Remote homebuying appears to be here to stay. But it has its pitfalls.
The real estate industry has shifted in the last few years with lower supply of homes sending the already-sellers-market into overdrive. This means more buyer competition and bidding wars.
In order to cope, homebuyers are finding news ways to beat out the competition such as buying a home sight unseen. In the last two years, the number of homebuyers who put an offer on a home without physically seeing it in person nearly doubled to 47%, according to a recent survey of by LendingTree.
Kaitlyn Hawkey, 28, and her husband Dylan Leininger, 29, started looking out of state for a home for their growing family because of steep home prices and property taxes where they lived in Lancaster County, Pennsylvania. “That definitely was the push to move farther away because we could get significantly more of what we wanted for significantly less,” Hawkey says.
Hawkey and Leininger ended up purchasing a 4-bedroom, 3-bathroom home over 12 hours away in Kentucky, and made their offer sight unseen. They bought the house for $135,000 and got just over $4,000 in seller assistance for the closing costs, something that is exceedingly rare in today’s market. At the same time, a smaller home across the street from where they previously lived sold for $100,000 over the asking price, Hawkey says.
Risa Lugo, 26, was living in Japan when she was accepted into medical school in Michigan. She decided to buy a home when she saw that buying a home would cost less monthly than renting. Buying a home remotely allowed Lugo to skip the in-person homebuying process before making the move overseas.
But for all of the potential advantages to purchasing a home that’s hundreds of miles away, there are unique challenges to purchasing a property you cannot easily visit in person, or that’s in an area you aren’t familiar with.
Here’s what you need to know before you make a remote home purchase.
4 Things to Know When You’re Buying a House Remotely
1. Photos don’t always tell the whole story
If you’re unable to do an in-person visit, understanding what to look for in photos or a virtual tour is essential. Any home you’re considering purchasing remotely should have clear and up-to-date photos as part of the listing. But those photos won’t always tell the whole story. “Photographers do use a wide-angle lens in some cases to make rooms look larger,” says Krisztina Bell, founder of Atlanta-based No Vacancy Home Staging. To get a better idea of the size of the home, or specific a room, Bell recommends getting hold of a floor plan or measurements of the room.
A virtual tour can help you get a better idea of what it’s like to be in the home, and your real estate agent should be able to walk you through with a video chat. Be sure to ask lots of questions. Find out what room you’re looking at and if there have been any recent renovations or updates to the property. And keep in mind that most non-verbal communication is lost on video, so communicating with your agent is even more important.
Get a feel for the surrounding sights, smells, and sounds by checking the Google Maps street view and asking your real estate agent to do a video tour through the neighborhood.
Rugo says that on her first few virtual tours she didn’t always get to see everything the way she wanted. “I didn’t want to interrupt [my agent], but by the time he’s done with his sentence he’s already in the next room.” Eventually, she started being more vocal, interrupting the tour to focus on certain details, like windows. “It’s something serious, you’re buying the whole house and you don’t want to miss something because you were afraid to speak up,” Rugo says.
You’ll also want to get a sense of the surrounding area and not just the house and property itself. “If I was buying out of state without seeing the property, I would be asking the realtor to do a full video walking down the street and behind the house,” says Jennifer Beeston, a mortgage educator and lender licensed in 46 states. If the home is across from a noisy freeway or near railroad tracks, that’s something you’ll want to make sure you know in advance.
Google maps can be a good tool for scooping out an area remotely, but make sure nothing has changed since the street-view photos were last updated. Also, ask about the smells. Being downwind from a large hog farm or sewage treatment plant could be a deal-breaker.
2. Work with a local agent
A local real estate agent will be able to verify that the listing photos accurately show the condition of the property and hopefully be able to take you on a virtual home tour. An agent should also be able to help you expedite your home search by honing in on the types of properties, neighborhoods, and school districts that best suit your needs.
One good way to find an agent is to get recommendations from friends and family, but you may not know anyone near where you’re looking to buy. So check online reviews for specific agents. If you can’t find any reviews, that could be a sign the agent is new or doesn’t have a lot of experience. Find two or three agents to interview and ask about their experience and the price range of homes they typically deal with. Make sure the agent’s area of expertise lines up with your needs and that the agent is a good fit for you personally.
3. The regulations and costs vary from one area to another
Some of the rules and regulations for the real estate industry differ from state to state and city to city. If you’re looking for homes in multiple states, it can get confusing. For example, the type of room classified as a bedroom may vary from one area to the next. Sometimes a bedroom may need to have a closet and window. In other areas, it may only need a window. Hawkey knew she wanted a four-bedroom home but would include three-bedroom properties in her searches. “There are some houses that are technically three bedrooms but have a bonus room that they’re using as a fourth bedroom,” she says. “It might not have a closet, so it can’t be [listed as a bedroom].”
The way the square footage of a home is calculated also isn’t standard across the country. The basement, patio, or attic may or may not be counted toward the size of the house. Have your real estate agent “clarify, exactly, the square footage of the home,” Bell says. This way, you can ensure that you’re comparing apples to apples when looking at listings in different states.
Not only do local ordinances vary, but costs—outside of the home’s purchase price—can be dramatically different from one area to the next. “There are certain states where the property taxes are 8% and others where they’re half a percent annually—huge differences,” Beeston says. “Someone may go, oh gosh, it’s so much more affordable in this state. But is it?” You should also consider the increase or decrease in closing costs, income tax rates, and the general cost of living, which can vary by location.
4. Qualifying for a mortgage is different
When a mortgage lender is deciding whether or not to approve you for a home loan, it wants to determine how likely you are to pay back the loan. If you’re trying to get a mortgage for a property that’s hundreds of miles from where you live, you’ll have to prove you’ll still be making money when you move. “The key thing is the lender needs to know how you’re going to pay that bill,” Beeston says.
During the pandemic, the number of people working remotely skyrocketed, but just because you’ve been working from home doesn’t guarantee you’ll be able to qualify for a mortgage in another state. You’ll need to be able to show that you’re able to continue working remotely permanently. “I had teachers calling me to try to buy out of state because they were working remotely because of COVID, and we couldn’t do that,” Beeston says. “A school is not going to say that he doesn’t have to come back and teach [in person] indefinitely.” Unless you have a source of income that will travel with you, or a non-contingent job offer in the new area, getting financing to purchase a home remotely could be a challenge.
Regardless of where you’re buying a home, there is universal advice to follow:
With home prices rising across the country, purchasing a home remotely and moving to a less expensive area opens the door to homeownership for a wide range of people.
But there are extra hurdles to clear when you’re buying a home far from where you currently live. To qualify for a mortgage, you’ll need to prove your income won’t change with the move. And working with a local real estate agent is essential to getting a feel for the property, local real estate laws, and everything about the area that isn’t captured in the listing photos.
Working with a local could help you avoid getting catfished into a mortgage.