For most Canadians who wanted to buy a home last year, 2020 was not their year at all. The outbreak of the COVID-19 pandemic saw to it that many buyers could not achieve their goals. Not because the housing market was shut down. But most of the services buyers needed to complete purchases were just not available.
Selling and buying homes often involves a lot of in-person interactions between buyers, sellers, estate agents, and financiers. But with people limiting their contact with strangers, sellers not hosting open houses, and delays with home financing, buying a home in 2020 was impossible for most buyers.
This was the situation late into the year and going into 2021. But thankfully, the housing market is back on track. Yet things have not exactly returned to how they used to be. The pandemic has forced real changes that are making the process of buying a home today radically different from what it was in the past.
Buyers looking to buy a home this year will be experiencing significantly new ways of buying and financing their properties. Many of these changes were already in the offing before COVID-19. However, they are experiencing a surge in uptake because they let people shop for homes without exposing themselves.
Here are some of the ways COVID-19 is transforming house buying and financing.
The types of homes buyers want
The most sweeping change has been a reversal in buyer demand for homes close to public transit and job centers. As Cressman Realty and Property Management explains, buyers are shunning dense communities found in cities for the less crowded suburbs, semirural, exurbs, and rural areas.
With companies moving their “back-to-office” dates to the end of 2021 or even later and employees getting used to working remotely, this trend is likely to get stronger. Moreover, property developers are taking note and starting to locate their projects away from cities.
In addition to wanting to move from the cities, buyers are looking for more space in their homes. The additional space will let the home have room for larger households, dedicated home offices, areas for children schooling from home, and places to quarantine sick family members.
Home design is also leaning away from the open-floor plans that have dominated in the last years. Instead, designers are starting to favor layouts that offer more privacy.
Impact on home search
Since the last two decades, online real estate marketplaces have been the de facto method for potential buyers to search for and find their ideal home. Platforms like Zolo have effectively replaced the traditional methods of listing properties.
However, before COVID-19, buyers would find homes online and then go to see them in person to verify the details. But today, sellers are reluctant to have strangers coming into their homes and buyers are not eager to do a physical walkthrough of the homes they want to buy.
In place of in-person visits, we are seeing:
- Virtual tours: 360-degree photographs of the home that buyers can interact with and move around to view the rooms from different angles.
- Video walkthroughs: These may be simple videos shot on a smartphone that gives the buyers the feeling of walking through the home themselves. They can also be enhanced video walkthroughs with advanced equipment and sound.
- Drone tours of a neighborhood or the area around the home. These tours are often supplemented with information from neighborhood watch apps (Citizen, Neighbors, and Nextdoor) and Google street view
With these tools, instead of visiting ten homes, buyers only have to visit one or two homes in person before they buy. At the same time too, more and more people are buying their homes using these online tools alone.
Impact on home financing
With the pandemic, more lenders are embracing fully electronic mortgage applications. The initial reluctance by banks to adopt these systems has been overcome by consumers’ unwillingness to go to banks or meet mortgage brokers in person.
Coupled with the fact that these digital solutions make it easier for customers to compare quotes by several lenders, they have had banks scrambling to make their own application processes more contact-free.
Fully electronic mortgage applications are also reducing the time it takes consumers to go from pre-approval to closing. The unintended consequence of this is that buyers who use financing are increasingly competing with cash buyers.
Another home financing trend that is gaining popularity is “renting to own.” The option is now more attractive due to the harsh economic realities imposed by the pandemic.
Impact on the closing process
Previously, the closing aspect of the loan process was one of the areas least affected by technology. Most closings were done traditionally (in-person) because of the obvious difficulty of appending signatures and verifying documents online.
But the pandemic has forced electronic signatures to go mainstream and made e-notaries an accepted part of the closing process. It is now possible for notaries to verify documents online, notarize them digitally, and distribute copies without ever meeting the borrower.
Although most closing is still done the traditional way, there is a real possibility that in the near future, every part of the mortgage process will be done digitally and online.