Patchogue, NY: Home for sale, under contract, on Center Street in Patchogue, NY on May 17, 2022.
Steve Pfost | Newsday | Getty Images
In many parts of the country, homes continue to sell even as mortgage rates, high prices and recessionary concerns filter through the economy. During the recent real estate boom, the urgency many buyers felt to act meant making the offer invisible.
Nearly half of home buyers — 47% — have made an offer without visiting the property in person in the past two years, according to LendingTree.
“I see a great sense of urgency with people,” said Adam Lampe, co-founder and CEO of Mint Wealth Management in Houston, Texas.
While the housing market is slowing, it is still a seller’s market today, and buying sight unseen can be an effective strategy. There are four caveats here.
1. Don’t make quick decisions
It’s a challenge when you lose a lot of homes and start to lose hope. And it can be even more frustrating when others are willing to shell out little or no money.
Notably, all-cash sales accounted for 25% of transactions in May, according to the National Association of Realtors. This is down from 26 percent in April, but up from 23 percent in May 2021.
More from Invest in You:
Summer temperatures – and inflation – are hot. Here’s how to save money on checking accounts
The ultimate retirement planning guide for 2022
Here’s how to save $1 million for retirement on a $60,000 salary
However, just because others are “throwing caution to the wind” doesn’t make it a good idea, says Connor Daniels, a realtor in Olathe, Kansas. He tells his clients to plan on losing at least five to 10 homes and strongly advises against buying a property sight unseen even to close a deal. “Images can make a rough house look great,” he said.
If you plan to buy sight unseen, you should at least reduce the risk by having someone else do it for you, says Andy Hart, chief executive of financial planning firm Delegate Advisors. If you want to insist on an inspection and make sure there are enough contingencies, going back is also recommended.
2. Know what you are getting into
The calculations may vary depending on the property you are considering.
“If you’re renting or buying a flip for $50,000 and you have that money, it’s one thing,” Daniels said. But it’s “crazy” to spend hundreds of thousands on a home you intend to live in without doing your homework, he said.
Another exception may be if you are in the market for new construction. “The cities are very strict with permits on new construction. They come in and inspect everything,” said Cameron Bursky, director of retirement security management at Cornerstone Financial Services in Southfield, Mich.
“That should make you feel more comfortable if you’re buying sight unseen,” he said.
3. Send a trusted professional, family member or friend as your proxy.
“Someone you trust should see the house before you buy it,” Bersky said. This could be a friend, family member, contractor, supervisor or real estate agent.
Daniel has done this many times for clients. A couple who recently worked together didn’t see their new home in person for several weeks after closing. But to give the couple a real-life feel for what it’s like before they get home, he FaceTimed with them on a complete walkthrough. That way, they felt comfortable not being physically present and were able to act quickly, he said.
4. Do not pass the inspection
Many buyers are choosing to forgo inspections in favor of moving deals. As tempting as it may seem, don’t do it.
Inspections can identify potentially costly issues later, such as the need for a new roof, leaks or mold. Buyers should at least be aware of these things before taking their hard-earned money away from the biggest purchase of their life.
“A good inspector is worth a lot,” said Mint Wealth Lampe.
An inspection gave Hart the confidence he needed to buy a 1920s bungalow sight unseen. He made the sale subject to inspection. Good thing the house’s foundation was completely messed up, forcing the seller to fix it before the deal closed.
Hart also presented on a four-year-old townhouse based on Internet images. That purchase was also subject to scrutiny and included a 10-day back-out window. He didn’t expect problems, but his extra protection is his “get out of jail free card”, something everyone should have, especially with a blind deal, he said.
“You should always have protection in the contract,” Hart said. “It’s better to avoid a bad situation than to put yourself together.”
open up: Money 101 is an 8-week course on financial freedom delivered to your inbox every week. For the Spanish version of Dinero 101, click here.
Disclosure: NBCUniversal and Comcast Ventures are investors. Acorns.