Ask Brian is a weekly column by Real Estate Expert Brian Kline. If you have questions on real estate investing, DIY, home buying/selling, or other housing inquiries please email your questions to [email protected].
Question from Carol in Virginia: Hi Brian, I had a purchase offer accepted the first week of March. Now, everything seems to have ground to a halt or at least is moving in super slow motion because of the coronavirus outbreak. The two biggest concerns that I have are the appraisal and signing the closing documents. Because of the stay at home order, my agent says I might have to extend the closing date. Is there anything I can do to help complete my purchase?
Answer: Hello Carol. First, congratulations on finding the home you want to buy. Unfortunately, the coronavirus has certainly slowed the sales process down. Everything from listing a house for sale to showing houses is more difficult today than they were a few short weeks ago. Carol, the good news is that because you have found the house you want to buy and have a purchase agreement in place, you are probably one of the fortunate few that can complete the deal during a stay at home order. The appraisal and closing processes have always been slightly different from one state to another but now every state is scrambling to put in place processes that work remotely. In some cases, these changes aren’t even statewide; individual real estate businesses and county offices are creating new processes to comply with the stay at home regulations. In your situation (Virginia and 36 other states), you can probably do the closing remotely using an electronic notary service. Below is a list of states that Docverify says allow electronic notary services. Still, regulations vary from state to state with a common requirement being that the transaction has to be recorded through a web conference along with electronic notarization.
Changes are already happening related to electronic notarization. For instance, Arizona has deferred driver license expiration dates for six months so that they can continue being used as identification. Also, Alabama (not listed) has issued an executive order permitting notaries to use video conferencing instead of a personal appearance. Other states have made similar changes.
Carol, in general, it’s probably a good idea to follow your agent’s suggestion to extend the closing date to allow extra time to iron out any wrinkles in the changing processes. Besides notarizing the documents, there can be issues recording the transaction with local government record officials. Of course, extending the closing date has to be agreed to with the seller. In these confusing times, it’s important that your agent and the selling agent are working towards the same goals. Ask your agent to explain to you what the selling agent is doing to close the deal electronically. At a minimum, they both need to be submitting paperwork to the same electronic notary platform.
Something else you want to investigate is if your contract has a “force majeure” clause. Some but not all contracts have this clause. Essentially, this allows either party to the contract to suspend it or even cancel it. The clause is usually limited to circumstances that neither party could have anticipated or that are beyond their control. It also usually requires that completing the contract has become impossible or impractical. As you might guess, there are many ways this might be interpreted or applied. As long as both you and the seller are willing to finalize the purchase, this shouldn’t be an obstacle. Still, it could slow things down if a third party (appraiser, lender, closing agent, attorney, etc.) declines to participate.
Your bigger issue might be completing the appraisal, which is what you and your agent should be working on first. Both the stay at home order and social distancing become issues because the appraisal requires a physical inspection of the home you are buying. The two biggies here are if your state considers appraisals to be an essential service and if the seller is willing to allow the appraiser in the house. Once you get past those issues, the appraisal needs to follow social distancing rules. This can mean asking questions of everyone that is coming in contact with each other. Questions include recent travel, interactions, and showing signs of symptoms. Some people have created checklists or questionnaires that they ask the appraiser to fill out (or vice versa). This is going to take some cooperation from your seller. There is some hope that federal mortgage backers like Fannie Mae and Freddie Mac will issue some guidance on the appraisal process but there is no indication when this might happen.
Carol, it’s a new world but it hasn’t stopped turning and real estate purchases will continue to close. It looks like you’re one of the pathfinders for the new process. It may take a little longer but you should be in your new home soon.
Here’s your chance to help many people out by sharing what you are doing to help reinvent the sales process? Please leave your comments.
Our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions or inquiries to [email protected].