Archive for Real Estate

Survey: Is a Flood of Short Sales Coming Soon?

By Real Estate Bees 

– Economic damage caused by the Covid-19 pandemic in the United States is having a significant impact on homeowners. According to Freddie Mac, the number of mortgage loan borrowers in forbearance (behind in their payments and negotiating with the lender) has increased from .09% in 2019 to 5.6% in November of 2020.

Real estate professionals can’t help but compare the current situation to the housing recession of 2008. The earlier recession, sometimes called the Great Recession, had an industry-altering effect on the real estate profession.

What Happened Last Time?

The Great Recession caused a record number of mortgage borrowers to default on their loans. This caused a corresponding record number of short sales of residential properties. A short sale is when a mortgage lender is willing to allow a sale of the collateral property for less than the remaining loan balance.

“Short sale is one of the solutions to avoid foreclosure. For a homeowner it’s usually a last resort, and for a buyer it’s an opportunity to purchase a home with a discount.” — explains Bob Vieira, a short sale processing expert.

Real Estate Bees surveyed over 5,000 active real estate agents to learn their opinions on the subject. In the survey, realtors were asked about the possibility of a pandemic induced recession, its impact on short sales, how short sales have affected their business, and how they can prepare for the upcoming economic challenges and opportunities caused by the pandemic.

Will the History Repeat Itself?

Overall, the results of the Real Estate Bees’ survey show a profession that is attuned to the economic health of the country. For example, economists had been predicting that a recession was inevitable even before the pandemic struck. Most of the real estate agents surveyed reflect this thinking, with only 15.6% believing that a recession will not happen.

One point that realtors made in the survey was the importance of knowing your market. They are aware that real estate markets in some areas will remain stronger than others in a Covid induced recession. Again, this mirrors the opinion of most economists.

The National Bureau of Economic Research (NBER) has pointed out that because of social distancing requirements, manufacturing jobs have taken a harder hit than businesses whose employees can work from home. Regions with a concentration of manufacturing jobs will be heavily affected. This could translate to more short sales in those markets.

56.6% of agents who were surveyed do not believe that short sales will grow to as many as there were during the Great Recession. They point out that compared to 2008, the interest rates are lower, there is much less housing inventory, investment property sales activity is higher, and government intervention has been much faster.

Their opinion is validated by the fact that today’s percentage of loans in forbearance of 5.6% is one third of the 17.6% of loans in forbearance in 2008 (Mortgage Bankers Association).

The increased number of agents who perform short sales are an indication of the long-term impact of short sales on the typical Realtor’s business. 63.4% of those surveyed stated that they now assist with short sales either regularly or periodically. Only 11.5% say that they have never encountered a short sale.

61.5% of those surveyed believe that there are increased opportunities in handling short sales transactions. Most of those agents, 40.4%, believe that knowing how to handle a short sale can be an advantage over competitors who avoid them.

21.1% said that since these properties are desired by investors there have been more opportunities for quicker sales.

Although short sale properties can be put under contract more quickly, the Real Estate Bees survey reports that short sales are more time consuming and difficult to close than traditional sales. 80.8% of the agents believe that this is the case. However, several realtors commented that once they built a pipeline of short sales they eventually began closing them regularly.

Crisis Prevention Measures for Real Estate Businesses

Successful realtors in the survey encouraged others to be proactive and incorporate short sales into their usual real estate marketing strategies. They discussed the need to make past clients aware of their expertise in handling distressed property sales in case those skills are needed.

Training and education were consistently mentioned as being the key to success in an increasing short sale market. As already stated, agents with training believe that they have an advantage over those who do not.

Several firm managers who were surveyed noted that successful completion of industry and trade association classes give agents additional professional designations. These include the NAR Short Sales and Foreclosure Resource (SFR) certification and the Certified Distressed Property Expert (CDPE) designation.

They suggested that once they have these certifications, realtors should include them in marketing to their past clients. These credentials should also be highlighted in targeted social media advertising.

Short sales require negotiating with the mortgage lender. Survey respondents recommended using people for this task who specialize in short sale negotiations. Some of them use outside negotiators like attorneys. Others have a person in-house who handles all lender negotiations for the firm.

The need to streamline the process came up over and over. 28.8% of those surveyed plan to incorporate a streamlined short sale process into their operations to help their business withstand a possible change in the economy. Since short sales take longer than a traditional sale, agents need to standardize their procedures as much as possible.

Realtors, particularly the firm managers who were surveyed, repeatedly stressed the importance of staying in touch with your database during a recession.

One lead generation strategy the survey suggested is to find homes that may be in forbearance and reach out to the owners. They mentioned that the NAR Realtors Property Resource (RPR) is a valuable tool for this kind of research.

Other ways to find short sale prospects with underwater homes that were discussed included networking with other real estate professionals like attorneys, mortgage lenders and brokers, and CPAs.

Some good ideas were shared about how to generally prepare for an upcoming recession. Most of them are simply good business practices.

Realtors were advised to perform a financial review of their practice. Activities and expenses should be examined for their profitability. The most effective practices should be emphasized and the least effective ones should be reduced or eliminated.

Those surveyed encouraged realtors to cut waste from their expenses. They suggested that realtors save as much as they can for a rainy day. This applies to their personal spending as well as their business.

Diversification came up frequently in comments by realtors in the survey. In addition to short sales, realtors were advised to look for other additional revenue streams. Some particular avenues that were mentioned were investment property sales and assistance with 1031 exchanges.

Some realtors pointed out their own success in investing in real estate as a part of their business.

Throughout the discussion on both short sales and preparation for a recession, realtors continually mentioned the need to improve one’s technology and social media presence. They believe that if business slows down, the time should be used to learn and improve in those areas.

The Real Estate Bees survey provides a comprehensive look at the real estate industry during the pandemic economy. Although realtors do not believe that short sales will match the 2008 levels, they will likely increase considerably in coming months.


Survey Results: COVID-19 Impact on the U.S. Real Estate Industry

The COVID-19 pandemic has created an economic downturn that is unique in the experience of today’s business owners and government officials.

A nationwide survey of real estate professionals conducted by shows the complexity of the issue in the U.S. real estate markets.

The survey was conducted in all 50 states and the District of Columbia. Professionals from various categories of real estate sales, investment, and services were included for a closeup view of the effects of COVID-19.

A Different Kind of Economic Cycle

Economic downturns that are caused solely by market activity are expected periodically. Prudent owners can plan for these times when their business is slow.

The unexpectedness of the pandemic, and the personal safety concerns caused by it, have presented a challenge no one has ever seen.

Survey respondents point out that the timing of the pandemic could not have been worse for their business. Residential real estate sales are strongest in the spring.

Across the country, sales in January and February were up from the previous year. As the level of danger became known, and precautions and restrictions were put in place, sales dropped steeply.

Survey comments relay concerns from homeowners about having people from outside walking through their homes. This was cited by brokerage owners and agents as being the primary cause of a drop in homes being listed for sale.

Sales agents also experienced unique expenses that were caused by COVID-19. Buyer’s agents have had to purchase Personal Protection Equipment (PPEs) for themselves and their clients. Listing agents have bought PPEs to place in the homes for sale for buyers who came unprepared.

Agents are also increasing their expenses for technology such as virtual tours.

It’s obvious that some firms and agents were clearly more prepared than others. Many said that if they had known that this was coming, they would have worked harder to maximize their business and to improve their technology.

The firms and agents who have held up the best through the pandemic were already doing those things.

New home sales were slowed as well. Sales staff were not allowed to open their model homes. Later, they were only allowed to have pre-scheduled appointments. No walk-in traffic.

Commercial investment properties brought weaker returns as retail businesses were closed. The value of office leases was put in doubt as office tenants had to send their workers home.

Perhaps forever.

Regional Differences in Economic Impact From COVID-19

Traditional regional differences and inconsistent COVID-19 policies by the states had a strong effect on their respective markets.

Some states said that the real estate profession is non-essential. Brokers were not allowed to leave their homes to conduct business. In other states, brokers were allowed to work outside the home.

Initially, most states would not allow actual showings. Potential buyers had to go through a virtual tour of the home. Home sales slowed as a result. The sooner that the state allowed in-person showings the quicker the market rebounded.

Brokerage owners reported that some states continued to confine showings to one per day per home after others had dropped similar orders.

The stronger markets in the south and west portions of the US reported that property values have held up well. Those surveyed in the northeast and midwest aren’t having the same experience.

Vacation and resort areas were shut down entirely. Investors who own those properties reported suffering significant losses. At what would have been the height of the rental season, that income stopped altogether.

On the other hand, places with a strong concentration of military bases have a regular supply of families moving in and out of the area. That was a strong factor in helping those markets to remain active.

Health and Safety

The comments heard most frequently in the survey had to do with personal safety concerns. Sales agents for all kinds of property were hesitant to expose themselves to the virus by going into both public and private places.

According to the National Association of Realtors, there was already a shortage of housing inventory before the coronavirus hit the US. This was made worse as homeowners decided to postpone listing their homes for sale for safety reasons.

When the pandemic response came in the spring, the housing inventory fell while spring buyers increased the demand. In some parts of the country, homes are selling in days for full price or more. This is keeping property values in those areas at a strong level.

Appraisers are having difficulty with the situation, both from the personal safety standpoint and in maintaining professional standards.

Some sellers are reported to be hesitant to let appraisers and inspectors into their homes. In some areas, appraisers have resorted to having homeowners fill out a form that describes the interior of their house. They have to use caution when placing a value on improvements that they haven’t seen for themselves.

Home inspectors’ reputations are built on the thoroughness of their work. Not being allowed into a seller’s home means that they cannot give an opinion on the majority of the working systems of the home including electrical, plumbing, HVAC, the roof, etc.

The survey reported that in some cases, buyers had to decide whether or not to basically buy a property as-is.

Real Estate schools and trainers have been stopped by their states from holding in-person classes, which is a large part of their business.

Schools in most states were already allowed to give some continuing education classes online. Those states’ boards or commissions quickly moved to give schools permission to hold the remaining classes virtually using platforms such as Zoom.

Pre-Licensing classes for new agents were heavily affected. The students who were able to finish the required classes and take their state exams have had trouble finding testing sites that are open.

Trainers and coaches stated that their classes were not only affected by health issues but also because agents have had to cut costs. They believe that this has had the biggest negative impact on those new agents who need the most encouragement right now.

Professional photographers have also seen their business drop because of safety concerns.

And, the people who are hired to professionally stage a seller’s home for listing have seen their business “virtually” disappear. It’s hard for them to do their job without going into the home.

Commercial Real Estate Affected

Commercial real estate was also hit by the pandemic. Broker-developers and investors who were surveyed gave several reasons for this.

Retail businesses were closed completely. Leasing in new retail projects stopped and some leases already signed were terminated.

When government stimulus funds expire, many retail tenants are expected to have trouble making their rent payments. This has retail tenants, including important anchor tenants, seeking to renegotiate their lease terms. This makes investors hesitant to buy existing retail properties.

The fact that workers in all industries are being forced to work from home has caused a lot of uncertainty in the office property markets.

Major companies could come to the conclusion that they don’t need as much office space as before. Investors who were surveyed believe that this would cause a long term change in the need for that type of asset.

Medical office space has also been impacted by COVID-19. Elective surgeries and procedures have not been allowed which has impacted hospital and doctors’ cash flow tremendously.

One southeastern US medical system has estimated its loss so far to be $700 million. They withdrew from 5 medical office projects this spring.

Multi-family construction didn’t seem to slow down during this time. The opinion of the commercial brokers and investors in the survey was that most of those were projects that had already gotten their permits and funding before the pandemic.

With the uncertainty over the future viability of retail and office tenants, investors are cautious about buying existing commercial properties. The prevailing opinion of the commercial professionals in the survey was that values may very well come down in the next few years.

After several years of strong values and low cap rates, investors worry that they could wind up buying high and selling low.

Lenders have tightened their underwriting criteria on riskier loan categories, including many investment properties — shares Sam McGrath, Lead Commercial Real Estate Analyst from a national commercial real estate investing company PropertyCashin — this has made it difficult or impossible for some projects to go forward.

Private and hard money lenders who leverage their cash with borrowed funds had to restrict their own lending policies as well.

The restriction of capital is also seen in the area of national residential property investors. The number of iBuyers making offers on homes has dropped precipitously.


A consistent theme throughout the survey is the impact of technology. Regardless of the profession, those in the industry who were up to date on their technology systems and platforms have held up the best.

Investors who bought residential properties around the country were already used to viewing prospective investment properties virtually. Virtual showings are now the norm for homeowners as well.

Having to work from home hasn’t impacted real estate agents very much. Agents have always worked mostly out of the office, says one of the survey participants — Kristina Morales, a real estate agent licensed in the states of Ohio, California, and Texas.

Kristina continues: they typically would come to the office to print transaction documents and, once signed, deliver them back to the firm for storage. Now, most of these documents are signed and stored electronically, which reduces the unnecessary back-and forth with papers.

Today, agents mostly report to the office for staff meetings and training. Otherwise, they are out of the office more than they are there.

Brokerage firms need to regularly go over important policies and procedures of the firm in training sessions. Staff meetings also provide important market information and regulatory changes.

Brokerages who had not already done so are now spending time and money adding the technology to hold their office meetings virtually with their agents.

Appraisers in some states report that they are focused on adding the technology they need to do “desktop appraisals”. These are appraisals that are done without any inspection of the property.

All the information needed for a “desktop appraisal” is pulled from public records, the multiple listing service, Google Maps, etc. These are full appraisal reports, not limited reports like a Broker Price Opinion (BPO).


As with ordinary economic downturns, weaker agents and firms are being culled from the profession. This creates more listings and sales for brokerage firms and agents who were more productive and better prepared.

It’s likely that mortgage interest rates will remain low. Residential professionals were optimistic that this would continue and will help their markets to rebound.

Over 61% of brokerages and 52% of agents said that they were either maintaining or increasing their marketing. A lot of this is being done online and through social media.

Possibly as a result of so many industries doing the same thing, the cost of social media and online marketing is down. Many professionals are taking advantage of this to build their marketing platforms for the future.

Low interest rates are helping appraisers replace their lost residential sales business with refinancing appraisals. Networking with attorneys can bring them appraisal orders that are needed for litigation, bankruptcies, and estate planning. They can also recruit business from banks who need to analyze their loan portfolio.

Coaches and trainers are encouraging agents in their area to take advantage of whatever downtime they have for professional improvement training.

Schools are doing the same thing, expanding from required pre-licensing and post-licensing continuing education classes to professional improvement courses.

Regardless of the unusual nature of this economic cycle, one thing is the same. Cash is king. Investors with cash will be able to take advantage of distressed properties that will almost certainly start to appear.

The lack of participation by national iBuyers is giving an opening to local residential investors.

With the uncertainty surrounding some segments of the commercial market, residential investment properties could be a good hedge for the future.

By Taylor Wilman