As of the initial writing of this post (Spring 2013), the housing market in the San Francisco Bay Area can be summed up in one word… “BANANAS”! There is a real shortage of available homes for sale. The problem is there isn’t a shortage of buyers looking for homes. An ever increasing situation arising from this crazy market is the scenario where a seller is asking bidders to put in a offer subject to a visual inspection. So, they’re asking a buyer to put in an offer without taking a look inside. Crazy right, but it happens more and more.
As an inquisitive home buyer, I would wonder why they wouldn’t let me see inside the house prior to making an offer. Are they hiding something? Most times they aren’t. One of the main reasons is that the subject property is ususally tenant-occupied. In these cases, the relationship between the tenant and the owner is probably strained at best. Keep in mind that the owner knows that with a tenant in the property, it could make their property less attractive to potential buyers. Also, the tenant is probably not happy at the prospect of strangers coming into their home for Tuesday Tours or Open Homes. The majority of the time something can be worked out with limited showing times, and at least 24 hour advance notice. However, it happens more and more where the relationship is so strained, the owner and listing agent decide it is better not to have anyone go in until an offer has been accepted.
Another reason for not having viewings could be the actual condition of the property. There could be some type of safety hazard in the property where the owner doesn’t feel comfortable having people in the property. This is usually the case where there are structural (foundation) issues. Once the property is in contract, the owner feels that the potential buyer will bring in the appropriate professional to further inspect.
So, the big question is whether you should make an offer on a property where you won’t be able to visually inspect the home until your offer has been accepted? Simple answer…. Absolutely not! Buying a home is too large of an investment to try and “eyeball” what the condition of the property might be. You need to have a good idea of the interior for numerous reasons. You want to have a very good idea on what potential problems (if any) that may be lurking in the home. That way you can tally up the cost of correcting them, allowing you to make an offer that fits your budget. Also, you want to know the current style of the interior. Do you like the current baths, or will the size of the kitchen work for you? Some things can be done with an educated guess, buying a home is not one of them.
Does it make a difference that in your offer you will have an inspection contingency? Not in my opinion. For a property that is in major disrepair, or has structural issues, you’re probably not going to have enough time to fully understand the depth and breadth of the issues. If you’re a home buyer, especially a first time buyer, you never want to rush into a major decision. The clock ticks fast on your contingencies, and having the extra time to investigate prior to making an offer really makes a difference.
My only exception would be for very experienced investors. I’m referring to people who invest in properties for a living. They usually rely on a team of construction professionals that help them make purchase decisions. An experienced investor will be able to do a much better job of determining the issues a property might have, and figuring out the costs for correcting them.
Let’s bottom line this. As a home buyer you should not make offers on properties where you have not visually inspected them. You need to get inside the property to get a general understanding of its style and condition. Yes, the market is competitive. Yes, you really want to get into a home. Pass on these types of properties … it’s probably not worth the effort.