Looking Forward: The Future of the Real Estate Industry
The property market has never been one that could be deemed acyclical, and when 2020 threw a global pandemic into the mix, it was ‘business as unusual’. Banning of open homes, virtual inspections and auctions, and rent negotiations all meant that real estate agents suddenly had to take on a slightly varied role.
There’s no crystal ball telling us when things will get back to normal, or if they ever will. But how is COVID-19 likely to shape the future of real estate? Are any of the practices adopted during this time here to stay? And what are the insurance implications of some of these practices? Below, we share our thoughts on a few of the matters real estate agents have dealt with, and how they can expect to move forward.
Virtual Inspections & Auctions – The future of real estate?
When restrictions were imposed across various states, virtual property inspections and auctions were adopted by many agents as a way of continuing to operate among the lockdown. So could COVID-19 be a catalyst for a permanent shift towards virtual inspections and auctions, like it has been for remote work? From what we’ve seen and heard so far, it doesn’t look that way.
When it comes to virtual auctions, the experience has been mixed among agents and buyers. While there may be early signs that buyers are becoming more comfortable with the mechanism, the consensus appears to be that it’s important for buyers to experience a house in person before making a decision. According to Stuart Greig and Trish Mewett from Jim’s Real Estate, “There is a saying ‘home is where the heart is’…the first impression and the vibe that you experience when you walk into your potential home, buying or renting, can’t be measured or experienced when you see something online…Nothing can beat physically walking through the home yourself. Are there any building concerns; are there renovation requirements in the wet areas that you can’t see?”
Brad Panayiotou, Sales Executive at Elders Real Estate Toongabbie, sees virtual inspections as a way for potential buyers and renters to do their initial research on a property. “It helps them filter out the properties they absolutely won’t consider – the deal-breakers,” he explains. However, there is one cohort of the market for whom virtual inspections may work successfully for, according to Trish Mewett.
“Over my 25 years in real estate I have certainly sold a few homes site unseen,” she tells. “These sales are to developers where the size of the land, the location and the development opportunity is the value, not the condition of the house…so if the virtual world suits anyone then maybe developers are at the top of the list.”
It would therefore appear that although virtual inspections may have some value during the initial research stage, and may be a reasonable avenue for developers, face-to-face inspections and auctions (and their associated risks) are here to stay. Any interaction with members of the public carries liability risks, whether someone alleges your negligence caused damage to their home, or caused them an injury. This means it’s important for agents to ensure their Public Liability Insurance stays up to date and current to help protect them if they do have a claim brought against them.
Government Support & Rent Payments
Government assistance such as increased JobSeeker and JobKeeper have helped to maintain the livelihood of many. At a time when some may have been grappling with the possibility of being pushed into poverty, these payments provided much needed relief for those facing financial hardship. Despite the economic stimuli, rent reductions and the ability of tenants to make rent payments continue to be a topic of conversation, with many real estate agents successfully negotiating reductions between tenants and landlords:
“The majority of our landlords were open to negotiations, and approximately 90% of our rent negotiations resulted in reductions for tenants,” further explains Brad Panayiotou.“ Of course there were landlords who weren’t willing, either due to their personal circumstance or a lack of supporting evidence from the tenants, but that was the minority.”
Whilst a number of people have received a rent reduction, statistics have shown that fewer than 10 per cent of Australians received what they considered to be satisfactory reductions in rent. So, what happens as the government benefits start to taper off from September? Trish Mewett recommends open communication as the way for a solution. “As long as parties are negotiating and communicating fairly, our job is to support and guide with empathy. As yet I haven’t had any issues and we remain focused on keeping informed by our tenants as to their position to pre-empt any possible financial issues.”
Remember to also check what is and isn’t covered under Landlord Insurance and advise your landlords to contact their broker so they’re also clear on what is and isn’t covered. For example, if a landlord and tenant mutually agree to a reduced rent amount or to suspend rent payments, this cannot be claimed under Landlord Insurance. Click here for answers to some commonly asked questions about Landlord Insurance.
Importance of Due Diligence
It’s likely these difficult times would have created some intense conversations and difficult decisions, whether that was with a landlord, buyer, seller or tenant. During times like these, it can be very easy for agents to make rash decisions or fail to undertake due diligence in their work. Of course, the future of real estate still heavily relies on
“Unfortunately, there have been a number of agents who have been found guilty of providing financial advice to tenants on how they could pay their rent,” adds Trish Mewett. “Our first obligation is to do the best thing by our landlord; however, we are authorised to tell a tenant what their requirements are financially.”
Not undertaking due diligence in providing your service at this time could result in disputes that lead to allegations of professional negligence. If you do receive the slightest hint from a client or third party that indicates an imminent Professional Indemnity claim, remember to notify your broker immediately, and not wait until you have to make a claim.