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COVID-19 Q&A

Over the past several days, NC REALTORS® has received questions from members across the state regarding the COVID-19 pandemic. Many of those questions relate to what can and should be done with regard to the marketing of listed properties. More specifically, REALTORS® are asking about open houses and other showings of listed properties and situations where there is likely to be a delay in closing as a result of COVID-19. Here are examples of some of the questions we have received, and the guidance we are giving in response to those questions. Some of this guidance has been suggested by the National Association of REALTORS®. A link to NAR’s Q&A on coronavirus issues can be found here. A link to NAR’s guidance on open houses can be found here.

HEALTH & SAFETY

What is Coronavirus?

QUESTION: What is Coronavirus?

ANSWER: The CDC is responding to an outbreak of a respiratory illness caused by a novel coronavirus outbreak. While the outbreak started in Wuhan, China, a growing number of cases have been identified in several other countries, including the United States.

What is the risk of exposure to coronavirus?

QUESTION: What is the risk of exposure to coronavirus?

ANSWER: The CDC reports that most people in the United States do not have an immediate risk of exposure to the virus. However, the situation is rapidly evolving, and the CDC will update its risk assessment as needed.

What preventative measures may be taken to reduce the risk of contracting and spreading coronavirus?

QUESTION: What preventative measures may be taken to reduce the risk of contracting and spreading coronavirus?

ANSWER: The same preventative measures recommended to prevent influenza are also effective in reducing the risk of contracting or spreading coronavirus.  These measures include:

  • Staying home if you have a fever, cough, shortness of breath or any other cold or flu-like symptom.
  • Washing your hands frequently with soap and water for at least 20 seconds. If soap and water aren’t available, use an alcohol-based hand sanitizer.
  • Avoiding touching your eyes, nose, and mouth with unwashed hands.
  • Avoiding close contact with anyone who is sick.
  • Cleaning and disinfecting frequently touched objects and surfaces.
  • Covering your mouth and nose with a tissue when you cough or sneeze, or cough or sneeze into your sleeve.
How should brokerage staff or agent/licensee reports of COVID-19 be handled?

QUESTION: How should brokerage staff or agent/licensee reports of COVID-19 be handled?

ANSWER: NAR has prepared a Sample Preparedness Plan for Circumstances Relating to COVID-19 that any real estate brokerage may adapt and implement in your workplace.

GUIDANCE FOR REALTORS®

What unique issues does coronavirus present to the real estate industry?

QUESTION: What unique issues does coronavirus present to the real estate industry?

ANSWER: When an infectious disease, such as coronavirus, is associated with a specific population or nationality, fear and anxiety may lead to social stigma and potential discrimination. REALTORS® must be mindful of their obligations under the Fair Housing Act, and be sure not to discriminate against any particular segment of the population. While the coronavirus outbreak began in Wuhan, China, that does not provide a basis for treating Chinese persons or persons of Asian descent differently.

Has NAR provided any guidance for transactions?

QUESTION:Has NAR provided any guidance for transactions?

ANSWER: Yes, on March 25, NAR published tips related to listed properties, properties in escrow, and leased properties.

May I ask clients or others I interact with in my real estate business if they have traveled recently, or have any signs of respiratory illness?

QUESTION: May I ask clients or others I interact with in my real estate business if they have traveled recently, or have any signs of respiratory illness?

ANSWER: Yes, you may ask clients or others about their recent travel, particularly to areas identified as having an increased risk of coronavirus. To avoid potential fair housing issues, be sure to ask all clients the same screening questions based on current, factual information from public health authorities.

I typically drive my clients to showings. May I refuse to drive potential clients to see homes?

QUESTION: I typically drive my clients to showings. May I refuse to drive potential clients to see homes?

ANSWER: Yes. However, be sure that any change to your business practices is applied equally to all clients. You may refuse to drive clients who show signs of illness or reveal recent travel to areas of increased risk of coronavirus, or you may instead decide to stop driving clients in your car altogether, and simply arrange to meet clients at a property. If you do continue to drive clients in your car, it is a good idea to frequently clean and disinfect surfaces like door handles and seat belt latches, and to ask clients to use hand sanitizer when getting in and out of the car.

Should REALTORS® continue to conduct open houses on their listed properties?

QUESTION: Should REALTORS® continue to conduct open houses on their listed properties?

ANSWER: First, NC REALTORS® should consult with their BIC, and consider how federal, state and local authorities’ recommendations and actions, and mandates, impact the advisability, and even permissibility of open houses. At the time this answer was written, North Carolina does not have any “shelter in place” mandates that exist in other parts of the country.

NAR and NC REALTORS® strongly encourages members to consider the advisability of continuing to hold open houses at this time, especially in light of the guidance and actions of federal, state and local authorities, including “The President’s Coronavirus Guidelines for America” recommending that gatherings of ten or more persons be avoided.

Any decision to proceed with an open house must be agreed to by both the REALTOR® and the client. We suggest that you thoroughly discuss the pros and cons of holding an open house with each of your seller-clients. While you can tell your clients that limiting access to their property may have an adverse impact on the time it takes to sell their property, you should definitely make your clients aware of the risks of exposure that are inherent if strangers are allowed to enter their property. Older clients should be reminded that, according to medical experts, they are at higher risk for developing more serious complications from the COVID-19 illness, particularly those clients with underlying medical conditions.

Let your clients know that if they do not wish to allow an open house, their wish will be honored. Many sellers may prefer having no strangers in their home for the foreseeable future. Others will wish to proceed assuming proper precautions are taken. Sellers should be advised that while they can restrict access to their home, they must do so in a uniform manner in order to avoid violating fair housing laws.

Let your clients know if there are alternative marketing opportunities available that would reduce the risk of exposure to the virus. With your clients’ permission, one option may be to conduct a video conference open house, using software such as Skype or Zoom. You may be able to schedule such a conference at a specified time, advertise it, and invite interested parties to participate. Another possibility would be to schedule more private video showings for parties expressing an interest in the home. For example, you could walk through the property using FaceTime or a similar product, and have a conversation with the potential buyer and/or their agent about the various features of the home.

The COVID-19 pandemic is changing rapidly. Please keep an eye on changes issued by your local, state, and national officials that might affect the permissibility of open houses as well as adhering to any MLS rules and regulations.

https://www.nar.realtor/open-house-guidance-during-covid-19

If we agree to hold an open house, what types of precautions should be taken?

QUESTION: If we agree to hold an open house, what types of precautions should be taken? ​

ANSWER: You should consider the following guidelines and best practices.

Prior to the open house, make sure the house is thoroughly cleaned. Also, open all doors so that people can freely walk around the house without touching door knobs. Place paper towels near sinks in case a visitor wants to turn a sink on and off.

Question all visitors upon their arrival, outside the home. Visitors with symptoms of a respiratory illness, or who have traveled to affected countries, or who have had recent contact with anyone with a positive coronavirus test should not be permitted entry.

All visitors who are permitted entry should be required to sign in. You should either sanitize the pens that are used or provide extra pens and ask visitors to take the pen they use with them.

Hand sanitizers should be provided at the entry to the home. All visitors must use those products to disinfect their hands before entering the home.

Determine a limit on the number of individuals that will be allowed in the home at one time.

All visitors should be instructed to follow social distancing guidelines, i.e. maintain a distance of six feet from all other visitors.

After the open house, you should recommend that your client clean and disinfect their home, particularly commonly touched areas like doorknobs and faucet handles.  Advise your clients that individuals can be contagious several days before becoming symptomatic.

What if my seller-client wants me to hold an open house, but I am concerned about the risks?

QUESTION: What if my seller-client wants me to hold an open house, but I am concerned about the risks? Can I refuse to do so?

ANSWER:  Yes. When NC REALTORS® adopted its Exclusive Right to Sell Listing Agreement (Standard Form 101) it considered whether the agreement should obligate REALTORS® to hold open houses. The decision was made that open houses should not be mandatory.

Paragraph 9 is the section of Form 101 that describes the listing firm’s duties to the seller. It includes the following statement: “Firm agrees to use its best efforts in good faith to find a buyer who is ready, willing and able to purchase the property.” Paragraph 9 does not mandate that the Firm conduct an open house, or employ any other specific form of marketing effort.

Paragraph 10(b) of Form 101 is entitled “Marketing Authorization.” In that paragraph, there is a check box relating to open houses. If checked, that section authorizes the listing firm: “To conduct open houses of the Property at such times as Seller and Firm may subsequently agree.” This wording makes it clear that before an open house is conducted, the agreement of the listing firm is required.

The REALTOR® Code of Ethics contains language that may seem contrary to the above guidance. Specifically, Standard of Practice 3-10 states as follows: “The duty to cooperate established in Article 3 relates to the obligation to share information on listed property, and to make property available to other brokers for showing to prospective purchasers/tenants when it is in the best interests of sellers/landlords.” In our view, the obligation described in Standard of Practice 3-10 can be modified by the parties’ contract. Form 101 does exactly that. We do not believe that a REALTOR® who uses that form and later refuses to conduct an open house because of legitimate health concerns is guilty of any sort of ethical violation.

The tenant is refusing to allow any showings based on health concerns. What do we do?

QUESTION: I am trying to schedule a showing of a property that is being rented. The tenant is refusing to allow any showings based on health concerns. What do we do?

ANSWER: The landlord-tenant relationship is governed by two things: the contract between the parties (i.e. the lease) and North Carolina’s landlord-tenant statute.

If your seller-client used NC REALTORS® standard residential lease form (Standard Form 410-T), he or she has the right, expressly set forth in paragraph 10, to enter the leased premises at reasonable hours for several listed purposes. One of those purposes is showing the property to prospective purchasers or tenants. Other leases generally include similar language.

North Carolina’s landlord-tenant statute does not give tenants the right to refuse access to a prospective purchaser. Therefore, assuming your landlord has reserved the right of entry in their lease, you can proceed with showing the property.

Keep in mind that landlords have both a contractual and a statutory obligation to provide a safe and habitable property to their tenants. Therefore, before allowing anyone to enter the property, be sure to take all appropriate health and safety measures to protect the tenant. These should include the measures and best practices set forth above.

What precautions should brokers consider taking in their offices?

QUESTION: What precautions should brokers consider taking in their offices?

ANSWER: Brokers should use their best judgment when formulating a plan. First, brokers should implement a mandatory “stay-home” policy for any staff member or agent exhibiting any sign of illness, and depending on where the broker is geographically located, a broker may want to consider imposing a mandatory remote work policy for employees and instructing agents to stay out of the office.  In addition, taking measures such as holding virtual meetings or potentially postponing or cancelling in-person meetings or events may be good measures to take to limit close contact between individuals.  Be sure to monitor updates from the CDC, as well as your state and local health authorities for additional information and guidance on holding meetings or events. For travel considerations, review NAR’s “Coronavirus:  A Guide for REALTOR® Associations”.

TRANSACTION DISRUPTIONS

Does NC REALTORS® have an Addendum to the Offer to Purchase and Contract (Standard Form 2-T) that can be used during this unprecedented situation?

QUESTION: Does NC REALTORS® have an Addendum to the Offer to Purchase and Contract (Standard Form 2-T) that can be used during this unprecedented situation?

ANSWER:  Yes, on March 20, 2020, NC REALTORS® released a COVID-19 Addendum (Standard form 790) to the Offer to Purchase and Contract (Standard Form 2-T). NC REALTORS® can download a pdf on our website here. It will be available with electronic forms vendors soon.

NC REALTORS® worked diligently with our Forms Committee and others to create this addendum in response to the COVID-19 pandemic. This addendum allows the parties to agree to an extension of the Contract (time period to be negotiated by the parties) if circumstances arise related to the world-wide Coronavirus (COVID-19) pandemic that could make it unduly burdensome or impossible for the Buyer or Seller to exercise their rights and/or perform their obligations under the Contract. This form is not required, however, it is being made available to all NC REALTORS® to use if appropriate in their transaction.

Do buyers and sellers have any rights to terminate contracts or delay closings due to COVID-19 issues that have arisen or may arise?

QUESTION: Brokers in my office represent a number of buyers and sellers who are currently under contract using the Offer to Purchase and Contract (Form 2-T). My question is, do buyers and sellers have any rights to terminate contracts or delay closings due to COVID-19 issues that have arisen or may arise?

ANSWER: The short answer to your question is yes, under certain circumstances. Whether or not a party has the right to terminate or delay a particular transaction due to the pandemic will depend on the specific facts. Following are examples that illustrate legal principles that would be applied in determining a party’s rights and obligations in three different situations. They should serve to underscore the fact that the legal issues involved may be complex, and that it is very important to advise a buyer or seller to seek legal counsel if they want to know what their legal rights and responsibilities are in this extraordinary environment.

Example 1:

A buyer under contract refuses to attend Settlement out of fear that he will be infected with the coronavirus. There is no evidence that the closing attorney or anybody in her office has been infected, and in fact, the closing attorney has implemented detailed protocols for her closings to help ensure that the virus is not transmitted. In addition, the closing attorney is offering a creative alternative to a traditional in-office Settlement, such as a “mail-away” or “drive-by” closing, or the execution of a limited power of attorney giving the closing attorney the authority to execute all closing-related documents on the buyer’s behalf. In that situation, the buyer’s refusal to close is likely a breach of contract that would entitle the seller to terminate the contract and keep the Earnest Money Deposit.

Example 2:

The Register of Deeds office in the county where the property is located has closed and does not accept electronic filings. Since the final step in the process of “Closing” is the recordation of the deed and any deed of trust, the transaction simply cannot be completed. In our view, it would be difficult to point to either the buyer or seller as a delaying party in this situation, in which case an argument can be made that the Delay in Settlement/Closing paragraph in the Contract isn’t even applicable. If that paragraph isn’t applicable, how long would a party have to close? Common law provides that if the parties haven’t made time of the essence, then the closing date is considered a target date and the parties have a reasonable period of time based on the particular circumstances to perform their obligations. Applying the law to this situation, since time is not of the essence in the Contract, we think an argument can be made by either party that under the particular circumstances, the contract remains enforceable through the time that the Register of Deeds office reopens.

Example 3:

A buyer under contract is informed by their lender that their loan has been delayed indefinitely due to the lender’s concern about the potential liability of placing an appraiser in the property. What are the buyer’s rights in this situation? If the Due Diligence Period hasn’t expired, the buyer has a contractual right to terminate and should seriously consider doing so. On the other hand, if the Due Diligence Period has expired and the buyer won’t be able to close without getting a loan, the buyer could be characterized as a delaying party and the Delay in Settlement/Closing paragraph could apply. Assuming the seller is willing and able to close, the seller likely has the right to terminate the contract. Ordinarily, the seller would also be entitled to retain the earnest money. However, these are not ordinary times. The buyer may have a legal defense that would allow them to obtain a refund of their Earnest Money Deposit (EMD). The doctrines of impossibility of performance or frustration of purpose offer relief to contracting parties in extraordinary situations where changed conditions caused by an unforeseen event occur during the term of a contract. The buyer in this third example may argue that their performance should be excused due to the unforeseen nature of a global pandemic and its effect on their lender’s decision-making. If that argument is successful, the buyer would not be in breach of the contract and would be entitled to a refund of their EMD. However, the seller may plausibly argue that although the contract doesn’t specifically address the effect of pandemics or other unforeseen events on the parties’ obligations, since the buyer’s obligation to purchase the property is not contingent on the buyer’s ability to obtain a loan, the contract clearly allocates to the buyer the risk of the loan not being made, and the buyer should forfeit the EMD, regardless of the reason that the loan falls through.

Does our Offer to Purchase and Contract (Standard Form 2-T) permit either of my clients to delay because of this pandemic?

QUESTION: Does our Offer to Purchase and Contract (Standard Form 2-T) permit either of my clients to delay because of this pandemic? I have two clients who must delay settlement because of the COVID-19 outbreak. One is a buyer who is outside the Due Diligence Period, and one is a seller. Neither can go forward right now because they cannot move given the large number of businesses that are closed. Both brokers on the other side of these transactions are threatening that their clients will sue if my clients do not perform as agreed. This feels hopeless!

ANSWER: Form 2-T does not have a specific provision that addresses this kind of worldwide emergency. Though each transaction will need to be evaluated on a case by case basis, we believe that in many cases each party will have a good faith argument that they are not the source of delay. If neither party is the delaying party, then paragraph 12 of Form 2-T would not apply, which would mean the parties would have a reasonable amount of time under the common law to complete the transaction.

 

Addendum Form

Is there more information about the new Addendum form?

QUESTION: Is there more information about the new Addendum form?

ANSWER: Yes. A new COVID-19 Addendum (Form 790) has just been released. A pdf version is available by logging into ncrealtors.org and clicking here. The form has also been provided to zipForms for inclusion in the NCR forms software program. The form may be used with a new contract or added to an existing contract. The Form is designed for use with NCR Forms 2-T and 12-T.

Here are the highlights of how the form will work:

  • If circumstances related to the COVID-19 pandemic make it unduly burdensome or impossible for either or both parties to exercise a right or perform an obligation under the contract, there will be a one-time extension of contract deadlines by a number of days agreed to by the parties
  • A party whose performance is affected by a COVID-19 issue must notify the other party in writing to trigger the extensions. Notice may take place in the same way it is typically handled under the “Delay in Settlement/Closing” paragraph in the Contract, so long as it is in writing. An email from one agent to the other describing the circumstances should suffice.
  • The extension of deadlines will apply to any contract deadline that has not already expired, including the Due Diligence Period and the Settlement Date
  • The parties agree to make a good faith effort to use alternative methods that may be reasonably available to enable them to perform their rights and obligations under the contract
  • If the parties are unable to close prior to the expiration of the extended period of time and they haven’t agreed to another extension, the contract will become null and void
  • If the contract becomes null and void, the seller will retain the Due Diligence Fee and the Earnest Money Deposit will be returned to the buyer, regardless of the reason for the delay
  • If the buyer is unable to get a loan due to loss of income related to the COVID-19 pandemic (for example, loss of employment), either party may terminate the contract, in which case the seller will retain the Due Diligence Fee and the Earnest Money Deposit will be returned to the buyer

For example, assume a transaction has been scheduled for closing, but the local Register of Deeds office closes on short notice and is not set up to accept electronic filings. The Due Diligence Period has expired. Since both parties are affected by this event, written notice from either party to the other confirming the closure would automatically extend the Settlement Date by the number of days agreed to by the parties. If the Settlement Date is March 30 and the parties have agreed to a 30-day extension, the Settlement Date would be extended until April 30. If, during the month of April the Register of Deeds office reopens, the Addendum provides that the parties will make a good faith effort to close as soon as reasonably possible. On the other hand, if at the end of April the Register of Deeds office has not reopened, the contract will be null and void if the buyer and seller don’t agree in writing to further extension, and the seller will keep the Due Diligence Fee and the Earnest Money Deposit will be returned to the buyer.

The buyer’s and seller’s rights under the Addendum are triggered by a “COVID-19-Related Restriction.” Examples of such restrictions are listed in the introductory paragraph, but the list is not all-inclusive. Thus, any event related to the pandemic that makes a party’s performance unduly burdensome or impossible can cause the provisions of the Addendum to become applicable. This open-ended definition anticipates that circumstances unforeseen at the present time could arise that will affect the ability of buyers and sellers to complete real estate transactions.

We recognize that a broad definition increases the potential for misunderstanding as to whether a particular circumstance is related to the pandemic or whether such a circumstance makes it unduly burdensome or impossible for a party to perform. We hope and believe that buyers, sellers and their agents will exercise the utmost good faith in dealing with each other during this very difficult time. However, it is important for all parties to understand the ways in which the Addendum will affect their rights and obligations in considering whether to make it a part of their contract. Careful consideration should be given to the length of the time that contract deadlines will be extended. The parties may agree to a further extension if, as the deadline approaches, they are both still willing and able to complete the sale and further time is needed.

The parties and their agents should also understand that use of this Addendum is not mandatory. Buyers and sellers may choose to use the negotiable terms of the contract (amount of Due Diligence Fee or Earnest Money Deposit, length of Due Diligence Period, etc.) to protect their respective interests without making the COVID-19 Addendum a part of their contract, and delays arising as a result of the pandemic may be addressed through the use of the Agreement to Amend Contract (Form 4-T).

Questions about the Form should be addressed to the Legal Hotline at legalhotline@ncrealtors.org.

Has NC REALTORS® provided additional information about how to use the Addendum?

QUESTION: Has NC REALTORS® provided additional information about how to use the Addendum?

ANSWER: NC REALTORS® released this video with more information on the Addendum.



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