The state of the commercial real estate market has changed significantly over the past few years. Perhaps the most significant is the increase in sight-unseen home purchases. This disturbing trend of home buyers making offers on properties without ever having set foot inside has become more and more common, particularly in hyper-competitive markets. OverTraders.com takes a closer look at what’s causing this trend and what it means for buyers and the overall real estate market.
The Growth of Remote Home Purchases
While the practice of purchasing homes sight unseen is not brand new, it has drastically increased, especially post-2020. Technological advancements have created the opportunity for this shift. Shifting buyer preferences and cutthroat competition in local housing markets are major factors, too. Data shows that a much larger share of today’s buyers are comfortable making offers on homes they haven’t seen in person.
Factors Contributing to the Trend
One of the major forces fueling the trend toward sight-unseen purchases is the hyper-competitiveness of many housing markets. In hot markets, homes can receive multiple offers within days of being listed, leaving buyers with limited time to schedule viewings and make decisions. This urgency forces buyers to waive common contingencies, such as inspections. They go as far as to make cash, sight unseen offers on properties to increase the odds they win the deal.
A second issue is that people are more comfortable making transactions online. As other parts of life shift online, consumers are getting more comfortable with making big purchases online. That small change in mentality is transforming the reality estate market. Now, buyers quickly and readily take advantage of virtual tours, high-quality photos and all manner of content online to assess properties.
Impact of Technology on Home Buying
Technology is at the center of how sight-unseen home purchases have flourished. Drone footage, virtual tours and great photography are helping you provide buyers an unmatched immersive experience. High-quality, detailed property descriptions allow them to feel like they’re there, even if they’re 2,000 miles away. A recent study from the University of Iowa found homes with virtual tours sold for an average of 3% more than comparable houses that don’t have one. This is a significant finding that sheds light on how much buyers value such immersive online experiences.
Redfin experienced an incredible 500% jump in demand for virtual showings in just one week. Moreover, agent-led video tours jumped from under 1% in early 2020 to almost 10% as of today. In kind, 3D walk-throughs rose a staggering 563% since last February, showing just how much Americans have embraced these tools. With an increased use of virtual showings and other online resources, buyers are now more equipped than ever to make informed decisions from afar.
Advantages for Buyers
Purchasing a home sight unseen can be daunting for buyers, the advantages are substantial. This strategy can be most beneficial in highly competitive markets. These benefits offer greater flexibility and convenience, and give users access to a broader inventory of properties. In addition, they provide you the opportunity to close a deal more quickly.
Convenience and Flexibility
One of the key advantages of purchasing a home sight unseen is convenience. Buyers can browse properties, attend virtual tours, and make offers from the comfort of their own homes, saving time and effort. This is particularly attractive for buyers moving from out-of-town or out-of-state. They may not have the time or resources to travel and see properties in person. Not having to travel to view a home saves considerable time. Using this method, prospective buyers can easily identify and purchase a property they may be interested in without the need for time-consuming in-person viewings.
Plus, sight-unseen purchases add more flexibility. Potential buyers can tour listings on their time—not a rigid defined schedule. They can tour properties in various regions, widening their reach for a better deal.
Access to a Wider Market
Buyers can increase their search radius by accepting sight-unseen purchases. This method helps them find nuggets they wouldn’t have remembered to search for. This is increasingly helpful in markets with low overall inventory. More importantly, it allows homebuyers to be competitive on a much wider range of homes.
A potential buyer moving to your city for a job can come take advantage of your listing in that desirable neighborhood. They could submit a sight-unseen offer, not requiring the person even to come to the community for showings. This can be a real game changer in an increasingly competitive marketplace.
Strategies for Successful Sight-Unseen Transactions
Purchasing a home online has many benefits. It’s important to be strategic about how you navigate the process to minimize pitfalls and ensure you’re on track for a successful outcome. Clear, concise communication with your real estate agent and knowing how to use the virtual tools at your disposal are key parts of a sight-unseen transaction.
Effective Communication with Clients
When doing business in sight-unseen transactions, transparency and clarity in communication are crucial. Real estate agents must be proactive in providing buyers with detailed information about the property, including high-quality photos, virtual tours, and detailed property disclosures. Listen to our experts. Have frank discussions about the dangers of making an impulse, sight-unseen home purchase. It’s important to confront these challenges head-on.
They need to be focused on being responsive to buyers with questions and concerns, readying timely updates and guidance throughout the process. Communicate. Seek to build a collaborative relationship built on openness, transparency and honesty. When this approach is utilized, buyers will be more comfortable and confident in their purchasing decision.
Utilizing Virtual Tours and Online Tools
In today’s market, virtual tours, high-resolution photos and detailed property descriptions are the bare minimum buyers expect when investing in sight-unseen purchases. These resources combine to produce a virtual 3D model of the property. They assist potential buyers in picturing the layout, features, and general condition.
Virtual tours are a must for buyers, but that’s only scratching the surface. Through their public library’s ProQuest access, they can research property records, neighborhood crime statistics, school ratings, and more to get a well-rounded picture of the property and surrounding area. These consumer resources can go a long way toward helping prospective buyers recognize smart opportunities and spot any red flags before it’s too late.
Potential Challenges and Risks in Sight-Unseen Sales
With all of the benefits, sight-unseen home purchases have built-in risks. Failing to disclose issues with property condition and dealing with inspections from a distance can present overwhelming obstacles. Buyers are waiving due diligence inspections and submitting offers sight unseen. That demonstrates that they are willing to assume greater risk in a competitive environment.
Misrepresentation and Trust Issues
The biggest danger of a sight-unseen purchase is that you’ll be misled. Not because sellers are bad people, but sometimes they just misrepresent or omit relevant information and issues. This, in turn, can result in unhappy post-possession surprises for buyers.
To mitigate this potential danger, homebuyers need to work with reputable real estate professionals. Consider agents with a track record of good faith and character. They must have a real opportunity to review any jurisdictional property disclosures and ask penetrating questions about possible red flags.
Navigating Inspections and Appraisals
Inspections and appraisals are important and necessary steps in any home purchase, but they can be especially fraught in sight-unseen transactions. Buyers will need to find new ways to make these assessments from afar. Unlike state DOTs, they have the flexibility to hire local inspectors/appraisers to more accurately represent their interests. You can lean on third-party experts reached through third-party services, such as home inspectors, appraisers, and more. They should provide an unbiased judgment on the state of the property.
Closely read both the inspection and appraisal reports. If something is not right, negotiate with the seller to make it right before completing the purchase. This could mean you’re able to negotiate repairs or reduce your offer, so the purchase price reflects the property’s true value.
Sight-unseen home purchases represent a significant shift in the real estate landscape, driven by technological advancements and competitive market conditions. These types of transactions offer tremendous customer experience and access to a larger and more diverse marketplace. Buyers must be on the lookout for increased risks and be willing to take affirmative action to preserve their interests. Sensible buyers can overcome the potential pitfalls of sight-unseen purchases by hiring trusted licensed professionals. With intentional use of virtual tools paired with smart due diligence, new paths toward homeownership can emerge.
