Note: This is a memo we shared with our agents this morning specifically addressing the financial relief packages aimed at replacing income for workers affected by COVID-19.
We decided to publish in order to share knowledge and learn what we don’t know in service of protecting the public and our real estate agent workforce as we process this global pandemic.
Good morning,
I wanted to remind you all that information about financial relief tied to income and work in the Coronavirus Aid, Relief, and Economic Security (CARES) Act is still being clarified (especially for how it applies to real estate agents) and among individual banks and individual states Department of Labor and Employment.
I am putting this out today just to help get you prepared for working through any of this that applies and to make sure you have current accurate info.
Much of whats covered in the act is clear. NAR put out a useful publication Provisions for REALTORS® and Their Consumers highlighting how most of the act applies to you.
What's not clear yet is how financial relief packages will extend to self-employed real estate agents. Hang tight. There are many premature congratulatory messages circling around the real estate community when we still have so much to understand how it works.
One of the two income replacement programs you might be eligible for are 1. Pandemic Unemployment Assistance or 2. Payroll Protection Loan. We do not know for sure how eligibility tests applies to agents yet (especially for #1) and both will require good faith certifications on a number of levels and intervals.
It is entirely possible that agents dont qualify for either program. Or that its dependent on state or local conditions. Or that its easy and applicable to all.
We believe that much of the criteria will rely on individual assessments of the need to protect oneself balanced against everyone's ethical points of view.
While we wait for specifics about which programs you as individuals may qualify for and how (as well as wait for banks and DOL to implement their own unique versions of making that aid available) I can definitely recommend one action in the next few days that you're going to have to do anyway. Organize your finances and make a folder with everything you can that might be required when applying for aid. I would recommend your last 2 or 3 tax returns and all of the information you typically need to file tax returns for the previous/current year not yet filed. Payroll tax filings, 1099's, income and expenses ledgers, etc. See full CARES Act here.
Pandemic Unemployment Assistance (PUA)
"Self-employed individuals, independent contractors, and other individuals who are unable to work as a direct result of COVID-19 public health emergency, and would not qualify for regular unemployment benefits under state law may be eligible to receive PUA."
It is not clear how real estate agents specifically qualify. We need information on how and when the benefit expires (ex: when you start showings, when you go under contract, or when you earn/paid a commission?) Perhaps this benefit is only deemed applicable to agents in states where real estate services were deemed non-essential? It even says,"This excludes individuals who have an ability to telework with pay" Is that agents? We don't know yet.
Colorado is not ready to accept applications at all, and we don't understand if agents are eligible or what actions end the aid period for those who are.
Again, to be clear. We do not know if agents qualify, if you will qualify if they do, or what triggers termination of aid. We will let you know as soon as we do.
2. Payroll Protection Loan
“The Paycheck Protection Program administered through the SBA – provides up to $349 billion in loans to eligible entities, with such loans being subject to forgiveness under certain circumstances for...self-employed individuals, independent contractors, and sole proprietorships to help small businesses keep workers employed amid the pandemic and economic downturn."
It is not clear how real estate agents specifically qualify. Applicants will certify "1. The uncertainty of current economic conditions makes the loan request necessary to support ongoing operations 2. The borrower will use the loan proceeds to retain workers and maintain payroll or make mortgage, lease, and utility payments." Banks will reportedly be ready to start accepting applications as early as mid-week which is when we'll know more about eligibility scenarios that might apply to you.
Loans can be up to 2x the borrower’s average monthly payroll costs, not to exceed $10 million. For the self-employed that means "The sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in one year, as pro-rated for the covered period."
Basic requirements can be found in the U.S. Chamber of Commerce Coronavirus Emergency Loans Small Business Guide and Checklist.
For the self-employed much of this loan is forgivable up to the amount spent in an 8 week period on "payroll, rent, utilities, and mortgage interest." If those major expenses are more than what's forgivable, Interest Rate not to exceed 4% or 10-year term. Payment deferrals available if loan exceeds amount forgiven.
Max benefit if self-employed at $100,000/year at 2.5 the monthly rate could result in a $20,833.33 forgivable loan. YMMV.
"Borrowers do not need to demonstrate actual economic harm in order to qualify. Instead, they simply need to make a series of good faith certifications, principally that current economic conditions necessitate the loan to support ongoing business operations, and that the funds will be used to maintain payroll and address other covered expenses." Read more in this analysis.
Again, to be clear. We do not know if agents qualify, if you will qualify if they do, or when applications will start. We will continue updating the Agent Resource Guide as info comes out.
Overall our message is to prepare your finances so that you can take advantage of relief that is intended to help you. If not one of these, there may be others. I can't stress enough how this will come down to how the real estate trade is defined, how states interpret essential services, how fast states enact the application process, which banks are approved to originate loans what the criteria will be, and your individual circumstances and needs. Still a ways to go.
Greg Fischer
Tech | Managing Broker
(720) 605-3325
