Would you buy a home sight unseen? About 2 in 5 millennials (39%) say they would, according to new data from real estate site Clever. All the same, many would require a few things in exchange before closing a deal.
For Clever's annual Millennial Home Buyer survey, researchers polled 1,000 prospective homebuyers about the compromises they're willing to make to buy a house. Among those willing to buy a home without viewing it in person beforehand, 29% said they would only if they could first see photos or take a virtual tour. Another 10% said they would need a virtual tour to seal the deal.
Many of the respondents who wouldn't buy sight unseen still indicated they could be persuaded to do so under the right circumstances. For example, 59% of the holdouts might be swayed if someone they knew looked at the property for them, and 51% would be tempted if the house was listed for significantly below the market value.
New construction (39%) was persuasive, too, as were seller concessions (39%) such as covering inspection fees or closing costs.
Video by Richard Washington
But buying a place you haven't visited yourself is a risk. Although you may close a deal more quickly by opting not to see the place in person, "it's in the buyer's best interest to be able to see the home," says Francesca Ortegren, a data scientist at Clever. "Photos and even virtual tours can give you some information about the place — layout, flooring, etc. — but they don't tell the whole story."
Certain issues with the home that add to the overall cost, Ortegren says, "likely aren't highlighted in a virtual tour or in photos."
And there's more to consider than unexpected repair issues: "Beyond issues with the home that might cost money, people can tell a lot about whether they'd be comfortable in a home by stepping inside," she adds. "The flow and the size of the rooms can feel completely different in person."
The Covid crisis is part of the reason young people want homes now and are willing to take risks like buying sight unseen. Almost one-third of people in the survey, 30%, said the pandemic pushed them to start house hunting earlier than they planned, in order to capitalize on low mortgage rates and buy before prices go even higher.
Home values have jumped about 10% over the past year and could rise above 11% in the next year.
Plus, would-be homeowners want more space and comfort so they can work remotely. As of January 2021, 56% of workers in the United States reported that they were "always" or "sometimes" working from home, per Gallup. And 72% of homebuyers and sellers expect that to continue, according to Redfin.
Nearly 20% of winning home bids last June waived home inspection contingencies, according to Redfin. But if you're buying a home you haven't seen in person, experts say that's not a risk you should take.
"You never want to forgo an inspection. Ever," Sue Riley, a real estate agent in Northern New Jersey, told Grow. "There's a lot of hidden things that can come up, and you don't want to be on the losing end of that."
An inspection can flag any number of expensive issues, which would allow you to back out of the deal. "For instance, foundation repairs cost around $2,000 to $7,000 on average but can cost up to $40,000," Ortegren says. "Partial roof repairs cost about $1,500 while full roof replacement can cost up to $11,000."
If the inspection results aren't a deal-breaker, you could request credits from the seller for such necessary repairs. For example, if a home needs a new roof, a buyer could negotiate down the total price by the amount of that expected repair cost.
An inspection doesn't entirely eliminate the risk of an expensive surprise problem, either.
David J. Haas, CFP, the owner of Cereus Financial Advisors, told Grow last month that when he and his wife moved into their first home, they soon "found out that our electric service in the old house we bought was inadequate and we needed an expensive electric service upgrade. We owned the house and it had passed inspection, so this was now all our responsibility."
"Since we can't predict the future," says Haas, "having some financial flexibility to maintain your home is also an important consideration."
If you're looking to call a new place home, take a comprehensive approach to saving, experts recommend, especially given the need for upgrades or improvements.
Aim to stash away a bit of money at a time so you'll be prepared for any added expenses that may come your way. Using a mortgage and housing cost calculator can give you a sense of all the expenses you might face.
"When it comes to choosing a home, be wary of hidden costs. The long-term costs of repairs and maintenance should be weighed against the price of the home," Ortegren says. But while homeownership can seem out of reach for many young Americans, especially those hit hard in the pandemic, "there are options and plenty of ways to save."
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