Jim Valentine: Thoughts for the pondering mind
I’ve written extensively over the past couple of months about the changes in the real estate industry caused by the COVID-19 virus. Times they’ve sure been a changing and the adaptations have been accepted and applied in the field. So what does it all mean to the consumer? Is everyone protected equally? It seems as if changes have been made that protect consumers from recognizable consequences, but what about some of the not so visible unintended ones?
1031 tax-deferred exchange participants have been given extensions to the time parameters they have to complete their exchange, but what happens to the investor that has sold his relinquished property, and then got furloughed, laid off, or otherwise had their income compromised or eliminated? If they need to get a loan to complete the exchange and don’t have sufficient income to qualify now, will there be any relief for them in the tax consequences they will have by not completing the exchange? It seems like they are deserving of some form of tax relief as their penalty is a direct result of the federal and state COVID-19 sanctions.
Once in awhile buyers want/need to occupy the home they are buying before the close of escrow. Generally speaking, this practice has upsides and downsides for both parties, but it can be very good for both in the right circumstances. We have to wonder what will happen if a buyer occupies a home in such a situation and the escrow fails to close. Is the buyer then a tenant with the governor-mandated protection from eviction, or was this a position created in order to facilitate the wants and needs of the parties in a business transaction? Does it matter if the occupancy has a rent payment, or not? Does it matter if the buyer’s reason for not closing the escrow is COVID-19 related? Most forms covering such a situation, i.e.- Agreement To Occupy Prior To The Close of Escrow, are like a mini-lease using the language of a lease albeit shorter, i.e.- intent is to create a day to day lease with seven-day notice to quit. Short term leases usually provide for a month to month tenancy with a 30-day notice to quit. So what does this mean in today’s pandemonium world? Something to ponder. Can they be given notice to vacate so the seller can find another buyer?
What happens if a buyer claims that he acquired the virus from looking at a home that was recently toured by many people? Who can say yay or nay about where the virus was actually contracted? Is there any liability for the seller or their agent? Did the buyer use proper COVID-showing protocols, i.e.- disinfect hands going in and coming out of the property, minimize touching of all things in the home, wearing a mask, etc.? Where else were they the week before and after the showing? Who can prove what in such a situation? Quite unlikely to have legal issues with all the warnings about proper protocols and advice to be safe, but anyone can sue anyone for anything. Not a reason not to allow your property to be shown and sold, just a point to ponder if you are thinking of relaxing your showing protocol procedures. Don’t do it!
The problem with such unintended consequences is that well intended people making a workable mutually beneficial agreement between them can be significantly adversely impacted, financially and emotionally, through no fault of their own. These points to ponder are just to make you aware that you might be making what would otherwise be a fine agreement in good faith and find yourself in a non-compromising position if the other party chooses to interpret their position in a different light than that in which it was structured and agreed to. The best way to proceed is to have faith in mankind and agree as you normally would in the best interest of all parties. You might include a note about the reasoning and thought process, i.e.- “Buyer is not a tenant, rather is occupying the property prior to ownership as a negotiated part of the sales agreement.”
Don’t freeze your real estate activities out of fear. It might be awhile before things change and some changed components may never change back to the old ways. Do what is best for your family and you should be just fine.
When it comes to choosing professionals to assist you with your real estate needs… Experience is Priceless! Jim Valentine, RE/MAX Realty Affiliates, 775-781-3704. firstname.lastname@example.org