One in 3 people who bought a home in the last year said that they made an offer without seeing it in person.
Millennials were even more likely to have made an offer sight-unseen, with 41 percent saying they had done so, compared with 30 percent of Gen-Xers and 12 percent of baby boomers. That’s according to a survey of recent home buyers and sellers around the country commissioned by Redfin.
As a real estate professional, this number surprised me. People are making one of the biggest financial purchases of their lives, and they are willing to make an offer sight-unseen? Is this a positive housing trend, and what is driving it?
To be clear, these are people who made an offer without seeing a home, but they didn’t necessarily buy that home. In other words, it’s not 1 in 3 home sales that was sight-unseen. Even still, if one-third of all buyers are bidding sight-unseen, we can assume that includes more than just people who are purchasing from out-of-state or overseas and have no other option.
Perhaps a portion of those respondents bought a new-construction home, in which case it is common to make an offer on a home before the builder breaks ground. And there are situations where real estate investors are willing to make an offer sight-unseen for a great deal. But for the vast majority of buyers, bidding sight-unseen is risky. Advances in technology and the speed of the market are probably contributing to this trend.
The abundance of listing photos — including interactive 3D photography that lets people virtually walk through listings and “drive by” the home on Google Maps — and other information made available about homes for sale online helps buyers feel comfortable bidding on a home they haven’t set foot in.
Mix in the severe shortage of homes for sale that is failing to keep up with strong buyer demand. In June, the national supply of homes for sale fell year over year for the 21st consecutive month. Today’s market is laced with steep competition, setting a brisk pace and pushing prices ever higher. The median sale price for a home rose in June by 7.3 percent from last year. Serious buyers feel they must act quickly and decisively.
The typical home that sold in June went under contract in 36 days, the fastest pace since 2010. But the market was even faster in some metro areas. In Denver, Seattle and Portland, Ore., homes were on the market for just a week. In the Washington, D.C., area, the typical home sold in June found a buyer in 16 days.
In this market, the pattern is clear. Homes are often listed on Thursday or Friday, an open house is Sunday, and the home may be under contract by Monday or Tuesday (if it lasts that long). For a buyer who thinks a home looks promising online, but can’t get out to tour it before an offer deadline, I can understand the impulse to submit an offer sight-unseen. However, I strongly discourage it.
First, sellers are less likely to accept your offer if they know you’ve never seen the home. Sellers want to know you’re all-in and serious. They would have well-founded concerns about a sight-unseen buyer getting cold feet. To instill confidence to the seller, making a portion, or the entire, earnest money deposit non-refundable might show that you’re serious and they may be willing to accept your offer. As crazy as this idea sounds, this is a common strategy in the nation’s most competitive markets.
Also there are things you just need to experience in person that you can’t tell from looking at online pictures. What if the nearby landfill produced a smell that you found unbearable? What if the noise from an adjacent highway is too loud?
But there are some circumstances, when a buyer is purchasing from overseas, for example, where there isn’t another option.
If you do have to buy your next home sight-unseen, here are a few tips to keep in mind when home-searching:
• Have your agent give you a live video tour of the home. Pictures are a great tool to see what the listing agent wants you to see. Video allows you to ask questions and zoom in close to all the details.
• Another good idea is to send someone you trust. Ask your agent to tour a friend or family member if they are nearby. Someone who knows you well can be a great asset. If they can’t picture the layout working for your family, you may not be able to picture yourself there either. Video and FaceTime work great for inspections, after you go under contract, too.
Staying in communication is the key to success in this situation.
Marshall Park is a real estate broker at Redfin in Virginia who writes an occasional column on the local real estate market.