Realtors deal with stranded clients
Contracts in limbo, agents petition Wolf to permit transactions
Allentown real estate agent Kristine McCreary had few answers for her client, who found herself stuck in a 30-day period of limbo.
With the Pennsylvania housing market on pause, the seller’s house was under an agreement of sale, but she was unable to purchase another home to live in. The questions for McCreary kept coming: “Will you be able to find me something?”
McCreary, of SlateHouse Realty, would take a deep breath and assure the woman, but truthfully, she didn’t know.
“I know that’s my job, but then I’m restricted in doing that job,” she said.
Since Gov. Tom Wolf ordered non-life-sustaining businesses to shut down in mid-March, real estate agents have been barred from conducting in-person business, which for some steps, like inspections and title insurance transfers, is the only way to complete transactions. The guidance from the state has since been clarified: Only home sales that went under contract before March 18 may be carried to completion.
The Pennsylvania Association of Realtors has waged a loud
battle against the governor’s decision to deem their industry nonessential. They’ve made repeated appeals, filed an amicus brief supporting a lawsuit, testified in the state Senate and supported a bill that recently passed in the House.
In a state Senate hearing this week, lawmakers frustrated by the state’s response to the coronavirus crisis held up the real estate industry as an example of arbitrary decision-making, Pennsylvania being the only state not to open up sales. Other states, such as New York and Vermont, previously imposed similar restrictions but have since changed course.
“We have penalized a lot of people in the economy,” Republican Sen. Bob Mensch of Montgomery County said.
In memos explaining the guidance, Wolf’s administration highlights significant health concerns as the driving force behind the decision to suspend in-person real estate business. At the Senate hearing, Health Secretary Dr. Rachel Levine said the decision was a collaborative one across multiple state agencies and driven by the data at hand, with initial modeling showing 20,000 people in Pennsylvania might die from coronavirus.
Pennsylvania Emergency Management Director Randy Padfield said the administration has leaned toward erring on the side of caution.
“Early on some of this modeling was pretty devastating,” Padfield said.
The Lehigh Valley has been hard-hit, its prevalence of coronavirus cases nearly double that of the state’s. In Allentown, that prevalence has been as high as four times the state’s.
That’s reason enough for state Rep. Mike Schlossberg, who represents Allentown, to want to make as few exceptions as possible.
“We’re not in a position where I’m comfortable opening up services,” he said.
But with their hands tied with real estate business, some Lehigh Valley agents are talking to legislators day and night to open up what can be opened up, joining PAR legislative committee calls and seeking the help of the National Association of Realtors.
“We’ve been working harder on this than anything else,” said Sean LaSalle, past president of the Greater Lehigh Valley Realtors Association.
Their plea, as PAR President Bill Festa testified: “The business shutdown order is truly preventing Pennsylvanians’ ability to gain shelter.”
The sale of McCreary’s Northampton-area client’s home was contingent on her finding another home to live in. But since stay-at-home orders prevented McCreary from showing her homes, the transaction was stuck in limbo, leaving the family who was supposed to move in to split up and staying with various family and friends. Their apartment lease had already been signed to new tenants.
In the meantime, the seller’s grandchild was born, and her boyfriend died of pneumonia.
“You can’t make this stuff up,” McCreary said.
Paying two mortgages
While restrictions have left some home sellers stranded, for others, the opposite is true: They’re stuck with two mortgages.
In mid-March, Mike and Patty Bernadyn settled on a house in Georgia, where they plan to retire to be near their grandchildren. They had just started getting their house in West Penn Township, Schuylkill County, ready for resale when the restrictions took effect. They haven’t been able to list their home. From the start they anticipated having some overlap and were prepared financially for a couple months of it. But reality hit when they paid two mortgages for the first time in April, and there seemed to be no end in sight.
“This here now is really putting us behind the eight ball,” Mike Bernadyn said.
The double mortgage problem is not an uncommon scenario in a competitive and fastpaced market where many people might have bought a home with the intention of selling theirs immediately after, explained Jill Saunders, an agent with United Real Estate Strive 212 in Wyomissing.
“The market was so good this first quarter that people were very confidently able to do that,” she said, the average time a home spent on the Lehigh Valley market being 43 days in March. “When the shutdown happened, these people got trapped.”
She and more than 2,000 others signed a petition asking Wolf to make real estate essential, with some suggested mitigation guidelines to ensure social distancing. It recommends new rules for home showings, such as the wearing of masks, gloves and shoe covers, a three-person limit, and a ban on open houses.
She said the heart of the petition is for the clients in limbo: having double or no mortgages, stuck at home with abusive relationships, or having to relocate for a job but having nowhere to settle down.
The latter happened to LaSalle’s client, a doctor living in Orefield who took a new job in Lititz. He had planned to put his home on the market on March 19. Instead, come June 1, he’ll add three hours to his commute to a 16-hour shift.
He has another client who lost a $60,000 deposit on new construction in New Jersey because he is unable to sell his current home, and the builder will not extend the closing date any further.
“I’m not saying we should open real estate the way it was,” said LaSalle, an associate broker with Berkshire Hathaway. “But we have to be able to transact.”
Not just for the clients’ sake, but for the agents, too.
“The problem now is the pipelines are drying up,” and they take months to rebuild, said Jack Gross, president of the Greater Lehigh Valley Realtors Association.
Even when agents are able to start new deals again, it’s another 30 to 60 days to get them under contract, and another 30 to 60 days to close, meaning months without income.
It’s Better Homes and Gardens agent Kathy Gregory’s only source of income, and she’s not willing to take risks on that, knowing there are testers in the market making sure agents aren’t betraying the governor’s order.
“Our unemployment site is not working, you’re stopping us from working, and now you’re sending people in to catch us?” she said.
Not immediately essential?
Wolf vetoed a recent bill that would allow many businesses to reopen while following CDC mitigation guidelines. The new House Bill 2412, which focuses specifically on allowing real estate services to reopen, has been sent to the Senate for consideration.
Schlossberg, who voted against the bill, agrees that real estate is essential, but not necessarily immediately essential. McCreary’s client, for example, found rental housing, and the buyers plan to settle on her house this week. The federal Coronavirus Aid, Relief, and Economic Security (CARES) Act offers homeowners with government loans the ability to request a forbearance for up to 180 days, and another 180-day extension after that.
“I have no good answers — I just have slightly less terrible answers,” Schlossberg said. “We have shifted from making good versus bad decisions to making atrocious versus murderous decisions.”
Looking toward the positive, McCreary surmises there’s a finite number of people in this loophole. By now, homeowners know not to list their homes. Many agents have eager buyers waiting in the wings, listings just waiting to be shown.
“The buyers out there right now are people that really need to move [into a new home],” she said.