RE/MAX real estate
Message From Leadership - David Coleman
Guidance on State’s Revised Guidelines for Real Estate
By: Hank Lerner, Esq. on April 30th, 2020 in Industry News
On Tuesday afternoon, the Department of State issued newly revised guidelines that somewhat expand the types of in-person real estate services that can be conducted by licensees. There has been – and continues to be – a great deal of confusion over just what is and isn’t permitted. I apologize for the length of the article, but since there are still a lot of holes and inconsistencies in the revised guidance (as there were in the original), the highlights below contain a number of explanatory scenarios in italics that might help make the guidance somewhat clearer.
- Real estate licensees, appraisers, notaries, title companies and home inspectors are allowed to conduct limited in-person real estate services (showings, property inspections, appraisals, final walk-throughs and title insurance activities) for limited residential transactions, subject to strict guidelines, including:
- Resale transactions that were under agreement on or before March 18, 2020.
Seller A and Buyer B are under contract for the sale of Seller’s property, executed as of March 15, 2020. In-person real estate services CAN continue. - Transactions involving buyers who, on or before March 18, 2020, were under agreement to sell their “prior residence.”
- NOTE: Though poorly worded, it appears this exception is intended to apply to sellers engaged in a current/recent transaction for their current or recently sold prior property.
- Seller C executed an Agreement of Sale for her property on February 1 and closed on the sale of her home on March 30. She has not purchased a new property. In-person real estate services CAN continue on a transaction to purchase a replacement property because she had an agreement to sell her prior residence in place before the cutoff date.
- Seller D executed an Agreement of sale for her property on March 15. That transaction has not closed, and Seller D still lives in the property. She does not have a new property under contract. It appears reasonable that in-person real estate services CAN continue on a transaction to purchase a replacement property even though she still lives there and it is not her “prior” residence.
- Seller E “entered into an agreement of sale for her prior residence” that closed in 2012, and she has been living in her current home ever since. In-person real estate services CANNOT be provided even though she did technically enter into a binding agreement of sale for her “prior residence” prior to the cutoff date.
- Buyer F falls into one of these categories and on April 30 legally enters into an agreement to purchase a property from Seller G. In-person real estate services CANNOT be provided to Seller G in an attempt to purchase a replacement property because this transaction was not under contract prior to the cutoff date.
- Transactions involving buyers who, on or before March 18, 2020, provided their landlord with a binding notice that they would vacate the property.
- NOTE: The intent of this section is very unclear. In many leasing situations, the landlord gives a move out notice to the tenant, or the parties may otherwise get to the end of a lease without a formal “binding notice” being provided by a tenant. As written, though, it would appear that this exception only applies in situations where a tenant has provided the notice.
- On March 15, Tenant H sent a letter to Landlord I indicating that she would not seek to renew the lease and that she would be moving out of the property when the lease expired on April 30. If Tenant H intends to purchase a property, in-person real estate services CAN be provided to Tenant H in that transaction.
- On March 15, Landlord I sent a letter to Tenant H indicating that he would not seek to renew the lease and that she would need to vacate the property when the lease expires on April 30. On March 20, Tenant H acknowledges the letter and indicates that she will vacate the property on April 30 As the guidance is worded, in-person real estate services CANNOT be provided to Tenant H because the initial notice was provided by the landlord before the cutoff date, but the tenant’s response was after the cutoff date.
- NOTE: Because this guidance applies only to residential sales, no in-person real estate services can be provided to Tenant H if she is seeking a replacement rental property.
- Transactions involving a property located in a region of the Commonwealth deemed to be in the “Yellow-Phase” of reopening once that designation is made.
- NOTE: At this time, it appears that the governor’s intent is that broad-based real estate services would be reopened on a regional basis, based on the announced “red-yellow-green” framework. Where a property is in a county that is designated “yellow,” in-person real estate services can be provided for the portions of a transaction involving that property.
- Seller J lives in County 1, which has recently been designated as a “yellow-phase” county. Buyer K lives in County 2, which is still a ‘red phase’ county. Regardless of where Buyer K lives, in-person real estate services CAN be provided to both parties in this transaction because the property is in a “yellow-phase” county.
- In order to facilitate the above transaction, Buyer K needs to sell his current home in County 2. Because County 2 is a “red-phase” county no in-person real estate services can be provided for this transaction.
- Seller L lives in County 1, which has recently been designated as a “yellow-phase” county. A few weeks after entering into an agreement of sale for her property there is a spike of positive cases in that county and it is reclassified to a “red-phase” county. At that point, it is presumed that in-person real estate activities would have to stop for that transaction until the county is again classified as a “yellow-phase” county.
- Transactions involving new construction homes which were under a previously executed contract that provides for closing and delivery to the customer on or after March 18, 2020.
- NOTE: Under the governor’s orders, residential construction project activity is permitted to restart as of May 1. Guidance for that order suggests that it applies only to construction activities and not to sales, but that is very unclear.
- NOTE: Language related to the prior exceptions (sellers/tenants looking to buyer replacement homes, and yellow phase activities), does not specify whether acceptable transactions are limited to resales or if they could also include new construction.
- Resale transactions that were under agreement on or before March 18, 2020.
- Where in-person activities are allowed, all showings, appraisals, inspections, final walk-throughs and title insurance activities must be arranged by appointment and must be limited to no more than two people on site at any one time.
- NOTE: It is unclear whether the phrase “on site” is meant to refer to a presence anywhere on the entire property at issue (e.g., no more than two people anywhere on a half-acre lot) or to a presence inside a specific property (e.g., no more than two people inside the home located on a half-acre lot). The following examples presume that the reference is to the interior of a property.
- Buyer M and Buyer N are looking to purchase a home together. Buyer Agent O arranges to show them a property. Seller’s showing instructions indicate that a buyer agent must be present during the showing. Buyer M and Buyer N must each go through the property separately with Buyer Agent O so that only two individuals will be in the property at one time.
- Any in-person real estate activity must follow the guidance incorporated in the Department of Health orders of April 5 (building safety) and April 15 (business safety), and “all participants” in any in-person service must wear masks, gloves and foot coverings at all times.
- A failure to follow this guidance issued by the Department of State could result in disciplinary actions.
- NOTE: PAR has previously reported that the Bureau of Professional and Occupational affairs is following up on disciplinary complaints filed with the state.
As PAR has noted in any number of publications, we continue to push to engage the governor’s office to develop common sense guidelines to reopen real estate on a statewide basis. The guidance in this revised memo clearly does not reach that threshold. Aside from the questions and inconsistencies in the language itself, this guidance still does not cover any commercial real estate or residential leasing.
In the meantime, brokers should consult with brokerage counsel on how to keep their business in compliance with the various state orders, and with questions about whether specific services are or are not in compliance with the order.
Mid Penn Bank
Anthony Falco
Anthony.falco@Mpbfinancial.com
RE/MAX real estate
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