In the social distancing era, digital closings are a great “no-contact” solution that makes buying a home simpler
BY ZACK JOHNSTON
The coronavirus pandemic is not only changing what buyers are looking for in a new home, it’s changing how they will buy a new home altogether. While the economy and the housing market are on shaky ground, to say the least, now is the time for innovation and creative problem solving. These qualities define the housing sector, and there are plenty of strategies to be employed that will help the industry survive and thrive.
It is important in these rough times to look at every aspect with a sense of perspective. The long-term effects will be felt across industries, but by looking at short-term effects and responding accordingly, we can prepare for what the future has in store.
“In the short-term, the virus has resulted in economic uncertainty causing lenders to tighten credit standards, would-be sellers to keep their homes off the market, and kept some potential home buyers on the sidelines,” said Odeta Kushi, Deputy Chief Economist for First American Title Insurance.
By adapting to the changing times, homebuilders can set a clear path forward through the recovery.
“While it’s too soon to gauge any potential long-term effects, early survey data points to altering preferences for home features, indicating more interest in home offices, yard space, and more space for gathering,” Kushi said.
The level of economic uncertainty and unemployment is certainly staggering, but as long as the housing industry is picking up on what customers are looking for it can not only stay sustained, but also help in the broader economic recovery.
The Housing Market Goes Digital
In the immediate aftermath of the initial responses to the pandemic, stay-at-home orders lead to a massive hit to the housing market. However, as builders continue to safely carry out their work, prospective buyers are still looking at homes and weighing out options, “This period of rock-bottom interest rates may be a great time to buy for those with stable incomes and who can qualify for financing, because lower rates boost house-buying power,” Kushi said. “In some areas, it’s becoming more of a buyer’s market, though this could wane with the rate of infections. Buyers may also benefit from a slowdown in house price appreciation as the economic uncertainty caused by the pandemic temporarily suppresses demand.”
This economic period might end up being a great opportunity for some first-time buyers. It can ultimately be an opportunity for homebuilders as well, but only if they can capitalize on it. With so many buyers spending their days at home, relying on virtual home tours and video conferencing to aid in their search, it only makes sense for builders to offer something similar for when it is time to close the deal.
“For several years, the residential real estate industry has been gradually moving toward a more digital home-buying process, from digital home search and loan application to more recent innovations powering the digital transformation of the closing experience,” said Joseph S. Tavarez, President of First American Title’s Homebuilder Services Division. “The pandemic has accelerated the demand for digital closings in order to increase low-contact and no-contact options. The pandemic has also sparked states across the country to approve some level of remote online notarization (RON) transactions to help real estate transactions move forward.”
There are a variety of low-contact and no-contact closing options homebuilders can offer their clients including RON, remote inksigned notarization (RIN), hybrid eClosing, drive-up signings. Many of these options have been available for some time, but the pandemic has made them more into a necessity. In fact, for the past two years First American has completed approximately 3,600 hybrid eClosings.
“With hybrid eClosings, we’ve seen closing appointments reduced to an average of 20 minutes, instead of 45 to 60 minutes. Home buyers appreciate the faster, more convenient signing event and builders can boost their efficiency with the shorter closing appointments and the greater accuracy of eSigned documents,” Tavarez said.
When there is greater customer satisfaction, the housing industry as a whole improves. Many builders have had robust digital options available prior to the pandemic, and those builders will surely have the advantage. But with digital closing practices rapidly increasing, more and more builders can make their necessary adjustments and start seeing benefits.
“Overall, I think the industry is well positioned to adapt to the pandemic. The challenge is rapidly adopting the processes, tools and technology needed to enable low-contact and no-contact closing options,” Tavarez said. “The opportunity exists to move fast and reap the efficiency and customer experience benefits.”
The road to recovery may look bleak, but it is not impossible. Traditionally, the housing market has aided aided the economy in recovering from recessions, and buy the looks of it this recession is no exception to that norm.
“The exact path of recovery will be dependent on the length and severity of the pandemic. The longer the pandemic continues, the more likely the economic fallout results in a prolonged recession and high unemployment, which will cause demand, and the number of sellers willing to put their home for sale, to drop,” Kushi said. “However, the housing market is already beginning to show signs of a turn, with purchase applications rising for four straight weeks. Showing activity has also rebounded in May after reaching a trough in mid- April, and home builder sentiment bounced back in the most recent May report.”
First American Title Insurance Company, the largest subsidiary of First American Financial Corporation (NYSE: FAF), traces its history to 1889. One of the largest title insurers in the nation, First American Title provides comprehensive title insurance coverage and professional services for real estate purchases, construction, refinances, and equity loans.
First American Title’s Homebuilder Services division caters specifically to the needs of national and regional homebuilders, combining deep homebuilding industry expertise with leading technology to deliver a streamlined closing process both builders and homebuyers appreciate.
Zack Johnston is the Assistant Editor for Builder and Developer Magazine. He can be reached at firstname.lastname@example.org.