COVID-19 Real Estate FAQs

1. We are supposed to close next week but the buyer has tested positive for COVID-19 and wants to terminate the contract. Can either party terminate the contract based on a COVID-19-related diagnosis, exposure, or quarantine?

Most standard contracts do notinclude provisions for termination that would activate based on an event like the COVID-19 pandemic. The date of closing listed in a contractmight not be a strict deadline. This meansthe date of closing could be postponed or extended due to illness or stay-at-home orders but it would need to be negotiated by those involved. The parties involved in the transaction must determine what changes they want to make under the current circumstances.

2. My seller has a positive diagnosis for the coronavirus. What are my obligations to release that information to the buyer, inspectors, and members of the public who have been to the property?

If a seller tells you he or she has contracted the virus, you are obligated to tell anyone who has been in interactingwith the client. I addition to buyers, this includes inspectors and other members of the public. The requirement to inform someone he or she has been exposed to a COVID-19 infected person falls under such a duty to inform. Additionally, you should speak to a doctor or local authorities about you having been exposed to the virus and quarantine yourself for at least two weeks to reduce the risk of spread.

3. Does my seller have to disclose to potential buyers if he or someone in his household has tested positive for COVID-19?

Yes. Sellers have a legal obligation to warn potential buyers someone on the premises has been diagnosed with the virus. This is the case even if the infected person did not directly come into face-to-face contact with anyone. The virus is considered a material defect, just like when other health concerns are present in a home. It is believed to remain on surface areas for several days after exposure and could cause someone to become ill even if they never came into direct contact with an infected person.

4. Can the buyer ask the seller to have the property deep cleaned after the seller moves out?

Yes. It is possible to build any requests like this into the offer to purchase and it will likely be received more amicably under the current circumstances. Buyers have the right to ask that the property be cleaned and that the seller pays for it. If the seller refuses the request, buyers have the right to postpone their move-in date so enough time will pass and the virtuality will be diminished. Essentially, they would wait until any “leftover virus” to diminish in virility before exposing themselves to the property.

5. May I ask clients or others I interact with in my real estate business if they have traveled recently or have any signs of respiratory illness?

Absolutely. There are many instances in which people can request information about any recent travel behavior and this is one of them. Real estate agents are allowed to question clients or others about their recent travel. They can ask for specifics about the travel destination, as well. To prevent potential issues with fair housing rights, it is important to ask consistent questions and behave a set process for inquiring about travel.

6. Can my buyer terminate his purchase and sale contract due to COVID-19 and receive his earnest money back?

They cannot if the only issue is COVID-19. However, ifa buyer can terminate according to the purchase and sale contract, then this would be appropriate. However, the buyer cannot end the contract only because of the virus. However, if the parties intended to use a COVID-19-related addendum in their contract, either party canhave the right of termination according to that specific addendum. In this case, the buyer would be refunded the earnest money.

7. My client is a cash buyer who lost her job due to COVID-19 related issues and wants to terminate the sales contract.

What happens will depend on the specific circumstances of your situation. The fact that it is a cash buyer is unlikely to allow for termination. Buyers and sellers can stop the contract because the buyer is no longer able to pay for the loan or cannot afford closing costs because their income situation changed due to the virus. However, in any case, buyers cannot terminate the agreementwhen paying in cash and the sales contract will need to continue as if the virus were not happening.

8. Is an executed deed effective even if it has not been recorded in the real property records due to delays under COVID-19?

Yes, deeds are effective when they are executed, even if they are not recorded. This means if there is a delay with recording it, which there likely will be under the COVID-19 shelter-at-home guidelines, it will still be the effect. The buyer becomes the property’s owner after the completion of closing no matter if a deed is recorded or not. The recording delay is more an issue with subsequent purchasers, so it is important to record the deed when it is possible and safe to do so.

9. How could the pandemic affect the real estate market?

It is impossible to know at this point the effect the pandemic will have on the real estate market or anything else long-term. At the moment, the pandemic has accelerated some trends that were already in progress. Other trends have already or are expected to reverse. The impact will also vary from region to region based on the extent of isolation and social distancing orders, the duration of these orders, and the fiscal and monetary policy response to the virus.

10. How could the pandemic affect my ability to qualify for a mortgage?

It depends on your specific situation. If you intend to apply for a mortgage in the short-term, your employment situation will play a major role. If you are currently furloughed or dealing with a temporary lapse in income, it is likely better to postpone applying for a mortgage. Long-term, you will need to prove financial stability, which will be difficult depending on your specific circumstances. If the pandemic affects your income, it could pay a role in whether or not you will qualify for a mortgage.