5 Steps to Buying Sight Unseen
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5 STEPS TO BUYING REAL ESTATE SIGHT UNSEEN
Have you ever bought something without seeing it first?
Of course you have - that’s the definition of online shopping!
Maybe your sight-unseen purchases have been limited to Amazon and your favorite online clothing retailers. Or maybe you’ve ordered a new car that you’ve never seen or test driven.
You feel comfortable buying these things online because either:
You know you can return them
OR
You know the product well enough to know it’s what you want.
Turns out you can do the same with buying real estate!
And remote real estate purchases are at their highest level ever - in 2020, 63% of home buyers made an offer on a property sight unseen, the highest since 2015 according to research from Redfin.
With real estate, you have a return policy too - that’s what your inspection period is all about.
Here’s how you can confidently buy real estate sight unseen in easy 5 steps:
Step 1: Choose an investor-friendly realtor
You want a realtor who knows all about investing, is good at negotiating, is well versed in strategy, and can provide you with an initial investment analysis so you know from the outset that you’re getting a deal that meets your appreciation or cash flow goals.
Do NOT just rely on your parents’ or friends' realtor recommendations for the biggest investment of your life - unless they’re also investors. Do your research and ask specific investment-related questions so you can find a realtor who really knows about real estate investing from firsthand experience.
Step 2: Get pre approved for a mortgage
Your investor-friendly realtor will gladly provide you with a number of different lender recommendations to help you make the most of your investment funds. You want to get pre approved so that when you find the right deal, you’re ready to offer right away. Good deals don’t come along every day so you want to be prepared.
Step 3: Get a video tour and detailed property information
Once again, that investor focused realtor should make this process as easy as possible for you by providing comprehensive video tours of the properties you’re interested in. This should be standard so don’t just go by online photos you see on Zillow and Redfin. You can’t see what the neighborhood and neighbors are like without having some eyes on the ground for you and that’s what your realtor should be doing - being your eyes and ears, sharing the good, bad and ugly of the places you’re considering.
You should also be seeking out information about the property online - places like the county records where you can see everything from property taxes, to zoning, to permits, and so much more. You want to sleuth as much information as possible BEFORE you make an offer so that you can be focusing your inspection period on checking out the structures and systems of the property itself.
Step 4: Offer and negotiate your deal
You’ll use your investor analysis as a guide to determine your offer price. You’ll also want to be aware of local population growth, job and industry trends, crime statistics, real estate market metrics, and recent sales and rental comps in the area. These are all things that you can ask any savvy investment focused real estate agent to help you obtain.
Especially if you’re offering sight unseen, you’ll want to negotiate inspection contingencies into your offer. You can think of this like your Amazon return window. You have a certain number of days to try it on, check it out, and decide if it fits or not. If it does, you can start to negotiate for repairs or credits if you’ve got a motivated seller and a kick ass realtor working for you. Or you can walk away and keep looking.
You’ll also likely have the following contingencies in your offer. These contingencies protect your earnest money - the deposit you put down when your offer is accepted to show the seller that you’ve got skin in the game. That earnest money is refundable only under certain circumstances called contingencies.
Common offer contingencies include:
Inspection
Financing
Title Report
Appraisal
Some experienced real estate investors in hot real estate markets will choose to waive some or all of these contingencies. Do so at your own risk and make sure you understand those risks before going this route - your realtor can give you details on the pros and cons of this strategy.
When you offer, the seller can accept, reject, or send over a counter offer with terms they desire. Then you have the ability to accept, reject, or send over your own counter offer to the seller.
Things may go back and forth a bit before you either land on mutually agreeable terms, or one party decides to walk away.
Once an offer is accepted, escrow gets opened, the buyer submits their earnest money, and inspections begin.
Step 5: Close the deal
Once you’ve done your due diligence during the inspection period, negotiated any repairs or credits, and removed the contingencies, you’re ready to close on your sight-unseen investment property purchase!
You’ll want to inform the escrow company that you’ll be signing remotely and will either need a courtesy signing or a mobile notary to come to you so you can sign purchase and loan documents where you are rather than traveling. Unless, of course, you decide you finally want to see that place in person!
Now that you know the process of HOW to buy a property sight unseen, let’s talk about the pros and cons of investing in real estate this way:
PROS - why you’d want to invest sight-unseen…
Save time money on traveling to each real estate investment market you’re considering
Never miss a deal just because you weren’t there in person
Learn to analyze online - using photos, videos, maps, county information, inspection and title reports, current leases if a property is already rented
Offer, negotiate, and do the entire transaction from WHEREVER you want!
Delegate and utilize your team of experts to help you navigate your real estate investment. You’re still responsible for your decisions, but you can engage the help of others!
CONS - why you might want to book a flight…
Photos and videos can sometimes be deceiving, even with the best of intentions
It can be difficult to gauge room sizes and space without physically being there - this is where your trusted realtor comes in to give you a clear picture with measurements and vivid details!
Some sellers are wary of accepting offers from sight-unseen buyers
Waiving contingencies to get your offer accepted is a risky move that should be last resort unless you truly know what you’re doing
COMMON PITFALLS of buying sight unseen:
Not doing your due diligence. This is why you hire people who are on the ground and why you pay someone or subscribe to trusted data sources that will provide you with this information. It’s your responsibility to do the research or pay someone to do it for you.
Not reviewing documents carefully. That preliminary title report is actually really important to read and has lots of good info. Click on the links in that report - these are the things you need to know before you buy. Review seller disclosures and tenant lease agreements during your inspection period. Actually read your inspection report, don’t rely on someone to tell you what it says.
Hiring the property manager that comes with the property. We know it’s all about passive income, but you have to do some work up front to set things up so you can have the greatest benefit. That means vetting at least 2 different property managers to compare rates, service levels, approach, and references.
Not asking questions about things that you can only detect in person. Things like odors (smoke, pet), noises (traffic, neighbors, delivery trucks), finishes (are things rusted, grimy, gross, faded), internet and cell phone services (are signals strong or weak, which carriers have better service).
Proceeding with the deal despite red flags. These would be things that come up on those reports you should have read in #1 and #2, sellers that don’t disclose things, tenants that don’t pay on time or don’t have a written lease or security deposits, a home that needs a lot of work that you don’t have time or money to deal with.
It’s more commonplace now than ever to use technology to invest in real estate remotely. Use those tools to your advantage and make sure you have your #1 most important LOCAL teammate in place: your investor-friendly realtor.
Not sure how to find one? Call us or submit our Contact Form to get in touch!
We have a giant network of investor-friendly realtors all over the country and in a few other places around the world too!
We can be a resource for you whether you’re investing in Central Oregon or Connecticut, or anywhere in between!