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.
These days, sight unseen buyers generally fall into three categories:
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, according to Tricia Riberto, vice president of brokerage services for @properties Christie’s International Real Estate.
“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,” Riberto says. “In other words, a buyer who views a home in person might actually be able to get themselves a better deal.”
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.
@properties Christie’s International Real Estate always recommends that homebuyers consult with their agent and other trusted advisors before waiving contract contingencies.
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.
“By far, most sight-unseen contracts that fall apart these days fall apart over the home’s condition,” says Riberto.
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.
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. Talk with your agent about the pros and cons, make a plan, and do as much due diligence as possible ahead of time.
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