When the market heats up and the number of homes for sale begins to tighten, potential buyers are sometimes tempted to make an offer on a home or investment property without seeing it first. In a competitive situation where homes are listed and go under contract in a matter of hours or multiple-offer scenarios abound, buying sight unseen may be a necessity. Or, you may be moving across the country for work and don’t have an opportunity to tour the area before making a decision.
No matter your reason for doing so, buying a home without seeing the property first can come with additional risks. But these are risks that more and more people are willing to take. In a 2017 survey by Redfin of people who bought or sold a home, attempted to do so, or plan to do so soon, 33% of people made an offer without seeing it with their own eyes. This number climbed 19% from the year earlier. With the advance of technology, particularly photography and virtual tour software, millennials in particular are feeling more comfortable to make these decisions digitally.
SIX WAYS TO REDUCE RISK WHEN BUYING A HOME SIGHT UNSEEN
If you’re considering this approach, how can you make an offer that doesn’t keep you up at night? Before making this major financial decision, follow these tips to protect yourself.
1. Be Prepared
Before you make a bid, get pre-approved for a mortgage so you can act quickly when it’s the right time. Providing a pre-approval letter with your offer gives sellers a higher degree of confidence that you can purchase their property.
2. Know Your Limits
Setting a budget is critical to any home purchase, but even more so when you may be competing with other buyers. Don’t get caught up in a bidding war only to regret it later.
3. Do Your Research
There are so many resources and tools available online that can help you understand the market where you want to live or purchase an investment property. Use the local multiple listing service, Zillow, Google Maps, and competitive market analysis to gather any information you can to make an informed decision.
4. Don’t Be Fooled by Photography
Advances in photography, virtual tours and Facebook live videos can help you see more than ever before if a home is right for you. But be aware that photos can be edited to look amazing and spaces can be made to appear bigger than they are in person with the right camera equipment and technology. It’s important to note that the selected pictures can strategically leave out parts of the house or areas the agent or property owner doesn’t want you to see.
5. Enlist a Professional
If you can’t be there, have someone review the property on your behalf. It needs to be someone you can rely on to look over the property objectively and help you identify potential pitfalls or reasons to walk away. If you don’t have a friend, family member or co-worker who could help, engaging a realtor in this process is critical.
Finding a realtor you trust in another city can take a bit more time, but it’s invaluable to have a set of eyes to see what you can’t – like obvious repairs or potential maintenance issues. If you don’t know a realtor in the area where you’re buying, you can ask a local, established real estate agent for a referral or conduct phone interviews with professionals in the city where you’re buying. You can even ask them to take short videos or use a video communication app like Skype or FaceTime as a way to “show” you the property. No matter who you choose, make sure you trust their judgement.
6. Include Contingencies
Even if you submit a bid and your offer is accepted, including contingencies in the contract will help protect you from the details that may be discovered during the inspection, appraisal, or due diligence process conducted by your mortgage lender.
Yes, you can reduce risk. But…
There are undeniable advantages to making a quick offer when the competition is tight or if you’re looking for a specific type of home in a desired neighborhood or community. Making an offer sight unseen will likely give you a leg up on your competition without putting your earnest money deposit at risk while you work through the home inspection details. But you also give up the opportunity to see for yourself where the property sits, the feel of the neighborhood and other intangibles that can’t be easily communicated with photos or videos. There’s nothing quite like seeing a home in person to know whether or not it’s right for you.