Special addendums addressing coronavirus are being added to real estate contracts. Here’s what they are:
Even under social distancing rules, Brent Landels is seeing deals come together in his market of Bend, Oregon. But it’s taking some creativity. He offers an example from an agent in his office who is representing a home that’s part of a trust.
“You have to get a notarized signature in order to close, but the trustee is in their 80s and all the senior centers are locked down. Nobody can go in,” says Landels, Principal Broker with Cascadia Group at RE/MAX Key Properties.
Landels says the agent is working on finding a title company that will accept a contract signed with a notary watching through the window. It’s been difficult, but agents are willing to go to great lengths to help their clients.
These workarounds for buying, selling, and closing on homes in the age of coronavirus take time – time that real estate contracts often don’t favor. Historically, many contracts outlined specific timelines for gathering signatures, completing inspections, and making requests for repairs on a home.
The need for new timeframes is raising questions for buyers and sellers alike, according to Ron Neal, Owner of RE/MAX Alliance in Victoria, British Columbia.
“What if people are quarantined and can’t attend their closing? What if the title is closed and people can’t uphold the terms of their contracts? Without a mechanism in place, you have to just hope you can renegotiate,” Neal says.
Some agents are now responding by helping their clients add what some refer to as a “COVID Clause” or “Coronavirus Clause” to contracts for their clients. These stipulations allow for extensions due to unforeseen circumstances arising from the novel coronavirus.
A clause may cover events such as delays in home inspections because inspectors aren’t able to enter the property or slower repairs because only one contractor is allowed in a building at a time. Clauses also may address what happens if one of the parties has to go into quarantine or allow buyers to exit the contract if they lose their job prior to closing.
More often than not, “COVID Clauses” provide flexibility when it comes to time. “It’s granting an extension for everything that goes into a deal,” Landels says.
What is included in the clause will differ based on each scenario. Many real estate associations in the U.S. and Canada provide templates for agents to refer to, but it’s important for buyers and sellers to discuss any contract addendums with their agent and perhaps even a legal professional of their choosing before adding to their contract.
“It’s not a cookie-cutter clause that everyone should use,” Neal says, “But it does provide a conversation starter and then each party can consult with their own legal counsel.”
Landels has already included a “COVID Clause” in two existing contracts. “In both cases, both sides of the transaction were happy,” Landels says. “We’ve gotten no resistance to it.”
He says what these contract terms encourage most of all is understanding between buyers and sellers as they navigate a real estate transaction together.
“The clauses basically say: Be a good human. Everybody is working in good faith to get this accomplished, if we miss a deadline, be understanding,” Landels says. “It offers confidence that everyone is trying their best and still being held accountable to a contract.”