing. If the property is a townhome or condo it may be covered by hazard insurance as part of the association. In this case, buyers are responsible to secure their own ‘HO6’ policy for the interior and their personal possessions but this may not be required for closing.
8. Final loan underwriting approval
After receipt of the appraisal and title work, the complete file is submitted to the mortgage underwriting department for final approval. They may ask for additional documentation as part of the underwriting process. Upon final approval, the closing package is sent to your title company/closer, and you will get a Closing Disclosure from your lender with a final estimate of funds needed for closing. Funds must be certified, most often in the form of a cashier’s check or wire transfer.
Due to coronavirus some lenders are requiring re-verification of employment within 3 days of closing.
9. Final walk through
Buyers usually do a final walk through of the property shortly before closing to assure it is still in the same condition as at the time of purchase agreement and to check that any agreed upon repairs have been completed.
Masks and hand sanitizer/gloves are again the protocol for final walkthrough, which can possibly be buyers only.
This process has changed due to coronavirus to achieve as little social interaction as possible.
- Seller(s) pre-sign before the actual closing and give Power of Attorney to the closer for any last-minute signing that may be needed
- Only the signing buyer(s) and closer are present at the actual closing, with a plexiglass shield as protection between them
Closing takes place at the buyer’s title company, and usually takes about an hour. This is where mortgage and deed transfer papers are signed, payment is made and checks are disbursed. Buyer typically gets the keys and takes possession immediately after closing. If sellers are closing on their next home the same day, sometimes the purchase agreement gives buyer possession 24-48 hours after closing to allow time for sellers to transfer their belongings to their next home.
More than ever during the coronavirus pandemic, what we do is tailored to individual needs and concerns, with everyone’s health and safety as highest priority. Consultations are conducted virtually whenever possible, utilizing phone, email, video (Zoom, Facetime or similar).
Only you know whether it makes sense for you to buy during the Coronavirus Pandemic. Homes are still being bought and sold, and at this point a continued shortage of homes for sale is keeping prices stable.
Give me a call or shoot me an email with your questions… we are here to help!
Sharlene Hensrud, RE/MAX Results – email@example.com – 612-419-0560