Buying A Home Sight Unseen

Back in 2020, the convergence of virtual technology and the COVID-19 pandemic resulted in a big increase in sight-unseen homebuying. According to the National Association of REALTORS® (NAR), during the first few months of the pandemic, 1 in 20 buyers purchased a property without ever setting foot inside. But while the pandemic is over, it looks like the trend of sight-unseen buying may be around a little while longer.

This is partly due to the competitiveness of today’s market, with demand still far outpacing ready supply. In fact, another NAR survey from last year found that almost half (48%) of Millennial homebuyers would purchase sight unseen to gain an advantage over other buyers.

But sight-unseen transactions can also create headaches for both buyers and sellers. So, before you buy or sell a home this way, here are some things you should know.

Who’s Buying Sight Unseen?

These days, sight unseen buyers generally fall into three categories:

• Those doing it out of necessity, for example buyers who are relocating and can’t get into town to view a property.
• Those doing it out of convenience. These buyers might be purchasing vacation property in a different part of the country – or a different country altogether. Sometimes they are acting through a fiduciary.
• Those making a preemptive offer in response to a very frenetic market.

Advantage or Disadvantage?

Especially in the last scenario, buyers may believe they are risking very little. They may attempt to tie up a home with an aggressive offer while making the contract subject to contingencies such as an inspection or attorney review. If they wind up canceling, they figure all they’ll lose is a few hundred bucks in professional fees.

In fact, these buyers might actually be putting themselves at a disadvantage. “Sight-unseen buyers usually have less negotiating leverage, because sellers tend to prioritize offers from people who have toured the home – sometimes even if those offers are lower.”  In other words, a buyer who views a home in person might actually be able to get themselves a better deal.

Contingencies, Competition and Reputation

There’s also the matter of how far contingencies will take you in today’s most competitive market segments, where multiple offers occur regularly. The most aggressive buyers are submitting non-contingent, all-cash offers, meaning they are waiving the home inspection, attorney review, and/or approval of mortgage financing. Therefore, trying to tie up a property while relying on contingencies as a bailout strategy may be pointless. And buyers who make a habit of doing this will develop a reputation for backing out, putting their future offers at risk.

What The Photos Don’t Show

Of course, there’s the obvious issue of a property’s condition. A home can look great in photos, but photos usually don’t show leaky windows, small closets or a furnace on the brink. These issues are only revealed through an in-person viewing by a buyer, their agent or an inspector. And if a buyer waives the inspection, there’s no turning back.

Most sight-unseen contracts that fall apart these days fall apart over the home’s condition.

Key Takeaways For Buyers

• If your situation necessitates buying sight unseen, do as much due diligence as possible. Spend ample time researching an area, including schools, amenities, and transportation. Use Google’s Streetview feature to “walk around the neighborhood.”
• Make a checklist of the things photos won’t show you, like the age and condition of mechanicals, and work with your agent to get as much info as you can about these items.
• Knowing most sellers prefer to engage with buyers who’ve seen a property, it’s important to make your case as a viable buyer. You’re not just buying a home in this case. You’re selling yourself. So work with your agent to come up a plan.
• Finally, make every effort to get to the property ideally before – but if not, soon after – you submit an offer.

Tips for Sellers

Buyers aren’t the only ones who need to plan for sight-unseen offers. Sellers must be prepared to navigate this increasingly common situation too.

• If you’re dealing with a sight-unseen buyer, do everything you can to vet that buyer and make the contract stick. That’s because any time a home goes under contract and then comes back on the market, it draws increased scrutiny. Buyers may assume that something is wrong, and that perception can cost you.
• It’s reasonable to assume that the chances of a contract being canceled are significantly higher when a buyer puts in an offer without seeing a home. Therefore, it’s up to the seller to impose conditions that make cancellation more difficult. For example, the seller can stipulate that the home must be viewed within a certain amount of time and require a deposit that becomes non-refundable when that window passes. Today, most sellers have the leverage. Use it.
• If a seller has received a verbal offer but is awaiting a written contract, they can and should continue to field showing requests and offers. Your agent can note the contract status in the listing.
• Finally, don’t reject a buyer outright just because they’re making a sight-unseen offer. Work the best deal you can get. If that’s a rock-solid buyer who’s buying sight unseen, so be it.

Buying a home sight unseen – or selling to a sight-unseen buyer – can be a productive way to transact, but both buyers and sellers need to understand what they’re getting into. Let's connect, so we can review the pros and cons, make a plan, and do as much due diligence as possible ahead of time.