As it turns out, buying and selling homes can be done digitally
BY DOMINIKA KOWALSKA
Despite coronavirus and the enforced shelter-in-place situation, the building industry is considered an essential business, and thus does not get to stop, which is good news for the industry, especially during the spring homebuying season.
“Housing has been deemed an essential business in most of the nation, and in the few states where the governors have not acted, we urge them to deem construction as essential,” said Dean Mon, chairman of NAHB in a recent press release.
Historically, low inventory and rock-bottom mortgage rates would normally set the stage for a highly competitive spring season. In 2008, anyone who managed to hang on to their job, savings, and credit score had a prime opportunity to buy a house at a bargain price. April’s 2020 mortgage rates of Freddie Mac are lower than last year’s. A 30 years fixed mortgage APR is now 3.31 percent, compared to Aprils 2019’s 4.12 percent.
Housing is an extremely important industry as it accounts for about 15 percent of U.S. economic growth. April’s record low mortgage rates may help selling homes to the aforementioned lucky ones, however, Ali Wolf, Chief Economist with the housing data and consulting firm Meyers Research, noted that social distancing rules will slow down completion times.
“This is starting to delay how long it takes to build a home,” Wolf said. This is not the only slowdown factor. According to the National Association of Home Builders, nearly a third of home building material inputs come from China. Having these supply lines disrupted, builders who source their materials abroad will suffer bigger slow down than builders who source their materials within the USA.
When it comes to home pricing fluctuation, Zillow conducted a study on housing during past pandemics, and concluded that home prices suffered only a minimal decrease or did not drop at all. However, they put the home sales on short pause. Lucky for us in 2020, developers have more tools to work remotely and have found innovative ways to build and showcase homes while practicing social distancing.
Virtual 3D Tours Homebuying slowed down, but hasn’t stopped. The coronavirus isolation forced changes on every industry, including the housing sector. Video tours were becoming a standard, but now they’re a necessity for homebuilders to survive. Homebuilders are stepping it up, incorporating virtual 3D tours. With a click, you can walk around the property just like you would on Google Maps.
Zillow allows sellers, agents, landlords, and property managers to create 3D home tours using a panoramic photo taken on a smart phone. Big homebuilders like Lennar or D.R. Horton are also doing their own 3D home tours.
Meritage Homes’ customers can design their custom home digitally. They can also look at a map of where their house falls in a community and watch videos of the construction site as the build progresses.
“We always felt like this was where the industry was going long term. I think this situation has just created a catalyst to move forward even more aggressively,” said Phillippe Lord, Chief Operating Officer of Meritage Homes, in an interview with Curbed Virtual tours, as great of a tool as they are, won’t entirely replace traditional home tours, during which the homebuyers can feel the energy of the house, touch and smell everything around, and imagine themselves and their family living in that space. However, they are a great help in the meantime.
Showcasing homes during shelter-in-place is not the biggest challenge in the home selling process. It is closing the deal. Many documents in the closing process require a notary and notarization is usually required to be done in-person. Remote online notarization (RON) exists, but it’s not legal in every state. Among others, Iowa, Wisconsin, Illinois, Colorado, Mississippi, Maryland, Pennsylvania, Washington, have adopted RON in response to the pandemic, some only for a limited time. Other states allowed it under conditions: New York, Arkansas, and Alabama permit using audio and visual conference technology to replace the physical presence requirement. U.S. Senators Mark Warner (D-VA) and Kevin Cramer (R-ND) have introduced the “Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020” that would authorize remote online notarizations nationwide.
Closing a mortgage also requires an adjustment. eOriginal, which provides digital transaction solutions for mortgages and mortgage securitization chain, launched a division that specializes in closing on a mortgage in 2018. “We’ve fielded I don’t know how many calls from existing clients and new clients about their desire to go to 100 percent digital and RON closing” says Brian Madocks, CEO of eOriginal. “It’s a big task for everybody.”
Dominika Kowalska is an Assistant Editor for Builder and Developer Magazine. She may be reached at email@example.com