Keep The Faith – Information To Help Get Through Trying Times

What effects will the COVID-19 virus have on the real estate market on the NH seacoast? What is the history of the governor’s orders? What were the effects of those orders?

On Friday the 13th, it all began; Governor Sununu issued a State of Emergency at 5:15 PM. What followed was a torrent of clarifications and further orders. Those emergency orders can be viewed here.

As it affected agents in real estate, a mass of confusion was cleared up when real estate was deemed an essential service. There were a number of additional orders surrounding landlords, their ability to evict, and several that affected the practice of real estate (most specifically Order #17 with its addenda defining real estate as an essential service, along with closing agents, etc).   

Business Owners Programs

To business owners looking to keep on as many of their employees as possible during this time without revenue, $349 billion dollars was made available through the CARES Act. These programs should be carefully read and reviewed with your lender and legal council, but can be an enormous help in keeping business running during the “stay-at-home” orders across New England.

Paycheck Protection Program [PPP]

If you are considering rehiring your employees and paying them their original salary (restoring your payroll), the PPP loan is the program that will be forgiven. If you offer employees their job back and they decline, you can document it, and hire someone else to take their place. Many questions have been asked and answered (in those sessions) about rehiring “non-essential” employees back during this time. Business owners CAN be paid through this plan as “self-employed” individuals.  You can apply for this loan up to June 30, 2020.

The filing for you and your employees officially opened Friday, April 3, 2020. The filing opened up specifically for “self-employed” individuals (without any other employees) on Friday, April 10, 2020. This loan needs to be used for items such as payroll, expenses, rent, mortgage, interest (not principal), utilities, etc.  Payments will be deferred for six months.

This program is specifically designed to help small businesses keep their workforce employed. Visit SBA.gov/Coronavirus for more information on the Paycheck Protection Program.

The new loan program will be available retroactively from Feb. 15, 2020, so employers can rehire their recently laid-off employees through June 30, 2020.

Economic Injury Disaster Loan [EIDL]

This is a low-interest (3.75%) disaster loan, for working capital that comes directly from the SBA, and can be up to a 30-year term. You can use this for many different functions including fixed debts, payroll, and accounts payable. For loans over $25,000, you will need collateral. The SBA will run a credit check for this loan, but have modified conditions; you need to show an ability to repay the loan. If you meet the criteria, there is also a GRANT (emergency funds), of up to $10,000, that accompanies this loan. Know that you must “opt-in” for the grant, on the application.

The new loan program will help small businesses with their payroll and other business operating expenses. It will provide critical capital to businesses without collateral requirements, personal guarantees, or SBA fees – all with a 100% guarantee from SBA. All loan payments will be deferred for six months. Most importantly, the SBA will forgive the portion of the loan proceeds that are used to cover the first eight weeks of payroll costs, rent, utilities, and mortgage interest.

Loan Terms & Conditions

• Eligible businesses: All businesses, including non-profits, veteran organizations, tribal concerns, sole proprietorships, self-employed individuals, and independent contractors, with 500 or fewer employees or no greater than the number of employees set by the SBA as the size standard for certain industries
• Maximum loan amount up to $10 million
• Loan forgiveness, if proceeds used for payroll costs and other designated business operating expenses in the eight weeks following the date of loan origination (due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs)
• All loans under this program will have the following identical features:
  • Interest rate of 0.5%
  • Maturity of two years
  • First payment deferred for six months
  • 100% guarantee by SBA
  • No collateral
  • No personal guarantees
  • No borrower or lender fees payable to SBA

SBA’s announcement comes on the heels of a series of steps taken by the agency since the President’s Emergency Declaration to expeditiously provide capital to financially distressed businesses affected by the Coronavirus (COVID-19) pandemic. 

As time progresses and more of the leveling out begins to occur in the infection rates, the toll on the economy will start to become a little more clear. For residential transactions, they appear to be on pace in March. On the commercial side, however, a larger number of banks have shut down their lending until they are more informed as to the extent of what their borrowers are facing with rent delinquencies. The smaller banks are all heavily involved in PPP loaning and processing, which is slowing down their efforts on the commercial transactions or they are approaching their liquidity limits.  

We will see if Congress and the Senate can come together to fund another round. We wonder, though, will all this spending leave the country with a big hangover that the struggling economy will not be able to support? Only time will tell.

IRS Extends Tax Deadlines

The IRS issued guidance on the evening of Thursday, April 9th, to grant deadline relief for both 1031 like-kind exchanges and opportunity zone investments that are already underway.  Both of these programs are designed to promote economic growth in communities, and NAR made the case that investors in these programs should not be harmed due to the effects of COVID-19.

• 1031 Like-kind exchanges: If an investor has taken the first step of a like-kind exchange by selling the old property, and either the 45-day or the 180-day deadline falls between April 1 and July 15, the deadline has been extended to July 15. 
•  Opportunity Zones: If an investor who sold a capital asset planned to roll over the gain into an Opportunity Fund and the 180-day deadline to do so falls between April 1 and July 15, 2020, he or she can make the investment as late as July 15.

Also, sole proprietors who pay quarterly estimated taxes now have until July 15 to file their second quarter payment.  As a result of an earlier IRS notice, first quarter estimated tax payments had already been extended to July 15. This means that any individual or corporation that has a quarterly estimated tax payment due on or after April 1, 2020, and before July 15, 2020, can wait until July 15 to make that payment, without penalty.  

NAR has advocated heavily for these extensions since the outbreak of the COVID-19 pandemic. They will have a full analysis of this announcement Friday on the  dedicated coronavirus page.

Everyone please stay safe and healthy!

– Written by Dave Garvey & Ethan Ash

– Contributions by Somersworth, NH economic developers & commercial lenders such as Primary Bank.