SOTM 40: Coronavirus Will Impact Real Estate: Here’s How to Prepare

March 18, 2020
A couple of weeks ago, we discussed whether or not coronavirus would impact U.S. real estate markets. Now, with offices closing down and shelter-in-place orders on the horizon for major cities, it’s clear that sales will be slowing down. As a Realtor, what can you do to prepare during uncertain times like these? On today’s podcast, we talk about the things you can do now to set your real estate business up for continued success. Listen and learn how to keep generating leads, what you need to ask escrow officers, and ways to generate interest in properties without hosting open houses.
SOTM Listen to today’s show and learn:
  • Coronavirus’ impact on the stock market [2:32]
  • Why coronavirus cases are underreported in the U.S. [3:44]
  • How to be a leader in uncertain times [6:40]
  • How to generate leads during the coronavirus crisis [8:14]
  • Why coronavirus is already impacting landlords [11:34]
  • What to ask escrow officers [12:51]
  • The silver lining [18:32]
  • Coronavirus’ impact on Airbnb and short-term rentals [19:13]
  • Alternatives for open houses [22:38]
  • How to set your business up for continued success [25:34]
  • How to break through your goals.
  • Plus so much more.
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Aaron Amuchastegui: Rockstar nation, this is Aaron Amuchastegui. I am back with Paul Morris for state of the market on Real Estate Rockstars. Rockstars, I shot a text to Paul earlier today and said, “Hey, do you want to jump on and do state of the market with me today to talk about the coronavirus?” It’s really hard right now to go find real estate news or any news at all that isn’t talking about this. Two weeks ago, Pat Hiban and I got on here and we were doing the state of the market. That was one of the items we talked about was the coronavirus and maybe some potential impacts that could be happening.

I know for sure now, as we look back, there was no way, two weeks ago, we had any idea what we were going to see this week. Two weeks ago, I flew out to Maui and I got there. Right when I got there, I was talking to my brother and we were looking around like this place is busier than ever. There’s tons of construction. All I was thinking was we are in the best economy ever. The housing market is booming, real estate is booming. Everyone is wealthy, everyone’s out there spending their money. It was 10 or 11 days later that we see, whoa, Las Vegas has closed all their hotels and casinos, tens of thousands of people laid off, entering the recession, entering what could be a housing market crash.

If you would’ve told me two weeks ago, I’d have been like, I feel like we’re in a bubble, but I don’t know what’s going to cause this thing to burst. If you’d have told me a super flu was going to do it, man. We go from there, stock market down something like 30%. Paul, I wanted to throw that to you because I know you’ve been looking a little bit closer at the statistics, but rock stars, plan to talk about some coronavirus news today, how we think it affects real estate, and what you can do about it. Paul, what do you think?

Paul: These are historic times for sure. I think these are times where we look for leaders to emerge. I also think there’s a big opportunity and we’ll hit on that in a minute as well. The stock market, the stats floating around a 30% decline, we’re really at historic correction level. I could see it going another 35%, but there’s going to be some stop-gap where folks are going to come in and really see this as buying opportunities. Also, unlike our previous 2008 issue where the big economic correction was started by real estate and therefore disproportionately affected real estate. This one is not, this is not national, it’s international, it’s affecting everyone.

I believe that real estate is also a safe Haven, safe Harbor investment. You can get a correction. At some point in time people are going to say, well, nothing’s good. let’s looks at real estate as an option. I definitely think that. I looked at really, it’s not about this, but I did look at some of the stats. I’ll go high level on some of the stats. CNN reported today they’re surveying the States health departments and they reported 100th deaths in the United States. There’s a bit of a tipping point with that. Now there’s 50,130 cases reported in the US that everyone says is wildly under-reported because we’re not testing for it.

That said, an overwhelming majority of people will be unaffected or very low-level symptoms. Because of that, there’s no way with our limited testing that those people are going to get tested. I do think there’s an underlying current of many, many more people have it. I do think that the stronger the government gets in terms of a lockdown in action right now, the shorter this thing is going to play out, that for sure.

As I was scouring the net for the stats that are relevant for a state of the market, and also I’m doing it for my businesses. Amazon is hiring 100,000 employees because they are keeping up with online ordering. I think that you will see long-lasting shifts. People will soon realize, hey, we had to shift to lower expenses. We had to shift to more online. I think the real estate profession can learn a lot from this.

Aaron: Definitely a market shift. I’m not a KW guy, but I heard that that was one of the things that Gary Keller either officially emailed out or sent out to everybody. Then we are now officially in that market shift. Some of us have been talking about a couple of years about how long this housing boom is going to go, and now it’s that true shift. That is a really interesting fact. Amazon now hiring 100,000 people and there’s going to be some of those different businesses that there’s going to be, maybe some new niches pop up in this, some new service industries within that.

Today, they announced that all restaurants in Travis County in Austin, Texas are closed, or they haven’t said shelter in place yet, but they’re very close to that out. Here they’ve said restaurants can only be open now for takeout or drive-through. You can’t be anywhere with 10 or more people in the room, or it’s a thousand dollars fine. That was big. The poll you’re out in LA and you guys, I think San Francisco in LA got the order for shelter in place. When did that come in and how long it’s going to last?

Paul: Well, LA has not done shelter in place yet. San Francisco has done. New York City, the mayor announced today, get ready for shelter in place orders. That’s 8.4 million residents in New York City that will be in a shelter in place, folks. It’s unprecedented. Sometimes I think the optics of it are actually worse than what’s going on. When I turn on the television, what I try not to do, and see these giant sporting matches played to empty stadium, I’m like, it looks like the end of the world. I will tell you one of the things as a leader and Real Estate Rockstar Nation, you can be this leader for your clients. These can be unprecedented times for you as well. Do things, be a leader in this.

I was on a conference call with Gary Keller yesterday and a lot of things are contagious, coronavirus is contagious, for sure. Fear is contagious, is contagious. Also, it doesn’t mean stick your head in the sand but also hope and lots of other things are contagious as well. I do think that a shift in what we’re doing is important. I have ownership in more than 10 real estate offices, and I have oversight of over 30. I’ll get off of this podcast and get on a leadership call which I’m leading talking to all the business owners and managers.

I’m saying, hey, good thing here, and realtors are the ultimate entrepreneur. If you don’t close a deal, you don’t get paid. What is somebody tuning into this, how can we help them? One thing it’s old news, but it’s right out of the shift book is make sure you learn how to live on less. I do believe this is going to be a period of time where we’re going to have this health crisis, but then also there’s going to be business tail whiplash, et cetera on that. We really need to cut expenses tremendously. The other thing too, it’s a little bit counterintuitive, but a podcast like this cannot exist without saying lead generate, lead generate, lead generate, it’s the lifeblood of a realtor’s business.

How do you lead generate in times like this? Is it crazy to say that? I will tell you it’s not crazy. We’ve gotten from the field, here’s my news from the field. Best practice emerged was just an eye care phone call. You take all of your top clients and you just go down the list and call and say, hey, Aaron it’s Paul, man. I just want to let you know, I really care about you. How’s your wife? How are your girls? Are you back from Hawaii? That thing. You’re like, wow, that Paul’s cool. Here’s the thing. It’s not just all about business. I actually do care. I did text Aaron and say, Hey, how are you doing because I care. He’s a good guy and I’m doing it with all my managers.

Now, look at your phone and see the messages that are coming in, not just out. Who are the folks? Obviously, your close family, like Aaron, how are you doing, what’s going on? Then it just drops off. It’s not a bad thing. It’s like we’re scared, man. On the other hand, first of all, it makes me feel better. It’s good for me and secondly, I get to be one of the people that care. Now’s a good time to learn those lessons and that’s a call what you want. I would call a move from the heart. I would say that it’s also a great business move for sure.

Aaron: I think that’s great advice. I think the real estate market right now is going to slow for a period, it’s going to have to. There’s no open houses. There’s some things we’re going to be talking about. I think some of the ones that I have in escrow right now are still going to close, but we’re trying to close them as quick as we can with some of the buyers because we’re not quite sure what’s next, but some of those best practices now, agents, the real estate market is not dead forever. It’s not even dead so do those best practices, get on the phone calling those clients, see if they need anything. See if anyone needs anything. This is our network. This is our base.

Then I love the thing you said that fear is contagious, but so is leadership so is calm, cool planning and processing and that’s the way I’ve been trying to talk to my family and my girls and remembering September 11th, and remembering 2008 and 2009 of the crazy housing crashes and what that did. Part of me feels like we’ve been waiting for this forever. Man, I am so under-prepared so is going to it took a couple weeks.

I did the same meeting with my team today and said, Look, it might feel weird for a few months, but this is something that we’ve been ready for, and we’ve been prepared for and there’s been a lot of things we’ve been able to predict this week because of some similar things they did back around September 11th and the financial crisis in 2009. Not all of it shocking, but some of it’s a little shocking.

I’m just going to talk about a few things on here, and see what impacts and maybe just for our real estate agents out there things they should be thinking about. In a lot of the bigger states, and not all of our listeners are from California and Texas and Colorado in New York, we have people all over the US but a lot of trends follow. Right now, we’ve got a lot of building departments that are getting closed because they said non essential, businesses don’t need to be opened anymore.

We had filed an eviction on a tenant and we got an email from the judge yesterday that said, hey, we are going to put a hold on all evictions, really on all court cases. We’re going to put a hold on all court cases, anything for at least 30 days so your eviction hearing has now been postponed 30 days. I saw some specific stuff in the news about some 90 day eviction deferrals in some places. Courthouses being closed in some locations.

A friend of mine sells probate leads and they said look, we don’t know if we’re going to be able to sell probate leads as much leads for real estate agents because they don’t have any probate cases. Have you heard anything about those building department evictions, courthouses that sort of stuff yet?

Paul: Yes and one of the things that is a direct impact as I talked to one of my colleagues in San Francisco right that’s on lock-down, and they said the recorders office is closed and I’m like,

Aaron: They can’t sell a house then.

Paul: Well, and here’s the thing. I didn’t have a chance to follow up with him. I was just like, “Oh my gosh, well, let me think on that. I appreciate, call me as a heads up.” I immediately went to our escrow company I went to our people in leadership on that side and, they said, “Look, even if it gets shut down, all of the online stuff is still going,” so we really– For example refis okay? Refis are going full force because the interest is low people now apply online you can get a apply and approval online. You can record those things electronically.

Our title company is saying, “Hey, we’re good to go,” even if they shut down the office physically and that’s what my people said to me. When I told that news they’re like, “Wait, they say shut down or they mean like the office is shut down because if the office is shut down, we’re still good.” I’m like “Actually, I don’t know.” I do know for LA that even if the office is shut down, as long as they had there end still going, we’re ready to go.

Aaron: I think agents out there you guys should talk to your escrow companies, talk to your places because every county is different, every city is different. I know plenty of places do do digital recording but it’s super interesting to me of what that can mean and for how long. Agents have you talked to your escrow officers if they say yes, there is a chance that we won’t be able to do recordings for a couple weeks, start to prep your clients now, start to get creative out there.

I think one of the deals that were selling was supposed to sell in about a week and a half, and they’re closing tomorrow now. On Friday, they were like we got to get this thing closed now. They were dragging their feet and they said we got to get this close now for fear that. There could be more opportunities for agents to say look we know this thing is going to close and everybody comes back online, you can rent the house. You temporarily rent the house you can move into the house now, temporarily rent something like that, there’s added risk to that, do you think there’s going to be much of that going on?

Paul: You mean like a sale leaseback?

Aaron: More like, “Hey, we’re going to close in two weeks, but the family’s ready to move, we’ll rent it from you until it closes.” Something like that.

Paul: It’s just one of the many.

Aaron: One of the many, yes.

Paul: It’s one of the many creative things. I’ll go back to global thing. One of the texts we changed I forget what my question was, how are you doing? What do you think? Aaron’s response to that was interesting? Interesting times or I’m remaining curious. I’m like, “That’s something we got to mention on the podcast because these you can be in fear, or you can be in absolute stick your head in the sand, it’s not true, hope.

Neither one of those are really all that helpful, but if you can stay aware and curious, these are going to help. You’ll find some interesting ways to close, it was in my reach out to all these people for me being a helping hand to them that there was one of my folks that came back and said, I’m doing just these eyecare calls and has made a huge difference. A sale-leaseback is obviously a very creative thing. I don’t think that we can do that on a massive level, but hey, guess what, you’re one realtor with one deal and you need that deal to close, that’s a good tip, for sure.

Aaron: Find a way to save the deal.

Paul: There also is going to be some pent up demand. There are people from New York and New York and LA people move back and forth. There are people in New York that, hey, we’re set to move to LA and now they’re on lock-down, they’re not moving yet. They’re not out looking for houses, they’re not whatever, but that’s demand that will exist as soon as we come out of this. One thing for sure is that marketplace behaves when we are in an upcycle. The marketplace behaves and people around they’re like, “It’s so good. It’s going to always be good.” We know that’s not true.

Well, guess what? We are now in a real unprecedented time, but I’m going to tell you, it will be over and we will be back and the question is, will you be ready when you get back

Make the eyecare call, stay in touch with your database. These are things that are going to really, really help you and then just be creative, and be aware and look around. If you’re half a step away ahead of the masses that aren’t doing anything, you’ll come out of this really, really on top.

Keep looking at those deals too they can be looking at offers, you can still write offers with clients or you could be like, “Do you want me to keep looking for you while here? Here’s some other ones.” People don’t want to be thinking about the house, the fact they’re stuck in a house right now. First and foremost, make sure people are okay. That was the first thing I said to all my employees, “Do you guys have the supplies you need? Do you have the supplies you need? Are you okay? Do you need anything? Do you need toilet paper? Do you need any of the crazy stuff that people have hoarded?”

Staying curious out there right now, this is unprecedented historical times. I compare it to September 11th. I compare it to 2007-2008 those crashes. A lot of the different things that we’ve seen, and the, no one could have predicted. I couldn’t have predicted this. I’ve been trying to predict what would cause the next recession and I couldn’t figure out anything and this is totally out of there. Figuring out the world’s response to this and how it affects the future.

One of the things I read too, was that the the good news about all this, one of the good news is, is coronavirus is not as deadly as like SARS or Ebola. How lucky are we that although we have this super communicable disease that right now this could just be a trial run of what it’s like to have to shelter in place and be ready. We’ve got to learn a bunch of stuff at a fairly low-risk disease as far as my understanding of it. That maybe a silver lining, like, “Hey, this is practice. We’ll get better at this. In a few weeks, we should all be back and normal and back at it.”

A couple of real estate things that I think are important out there. Airbnb so, Airbnb, short-term rentals, investment properties, if people are trying to sell properties that are short-term rentals, or hotels, that sort of thing. The prices are definitely taking the hit this week. I’ve got a bunch of Airbnb properties, and we lost an absolute ton of bookings on Saturday and Sunday. One of them was going to be a giant wedding in Northern California, and that one got canceled.

There’s nothing you can do. I was like, “Of course.” She was like, “Hey, I want to have a big wedding.” They told us we’re not allowed big yet. Of course, nothing she can do about it. I don’t know how long it’s going to have. That house I was going to keep out there as an Airbnb investment no matter what. Now I’m telling myself, “Hey, if the summer doesn’t really make up for this, it might not be a house that I keep forever as an Airbnb. I might need to sell it because of the way that market acts.” Have you heard much about that? Do you think that’s going to have a huge impact on a lot of real estate markets? Some of the real estate market?

Paul: Yes, I do. I think what you see in any downturn, for example, is your second home markets. I have a house in Palm Springs, and prior to this happening, I was getting the thing ready to sell. It seems like pretty bad timing, because I didn’t get it sold, and I could have. The second home markets are affected first. The travel vacation areas are affected first. These are the things that boom when times are great. These are the feast and famine.

I have properties that I invest out in LA and I have properties invest in back in Pittsburgh, where I’m originally from. It’s more of a regular Midwestern town. The last question we had, people are like, “Are you okay? Are you okay?” I’m like, “We weren’t invited to the party so, I guess we don’t have the hangover.” Things vary by region, for sure and they vary by category. Your second home markets, your vacation rentals, that sort of things.

You can expect them to screech to a halt. If you didn’t sell prior, then I would not necessarily rep it. I’m going to relook at this. When I’m finally able to sell the house in Palm Springs, I’m not selling it all at any cost. If it drops below a price where I think we’ll get, there are opportunities to buy at the end of this. Holding is the same as buying, really.

Aaron: Yes, holding is the same as buying. For agents out there, too, it can be something that we’re starting to look at out there. There could be investments that people had, as vacation rentals and things like that, that were priced out as a home as itself. Now that they’re not new, some of those sellers are going to be more willing to sell right now. I’m more willing to sell my Northern California house than I was a week ago, which is crazy.

At the same time, this will all come to an end. In a few weeks, it may be better, or in six weeks, it may be better. I may see a whole bunch of Airbnb replacement. Who knows how that’s going to go. I think that definitely that’s been a new asset class, really. Airbnb investments is a new asset class and last couple years that people have bought houses specifically for VRBO and Airbnb. That asset class, it’s definitely taking a hit this week.

I’ve talked to a lot of different people. At the same thing, anything that’s taking a hit could also be an opportunity for any of you agents out there for when we come out of this or people that do you have cash to be able to buy properties. They said no open houses. That was the thing that’s been announced a couple of different places. Do you think there’s a replacement for the open house? Do you think there’s anything that those agents could be doing to try to market it during this time?

Paul: Well, there is. There are 3D home tours, we’re using that. There are a few companies that do that, some of them are very, very good. If somebody actually going to buy a house without ever walking through it, I maybe the person who would do that. I’m not sure that other people do that. Definitely, you can mark it and create hype around it. Instead of having an open house getting to the point where people submit an offer before they come and see the house or figuring out a way to really get it down to the most serious things.

Believe it or not, in LA they have not canceled open houses yet. I think good idea to cancel them because that’s really a hotbed for transmission. So many people are in and out of the house touching everything, that sort of thing. I got a message from one of my managers because I’m checking in with everybody. “How are you doing?” He said, “We still have 18 open for this weekend, 18 houses over this weekend.”

We’ll see what happens. Another house, the same guy told me, we have one house. it’s in a lower price point. It’s well-priced, not a screaming deal but well priced had 24 offers on it. Things are still happening, even in the hotbed. I can’t imagine that if you’re on shelter in place orders like New York City, and we’re probably in San Francisco, we’re probably going to get that in LA soon. I have to believe that most transactions ground to a halt.

Aaron: It’s going to have to be a lot harder. People do want to see and touch stuff. One of those silver linings too is we haven’t had any of our deals fall out yet. We haven’t had a lender not fund anything yet. I had a couple that made me nervous, and it ended up going through just fine. I guess if you have one of those open houses, do you have a box of rubber gloves when people walk in or out to that open house? You say, “Hey, you come in and touch everything but put these on first”

Paul: Yes, I think there will be precautions for sure, and being ahead of that will definitely help. It’s one of the supplies that were low. I used a very low-level way of stocking my house. I went online. I’m not going to run to the grocery store with the lines and the crazy and I just said, I went online, I picked the stuff that was available for immediate delivery, everything else like, oh, it’ll be a week or 10 days. If you’re nervous, you don’t want something a week or 10 days. Guess what? I clicked Yes anyway, it doesn’t hurt.

Before you know it, it’s 10 days ago and my house is totally stocked. I got a bunch of stuff. I went back to do a little bit more. There’s nothing available right now. We totally can just be looking a little bit into the future. I’ll just say because I know, we have to close off pretty soon. You’ll have to say that, yes, these are unprecedented times. Now is a great opportunity for realtors to be leaders in their areas.

Don’t spread panic. Don’t spread fear, spread leadership, as you said, Aaron, good point. Be the person that cares. Go out there, and just if you send a text message to every person individually in your database, you will get a swarm of answers, and people will remember that. It is because you care, and it’s also great for business. Cut your expenses and figure out creative ways to stay in touch with your people. When this thing is over, which will be over. When it’s over, and your point too, it may not be as big of a health crisis. It could be but it still will be over. When it’s over, there are ways to be at the top of the market.

Aaron: Yes, we’re not saying it’s going to be over soon or late or anything. That’s too early on that. Everything will come to an end and we will end up getting through it. Be that leader at that beginning, and try to see where those opportunities are. Instacart is a grocery delivery. That’s what we did and Instacart’s getting busier, Amazon’s hiring those drivers. Uber Eats all those different places. There is a market shift and a new industry.

It may be just ways for people to get through some of the maybe the fact that Amazon’s hiring that many is going to offset the fact that a lot of people can’t work at the casinos in Vegas right now. There’s a lot of different things that we’re going to see out there. We won’t have time to get into more, but I’m sure next week, we’ll be talking about it, but we’ll see what’s next and what’s happened and what’s changed out there.

Real estate is an awesome thing. It is so huge out there that it’s always impacted by other things that are out there. This week, we couldn’t find any real estate news that didn’t have something about the Coronavirus. Paul, I appreciate you jumping on so quickly today to the prescient to talk about this and your insight because you’re in one of the places where it’s a big deal. I’m in one of the places where it’s a big deal. I just hope that everybody makes the best of this and when we come out of it, we’re on the right side.1

Paul: I think the folks that tune into this are already as you said curious, which is good. That’s why we want to make sure that we’re true to that and giving a message. Look we’re not about false hope, we’re not about stick your head in the sand but we’re also not about spreading the panic. Whatever this is, there are activities that you can do that will make a huge difference on the way out. We would love the listeners for this show to be a step ahead of everybody else, and I think that’s easy to do.

Aaron: Go be a step ahead. Take care of yourselves out there, Rock Star Nation, and we will talk to you soon. Paul, thanks for coming on.

Paul: Stay well. Thanks.

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