Governor’s Stay-at-Home order and its effect on real estate

On March 23, Governor Inslee issued a Stay-at-Home executive order requiring Washingtonians to stay at home for the next two weeks and requiring non-essential businesses to operate by telecommuting.

Non-essential businesses, including real estate brokerage, must cease on-site operations by midnight on March 25, 2020.

In response to a number of questions regarding the Governor’s order, Washington REALTORS® (WR) Legal Hotline Lawyer Annie Fitzsimmons has some preliminary information as of March 24. This information will be updated by WR as we learn more.

Here is a summary of Annie’s analysis as of March 24 at 9:00 AM. Please refer to Washington REALTORS® website for further updates.

Essential Businesses

The Governor’s order lists “essential businesses” that are allowed to continue operating notwithstanding the “Stay Home” order. “Real Estate Brokerage Services” is not in that list. This means that RE Brokers are not allowed to continue conducting business except remotely, from their homes. 

Physically touring houses, with buyers, is not considered an “essential business”. Effective Wednesday, March 25 at midnight, physical home tours should cease for the duration of the “Stay Home” order, currently scheduled to last for two weeks. Brokers can continue to conduct all business remotely, from broker’s home.

Showing and Inspections

To the extent broker can develop a virtual tour of seller’s home, broker can continue to show seller’s home. Otherwise, home showings are restricted by the “Stay Home” order. Listing brokers have until the night of Wednesday, March 25 to develop a virtual tour of listed properties.

Because the “Stay Home” order does not take effect until the night of Wednesday, March 25, buyers have until that time to conduct home inspections. Once the order goes into effect, there is no obvious allowance for home inspections while the order is in effect. Based on the “Stay Home” order, home inspections will likely be suspended for the duration of the order. This issue creates a good reason for brokers to discuss with clients, the benefits of including a Form 22FM (Force Majeure Addendum) in a purchase agreement. Form 22FM can be included in a PSA at mutual acceptance or it can be added to an existing PSA by agreement of the parties.

Pending Sales and Closings

Pending sales can likely proceed to closing under the Financial Services section of the “essential businesses” list. The list specifically describes “insurance companies” as part of the chain of financial services. Title insurance companies are “insurance companies.” “Essential Workforce” includes: “Workers who are needed to process and maintain systems for processing financial transactions and services (e.g., payment, clearing, and settlement; wholesale funding; insurance services; and capital markets activities)”. Closing a pending real estate transaction seems to be included within this description. Moreover, a liaison from the Governor’s office has assured Washington REALTORS staff that pending transactions will be allowed to close with operation of the required escrow and title services essential to that process.

Of course, everything will depend upon the interpretation made by the insurance and escrow companies designated by the parties to close the pending transaction. If the designated title and escrow companies proceed to close transactions, that is a choice made by those companies outside any authority of a real estate broker. The same is true if the designated title or escrow company refuses to close, citing lack of authority from the Governor’s order.

Appraisal

Is it possible that appraisers will be considered as essential workers in the Financial Services exception? It is possible although that conclusion is not immediately apparent. There is also an “essential business” service identified as: “Professional services, such as legal or accounting and tax preparation services, when necessary to assist in compliance with legally mandated activities and critical sector services.” It is arguable that appraisers could fall into this category although, again, it is not plain on its face. As with title and escrow, the answer to the question will ultimately fall to the appraiser and to the lending institution that hires the appraiser. Broker should not attempt to direct the actions of any third party, based on broker’s interpretation of the “Stay Home” order, including a lender’s appraiser.  Again, this issue should cause brokers to discuss, with clients, the wisdom of including a Form 22FM in a transaction.

Property Management

As of the writing of this answer, property management activities may be considered an “essential business” under the Governor’s order but property management firms should not plan to continue to operate in the firm’s commercial office space. All property management activities may clearly continue to be conducted by property managers and firm employees, remotely and out of the office space. The Stay Home Order takes effect on the evening of Wednesday, March 25. Firms have until then to get their remote operations up and running. If, through conversations with the Governor’s office, it becomes apparent that property managers are an “essential business” and can operate from their office spaces, utilizing social distancing measures, the Washington REALTORS will communicate that information immediately.

Residential and commercial construction workers and repair contractors, however, ARE considered “essential workers” insofar as the work is “related to emergency repairs and projects that ensure structural integrity”. Property managers CAN continue to hire and direct contractors necessary to make emergency repairs and ensure structural integrity to the properties they manage.

Property managers should not direct the actions of tenants who are vacating property. Property managers have no authority to advise any other person as to the actions they should take with respect to compliance with the Governor’s order. However, if a tenant vacates a property as previously scheduled, property manager can take the actions necessary to secure the property including prevention of access by unauthorized persons and to clean the property for prevention of spreading disease.

Nothing in the Governor’s order speaks to allowing property managers to move new tenants into housing although because of the inherent public benefit of creating living spaces for people in need of living spaces, it is hopeful that this activity is immediately acknowledged by the Governor’s office as an essential business. Washington REALTORS® will post information to that effect as soon as it is determined.

Stay updated: Washington REALTORS® COVID-19 Updates