The emergence and prevalence of COVID-19 have cast a shadow of doubt on the future of the global market. The disease has affected businesses worldwide. It has immobilized consumers and companies from the normal trade with no expected date on when everything can return to normal. The uncertainty has a significant impact on people’s psyche, which influences their buying decisions.
Most businesses have shown immense resiliency, though. Some retailers and restaurants have ramped up their delivery efforts to continue earning an income as well as catering to customers’ needs.
Unfortunately, some enterprises, like real estate, cannot fully operate on a remote basis. There’s still the need for on-site meetings and viewings with clients, which is nearly impossible while the virus prevails. With this, the industry is currently going on a downward spiral because of the pandemic.
That being said, here are the ways that COVID-19 has affected real estate businesses:
(1) Plummeting Mortgage Rates
When news of the virus came about last month, the mortgage rates have already been low. Now, prices have dropped even lower. This is considered good news for current homeowners since they can refinance their mortgages and repay their debts quicker.
However, it doesn’t bode well for real estate companies and financial institutions. This is because they invested a substantial amount for residential and commercial projects in the hopes of getting considerable income from them through interest rates.
One possibility that you can look forward to is the likelihood that interest rates will soon rise again. A lot of people may enter the market after seeing the prices plummet, which can create demand and opportunity for profit from a realtor’s standpoint.
During these uncertain times, regardless of your age, it’s practical to prepare for the worst and settle your legal documents, especially if you have real estate assets. Enlist the help of a probate litigation attorney here to ensure that all your files are crafted with clear and concise terms, leaving no room for misinterpretations or confusion for your family as well as the executor of your will.
(2) Fewer Foreign Buyers
The real estate market has also felt the adverse impact of social distancing. With international flights getting banned and even moving around the city being discouraged, realtors can’t set up meetings and viewings with potential buyers. The situation reduces the incentive to purchase real estate because clients are unable to check the property for themselves.
Foreign buyers have always been a significant contributor to the US real estate market, particularly the wealthier households in developing countries. Sales of luxury homes may see a boost soon with potential international clients looking at investing their money in developed nations, which have a more stable economy than their hometowns.
(3) Closing Delays
Aside from encountering difficulties in scheduling house viewings, realtors are also left to wait for the end of the quarantine period to complete and close sales. This is because most clients want to review the property before making the final decision and signing on the dotted line. Sometimes, due diligence and other related inspections are required either by the customer or the state.
With travel restrictions and community quarantine being implemented, buyers won’t want to venture out unless necessary, especially if their search for property isn’t one borne out of necessity. This gives them more time to think about the deal and mull over the advantages and disadvantages of pushing through with the transaction, which heightens the risk of them pulling out.
(4) Payment Collection Challenges
Most people are going on quarantine and observing social distancing. Moreover, some US cities are also on lockdown to protect its citizens and limit the spread of the disease.
For a lot of tenants and homeowners, though, this means that they aren’t earning as much as they used to, especially if they used to work multiple jobs before the pandemic. As a result, their current income can’t cover their weekly or monthly expenses. Plus, they have to prioritize the allocation of financial resources to necessities, like food, water, and medicine.
Unfortunately, this means that rent takes a backseat, which then impacts the income of property owners as well as stakeholders of real estate investment trusts (REITs). Of course, as a lessor, you can’t blame your tenants for being unable to pay their rent on time because the pandemic has lessened their opportunities to earn.
To improve the chances of getting paid for your properties, you can take advantage of technological tools to make rent collection more convenient and accessible for you as well as your tenants. Hence, the best thing for you to do is to invest in tools that allow you to accept digital payments through credit cards or e-wallets.
These are the benefits of investing in cashless payment methods:
● Streamline Your Collection Process: Protect your real estate business from the adverse financial effects of the pandemic by making your collection process more straightforward for you and your tenants.
The ability to accept digital payments enables your renters to send money from their bank accounts during payday directly to yours, which lessens the effort that they have to spend otherwise if you can only take cash payments.
● Allow Automatic Payments: Another benefit of the cashless method is that tenants can set up auto-debit. This means that their rent will automatically be sent to you every cut-off.
This feature is convenient for busy people who always forget when they need to pay their dues. With this, they just need to make sure that they have enough balance on their accounts when the scheduled payment date arrives.
● Information at a Glance: Most digital payment tools also include functions that can help you monitor payments and provide you with other relevant data. This feature is valuable if you have several properties since a dedicated software program serves as a central location for all tenants’ information and files that you need to run your business.
● Automate Notifications: You can also avoid the stress that entails rent collection by automating your notification system. Most payment processing tools allow you to set a schedule or cut-off, and the app will send an email or text message to your tenants a few days before the due date.
This feature benefits both you, as a property owner, by delegating this tedious task to the software and your tenants because they’ll be reminded of the due date.
● Record Transactions: Another essential feature that most payment collections software has is that it can provide you with a comprehensive transaction history for all your tenants. This comes in handy when there are disputes concerning rent and other related issues because you can easily check previous payments and investigate the potential cause of the issue.
(5) Limited to No Business Operations
While most of the states see real estate companies as essential businesses, some localities only allow limited operations. Worse, there are local jurisdictions that don’t see real estate as a crucial part of the economy, so they impose this type of enterprise to shut down for the duration of the
pandemic.
Essential industries in other countries include healthcare and finance. Supermarkets, groceries, and convenience stores are also considered vital for the market.
It’s fortunate if you’re based in states like Alabama, Alaska, California, Connecticut, Florida, Georgia, Kentucky, Minnesota, Oklahoma, Texas, and Wisconsin, among others, since these local governments view real estate as an essential business and allow companies to continue operations as long as they follow social distancing protocols. Colorado, Massachusetts, New Hampshire, New Jersey, New York, Oregon, Virginia, and Washington permit for limited business transactions, such as appraisals and closings. Open houses and showings are deemed as non-essential, though.
On the other hand, real estate companies in Delaware, Michigan, Pennsylvania, and Vermont are required to conduct businesses remotely. Realtors have become quite creative and have taken advantage of digital tools, like virtual reality, to show properties to potential customers.
Conclusion
The entire business world has been affected by the current pandemic. Real estate, in particular, is greatly impacted due to the nature of the industry that requires in-person meetings and viewings with clients for a favorable outcome.
The first significant economic impact of COVID-19 is in the low mortgage rates that continue to plummet. Fortunately, there’s a high possibility that property prices will rise again once the demand for residential or commercial spaces increases.
Travel restrictions also contribute to the slow real estate market since there are fewer foreign buyers who can view properties. The international market, especially the wealthier ones looking for luxury homes, is a valuable contributor to the US real estate economy. With the focus on social distancing, it’s impossible to complete a transaction and close a sale for both local and overseas prospects.
Rent collection is another issue that’s being faced by property owners, particularly those who can only accept cash payments. If you have this problem as well, take advantage of software programs to streamline your process and enable you to receive payments made via credit cards and digital wallets.
Lastly, some real estate companies are unable to earn an income because they have to comply with their local government’s mandate. If they’re deemed as a non-essential business, they may face limitations in their transactions or urged to forego operations ultimately.