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NEWS MARCH 23, 2020 ¦ 9

The Coronavirus Pandemic and
the Crisis in Real Estate

By Dwight Merriam

The COVID-19 pandemic has
created a crisis in real estate
of unknown dimensions
and with few clear answers. Fol-
lowing the many networks of real
estate lawyers nationwide, the is-
sues that have surfaced thus far
are many.
As with other calamities, there
is often a cascading series of
events and conditions, as with the
Chernobyl disaster in 1986, and
the “perfect storm” of 1991 that
led to the loss of the Andrea Gale.
The people least able to pay their rent and their wait to market their homes until the pandemic is
mortgages are likely to be the ones let go and left over?
without incomes as businesses shut down. Evictions The effect has already been felt. The National
and foreclosures will increase. Will landlords and Association of Realtors surveyed its members on
lenders extend the time to cure and avoid having March 9 and its Realtors reported an 11% drop in
to take action? The mayor of San Jose has called for buyer traffic and 7% lower seller traffic. The NAR
a moratorium for 30 days on evictions of residents predicts a 10% reduction in sales, at least in the short
who can demonstrate that they cannot pay their term, as a consequence of the coronavirus. The NAR
rent because of a substantial loss of income related also issued a guide for its members about what ques-
to the virus. The council vote is expected in the next tions they can ask of those they are dealing with as
week or two. Italy is suspending mortgage payments to their exposure to the virus and warning them to
throughout the country. avoid discrimination.
As businesses slow down, close and fail, rents will The market has already reacted strongly, with RE-
evaporate, and the properties will become less valu- ITs in mall properties and hospitality hammered.
able, altering the loan-to-value ratios, triggering Ryman Hospitality Properties was $90.30 a share on
default clauses, and making refinancings impossible. Feb. 18. On Monday, March 17th, it closed at $24.09.
Seeing what lies ahead, lenders are reducing their Current contracts for sales and for leasing do
lending. not have provisions addressing the problems raised
Potential home buyers, skittish about the future, by the pandemic, particularly those relating to the
will withdraw from the market, decreasing demand time within which to perform. Suggestions have
and driving down the value of homes. been made for an addendum to contracts. CATIC
And how does one market real estate in this recently offered this advice, along with some sug-
environment? “Open houses” are going to be prob- gested language regarding “excused delay”: “Given
lematic. Does a seller want strangers coming into the uncertainty caused by increasing reports of
their home, possibly contaminating it? Will they
¦ Continued on PAGE 10

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