Would you make an offer on a home without seeing it in person? According to year-end research by Redfin, 63% of 2020 home buyers did just that. That percentage represents a big jump from its previous high of 45% last July and is nearly double what it was in 2019.
Fueled by health restrictions on both open houses and travel, historically low interest rates, and a hot seller’s market, this new brand of “sight unseen” home buyer is making decisions with the help of technology. The Redfin study notes that its agent-led video tours surged from less than 1% in early 2020 to about one in 10 today. Similarly, 3D walk-throughs increased 563% since last February.
What does buying a home “sight unseen” really mean?
Buying a home “sight unseen” means you place an offer without touring it in person first. Typically, the buyer has viewed photos and video tours and taken one or more virtual walk-throughs of the property.
Millennials are at the forefront of the sight-unseen trend. Not only did this age group grow up with the internet, but many of them are feeling pressure these days to move up their home buying timeline.
These tech-savvy buyers are looking for more space and are concerned that home prices will just keep going up. After all, the pandemic marks the second big economic disaster older millennials have been through as young adults, the first being the Great Recession.
According to Clever Real Estate’s recent survey of 1,000 millennials, 30% admitted that COVID-19 motivated them to begin house hunting earlier than they originally planned. And, get this, 80% of the respondents reported that they “could be persuaded” to buy a home sight unseen.
These are the most popular reasons that millennials answered in the survey to convince them to buy a home sight unseen.
The Clever survey also found that 29% of the respondents would purchase a home after seeing only photos or virtual tours.
Here’s an example of how the sight-unseen process works. In February, The New York Times profiled a millennial couple who planned a cross-country move due to a job change during the height of the pandemic.
The first-time home buyers were renting in upstate New York while they searched for a house in Colorado Springs, Colorado. With travel restrictions in place and homes in Colorado Springs selling in a manner of days and often at 20% more than the listing price, the “sight unseen” route seemed to be a no-brainer.
They set their budget, poured over online information on neighborhood schools and crime rates, and took virtual tours on sites like realtor.com and zillow.com. Then they hired a Colorado Springs broker and asked her to visit the homes they liked in person.
After being outbid on their first eight offers, the couple was successful on their ninth bid. In January, they moved into their first home, a three-bedroom house they bought entirely online, including the signing of closing documents. They arrived in Colorado to do a final walk-through – the first time they set foot in their new home -- just before the closing process ended.
How did we get here? - the technologies and circumstances driving “sight unseen” bids
The technology for sight-unseen home bids existed long before the pandemic. You could take a virtual tour of the White House since 2012, for example. However, sight-unseen bidding was primarily used for vacation homes or investment purchases. The pandemic changed all that.
When shutdowns forced many businesses and schools to shift to remote work, Zoom meetings and virtual classrooms became the new routine. As Americans became more and more familiar with this altered reality, virtual home buying began to feel more comfortable. If you could shop for everything else online, why not a home?
Although many experts once labeled the real estate industry as slow to adapt to new technology, the "zoom life" era has driven change. Companies that make the tools that support virtual decision-making - VT's, professional photography, and video walk-throughs – quickly adapted to the higher demand. Today’s technologies are more accessible and user-friendly than ever before.
However, it's important to understand that "sight unseen" does cover a spectrum for home buyers. Some buyers may make an offer on a property without seeing it in person but then attend the home inspection in person before the sale closes. Some don't visit the home until the final walk-through, and still others don't set foot in it until after the closing.
When you add in the robust seller's market that has accompanied the pandemic, virtual home bidding has become a necessity in some markets.
A Virtual Market On Fire
Home buyers today have good reason to be nervous about finding the home they want at a price they can afford. Case in point – a suburban Sacramento, California home recently received 122 offers in only two days.
And a Bay Area home recently sold for $1 million over its asking price at $2.3 million. The Berkeley home received 29 offers in just 11 days.
According to the National Association of Realtors (NAR), last year was a record-breaking year for the U.S. housing market, and 2021 continues to be a continuation of the brisk seller’s market. In March 2021, the median home listing price reached $370,000, an all-time high that represents a 16% increase over the same time last year. Homes in large metropolitan locations saw an average price gain of 12.1% compared to 2020.
To add to the mix, for-sale listings have declined by 52% over last year, and homes are taking an average of six days fewer to sell than the same time last year.
With these kinds of numbers, sellers and their agents may think they don’t need to invest in any bells and whistles to get a good offer. However, a new body of research is showing that virtual home tours are a significant factor in getting more and higher-priced offers. For example, according to a University of Iowa study, houses that feature virtual tours sell an average of 3% higher than similar homes without online tours.
Even with pandemic travel restrictions lifting, many homes are going under contract within weeks – or even days -- of hitting the market. As a result, out-of-town buyers often don’t have time to see a property before making an offer, so they are using photos and videos to help them make their decisions. If a listing doesn’t have these images or the images are not high-quality, it may not get a second glance.
What’s in store for “sight unseen” home buying?
While the pandemic is the main reason for the recent surge in sight unseen home purchases, the trend is not going to disappear as our world returns to normal.
Many of today’s home buyers will continue to rely on photos, videos, and VTs to narrow down their choices. And why not? It saves precious time and money.
Brokerages nationwide are investing in partnerships and tools to meet these new virtual demands. At its recent 45th annual convention (a hybrid in-person and virtual event this year), RE/MAX introduced its partnership with Snappr, the on-demand professional photography marketplace. According to a press release about the conference, RE/MAX sees professional photography as a critical way for its agents to remain competitive in this new era of real estate.
If you’re ready to make your real estate listings stand out to remote buyers with the work of a professional photographer, contact Snappr today. That way, your listings are sure to be seen by the sight unseen buyer.