Are you thinking of buying a home sight unseen? As Melbourne’s lockdown continues, buyers are increasingly purchasing properties without inspecting them first. But in our view, it’s incredibly risky. Buying property is one of the biggest financial decisions you’ll ever make. So, we advise you to think very carefully about buying a property sight unseen.
Why people of Melbourne are buying homes sight unseen
It’s all about FOMO. Buyers feel that when lockdown ends, there’ll be a flurry of activity and prices will rise further. Now that Melbourne has endured six lockdowns, we have historical data showing there is typically a surge in buyer interest and sales when restrictions ease. So buyers worry that when this happens, they’ll miss out if prices rise further.
So, they’re competing to get in ahead of this surge and buy now. However, it’s by no means certain that prices will rise rapidly in future. Now more than ever, there’s no predicting what will happen in the market. We’d hate for you to buy an unsuitable home that you regret.
Meanwhile, media coverage may exacerbate buyer fears, by highlighting the emerging trend of buying homes virtually without setting foot in the property. The reports, while accurate, only serve to intensify fears held by nervous buyers and may even result in more people considering this risky strategy.
A lack of properties on the market leads to increased competition
Naturally, with inspections not possible, many vendors have put sales campaigns on hold, while others decide to wait to list their homes. This means buyers are competing fiercely for the few quality properties remaining on the market. Low supply and high demand naturally leads to price pressure. Especially for quality homes that would be in demand regardless of circumstances.
This perfect storm of low stock, media frenzy, buyer competition and fear of future price rises combine to spur people on to get ahead and buy a home now. And with inspections currently limited to private appointment only, and potentially difficult to arrange, buyers may consider taking extreme action. Suddenly the previously unheard of practice of buying a home sight unseen is something you start to consider.
Why buying a home sight unseen is a risky move
Virtual inspections have their limits
As a workaround, agents are offering virtual inspections, using video to show buyers through the property. This means that agents can easily gloss over any defects and skim past that dark hallway, poorly tiled bathroom or chipped door frame paint. Agents are keen to sell homes and make their commission, so they’re unlikely to highlight problems with the property during virtual inspections. You won’t be able to smell mould or spot rising damp in a virtual inspection.
Beyond defects, the virtual inspections don’t give you the chance to test the property and see the colours, quality finishes and fittings up close. I’ve seen kitchen benchtops that have a high-gloss sheen or a sparkle that seem more muted via video, or paint colours that are much brighter in real life. So you may find the benchop or paint work that looked great virtually or in photos doesn’t quite have the same impact in real life, which can cost you later if you decide to remodel because it’s not to your taste. The orientation and flow of natural light can make a lovely home seem dark and dreary, so this can be another aspect you won’t know till you move in.
Lastly, in a virtual inspection, you don’t get the sense of the space, how the floor plan flows and whether the sizes of the room will suit you. You don’t get a sense of how noisy a distant freeway, major road or railway will be during quiet nights. Or whether the neighbour’s dog barks incessantly.
Homes have a feel
Have you ever walked into a home and gained a feeling of comfort, peace or relaxation? Or perhaps you’ve entered a home and felt unsettled, like the vibe of the home is off. Working in real estate for more than twenty years, we know that homes have an indescribable essence. Some homes have a distinct smell, too. Impressions vary, and some don’t think it matters, whereas others follow instincts closely. It’s like meeting a new person; sometimes you’re connected and establish rapport easily, and with others it’s harder work. It’s only when you physically occupy the space can you determine how the home feels to you and whether you can see yourself living there. This is the je ne sais quoi that you can only appreciate when you inspect the home in person.
Building inspectors are under pressure
Buyers who purchase a home sight unseen take comfort that they’re permitted to have a building inspector review the property. Admittedly, this improves your chances of becoming aware of potential defects, but it can still be risky, for a few reasons.
Inspectors have never been so busy, as many buyers are turning to them to review properties on their behalf. Unfortunately, busy building inspectors mean they are more likely to rush through inspections, and potentially miss something crucial. It’s a minor risk, but could be costly to you down the track.
Meanwhile, the leading building inspectors are getting booked out, leaving less scrupulous operators as the only ones available to inspect your desired property. While the majority of building inspectors are highly ethical and professional, there are some who are taking advantage of this property boom, leaving you at risk with subpar advice. Unless you are familiar with the industry it’s easy to make a mistake and select an inspector who may not have your best interests in mind.
Beware the building inspector recommended by the vendor’s agent, as they might be motivated to overlook or downplay defects in order to maintain a relationship with the agent who is a regular source of referrals for them. On the other hand, we’ve seen building inspectors deliberately overstate the defects of a property in order to get the repeat business from the buyer. It’s rare, but it does happen, so it’s important for buyers to be aware of these potential pitfalls when using building inspections to buy a home sight unseen.
It’s a considerable financial risk
With the median house price in Melbourne over one million dollars, buying a home is likely to be one of the biggest financial commitments you make in your lifetime. So it’s vital that you secure the right property. Competing for the few properties on the market and trying to snap something up without an inspection may land you the keys, but at what cost? Imagine the worst case scenario. Your new house has considerable defects that are missed by you and an inspector.
This could be disastrous. You’d be faced with considerable costs of reselling or renovating to fix problems, perhaps at a loss. Not to mention the inconvenience and stress of having to manage unexpected living arrangements that would result. Or, a less extreme example would be just being forced to live in a house with a layout, finishes or aspect that doesn’t suit or that bothers you every single day you see those wonky shutters or crappy finish. Of course, many buyers don’t encounter those troubles, and are able to secure quality homes without inspections. But for us, the risk of problems is simply too considerable.
So, to summarise the risks of buying a home sight unseen
- you are less likely to notice defects or finishes with a virtual inspection
- even with a building inspector, the better ones are booked out and the remainder may rush your inspection and miss something important
- you can’t get a feel for the home layout, finishes, the fall of the light or the vibe of a home with a virtual inspection
- it’s a huge financial gamble to take with the high cost of reselling or renovating if you make a mistake
- limited stock at the moment leads to extreme competition, meaning you may mistakenly pay too much for a home that’s not right for you
What about buying property from overseas or interstate?
Of course, this is a different scenario. We regularly purchase homes for interstate and international clients who are geographically unable to inspect. But they have us as their eyes and ears. When restrictions are not in place, we are able to inspect and ensure that the property ticks all the boxes for you. We’ll spot any defects and make them very clear to you before you make a decision. Plus, we will secure a building inspection from a trustworthy provider. So with those checks and balances in place, your risk is minimised. Having an impartial third party like an advocate or a friend inspects on your behalf reduces your chance of coming across problems later.
What can you do instead?
If you are keen to buy a home soon, we recommend a number of tactics to get ready.
Start doing your research now. Ensure you understand the local market in your desired suburbs, especially the highest prices paid for your preferred type of property. For example, what does a three bedroom house in Oakleigh usually sell for? Knowing the upper ends of the price range will help you identify homes that are overpriced. You don’t want to be the buyer breaking a price record by paying too much.
You can speak to agents to register your interest (don’t tell them your budget) and see what they have coming up. Many vendors are tentatively listed with agents and are waiting on restrictions lifted to be ready to sell, so find out who’s got potential listings of the properties you’re seeking.
Be prepared to purchase in summer. Usually, the spring market is busy and by December it’s all quiet. But the obliteration of the spring market means that activity will continue through December and January. Be ready for campaigns starting in late January with auctions taking place in mid-late February.
If your circumstances demand you purchase soon, be prepared to rent. Renting is inconvenient, and yes, there’s extra costs involved, but better spend a few grand a month on rent instead of hundreds of thousands (millions even) on purchasing a property that doesn’t suit your needs or that is difficult to resell later.
If the property looked great in video you might be stuck with a bad investment, that you hate living in or that causes financial stress due to unforeseen problems. If you wait to view a property, you greatly reduce your chance of this happening.
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