Wednesday, April 21, 2021 - by Robert Backer, president, Greater Chattanooga Realtors
Homebuyers looking at brand-new construction homes often sign a sales contract without setting foot in their new home, but lately, more and more homebuyers are doing the same thing when purchasing an existing home. COVID certainly made many realtors pivot to virtual walk-throughs, and the hot housing market has made this a usual occurrence.
Sure, most people would still prefer to see a home in person before making an offer. Still, the low inventory across the country at times makes homebuyers go above and beyond the norm to get an advantage on the potential next home. We’ve already discussed the potential fair housing risks of buyer “love letters,” and I want to focus on the merits of a new trend – sight-unseen offers.
Both buyers and sellers face potential risks when negotiating sight-unseen offers, so it’s important to explore this topic from both sides of the transaction. This week, we’ll highlight a buyer’s potential risks, and next week we will explore this topic from the seller’s perspective.
Imagine you’re the prospective buyer. You’ve obtained a preapproval from a lender and engaged a Realtor to help you through the buying process. Your realtor sets you up with an app-based portal for previewing Active listings in the Multiple Listing Service. Also, they’ve emailed you a “coming soon” listing, which isn’t yet available for showings. Or you saw a social media post about a “coming soon” property. After not prevailing in a recent multiple offer situation, you decide to make a sight-unseen offer on a Coming Soon property. Your offer is accepted, and you soon will be a homeowner.
Let’s hope your realtor guided you to make your contract contingent upon seeing the property in person by a specific date. If not, once inside the property, you may be disappointed with certain features or the layout. The rooms look a little smaller. The wallpaper looks different in person. You begin to feel a twinge of regret. So what? Your contract included an inspection period, so you plan to walk away if anything isn’t to your satisfaction. Yet, exiting the agreement at this juncture may be easier said than done. Or could cause you to forfeit the earnest money, or even face legal action.
In both Tennessee and Georgia, the widely used contract includes language stating the buyer waives any objection to cosmetic items (e.g. decorative, color or finish). Also, you agreed to negotiate with the seller in “good faith” when it comes to repairs and items that are not in working order. You’re buying an existing home that has been lived in previously, and a seller should not be expected to agree to every buyer request, especially those considered cosmetic.
Inspection aside, there are other items to consider before binding a sight-unseen contract. For example, if you’re paying part cash, is your contract contingent upon the property appraising for the full purchase price or only the loan amount? If the latter, then you may have “won” the property but “lost” when it comes to price and overpay what the current market conditions support.
In your hurry to make an offer ahead of other buyers, did you remember to make your contingent, if applicable, on the sale of your current home? If not, and you cannot close without the proceeds from selling your current home, then again, then the failure to close could be a basis on which your earnest money is not refunded.
A realtor will do all in their power to help a buyer negotiate the best terms and conditions given their individual needs and concerns. Ahead of making an offer, communicate with your realtor about key issues and concerns (e.g., financing, proximity to amenities, house layout, traffic noise). This communication will help your realtor help you minimize misunderstandings when negotiating the contract.
Realtors go above and beyond for their clients to ensure as best they can that they are pleased with their purchase for years to come. That’s Who We R.