Buying and Selling a Home during a Pandemic
Published April 16, 2020
Associated Areas of law
Buying and selling a home can be a daunting process in the best of circumstances. In the grip of a pandemic, this process becomes all the more challenging. While circumstances have changed, the standards and requirements involved remain the same.
With the use of technology, and a bit of extra planning, we can ensure your journey to closing is both safe and successful.
Below are some things to consider when buying or selling a home during a pandemic.
Force Ma-what? A ‘Force Majeure’ clause protects parties from unforeseeable circumstances that prevent them from fulfilling the terms of a contract. For example, if you have been forced into self-isolation and therefore unable to meet with your lender or lawyer to finalize paperwork for an upcoming closing, a standard Force Majeure clause could ensure that you do not become liable for your failure to complete a contract on the closing date.
A ‘Force Majeure’ clause is common in many contracts, but you may be surprised to learn that it is not found in the standard form Agreement of Purchase and Sale used by realtors when negotiating contracts for clients who are buying and selling in Nova Scotia.
Whether you are a buyer or seller, you should speak with your lawyer about including this term, or something similar, in your contract. You should seek this advice either before signing your Agreement or before your condition date passes and your deal becomes firm and binding.
The difficulty with including a standard Force Majeure clause into new Agreements negotiated during times of COVID-19, is that the pandemic and the challenges that it has created are no longer considered ‘unforeseeable’ to the parties possibly rendering this term useless. Your lawyer, however, will have advice for you about including a similar term that helps protects you in these ever-changing and uncertain times.
Meeting your Conditions
All standard Agreements of Purchase and Sale for real estate provide a date by which parties must satisfy certain conditions. The most common conditions are: inspections, financing, insurability, and lawyer review. After this date passes, and assuming neither party is notified of failure to satisfy a condition, your conditions are deemed satisfied and your Agreement becomes firm and binding. In other words, both parties are now obligated to complete the contract on the scheduled closing date.
Some conditions have proven easier to meet than others during this pandemic. Confirming you and your new home are insurable and satisfying lawyer review can all be accomplished over the phone and by email. Financing and Inspection are a different story.
Financing. Financing approval can typically be accomplished easily enough over the phone and by email, right? The answers is “maybe”. You will want to ask your mortgage company extra questions.
- How has your mortgage company been dealing with physical distancing requirements when it comes to finalizing the terms of your mortgage nearer to your closing date?
- Will you still be required to meet with your mortgage specialist face to face sometime before your closing date to review and sign documents?
- If so, will you face any barriers relating to travel restrictions if you are from outside Nova Scotia but planning to move here?
- What will happen if you or a family member becomes sick and are required to self-isolate?
- What will happen to my mortgage approval if I lose my job or my salary is substantially impacted?
These are all important questions to ask yourself and your mortgage specialist before being comfortable that your financing condition is really met.
Home Inspections. A home inspection requires a professional to visit the home and thoroughly inspect the inside and outside to report on its physical condition. Some sellers may be uncomfortable with the idea of having a stranger spending a few hours inside their living space, but we need to assume that a seller would not have accepted an offer with a standard inspection clause, if they do not see it as unavoidable.
Some home inspectors are working during this pandemic and some are not. It is therefore important to give yourself ample time to meet this condition since finding an inspector may take some extra effort – we recommend 10 business days, if possible.
Luckily water, well, and septic inspections, if applicable, are conducted outdoors and do not, therefore, present the same challenges.
Anyone will tell you that buying and selling a home comes with a lot of paperwork and signatures. Some of it can be completed virtually using electronic signatures and some of it requires ink signatures. Most Agreements these days are signed using DocuSign or Dotloop technology anyway, which your realtor will already be familiar with. Mortgage and closing documents, however, that are required for your lender and lawyer in order to complete the deal on closing day require real ink signatures.
Most lawyers have come up with ways to properly and safely review and sign documents with their clients either virtually or, at the very least, while adhering to physical distancing guidelines. As most of us have learned, an at-home printer, scanner and webcam will be your best friends during these times.
If you do not have access to the required technology, speak to your lawyer about other options. Some of our office locations, for example, are set up to meet with you in our boardrooms but you will be joined by your lawyer via videoconference from their office down the hall – there is no actual face to face contact required!
Coming from Away?
If you are buying and moving from another province, the pandemic poses additional challenges on top of the typical headaches associated with cross-country travel.
Well in advance of your closing date, review your travel route and review which provinces you will have to enter and exit on your way. Most provinces have implemented some form of travel restriction, which you should consider before committing to a purchase cross-country.
If you are unsure what restrictions might apply in a particular province, ask your lawyer. They may have had another client making the same trek, and may be able to provide some guidance.
Keep in mind, on entrance to Nova Scotia, you are required to self-isolate for a period of 14 days. In addition to signing all documents virtually, you may require the assistance of a third party to get your purchase funds from your own bank and into your lawyer’s trust account.
Best case scenario, come closing day, you have already signed your closing documents, and if you’re a buyer, your down payment is in your lawyer’s trust account. Make sure to check your bank’s hours before making the trip over to get your bank draft. Most banks are operating on significantly reduced hours of operation.
While we wait on receipt of funds from your lender, you will do your pre-close inspection to ensure the property is in the same state of repair as when you made your offer. Your realtor will typically accompany you to complete your pre-close inspection, and for the most part, this process has not changed – but for the need to keep at least six feet apart.
If you’re selling, be sure to have the property empty and clean, to comply with the requirement for vacant possession. Especially during a pandemic, you do not want to have to return to your home to remove items after the buyer and their realtor have been through during pre-close inspection. Also, be sure to test your appliances in advance of closing day. Finding a repairperson to fix a stove or refrigerator may prove to be a challenge.
Keep in mind that with the requirement for social distancing, businesses are trying to reduce person to person contact and most offices are operating on a “by appointment only” basis. If you’re a seller, your lawyer may wire proceeds to you, rather than have you pick up a cheque at the office. Most banks have a small fee associated with a wire, but this fee is comparable to the cost of sending a cheque by courier.
Most importantly, when buying or selling during a pandemic, stay organized and plan ahead.
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with a lawyer or other professional. For specific technical or legal advice on the information provided and related topics, please contact the author. This article was written by Kristin Pike and Blair McIlwain.