A smart way to speed up your house hunt?
Many home buyers these days have to move quickly. That’s because demand outweighs supply, and appealing homes that hit the market often generate bidding wars and sell fast.
Some buyers eager to move fast will buy a home ‘sight unseen,’ without ever touring the place in person.
This can be a good strategy in a competitive real estate market. But sight-unseen homes aren’t without risk. Here’s what you should know before making an offer.
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What does it mean to buy a house ‘sight unseen’?
Purchasing a home ‘sight unseen’ means buying it without having toured the property in person first.
Typically, someone buying a home sight-unseen will have looked at pictures and videos online and likely taken a virtual tour.
While it might sound odd to buy a home without having set foot in it, more and more home buyers are choosing to do so.
According to recent research by Redfin, a surprising 63% of those who purchased a home in 2020 made an offer on a property they hadn’t viewed in person.
Why remote home buying is increasing
There are several reasons why more buyers are opting to purchase a home sight unseen lately.
“Given the ongoing [coronavirus] pandemic, it makes sense that people make offers on properties without actually physically touring them,” says Rajeh Saadeh, a real estate attorney, investor, and professor.
“After all, people are trying to limit physical contact and going into places where they do not know if any occupants have COVID-19.”
“In hot markets, you must submit offers in minutes or hours, not days” –Bruce Ailion, Realtor and attorney
Bruce Ailion, a Realtor and attorney, agrees.
“The market has changed. People need to move quickly, and touring a home in person before an offer may not be possible. In hot markets, you must submit offers in minutes or hours, not days,” he says.
He points out, “Today, photos and videos are of better quality. And a smart buyer should be able to rely on a high-quality agent or broker to act as their eyes, ears, nose, and fiduciary.”
How to buy a house sight unseen
The process of buying a home sight unseen isn’t too different from a traditional home purchase. You’re simply using online photos, videos, and tours in place of an in-person tour or open house.
Saadeh says the following steps are involved for the buyer:
- Evaluate the property remotely using photos, facetime or video tours, and descriptions provided by your real estate agent or broker
- Get pre-approved for a mortgage to show the seller you can afford to finance the home
- Make an official offer to the seller to purchase the property
- If the seller likes the offer and accepts it, you and the seller prepare a contract
- Both parties sign the contract
- You make an earnest money deposit (or ‘good faith money’) in cash
- You have the property professionally inspected (optional but strongly recommended, especially for a sight-unseen offer). If you are satisfied with the inspector’s findings, the deal continues
- You order a title report. If the title is clear or clearable at closing, the deal continues
- You choose a mortgage lender, finalize the terms of your home loan, and lock an interest rate
Then, as with any purchase, you’ll schedule a closing date to sign your final loan documents.
Once the mortgage is finalized, your lender pays the home seller and the home title transfers to you. You’re now the official owner.
Is buying a home sight unseen a bad idea?
There are pros and cons to purchasing a home sight unseen.
“On the positive side, you may get to purchase the property for a bit less because you moved quickly and avoided a bidding war,” notes Caleb Parr, vice president of Sales and Acquisitions at Renshaw Company Realtors.
Virtual home tours can also be helpful for long-distance purchases, like buying a home out of state.
“Most people end up visiting a home multiple times during the purchase phase. This can cost a lot of money if you are having to travel out of state to tour the home,” says Nathaniel Hovsepian investor and owner of The Expert Home Buyers.
“You may get to purchase the property for a bit less because you moved quickly and avoided a bidding war” –Caleb Parr, VP of Sales and Acquisition, Renshaw Company Realtors
On the other hand, with a sight-unseen offer, you won’t have the benefit of previewing the property in person.
You’ll have to rely on photos, video, virtual tours, and the descriptions and opinions provided by your real estate agent and home inspector.
“Given that a home purchase is likely the most expensive transaction of your life, it’s important to adequately ‘kick the tires’ and determine the true condition of the property,” cautions real estate attorney Charles R. Gallagher.
“There is great risk in failing to see defects to the property with a sight-unseen purchase, particularly if you choose not to have the home professionally inspected.”
Even when you’re in a rush, real estate experts recommend getting a home inspection to make sure there aren’t any major issues the seller neglected to disclose. An inspection is your one chance to get the seller to cover repair costs — or walk away if the problem is a deal-breaker.
Precautions to take with sight unseen homes
Again, there are risks involved with committing to a sight-unseen home. To minimize these risks, it pays to take special precautions.
“Try to have someone you trust at least drive-by the home and take fresh videos and pictures so that you know what you are getting. It’s possible that these images may more accurately reflect the property’s current condition than the images displayed on a website,” says Parr.
A friend or family member in the area you hope to buy could be a big help in this regard.
Additionally, consider placing a home inspection contingency in your offer.
“A buyer does not have a trained eye to notice or even look for issues and concerns with a home. It’s always prudent to have the property professionally inspected, whether or not the buyer did a walk-through or simply viewed pictures and video before making the offer,” advises Saadeh.
Also — using your agent as your representative — be sure to ask the homeowner about any aspects you aren’t sure about based on the listing photos and video tours; including home features, appliances, systems, design aspects, or potential renovations.
Buying a house sight unseen FAQ
It’s perfectly legal to make an offer on a home ‘sight unseen,’ meaning you haven’t viewed it in person. Sight-unseen offers are becoming more popular as home inventory remains low and COVID prevents home buyers from touring propreties.
A sight unseen addendum is part of a home purchase agreement. It indicates the buyer has not seen the property in person, and accepts the purchase terms without an in-person viewing and without walk-through contractual entitlements, per real estate attorney Charles Gallagher.
It’s possible to buy a home virtually. But it has more to do with how your mortgage closes than how you view the home. “Some may define a sight-unseen purchase and a virtual purchase as the same thing. However, a remote or video closing doesn’t involve closing in person, which can happen even if the property is being purchased sight-unseen,” says Rajeh Saadeh, real estate attorney.
The time it takes to buy a home can vary a lot, depending on whether there are competing offers or multiple negotiation stages between the seller and buyer. If everything else goes smoothly, though, the longest stage of the home buying process is closing the mortgage. This usually takes around 30 days.
No, you don’t need a real estate agent to purchase a home sight unseen. “But it is prudent to use an agent to purchase a home. You can benefit from this person’s expertise in terms of valuation, deal points, and guidance through the entire transaction,” recommends Charles Gallagher, real estate attorney.
It’s especially helpful to have a professional on your side if you can’t see the home in person, or if you’re a first time home buyer without much experience in real estate.
The answer depends on your risk tolerance and the degree to which you perform due diligence on the property.
Purchasing a home sight unseen can help you avoid a bidding war and buy your new home more quickly.
“But a sight-unseen purchase increases the odds of an unfavorable outcome for the buyer. You may be saddled with some undisclosed defect that can cost you upwards of tens of thousands of dollars,” says real estate attorney Charles Gallagher.
So take certain precautions. You should have the home professionally inspected, make sure you’re satisfied with the inspection results, and consult closely with your real estate agent or broker throughout the process.
Anyone can purchase a home as-is. This simply means the “seller has no obligation to improve the property or make it better for the buyer,” Rajeh Saadeh explains. If you’re considering a home listed ‘as-is,’ you should be sure to have it inspected before you buy to make sure there are no major issues you’ll end up paying to repair.
The answer depends on the state you live in. Some states require in-person notarization. And some lenders require that a buyer sign documents in the presence of a notary.
If you choose a lender that offers ‘e-closings,’ and live in a state that allows remote mortgage closings, then you do not need to be physically present on closing day.
If there is no loan because you’re buying the home with cash, there is no obligation for a buyer, a seller or a closing agent to be in the same room or even building to conclude a closing. “Everything can be done by mail, email, and wire transfer,” real estate attorney Rajeh Saadeh explains.
Issues can occur at closing if you no longer qualify for the mortgage you were pre-approved for. This might be the case if you lost your job or had a negative change to your income or credit score between applying and closing. In this case, you’ll need to re-apply and see if you still qualify for financing. If not, the deal can fall through.
Other potential issues at closing include problems discovered with the property’s title, a bank transfer of funds that falls through, or document errors. Consult closely with your mortgage lender, real estate agent, title company, and attorney to avoid these and other problems.
The first step to buying a home
Whether you’re buying a home sight unseen or touring homes the traditional way, the first step in the process remains the same.
You need to get approved for mortgage financing before you can make an offer on any home.
A pre-approval letter verifies your loan amount and your mortgage rate — and it shows the seller your offer is serious. If you hope to move quickly on a home purchase, getting pre-approved first is a must.