Real Estate Contracts in Post Covid World

The onset of the pandemic brought about transformations in the real estate sector. Consequently, the demands of the buyers also evolved. The issue with properties in the post-Covid era is that buyers are now prioritizing different features than pre-Covid times. Safety, ample space for entertainment, and a suitable area for work are now more critical than before. If a property lacks these features, it becomes more challenging to sell.

Buyers are looking for large single family homes in the suburbs away from crowded downtown centers. Buyers also seek certain characteristics from those types of homes. For example, demand for properties with additional space to accommodate a home office, properties with a large backyard, pool or playground for homeschooled children to find an escape, are in more demand. 

During closures, inventory was extremely low, which resulted in higher sale prices. The result of low inventory resulted in a sellers market. For example, many properties were sold “as is”, and also ended up selling above their listing prices. Many sellers have leverage to request all cash transactions, require purchasers to purchase the property even if an appraisal came in below market price, allowing sellers to stay on the property after the closing date, etc. 

Closures and the resulting low inventory locally also resulted in purchasers searching out of state for properties. Those who purchased homes out of state, also found benefits in lower property taxes out of state. For those moving out of state for more than 181 days, under New York law, may be considered non-residents subject to no New York income tax. 

There have also been changes in the condominium and cooperative market as a result of closures and the “Surfside building collapse”. Fannie and Freddie Mac requires cooperatives and condominiums to disclose more information in the form of a 12 question questionnaire from the board, and “reserve study”. The purpose is to ensure that all coops and condos are safe, for example structurally sound. In cooperative or condominium transactions, due diligence requires a review of the contract of sale, legal minutes, board budget, and now your lender is performing this added “reserve study” review.  

Post closures, with inflation and rising interest rates, we are now seeing owners facing the possibility of foreclosure. We anticipate that those property owners in danger of foreclosure prior to the pandemic may lead the next drop in the real estate market. Government programs to stave off foreclosures from 2008 have now mostly ended and property owners under water may be at risk. There are different options available in lieu of losing a property to foreclosure, including: Short Sale, Deed in Lieu of Foreclosure, Consent Foreclosure, Cash for Keys (generally with a Quit Claim Deed).