Beth Shea Palmer is a Hawaii-based freelance writer with nine years of experience reporting and editing for the Chicago Tribune, AOL, Advertising Age, and other publications. Connect with Beth at bethsheapalmer.pressfolios.com.
Guide Clients Through Sight-Unseen Offers
The burgeoning investor-led sight-unseen trend does present some risks, but brokers are using technology to best serve this group of buyers.
October 5, 2015
The state of commerce mirrors the times: instant gratification, tech-driven, and globally connected.
Real estate rides that tide, too. Although you can’t yet buy a house on Amazon.com, 92 percent of buyers use the Internet in their home search process, according to data from the National Association of REALTORS®’ 2015 Profile of Home Buyers and Sellers. The connected, fast-paced landscape has produced some new trends, including the burgeoning practice of sight-unseen offers and purchases.
Sight-unseen transactions have a duality of being an opportunity for a quick, efficient purchase that often comes with a cash offer, but it can sometimes introduce a number of risks and challenges to sellers and the remaining buyer market. And depending on the market and type of buyer, the experience can be welcomed or cautioned by brokers.
Primarily a tool for investors to make a quick offer on a property but also used by out-of-town owner-occupant private buyers, the practice of sight-unseen sales requires quick and savvy navigation by brokers and agents in order to best serve clients.
One managing broker in Titusville, Fla., Bobby Mutter, has seen a surge in sight-unseen investor buyers since the real estate market improved.
“Especially on investment properties; it’s increasing as the inventory of rentals heats up,” he says.
Mutter, who keeps his 54 agents in two Real Living Mutter Real Estate Group offices abreast of the trend, keeps an eye on his inventory. If showings have not been scheduled for a particular property, it can be a red flag that there is a sight-unseen offer. The next step is to assess whether the sight-unseen investor buyer is legitimate, he says.
“If the sight-unseen buyer has a history of walking away after 30 days, I will tell the seller immediately,” he says. In many cases he sees investors make offers sight-unseen only to back out when they find a better deal.
Although sight-unseen investor offers are typically higher and in cash, sellers may want to consider whether they want to risk taking their property off the market for 30 days, or they might want to consider lesser but more prudent and trustworthy offers, he says.
Determining whether a sight-unseen investor buyer is legitimate can be difficult. Often, the buyer’s real estate agent won’t discuss the transaction over the phone with the seller agent, Mutter says.
“It’s wrong,” he says. “They don’t want to be confronted with the situation.”
On the other hand, it’s a good sign of legitimacy if the sight-unseen buyer’s agent or a representative views the property before an offer is made, he says.
Despite the risks often associated, his agents close on about 30 percent of sight-unseen investor offers, Mutter says. But, overall, the risks in sight-unseen investor transactions are unsavory for Mutter.
“I think it hurts legitimate investors and buyers,” he says. The offers, and often subsequent back-outs, remove inventory from legitimate buyers, he says.
While investors present risks, Mutter says he has had excellent and successful experiences with sight-unseen individual buyers who are seeking a vacation property or retirement home. He takes videos of properties to send them to private buyers, usually from the northern U.S. They often find his listings online and want to make an offer but can’t travel to see it in person. He says he does his due diligence to make sure these buyers have an accurate view of the property.
Similarly, elsewhere in the nation, brokers have adjusted some of their business practices to accommodate sight-unseen buyers.
In Boston, Joe Schutt, broker-owner of virtual brokerage Unit Realty Group, successfully uses Facetime, Google Hangout, and Skype to cater to sight-unseen buyers. He’s done three sight-unseen deals this year.
“It’s really nice to have that client trust,” he says. “We wish there were more [sight-unseen buyers] … the tech in place these days makes it really easy.”
Schutt’s sight-unseen clients are usually new customers who found his agency online or referrals, he says. The sight-unseen process works well for the fast-paced downtown real estate landscape in Boston, he adds.
“There will be two showings and then offers are due,” he says. It’s difficult for buyers to make the showings depending on travel or being based out of town, he says, so sight-unseen allows him to take the buyer on a video tour in the time frame needed.
Schutt says floor plans help, so buyers can follow along while he takes them through the house in real time. Differing from in-person buyers, he has to adjust to video walk-throughs to give more transparent details than he might normally point out in an in-person walk-through.
“It can be nerve-wracking,” he says, “because you’re their eyes and ears.”