Buying things online used to seem like a complete novelty, but today it’s passé. What’s still novel? How about trying to buy a house online?
While the COVID-19 pandemic accelerated adoption of digital home shopping tools, they’ve been around for some time. It is possible for homebuyers to shop for and buy a house online in which they’ve never actually set foot. But it will be different from a normal homebuying experience.
Agent John Leinaar works in Kalamazoo, Michigan, an area where many pharmaceutical companies operate. He’s helped several families relocating from other states purchase homes remotely, and he works with 66% more single-family homes than other agents in his area. He says that, “relocation is the No. 1 reason why people purchase homes in this fashion. It’s become more common over the last three years because the common use of technology in day-to-day life has changed so drastically.”
It’s not only possible to buy homes online, it’s becoming increasingly common. Whether you’re relocating or unable to travel to a home, here are the steps to buying a house online.
Step 1: Figure out your must-haves and nice-to-haves
In a normal house hunt, you’d make a list of must-haves (three bedrooms) and nice-to-haves (a pool), but when you’re shopping online, it’s even more important. Sit down and put those vague ideas down on paper. Get very clear about non-negotiables and specific about variables like square footage in the spare bedroom.
Since you won’t be seeing the house until after it’s yours, actual data to drive a purchase decision is very helpful. It will help your agent bring you the right houses, too.
At a minimum, you should know:
- The number of bedrooms and bathrooms
- Total square footage
- Square footage of important rooms
- Finished or unfinished basement,
- Fenced-in or open yard?
Other must-haves, such as accessibility features or a porch, will depend on your household’s needs. Still others, like a garage or central air, vary by geographic location.
Step 2: Decide where you want to buy
School district, walkability, commute time and distance, and neighborhood amenities should all come into play.
Do you want a home within walking distance of a park? Would you prefer one with an HOA and community pool? Online home shopping doesn’t allow you to “try on” a house and return it like a sweater that didn’t fit, so don’t feel bad about being picky.
If you’re moving to a completely new area, it helps to lean more toward a general than a specific idea of where you want to live — your agent may know of a spot that’s perfect for you!
When Marie S. had her hours and pay cut during the pandemic, she looked for and found a new job. An experienced homeowner, she had no hesitation about buying online, even when moving from the Midwest to New England. Because coronavirus restrictions still prevented short-term rentals, and she wanted to re-enroll her son in school immediately, she didn’t want to rent.
After researching towns and school districts and following the first two steps on this list, she talked to a local agent.
“My agent steered me to a town I hadn’t put on my list because I thought it was too far from Boston,” Marie says. “I didn’t know about the public transportation options or the great beaches. Now, I can take a ferry to work!”
Be open to suggestions, as neighborhoods can change over time. Set minimum standards for school ratings, driving or commuting distance to work, and proximity to local parks, and communicate them to your agent. Then let them help you find an area that will fit your needs.
Step 3: Shop around for lenders
A mortgage is a 15- to 30-year commitment, unless you sell or refinance. Shop around for different local lenders and compare rates. Talk to several lenders about their options and fees.
For example, a 1% difference in your mortgage rate could bump your monthly payment up around $100 a month, costing you $30,000 over the life of a 30-year mortgage. Shopping for lenders may not be as fun as shopping for your dream kitchen, but it can have a big impact on your financial future. Luckily, it’s something else you easily do online.
Step 4: Get preapproved for a mortgage
Did you know that conforming mortgage limits vary by state or country? Or that FHA loan limits vary widely, too?
Buyers who are moving from one area of the country to another could be shocked at the difference in prices and loan limits. Marie S., moving from the Midwest to a more expensive part of the country, was pleasantly surprised when she got preapproved.
The conventional loan limit is much higher in Massachusetts, she explains, “so I qualified for a higher mortgage with only 5% down.” Her higher budget expanded her search radius. It’s a good idea to get preapproved before you start looking at homes online so you have a budget.
You’ll typically need to submit documentation such as pay stubs, W-2’s, and tax returns, for a preapproval. Lenders need proof that you meet minimum requirements to buy — stable income, have a down payment, your credit score is solid. After you submit your documentation, you’ll know what kind of budget you have to work with, or your approval “ceiling.”
Step 5: Find a local real estate agent
A local agent will know how to write a competitive offer and what sellers in the market prefer. They’ll know whether offering a rent-back period could sweeten the deal, or if it’s more common to pay seller closing costs.
Leinaar doesn’t think it’s possible to buy online without an agent — sellers might think you’re a scammer or refuse to work with you.
Local agents also know the housing stock in the area — including which builders built which local developments, the common issues in their homes over time, or the most desirable new areas. When it’s time for the inspection, they’ll reassure you that a damp basement is normal for the town, or tell you to get it checked out by a professional. There are many things that are critical in the homebuying journey, and you’ll need someone in your corner with boots on the ground.
Step 6: Look at homes online
Your agent can set you up with MLS access, filtered for your criteria. You can also use platforms like HomeLight, realtor.com, Zillow, and other listing portals to browse for homes online — just be cautious about the online home values you see. Many automated valuation models lag actual sales data and could be outdated.
Use a checklist or create an account to keep track of your favorites. Don’t get discouraged if homes sell within days of you saving them to your account. You’re getting a feel for the market, and that quick sale just told you it’s probably a good area.
Step 7: Request a virtual tour
Found something you like? Ask whether there’s a virtual tour available, or if you can have your agent take you on one.
Leeinaar thinks that while virtual tours are great, they do have some drawbacks. While you can spend as much time as you’d like looking at a home virtually, “parts of the virtual tour can be blurred because of how it works,” he explains.
The camerperson walks into a room, sets up a camera, and takes a 360-degree shot. “With a transition from room to room, you’re not doing to see the trim, or the floors.”
He, and many other agents, will walk prospective buyers through a house on a video call app.
“My agent started the video call as she pulled into the driveway, panning around the neighborhood so I could see neighbor’s houses and the road,” Marie says. “It was great; if I saw bikes in the driveway or a playset in the backyard I knew it was the type of neighborhood I was looking for!
“She also opened all the kitchen cupboards and closets in the bedroom, showing me things I couldn’t see on a virtual tour or in the listing’s photos.”
An agent can point out how tall the ceilings are, the views from the windows, or the quality of the doors and trim. They can open closet doors and peek inside, revealing issues not shown in pictures or on a virtual tour.
Step 8: Submit an offer
When you’ve found the “one,” it’s time to submit an offer. Ask your agent to help you create one that’s hyper-competitive if you don’t want to miss out.
A good agent will reach out to the seller’s agent and ask about non-financial perks, such as a flexible closing timeline or rent-back period, that could seal the deal.
Sometimes sellers can be leery of long-distance buyers who haven’t seen the home in person. They worry that the buyer could back out of the sale at the walkthrough if they see something they don’t like. Consider writing a well-crafted offer letter to ease their worries.
Step 9: Order an inspection
Some states require sellers’ disclosures, while others don’t; no matter where you are, you should absolutely get an inspection if you’re buying a house online. Even if your offer included a promise to not request repairs after an inspection, you should still get one, if only for informational purposes.
After offering to buy (and losing out on) two houses, Marie S. knew she had to sweeten her final offer. She waived the right to negotiate for repairs or ask for concessions after an inspection, but she still had one done.
“Even though I knew I couldn’t ask the sellers to fix anything, once I found out about a few issues, I made calls and had professionals lined up to start repairs the day I moved in.”
Ask your inspector if they can record video of the home inspection or take you on a video call ride-along — if not, ask your agent to go on the inspection. They can take photographs or send short videos, too.
According to Leinaar, the most important thing about the virtual process is that there’s still somebody going there. Even if your agent can’t attend the inspection, you’ll get a long report and videos and pictures from the inspector.
After the inspection, discuss what needs to be fixed, and negotiate any repairs with the seller.
Step 10: Check on the appraisal
The appraisal establishes the home’s value. Your lender will order the appraisal. Unless it comes in lower than the purchase price, you won’t need to worry.
If it does come in lower, the lender won’t approve the mortgage. At this point, you have a few options.
You can negotiate with the seller and see if they’ll lower the price. If you have the cash, you can put down more money and make up the difference between the appraisal and your offer price. Or you may be able to order another appraisal.
All of these options take time, so make sure you’re keeping in touch with the lender about the appraisal’s results and what your options are if it’s low.
Step 11: Get your insurance in order
As a homeowner, you’ll want to protect your investment! If you’re taking out a mortgage to buy the home, your lender will require proof of an insurance policy at or before closing. You’ll need to purchase homeowners insurance.
Ask your real estate agent if they can recommend a local insurance agent, who will often have the inside scoop on which insurance companies have the best deals — as well as whether it’s a really good idea to get supplemental policies for flood, fire, or other natural disasters common in your new place.
Your insurance rates will vary depending on whether you plan to occupy the house or rent it out as a landlord, so discuss those with your agent, too!
Step 12: Consider title insurance
Title insurance protects you from anything that might have been missed during the title search. Think a lien against the property, or a past foreclosure not properly cleared off the record. The risks from buying a house online don’t necessarily relate to the title, but you still want to cover your bases.
During the title review process, the title company verifies that the seller owns the property and that the correct and complete chain of ownership has been documented. The title company will also check for any liens, judgments, or pending lawsuits against the property.
While it’s rare, they could miss something during the title review. Title insurance protects your investment from any claims that arise at a later date, when the house (and all its encumbrances) are legally yours.
Step 13: Ask about your closing-at-a-distance options
Some states allow remote online notarizations, but not all of them!
A remote online notarization allows you to sign the closing documents through a web portal, an online meeting, or other digital tool. Thirty-eight states have passed remote notarization laws.
If your state doesn’t allow notarizations online, you may need to have a notary visit your house to notarize the documents. You could also go to a local notary and FedEx the documents to your agent to have them signed on the other end. In some cases, you might have to designate a local legal proxy, who is often your agent.
When taking care of all the paperwork, don’t forget about the down payment or closing costs! You can either have them wired from your bank to an escrow account, or obtain a certified check to mail to the designated person.
Even if you’re reading it online, make sure to review the Closing Disclosure! This isn’t like the terms and conditions on a website (which, let’s be honest, most of us skip). It contains important information about payoff amounts, escrow accounts, and more.
Step 14: Final walkthrough
Don’t skip this step! Even if you can’t be there in person, a good agent should be able to take you through on a video call. They can check to make sure all requested repairs have been made and all of the seller’s belongings removed.
“The first time I saw my new house in person was the final walkthrough. It was hard to tell who was more nervous — me or my agent!” Marie laughs. “But I was thrilled with the house, and so happy we had a place to move into right away.”
Ask your agent to check major systems, too. Have them turn on the heat or air conditioning, plus major appliances. The way, if anything broke between the home inspection and the walkthrough, you can have the seller fix it.
Step 15: Closing day!
Depending on your options, you might not need to leave your house at all! You could pre-sign documents, sign them online with a digital signature, or sign paper copies in advance and mail them to closing. Check with your agent to find out your options.
Is buying a house online right for you?
Even if you’re eager to have a place lined up in your new town, buying online isn’t always a good idea. Sometimes, you’d be better off renting an Airbnb or staying with family while you home shop in person.
When it’s a good idea to buy online
- You’re getting transferred, are relocating, or have to move and know you’ll be somewhere long enough to justify owning another house
- You are looking for a second home or an investment home in a different state
- You can find an agent who’s done it before and knows what to expect (and can prep you accordingly)
When it’s a bad idea
- You’re trying to buy a short sale or foreclosure or an REO home — those have too many potential problems, both with the homes themselves and with the process, to leave to online only
- For-sale-by-owner deals — without a seller’s agent to help expedite the process, it could prove too difficult
- If you can’t find a local agent to help you — without someone walking you through the process, you’re going to feel nervous the whole time
- If you’re a nervous first-time homebuyer
“The whole point of the real estate process is helping someone make the largest financial decision of their lifetime, they should feel comfortable through the process,” says Leinaar.
Your agent should be a huge help while online shopping for a house, whether it’s driving out and walking you through an open house via a video call or setting up the closing. With the right team and tools in place, buying a house online may not be as easy as ordering a new sweater but it can be a more-or-less seamless process.
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