Talking Points: How to Talk to Consumers About the Transaction, Contracts and the Coronavirus

 

Updated on March 18, 2020

Key Talking Points

 

Expanded Talking Points

Collaborating with sellers on the open house

  • REALTORS® will honor the seller’s wishes when it comes to open houses, if those wishes are allowed by law.

    • REALTORS® will have an open and honest conversation with their seller clients about the possible impact that limiting access to the listed property could have on the amount of time it will take to sell, the eventual purchase price and the marketing plan. 

    • REALTORS® can offer feasible alternatives in today’s ‘new norm’ coronavirus environment such as three-dimensional interactive property scans, video tours and other methods to virtually tour a property. 

    • Once a decision is made, the seller will put their desired open house instructions in writing, or the licensee could document the discussion and instruction and provide a copy to the seller for their signature.

 

The Residential Listing Agreement and marketing properties

  • A seller’s legitimate concerns about strangers entering their property would most likely be a good faith objection to the Residential Listing Agreement (RLA)

    • You see, the RLA establishes the basic duties of the broker and seller in marketing a property with Paragraph 7A authorizing the broker to market the property by any method, and paragraph 7B states that the seller agree to make the property available for showings, but that obligation is limited by the seller’s duty to act in good faith to accomplish the sale of the property. 

    • Therefore, if a property owner wants limited access to their property, the RLA, the broker’s marketing plan and the right to conduct open houses should be amended and signed by the seller, in writing.

 

Open house precautions and showing a home

  • First, it’s still unclear (as of 03/18/2020) if testing positive for the COVID-19 virus is a disability.

    • As you know, it is unlawful to discriminate against persons with disabilities, and disclosure of a person’s status of being afflicted with a disability is not permitted without that person’s consent. 

    • It remains unclear whetherbeing afflicted with coronavirus, something that is easily spread by contact with surfaces or through airborne molecules, is by law a disability.

    •  Therefore, REALTORS® will need to communicate and discuss best options with the seller if the seller reveals that the seller or anyone living in the home has tested positive for COVID-19.

 

  • If the seller and their REALTOR® decide to hold an open house, then both parties should implement standard operating procedures but also implement ‘new norm’ precautions.

    • The primary goal in all situations is to maintain a safe and healthy environment. Standard procedures such as asking visitors to sign-in upon entry and to take off shoes or wear protective shoe coverings are even more important today with tracing, for example, being essential to health officials in tracking the COVID-19 virus and its potential spread.

    • If visitors question the need, remind them that the sign-in sheet is now more than just a marketing tool: It is potentially a significant means by which to help stop the potential spread of the coronavirus.

    • These traditional open house practices will be in combination with social distancing and other additional precautionary measures like having visitors disinfect their hands upon entering the home, limiting the actual number of people in the home and providing alcohol-based hand sanitizers at the entryway and soap and disposable towels in bathrooms. 

    • Prior to the open house, if a client asks to have their home cleaned, REALTORS® will request that the seller provide a list of products they prefer to be used. Remember, it is still the client’s property

  • At the open house, our REALTOR® members are not required to put themselves at risk and can ask screening questions to all who wish access to the home.

    • And, yes, on the flip side, REALTORS® can refuse to show a property and or hold an open house, and I’ll touch on this in a minute.

    • So, yes, it is allowable for a REALTOR®, as part of an overall screening policy, to ask anyone wanting access to the home if they have a cold, influenza or other contagious respiratory illness. 

    • REALTORS® can also ask people if they traveled abroad as long as they ask all those wish to enter the home, no matter their ethnicity, national origin, primary language or race. Note that real estate licensees understand that they are not experts on where outbreaks are occurring, nor are they burdened with the task of constantly updating such knowledge.

    • Remember, we are proud that as REALTORS®, we all abide by Fair Housing laws and treat all parties fairly. 

  • Brokers can also refuse to show a property as well as holding an open house. 

    • As indicated above, the RLA (Residential Listing Agreement) authorizes the broker to market the property by any method selected by the broker. Refusing to show a property and holding an open house, given the current environment surrounding COVID-19, is reasonable. 

    • It’s important here to note, that the broker is agreeing under the terms of the RLA to exercise reasonable effort and due diligence to achieve the purpose of the listing — which is to sell the property. 

    • Therefore, the broker, the listing agent and the seller should discuss alternative ways to show and or market a property.

    • One last note:Governor Newsom has suggested Californians aged 65 or over, as well as those with pre-existing conditions, take extensive precautions to avoid the spread of the coronavirus, including self-isolation.

    • As such, the real estate licensee may bring this issue up with seller clients who fall into this age criteria. We have relationships with the community at large, informing sellers who meet of the self-quarantine guideline provides a service not only to the client but the public as well. 

    • Of course, a disgruntled seller may choose to fire the broker for making these decisions, but then it would be at the discretion of a judge to decide whether the seller had good cause to do so.

 

Unique coronavirus issues & the real estate industry

  • The more things change, the more they stay the same: Do NOT Discriminate!

    • Fear and anxiety could lead to social stigma and potential discrimination but as REALTORS®, we know, and we’re proud of our obligations under the Fair Housing Act and California’s own fair housing laws and we will not discriminate against any particular segment of the population. 

    • While the coronavirus outbreak began in Wuhan, China, that does not provide a basis for treating Chinese persons or persons of Asian descent — or any person travelling from any other country differently.

    • The Travel Levels and Warnings issued by the CDC can be found at cdc.gov/coronavirus/2019-ncov/travelers/index.html.

    • As we discussed earlier, our brokerages have the discretion to permit their agents to ask screening related questions about travel. Remember, it’s the CDC that advises travelers returning from abroad to monitor their health and limit interactions with others for 14 days after returning from anywhere in the world. 

 

Transactions, contracts and the coronavirus: Domestic

  • The coronavirus has hit the financial markets hard and investors, including many REALTORS®, have investments that lost much of their value — but that does not, in and of itself, provide grounds for a buyer or seller to cancel a contract…

    • Unless said contract is contingent upon that value being maintained. Note, however, that the C.A.R. Residential Purchase Agreement does not contain such a preprinted contingency. 

    • In fact, the contract specifically states — in the last sentence in paragraph 3J(2) — that the buyer’s contractual obligation regarding deposit, balance of down payment and closing costs are not contingencies. 

    • Others are saying that a “force majeure” — or the “Acts of God” clause — allows them the right to cancel a real estate contract in California. But California Civil Code — Section 1511, paragraph 2 — provides that performance of an obligation is excused when it is prevented or delayed by an irresistible, superhuman cause unless the parties have expressly agreed to the contrary. The C.A.R. contract does not have such a clause.

    • What is unclear is whether the extraordinary circumstance surrounding COVID-19 is considered by law a circumstance warranting if not complete failure of performance then at least a delay in performance. 

    •  What is clear, given the uncertainty, is that the buyer and seller are encouraged to discuss alternatives to timely performance and reach a voluntary amendment during this period of state and national emergency, if necessary.  

 

  • Discussing alternatives and finding solutions are also best for proceeding with consumers and their current agreements.

    • COVID-19 is introducing several unknowns into the hearts and minds of consumers who are managing the stress and anxiety typically associated with the real estate transaction. It’s these COVID-19-related situations or asks that are causing postponements to agreements and contracts. 

    • The good news is that REALTORS® are accustomed to helping homebuyers and sellers manage that stress and get to their desired outcomes safely and securely. 

    • For example, in today’s ‘new norm,’ a seller client may want to postpone listing their home for sale. Here are some considerations:

      • If the property is already listed for sale, the broker and the seller can mutually agree to postpone marketing of the property and extend the effective date to a time when the broker would then do what it does best — sell the listed property.

      • If a property is not yet listed, a broker and seller, with written instructions from the seller, can mutually agree to take a listing with a postponed effective date. If the seller wants to begin marketing and listing the property before the initial or extended date has been reached, then a written instruction from the seller to the listing broker will suffice. 

  • Another situation that could postpone the closing is a client who doesn’t want to meet in person to sign documents. The good news is that in California, in-person meetings are not contractually required and documents can be signed electronically. However, some lenders may require that documents be signed and notarized in person and escrow may require a deed also be notarized in-person. Here’s where relationships REALTORS® have with third-party providers, like a notary, can be leveraged. 

  • If they are able to find a notary willing to visit the client at home, ‘new norm’ precautions and good hygiene practices are recommended.

  • Government office closures could also postpone a closing. For example, if a county recorder’s office is closed on the date outlined in the C.A.R. purchase agreement, close of escrow cannot contractually occur. Contract law requires contracts to be interpreted to give effect to the intention of the parties (Civil Code section 1635) and delaying closing while recorders’ offices are closed would appear to be consistent with that intent.  

 

Transactions, contracts and the coronavirus: International

  • California has earned its reputation as a great place for people to live and work, which makes it an attractive location for global investors to park their investment dollars... 

    • And, as such, these deals come with additional duties, responsibilities and challenges. For our purposes, it’s important to note here that these global practices existed prior to — and will exist after — the resolution of the current situation with the COVID-19 virus. 

    • For example, clients who are stranded overseas may need to close escrow and sign closing documents. Now, while some contract requirements can be satisfied through electronic signatures, others, like some lenders we spoke about earlier, may need to be notarized.

    • In these cases, the client will need to go an embassy or consulate in the country where they are stranded and sign those documents in front of a notary.

    • Overseas buyer clients, like their counterparts in the states, must satisfy their obligation to prove they have the funds required to satisfy the contract — as stipulated in the California Residential Purchase Agreement. 

    • An all-cash buyer is required to provide verification of the funds to the seller while a buyer who is obtaining financing is required to provide written verification of the down payment and closing costs. 

    • Ordinarily, money available in a U.S. bank account would be considered adequate to satisfy the buyer’s obligation, but if the buyer’s proof of funds comes from a foreign bank, the seller may consider the ready availability of funds from the foreign account and whether any disruption in the global transfer of funds could delay the transaction. 

    • Now many international buyers purchase rental properties here and hire their REALTORS® to serve as managers of their property or properties. In these cases, California and federal law impose withholding requirements on property managers acting on behalf of a foreign person who owns income-producing real estate. 

    • hese laws are complex and affect the foreign person’s decision on what to purchase and how to hold title. Since I am not an attorney, let me advise that get further information online.

    • wo documents in particular are offered by C.A.R. They are: “Foreign Investor Property Owner Withholding” and “Nonresident Property Owner Withholding” and they can be found online at (https://www.car.org/riskmanagement/qa/landlord-tenant-folder/foreign-investor-property-owner-withholding) and (https://www.car.org/riskmanagement/qa/taxfolder/nonresident-owner-withholding).  

    • Remember, the concerns we just discussed existed prior to — and will exist after — the resolution of the current situation with the COVID-19. 

 
 
 
 
 

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