There’s been a recent trend in listings that do not permit for potential buyers or their agents to see the inside of the property. Typically these listings are short sales, occupied either by the owner or tenants, have no listing signage, have 1 obscure photo of the front of the house and priced in the lower tier, typically under $417,000 in the San Jose area.
Just last week I wrote an offer for an investor client for one such property, a single-family home listed in an East San Jose neighborhood. The property was a short sale, occupied by the owners with 1 obscure photo. The “showing instructions” were as follows: No Keysafe, Do Not Disturb Occupants, Make Offer Subject To Inspection (translated means “You cannot see the inside of the property but write an offer anyway and we’ll call you, maybe.”) There were no disclosures or reports to download.
The property had been listed only 3 Days when I emailed the listing agent requesting a Preliminary Title Report (a “prelim”). A prelim helps buyer’s agents gauge any potential title issues, shows publicly recorded liens, judgements and lis pendens and also shows who the owner on record is. A prelim can be a very useful report to writing up an offer especially in a short sale where there could be any number of liens or title issues. The next day we submitted an offer without ever seeing the inside of the property. I received neither a response or acknowledgement to either the request for the prelim or the offer. Three days later the listing was changed to Pending Release. We offered $41,000 above list price.
Even my investor client was impelled to question how common it was to offer on a property that did not allow potential buyers to see the inside. My client is a seasoned investor familiar with the ins and outs of purchasing property. So I had to ask myself, Is offering on property “sight unseen” mainly a San Jose Bay Area phenomenon? It certainly is becoming a common sight as the number of inventory continues to remain low and the number of buyers, speculators and investors remains healthy and vibrant.
Currently, properties listed in the low tier range are receiving anywhere from 25 to 50 offers. Quite a few of these listings are sight unseen short sales that cannot be opened or shown by buyer’s agents. However, a buyer might be fortunate enough to see the inside of a sight unseen listing at their “One Time Event Only” Open House held for 2 hours. If you missed it, too bad. That listing received 50 offers.
You might ask, What’s a buyer to do? Sometimes the listing agent will invite only the buyers who have made offers sight-unseen to see the property on the inside. It’s a backwards way of offering on a property anyway because the buyer is basically guessing what the condition of the property might be based on the 1 photo and how it looks on the outside. Most purchase offers (the “contract”) used by Realtors® have built-in inspection contingencies that allows the buyer sufficient time to inspect and investigate the property. A term often used by agents called “Offer Subject to Inspection” is understood in the real estate field as a buyer offering on a listing who has not yet seen the property but is making the offer anyway, subject to inspection. I like to add the term “subject to seeing the inside” too. A short sale can take up to 3 months (or more) to approve, so I include terms that provide for the seller to make the property available for buyer investigation, after the offer is accepted. If this term is left out on a short sale, the default time for investigations might not start until after the short sale is approved. You may also be dealing with an uncooperative seller or tenant – or perhaps just a miserly listing agent – but usually that shouldn’t be the case – so make sure your agent puts the clauses in your offer that will protect your interests first.