How can coronavirus affect your house sale?
Changes to everyday life due to the coronavirus outbreak have already affected the property market. Still, the announcement on Tuesday that auctions and open homes will be banned was the biggest shake-up to date.
As of midnight Wednesday, public open homes and auctions, both on-site and in auction rooms, can no longer be held as authorities ramp up restrictions to contain the spread of coronavirus.
Not only will these changes cause home-owners contemplating a sale to rethink their strategy, but it will also affect vendors who already have their homes on the market.
While there is likely to be a period of reduced activity in the property market due to the COVID-19 pandemic, not all vendors have the luxury of simply waiting out the crisis.
"There are compelling reasons to sell," said Tower Property Advisory director Robert Allandale. "I know vendors out there who have bought a property, and they have to sell. People are moving into aged care that need to sell their property to pay the rates."
Home-owners with a financial need to sell will probably continue their campaign, but it may take longer to find a buyer. For owners who need a quick sale, there's no guarantee of prices seen in the past few months.
A successful sale in the current climate requires a level head, innovative solutions and realigned expectations.
The U.K. housing market — that obsession of middle-class Brits — has been placed in suspended animation. Buyers and renters have been told to delay moving home to limit the spread of coronavirus. While a few transactions are still going through, a functioning market depends on prospective buyers and surveyors being able to view people's homes. Mobility restrictions and distancing measures make that all but impossible.
Set against the loss of life caused by the virus, the anticipated collapse in housing transactions for at least the next few months is a price worth paying. Still, the knock-on effect will be severe across the sector, from the mortgage lenders obliged to offer struggling customers three-month payment holidays to the home-builders like Persimmon Plc and Taylor Wimpey Plc who've closed construction sites. For estate agents, struggling even before the pandemic, the standstill will be particularly painful.
Boris Johnson's government is trying to cushion the blow by suspending property taxes for businesses and paying employee wages (yes, even for real estate agents). But smaller outfits, those with weak balance sheets or those that were mismanaged before coronavirus struck, face a tough year. In the 2008-2009 downturn, thousands of estate agents left the industry.
It won't be just those forced to shutter high street branches that face a bleak period though; while employees of digital property portals such as Rightmove Plc and Zoopla can more easily work from home, they're being drawn into a brutal price war.
With the busy spring and summer selling season poised to start, the timing of the lockdown could hardly be worse. The U.K. property market has already endured a few tepid years of because Brexit worries, stamp duty changes and high house prices that make it harder for people to purchase a home. Now the much-ballyhooed "Boris bounce" after his recent election win has been extinguished, and 2020 looks like being a write-off, forcing estate agents to slash costs.
With employees working from home where possible and thousands of people self-isolating what happens if you were in the middle of buying or selling a property? And what will be some of the main issues? One leading property lawyer has said a range of issues could hit both buyers and sellers due to coronavirus and the government's lockdown.
Countrywide Plc, the country's biggest estate agent, was already ailing, having piled on debt to fund expansion. Shareholders recapitalized the business in 2018 via a massively discounted rights issue. Its debt covenants were also amended. Now, a takeover by rival LSL Property Services Plc has been called off; an agreed 38 million pound sale of its commercial property arm also failed to complete. Including lease obligations, it still has about 194 million pounds of net debt or almost six times EBITDA. That's uncomfortably high.
London-focused Foxtons Group Plc is also loss-making, but it has no bank or bond debt and held 15.5 million pounds of cash at the end of December. It has since drawn down a 5 million pounds credit line. However, renting office space and the ubiquitous Minis that its agents drive around consumes about 12 million pounds annually, so it too must slash costs.
Besides rent, another significant outlay for agents is the cost of advertising properties for sale with online portals. On average market leader Rightmove Plc charges agents more than 1,000 pounds a month for each advertiser. Coronavirus has sparked a full-blown rebellion against such fees. Rightmove's initial offer to defer part of those payments for six months was poorly received, forcing it to backtrack and offer a 75% discount for the next four months instead. This will cost about 70 million pounds or about one-fifth of estimated revenues. But that's not the end of it: Rival Zoopla, which was acquired by private equity firm SilverLake in 2018 for $3 billion, is offering agents nine months free if they quit Rightmove. On Friday, Rightmove suspended its dividend and scrapped its financial guidance.
Loss-making platform Purplebricks Group Plc says it plans to conduct viewings and valuations via Zoom, Facetime and Whatsapp. But its fixed-fee model (customers must pay even if their home doesn't sell) could come under more pressure. The company is already reeling from a failed U.S. and Australian expansion. German media giant Axel Springer SE doubled its stake last year and now owns 26% of the group, but the shares have since lost about two-thirds of their value.
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And financial concerns are ongoing. According to Halifax, house prices hit a record high in February following a bounce back from Brexit interests. But where buyers were previously worried about the uncertainty of property prices surrounding Brexit, they are now worried about the effects of coronavirus on sales chains. Will, their buyer, stay confident in purchasing, or will they fear being made redundant as coronavirus causes certain businesses to collapse? Buying a property is a big decision, and the uncertainty of coronavirus means that many are taking the safe option and staying put.
A spokeswoman for agency Chestertons said the Brexit rebound continues to flourish and its Fulham office saw a record 22 deals in February, but they have seen some cases fall through. "Coronavirus impacted our business for the first time on Wednesday," she told the Evening Standard. "Stealing away a sale that was just days away from exchanging, the buyer worked in the events industry, which is being rocked by large numbers of cancellations. He was unfortunately told his job was at risk."
Problems with the banking system, meaning approvals and transactions take longer. Possible requests that buyers deep clean properties before moving in. Delays in obtaining signatures on documents due to problems with the postal system. Delays in issuing mortgage offers by lenders because they are working with skeleton staff or from home. Issues with removal companies who may not be available due to staff self-isolating. Closures of estate agencies affecting handover of keys. Sellers being unable to move out of a property due to self-isolation. As a result of government restrictions on daily life, in-person property viewings are currently not available.
However, some of our agents can offer virtual property viewings, allowing you to view a property from your home. The selling agent can also provide information and insights about the property and area over the phone or by email. Contact the relevant agent to find out more. With ESPC, you can also quickly request the Home Report and view property schedules and photos online. Getting your property valued is the first stage of selling your home and generally involves inviting an agent to your home to assess its value. However, due to government restrictions on daily life, in-person valuations are currently not available.
Some of our agents are, therefore, able to offer virtual valuations at this time. Doing valuations remotely allows our agents to review the features and conditions of your home without risking unnecessary contact. Please note that the valuation services on offer will differ depending on each firm's circumstances. Request a free virtual property valuation today. All ESPC agents can also provide advice about selling a property over the phone. Find an ESPC agent on our website or find out more about ESPC's free property advice phone service.
How will the latest restrictions affect vendors?
Restrictions on auctions will have the biggest effect in areas where the auction format is preferred, such as the inner suburbs of Sydney and Melbourne.
The ban is also expected to be a catalyst for growth in online auctions. It will lead to an increase in expression-of-interest campaigns, which are usually reserved for expensive or unique properties. "People who are in the middle of an auction campaign, what the agents are doing is changing the campaign to expressions of interest," Mr Allanadale said. "Let's say it's on this Saturday coming up, and they'll say expressions of interest are closing this Monday."
If agents receive enough offers on a property, they may convert the sale to an online auction, he said. In areas where the private treaty is preferred, the most considerable effect will be restrictions on open homes, which are now prohibited due to restrictions on crowds in enclosed spaces. The good news for sellers is that private inspections are still allowed to go ahead, for now, and there are no restrictions on transacting property.
"If you're interested in a property, agents will have private inspections," Mr Allanadale said. He said agents were already following social distancing protocols, including providing hand sanitizer, ensuring buyers who felt unwell did not attend, and asking all who inspect to avoid touching anything in the home.
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Vendors already in the market should maintain clear lines of communication with their agent around how their home is being marketed and sold. At the same time, those planning a sale should discuss options and strategies with local agents in the area.
Is it still possible to sell my property during the coronavirus?
Yes, it is. You can still buy and sell a property during the Coronavirus period. In fact, right across our network, we are seeing many committed buyers keen to buy a property immediately.
Every seller has a different motivation for selling, so there is no one size fits all answer to this question. We have options to sell immediately and options to sell at a later date if required.
It is important to talk to your local McGrath Real Estate Specialist as they are living and breathing your local real estate market and can discuss your specific property needs.
At McGrath, we have moved all our auctions across to our online auction platform so they can proceed as normal.
This easy to use platform offers buyers the opportunity to watch, register, bid, buy and exchange on live property auctions. This service will ensure bidders can still participate and bid at a sale at the comfort and safety of their own home.
Live auctions will be hosted from the property or within the appropriate McGrath office.
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Ten key steps to selling a property during COVID-19.
Step 1 Research the local real estate market
During these modern times it a good starting point is to talk to your local McGrath Agent as they are living and breathing your current local market. They are in constant contact with their active buyer database and have a proper perspective on domestic demand during this period.
Step 2 Get a property appraisal from your local McGrath real estate agent
The next step is to understand how much you could sell your property for in the current market. At the moment, we can still come to your home and conduct the appraisal.
If you are more comfortable with this occurring virtually, we can help here too. We would ask you to walk through your home on Facebook or Instagram Live, Facetime or a similar virtual process.
Either way, your local agent will review:
- Its key selling features
- Its location
- Local buyer demand
- Their active buyer database
- Relevant market data
- Wider market trends
- Properties currently on the market
They will summarise their findings and provide you with a comprehensive report on the local market, along with a suggested price guide for your property which is appropriate during this coronavirus period.
Step 3 Choose a method of sale
There are three main ways to sell a property in Australia - private sale, auction or expression of interest. Each of these methods suits different properties and different markets.
During COVID-19, McGrath is still currently offering all methods of sale. All our auctions are now being hosted online. This easy to use platform provides buyers with the opportunity to watch, register, bid, buy and exchange on live property auctions. This service will ensure bidders can still participate and offer at an auction remotely.
For private sale and expression of interest, our agents will negotiate with buyers using standard methods such as phone, email and digital meeting platforms, to achieve the best possible result for you and your property.
Your real estate agent is the best person to help guide you here. They will consider the following elements before recommending the best method of sale for your property during the current climate.
- Current local market demand
- Number of active buyers on their database
- Property type
- Property Location
- Timing - how quickly you want to sell
- Personal preferences
Step 4 Prepare your property for sale
Usually, we would suggest hiring a stylist to help with this step.
As this is not currently possible, there are many simple ways you can style your property to sell without employing a stylist or having anyone come into your home. Download our Preparing your Home for Sale Checklist here to get you started.
Step 5 Engage and hire a property lawyer or conveyancer
Selling a property is a legal process, and while you are not required to have a conveyancer or lawyer manage the settlement process, managing the documentation and settlement of your property's sale can be complicated.
Having a team of experts familiar with the legal documents and legislation within your State or Territory, can provide you peace of mind and ensure the process runs smoothly. Having a team of experts to support you can be invaluable.
Step 6 Promotion of your property commences
Your McGrath Agent would work with you to create a customized marketing strategy within the boundaries of the current regulations.
As a starting point, your marketing plan would include promotion on mcgrath.com.au, via social media, directly to our buyer database and via phone calls to our active buyers.
If you are looking for a more comprehensive marketing plan, we will combine the methods detailed above with professional photographs, floor plans, virtual tours and promotion across all the key real estate portals.
Importantly talk to your agent about structuring the best marketing campaign for your property and your local market during this time.
Step 7 Property goes to an online auction or offers received
If you are selling via online auction, they will be hosted from your property or within the appropriate McGrath office. Buyers will bid, buy and exchange on live property auctions remotely.
If you are selling by private sale, interested buyers will make an offer to your agent via email who will in-turn present them to you for consideration. The agent will then negotiate on your behalf until you are happy with the price.
If you are selling via expression of interest, buyers will submit their best offers via email by a particular time and date and your agent will negotiate with them to achieve an outcome both of you are happy with.
Step 8 The contracts are signed and shared electronically, and deposit paid
Once the buyer and seller have agreed to sell the property, or it has been sold by online auction, the first step to legalize the sale is to sign and exchange the Contract of Sale.
There will be two copies of the Contract of Sale, one for you and one for the buyer. You each sign one copy before they are swapped or as it's called in some states 'exchanged'.
This process can be facilitated by your real estate agent, your solicitor or conveyancer. Given social distancing regulations, this may be done electronically.
At the time of the exchange, the buyer will be required to pay a deposit, which is usually 10% of the purchase price, and this will be held in trust by the real estate agent or your conveyancer.
Step 9 The property settles
As settlement day approaches, your conveyancer or lawyer will work with the buyer's settlement team to ensure all the legal obligations of the contract have been fulfilled. They will make all payments and lodge the correct documents with the appropriate land registration office. Assuming all goes to plan, the final payment will be made to you, and the keys will be handed over to the new buyer.
In the current climate, perhaps jump on a group chat with family and friends and celebrate the good news.
For a more in-depth look at everything, you need to know when selling and how to maximize your sale price, download our Selling a Property Guide.