Real estate shutdown in Pa. wreaks havoc: Some face two mortgages, others have no home

In Pennsylvania, realtors say the governor has put his foot on the neck the real estate industry.

• By Christine Vendel/PennLive

(Harrisburg) — Mickie Stough and her husband Donald are in their 70s and wanted a maintenance-free home.

So they got on a waiting list for an apartment complex they liked and signed a contract when a unit opened up that fit their specifications.

The next step was to put their Dillsburg home on the market.

But that’s when the novel coronavirus hit, shutting down businesses across Pennsylvania, including the real estate industry.

Under Gov. Wolf’s shutdown orders, realtors are not considered “life-sustaining,” so they are forbidden from doing any in-person real estate work.

That means the Stoughs’ real estate agent, Bob Lehman of Re/Max First Advantage, can’t visit their home to help them set a price, stage their home or take photos. He can’t even place a sign in their yard or lockbox on their door.

No showings or open houses are allowed and even if a buyer was interested in purchasing the home “sight unseen,” they couldn’t hire an inspector, appraiser or notary to complete necessary documents.

“We didn’t want to worry about the lawn and snow anymore,” Mickie Stough said. “We didn’t want to worry about maintenance.”

But now the Stoughs are worried about much more. On June 1, they will be legally obligated to start paying rent at their apartment. Will they still be paying for their house too?

Similar scenarios are playing out across the Commonwealth as buyers, sellers and realtors grapple with the state’s clampdown put in place to stem the tide of COVID-19. The restrictions for real estate in Pennsylvania are tighter than any surrounding states, say real estate agents. Many other states, including New York and New Jersey, which are considered epicenters of the virus, have declared real estate “essential,” and are allowing in-person services to continue under new social distancing guidelines.

But in Pennsylvania, realtors say the governor has put his foot on the neck the real estate industry, along with many supporting businesses, despite a March 28 declaration from the federal government that real estate services, including settlement services, should be considered “essential critical infrastructure.”

The situation has prompted several real estate offices to file a lawsuit against Wolf, asking him to grant the industry a waiver since “shelter” is vital. The Pennsylvania Association of Realtors filed a brief in support of that lawsuit.

“The three essentials to life are food, clothing and shelter,” the association said on its website. “The governor is preventing Pennsylvanians’ ability to gain shelter. Pennsylvania Realtors are responsible for helping people achieve that shelter but across Pennsylvania, first-time homebuyers, single parents, doctors and other emergency workers may be unable to ‘stay at home’ if they’re not able to secure their new home because of these orders.”

Under new state guidance released Friday, real estate contracts signed through March 18 can continue to have limited in-person real estate services to finish the deals, including appraisals, inspections, final walk-throughs, and title insurance.

But any contract inked after March 18, cannot. Those activities “are prohibited until the Emergency Disaster Declaration is lifted for Pennsylvania,” according to the Department of State. This applies to refinancing transactions as well.

“For sales outside of that date range, they are at a pause, at a standstill right now,” said Jordan Piscioneri, president of the Greater Harrisburg Association of Realtors. “Half of our pending contracts are impacted by that date.”

Realtors have figured out how to do virtual meetings and virtual showings, “but home inspections, appraisals and closings. Those are three things we need to figure out.”

If the disaster is over April 30, realtors could start closings on May 1 without many problems, Piscioneri said. But if the disaster continues, “we’re going to have a bunch of files with a lot of challenges.”

Lehman, of Re/Max First Advantage, said he has a contract signed Feb. 18 that is on a knife’s edge. The buyer didn’t show up for the settlement appointment last month. He has so far declined to sign a settlement extension document but has promised to show up for a new settlement date later this month.

The seller, meanwhile, already has moved into a new home and doesn’t want to start marketing her home all over should things fall apart. She originally had six offers when it was on the market in February, but things are different now.

“It’s rough,” Lehman said. “I’m doing the best that I can for my client.”

Normally this would be boom times for the real estate industry: springtime with record-low interest rates. Instead, it’s a disaster, said Tim Costello, co-owner of Re/Max First Advantage.

“This is our busy season,” he said. “We typically sell 100 to 150 homes per month, but now we’re lucky to have a sale or two a week.”

The only sales that have gone through in recent weeks are ones that are “sight unseen,” he said, which is common in popular resort communities but rare in Central Pennsylvania. Until now.

Housing inventory was tight before the coronavirus hit, and now it’s contracted since then, with no foreclosures allowed and sellers generally waiting to put their homes on the market. That makes the few homes that are for sale hot commodities for buyers willing to take a leap of faith.

A house in Hamden Township listed for $230,000 recently enticed 10 offers, including including one $17,000 over asking price, Costello said.

One of his agents, John Patrick Henry, has been excelling at selling sight-unseen homes in recent weeks, selling five homes, including one for $465,000. Instead of in-person tours, buyers have settled for photo galleries and video virtual tours. The buyer of the $465k house was okay with no home inspection because the home was only two years old.

“Why are people still buying?” Henry said. “Because some people have no choice right now.”

Henry said he represented a woman with four children who bought a house just before the pandemic hit Pennsylvania, but now it’s unclear if she will get to close on the house.

“She has nowhere to go. It’s putting people in some tough places,” Henry said. “This is uncharted territory for all of us.”

Jennifer DeBernardis, president of the DeBernardis Group, said she has three contracts written after the March 18 cut-off date, including one set to settle April 24. The seller was wanting to downsize and move into a rental property but now she doesn’t know if that will happen on time because of the restriction against title insurance activities.

In that case, the buyers are in a flexible rental situation, she said, and both parties are working together to keep the deal intact, even if settlement gets delayed.

Realtors are now adding a “COVID-19” addendum into any contracts, DeBernardis said, that explicitly allows delays and protects all parties.

A house that DeBernardis was supposed to put on the market by now is in a holding pattern because the seller realizes no one can come look at it. But the seller has already purchased a home in Massachusetts (where Realtors can still operate) for a job transfer.

DeBernardis said she can wait for a while, but eventually that house must be put on the market, no matter what the restrictions.

“All the Realtors, we want everyone to be safe and healthy,” she said. “But the work we’re doing is essential and now there are so many gray areas. I don’t know how long we can sustain it like this.”

Even before the pandemic, buying and selling a home already was known as one of the most stressful times in a person’s life. The disruption from the new coronavirus has only amplified that, but deals are still holding together for the most part, said Joy Daniels of the Joy Daniels Real Estate Group.

“In our experience, most buyers are still looking to complete their purchase transactions,” she said. “Some buyers have terminated their agreements, but that is usually a response to employment loss or uncertainty. There have been a few sales where the buyer was actually from another country and due to airline restrictions, stock market, economy, etc. they have chosen to hold off on a purchase.”

The situation has caused all sorts of new problems and wrinkles in an industry already known for being unpredictable.

“Our members are calling us all the time: ‘What do we do?’” said William Festa, president of the Pennsylvania Association of Realtors. “We had a situation where a man wanted to move into a senior center, and he sold his home, but now he can’t move into the senior center (because of their COVID-19 rules.) There are probably hundreds of stories out there like this.”

The industry should be allowed to buy and sell homes for people who need to move, Festa said.

“We aren’t asking that we go back to business as usual,” he said. “We can use proper distancing, gloves, masks and other limitations on the number of people involved. But let us get these people who need homes, into homes and save others from financial hardships.”

The association thus far hasn’t heard back from the governor’s office despite numerous pleas.

As it stands, there doesn’t seem to be any “common sense,” in the restrictions against real estate activities, agents say. That’s why they want the governor to reconsider.

“We provide places for people to live but we can’t fulfill our obligation,” Costello said. “Buyers want to see homes. Sellers want to let them see their homes, but we can’t even go and unlock the door.

“We could call the owner and ask them to unlock the door, but then are we an accomplice to violating the stay-at-home order? It’s a crazy situation. We can go to Wegman’s with 500 other people but can’t meet with a seller or have a document notarized.”

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