A Practical Guide to Navigating
Real Estate Transactions
During COVID-19

A Practical Guide to Navigating Real Estate Transactions During COVID-19

To say that COVID-19 has impacted the Toronto area real estate market is an understatement. COVID-19 has affected and is still affecting the processes for buying and selling real estate.

There are valid, and perhaps compelling reasons why homes still need to be purchased or sold during the most challenging times. We’re hoping that this guide will help unburden some of the worries you have about real estate transactions and answer some of the questions you may have about your home purchase or home sale journey.

Buying or selling a home or property is usually a very fluid process, provided that all parties and stakeholders are working effectively towards a common goal of completing the transaction with everyone’s best interests in mind.

Coronavirus bugs on the left a hand stopping them beside a house

Of course, issues can happen; but for the most part, where there is a willing buyer and seller, most issues that arise can be overcome and the transaction completed.  This sentiment continues to be in place during the current pandemic. However, as a result of the current climate, it is wise for both parties to add additional time to the entire process, to account for unexpected or unplanned issues that may arise, and to provide flexibility and patience needed to resolve such issues.

Along with offering some guidance which may help you with your real estate transaction experience, we have provided some insights, a few observations, and we also offer some suggestions that may provide some clarity during these challenging times.

COVID-19 Market Impact

Unfortunately, the COVID-19 crisis has not only impacted the real estate transaction process, but the real estate market in the Greater Toronto Area as well. The Toronto Regional Real Estate Board revised its 2020 forecast when the COVID-19 crisis impacted real estate downwards by 69% (year over year) in the first half of April.

In addition to reduced market growth and average selling prices for homes dipping, the entire real estate transaction has become much more disruptive, complex, and restrictive, which may also affect closing timelines and costs.

Although April’s market numbers suggested a downward trend, recent activity in Toronto during the month of May shows that the market may be warming up somewhat, provided that efforts to re-open the economy continue. We will expand on additional reasons for optimism later in this article. 

Patience Is a Virtue During the COVID-19 Real Estate Transaction Process

Buyers and sellers must be even more patient and flexible in a COVID-19 environment. Physical distancing has impacted meetings and processes with your real estate agent and mortgage representatives, and your lawyer.

It has also affected open houses, showings, appraisals, home ‘walk-throughs’ inspections, and more. The stakeholders involved with a real estate transaction must find a way to navigate through the challenges, restrictions, complexities and timelines for their clients and anticipate unforeseen issues.

Work with Your Real Estate Representatives and Specialists Early in the Process

A buyer and seller must rely on their representatives and specialists to work in their best interests and be aware that in addition to making the transaction go forward, that backing out of a transaction may have costly repercussions. For example, many buyers that backed out of transactions during the April 2017 ‘Foreign Buyer’s Tax’ cooling measures, not only lost their deposits but were also forced to pay for the seller’s losses.

Client having coffee looking at his laptop screen talking with his mortgage professional on video chatThere may be additional areas of a COVID-19 real estate transaction that may have a negative impact on your specific situation. Having experienced representatives, specialists, including your lawyer, work with you and also your buyer’s representative’s is crucial, if a deal is to be worked out in everyone’s best interests.

COVID-19 Essential Services

For those buyers or sellers that need to move forward with a real estate transaction, realtors and most of the specialists involved with your transaction, including your lawyer, and mortgage brokers, have been declared ‘essential’ and can help you through the COVID-19 impacted ‘property buy or sell’.

Real Estate Sector Digital Workarounds and Improved Processes

Digital workarounds have been implemented to make your transaction more fluid, as the real estate sector learns to adapt in the COVID-19 environment. More emphasis on virtual home tours, video communications, making and accepting digital offers via digital signature are commonplace in the process, which can make the process much more efficient.

Even though many documents can be signed with digital and on-line technology, the ‘Closing documents’ will need to be printed and signed with a lawyer, and will need non-digital signatures (‘wet signatures’).

A quad split screen laptop with four specialists on a video chat

The process and logistics of closing have also evolved, along with the number of entities with the transaction. Your real estate lawyer can now perform many parts of the transaction electronically. Prior to COVID-19, your lawyer would have to oversee the exchange of funds (e.g. courier of manual cheques) and house keys. However, now there are digital solutions to help with the entire process.

These solutions include special accounts that lawyers set up so banks and lending parties can e-transfer funds to your lawyer and ensure the entire transaction is verified, validated and completed. Lockboxes are being used so that when the funds have been successfully transferred, your lawyer can provide a special code to release the keys to the property.

Even lenders have improved their processes with online applications, digital loan qualification and approvals, including smartphone apps to help facilitate the process.

Home Inspection During COVID-19

Home inspectors are also adapting with the inspection protection with hazmat suits, respirators and gloves to facilitate the home inspection as best as possible. Results of the inspection are provided electronically.

Real World Observations

Social Distancing, Plastic miniature human figurines, on a circles grid with arrows 6 feet apart

Having completed numerous real estate transactions in the current climate for the past few months, we wanted to share some observations we’ve made during this time and offer suggestions to help make your transaction proceed as smoothly as possible.

Social Distancing and Signatures

Social/physical distancing has impacted the timing of nearly every aspect of a real estate transaction. Arguably the biggest impact is that a lawyers’ ability to meet with clients in person, has been limited, if not restricted outright, (for the time being). The solution has been to allow lawyers to meet with clients virtually, to witness the signing of documents.

While most documents in a real estate transaction can be signed using DocuSign programs (including the Agreement of Purchase and Sale), closing documents signed with a lawyer still require a “wet” signature. Meaning, documents still need to be printed and signed. Arranging for the delivery and pick-up of those documents after signing has required that meetings with clients take place much earlier in the process and well in advance of closing.

Home Inspections and Walk-Throughs

With respect to home inspections or ‘walk-throughs’ prior to closing, because of the social/physical distancing measures, buyers may decide not to have their final inspection. Or alternatively, sellers may object to buyers walking through their home.

House inspector with clipboard looking inside of the house

Whether you as a buyer have the right to a walk-through of the home or you as a seller have the right to object to having a buyer walk-through your home, depends on the wording in the Agreement of Purchase and Sale. Unless the wording in the Agreement of Purchase and Sale provides the seller with the right to prevent the buyer from walking through a property, the buyer can insist that they complete their walk-through prior to closing. However, the seller can insist that proper safety precautions be taken (such as the wearing of PPE’s, confirming that they do not have any symptoms of illness, or have not travelled or been around anyone known to be sick in the last 14 days), prior to admitting a buyer into their home.

If you as a buyer are being restricted from entering the property, when you have the right to do so, you should speak with your lawyer immediately. Failure by a buyer to walk-through a property prior to closing, could result in missing out on identifying recent damage caused to a property and limit the remedies available to rectify such issue.

Land Registry Office Registrations

From the onset of the provincial lockdown, questions were raised as to whether the Land Registry Office would be deemed “essential” and remain open. Without the Land Registry Office accepting the registrations of transfers (purchases/sales), real estate transactions could not be completed.

Over two months into the provincial lockdown, lawyers and the Land Registry Office continue to be deemed essential services and remain open. While we cannot predict how the next phase of the pandemic will pan out, with the number of new COVID-19 cases on the decline, we are cautiously optimistic that the Land Registry Office will continue to remain open and prevent any obstruction of real estate transactions.

Banking Transactions

Banks have shut down certain branch offices and limited their hours of operation. This reduced service coverage has forced most real estate lawyers to turn to electronically wiring ‘Closing’ funds. With the bank’s limited hours, you should give yourself adequate time to withdraw purchase funds from your account, prior to closing and provide the funds to your lawyer in advance of closing

5 Suggestions to Help You With Your Real Estate Experience

  • Be proactive. Give yourself more time for everything. In today’s environment, every aspect of a real estate transaction takes longer. Being properly prepared will ensure that if there is a hiccup along the way, you still have time to get things sorted and back on track
  • Walk-Through Just Prior to Closing. As a buyer, insist on having your final walk-through of the property just prior to the closing date. This is an important last measure for ensuring the sellers have not inappropriately removed any chattels from the property and that the property will be left in the state of repair, as agreed upon.
  • Sellers – Establish Safety Protocols for Home Visits. As a seller, you can insist that proper safety precautions be taken, before admitting a buyer or their representatives into your home.
  • Read the ‘Agreement of Purchase and Sale’ Thoroughly and Understand It. Make sure you understand your rights and obligations under the Agreement of Purchase and Sale. While this goes without saying, it is more important than ever that you have a firm understanding of what you are entitled to do and entitled to decline. Most real estate disputes stem from an improper understanding of the terms of the Agreement of Purchase and Sale.
  • Talk to Your Representatives, Specialists and your Lawyer Early in the Process. From our experience, a 10-15-minute phone call with your lawyer to review the terms of the Agreement of Purchase and Sale, will go a long way in preventing possible conflicts down the road.

Final Thoughts

Our final observation is that real estate transactions are still closing! Despite the doom and gloom of the recent market downfall, we have successfully closed every real estate transaction scheduled for the months of March, April and May.

This activity indicates that banks are still lending money, buyers are still closing purchases and sellers are still moving out of their homes. While we can’t speak to whether the number of transactions will increase over the next few months, those that are scheduled to close, appear to be closing on time and without (too much) issue.

About Nichols Law Professional Corporation

Nichols Law Professional Corporation (NLPC) has been serving clients in Markham and York Region with legal services since 1983. The firm is operated by its Partners, Graham Nichols and Keith Nichols.

Nichols Law office location, corner of Main And Centre in Markham, looking across at the clock towerNLPC’s clients range from individuals and families that are just starting out, to growing families and businesses who are looking for future succession planning or protecting their dependents and loved ones with their estate planning needs. NLPC helps business professionals and small business owners with their legal needs for starting a new business, contract or agreement advisory or more complex corporate or commercial legal needs.

Learn More

If you’d like to read more on the subject of how COVID-19 is impacting real estate transactions, we have linked several articles below discussing similar issues.

Information Sources and Links

BNN Bloomberg. Signs of life in Toronto housing as sales surge 53% from April

Toronto Regional Real Estate Board. ‘TRREB Releases May Resale Housing Market Report’

Toronto Star. ‘Toronto region home sales suddenly tumble by 69%’

Globe and Mail. ‘For home buyers, backing out during COVID-19 crisis is not an option’

BNN Bloomberg. ‘How COVID-19 is changing the way Canadians buy and sell real estate’

Financial Post. ‘How to buy and sell a house in the time of coronavirus, from virtual tours to hazmat home inspections’

Toronto Storeys.  ‘How COVID-19 Could Impact Hamilton’s Real Estate Market: RE/MAX’