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How to Buy a House Over the Internet
A diary of actually completing the purchase of a house over the Internet.

By: Bruce Bahlmann - Contributing Author (your feedback is important to us!)

Are you on the market for a new home? Perhaps you are looking to relocate to a new city and need to purchase a home but cannot find the time to get there and look. The following is a diary of an actual house search which resulted in an offer, an inspection, radon test, a counter offer, a counter offer by the sellers, and an eventual agreement by both parties. It occurred to me that in going through this process there probably isn't a lot of information out there about how to do this... So, here is my attempt to explain how to do it. Of course each purchase will be unique, but being able to refer to an actual completed purchase might prove useful.

House Search

To make matters simple, we were moving to a location that was familiar. I grew up in this city, so having a general understanding of where everything is located was helpful. If you are moving to a new city, there are places you can go to find more information about the city where you are moving. Below are some links that you might find helpful if you are moving to a new area (one you are not as familiar):

• City-Data - Provides some very basic statistics about many US cities including population, household income, housing prices, etc.
• Crime-Rates - Provides comparison of the city you live in now versus the city you are moving to in terms of violent and property related crimes according to the FBI. Each city is ranked from 1-10 (one being the lowest, 10 being the highest)
• School-Data - Provides information about local schools in the area along with the ability to compare various schools

Once we figured out which city we wanted to live in, we began to reach for real estate search engines. So as you can imagine, we started searching websites like:

• Century21 Real Estate - Good information where they have homes listed
• GMAC Real Estate - Coverage is spotty
• Prudential Real Estate - Major cities mainly
• Realtor.com - Good coverage of various cities (especially smaller cities), information not always as comprehensive (sometimes only one picture where other services offer several). In some cases had listings not found in other search engines.
• Yahoo! Real Estate - Good coverage (even in smaller cities), fast and responsive searches, takes you right to actual listing agent's website for more information and pictures.

We found several homes in our price range and attempted to email real estate agents associated with these listings. Unfortunately, real estate agents don't seem to be too Internet literate. After a couple days of no response, I started calling them and was able to immediately reach them and discuss their listings. We narrowed down our choices to a few that were most interesting and were able to get some basic feedback such as:

• History of the house (year built, general condition, best features, how long it has been listed)
• Information about the sellers (how long they lived in the house, did they have kids, why did they leave, where did they move to)
• Information about the neighborhood and lot (sidewalks, age of trees, proximity of house to neighbors)

Since we are moving to a location with the intention to only have one car, we wanted to be sure the house was centrally located. So having the house close to school, park, grocery store, were important. We also highly desired an area with a mature neighborhood where the trees were older, homes were older, and which looked "lived in". Newer "snub houses" with garages up front and saplings planted all around were out of the question.

We also paid a lot of attention to streets and looked at maps to figure out which streets were "main drags" or multi-lane roads and wanted to be at least 2-3 blocks away from any major street and at least 5-6 blocks away from any major highway. These are good rules of thumbs to follow - as homes close to roads may look convenient to get to but end up not being so attractive if you can't keep your windows open at night due to traffic noise. So, quiet and safe were all considerations.

When we found a house we liked, we scheduled a house showing with the real estate agent and had family members meet them, walk through the house, and give us a run down of what they liked and disliked. Looking at a house over the Internet, you are dependent on the information you can find out about the house and what pictures the house has posted. I'd say the following pretty much sizes up our feel about the houses we looked at:

• Houses with 1-3 pictures left us with more questions than answers. If we "loved" curb appeal of the house we called on it, but anything less than that and we moved on. Essential pictures include front and back of house as well as the kitchen.
• Houses with less than a dozen pictures included images of all major rooms in the house as well as the front and back of the house and even the garage (if there was one).
• Houses with more than a dozen pictures often included stairs, multiple angles of the kitchen and foyer (if it has one), all rooms in the house and even one or two of the basement. We really didn't see many of these, but when we did, those were the houses we felt the most comfortable with.

We actually had different family members walk through the house and then called them individually to discuss their feedback. Each person seemed to notice one or two things they liked about the house and disliked about the house which was helpful. We kept track of these in a spread sheet with "Pluses" on one side and "Minuses" on the other side. We had decided to make an offer on this particular house but before we could call it in, the agent came back to us saying that another offer had been made on the house. The agent wouldn't tell us how much the offer was for, but rather just that an offer had been received. There were three things we knew going in that were less than ideal about the house:

• The roof - seller could not provide documentation about the age of the roof but had indicated a friend who was a realtor had gone up on the roof to look at it and said it was in "good shape"
• Main bathroom - was very small and actually had miniature fixtures rather than standard sized ones
• The kitchen - was good sized, but also was older and not as functional as others

Since we really wanted the house but also wanted the seller to come down some in price, we made an offer 4% below the offer price rounded down to the nearest even thousand. Additionally to make our lower offer more attractive, we didn't make the offer contingent on financing rather only contingent on a successful inspection. After our offer was presented to the seller, the realtor called us back to inquire about a request of the seller. Essentially the seller wanted to see if we would be willing to move up our closing date. While we couldn't move up the date, this information provided us with valuable pieces of information:

• First, it told us that we have a compelling bid, as the owners wouldn't be asking us to change the timing of the close if our offer wasn't attractive to them.
• Second, it told us that the owners seemed pretty impatient to want to move the closing date up. I asked the realtor why they wanted the date moved up and the response was that they couldn't close on their new house until they closed on the house we made an offer on.

There was to be another showing of the house the next day which would happen inside of the timeframe both offers were still valid, so the realtor told us the sellers wanted to see if this house showing would generate any more interested parties before they made a decision on either of the offers already received. Effectively this indicated to us that both offers were lower - but because this showing was scheduled before both offers were received, its hard to knock the sellers wanting the most money for their home.

The realtor called back after the house showing and indicated that the seller had selected our offer and that we would be given 7 days to complete our inspection. During my conversation with the realtor I asked since the seller had selected our offer, how much the other offer was. The realtor told us what the other offer was which gave us another important data point should there be any future negotiation required.

Home Inspection

We proceeded with setting up a home inspection and had to consider whether or not to also have a radon test completed. We read about radon tests and the effects of radon if present (which is effectively the equivalent of a pile of asbestos lying in the basement). Radon is a class A carcinogen so testing for this should be part of any real estate transaction - especially in the Midwest, Northeast, and Northwest US. The test costs around $100 to complete. For more information about radon look up the EPA website below:

Radon - EPA website (get the facts)

The inspection came back with seven issues, most of which were not really relevant but useful. There were three key items found during the home inspection:

• Roof was old - and was at or near life expectancy (20 years) - replacement cost around $5,000 to $7,000 if sheathing needed replacing
• Water heater was past life expectancy (20 years) - replacement cost around $300
• Gutters on the house were coming loose and needed to be repaired - repairs cost around $200

I got estimates for replacing the shingles on the roof, water heater, and gutter and submitted a request for a seller's concession which placed my offer equal to that of the other low offer the seller received (but at which point there would be no remaining contingencies) as well as asked the seller to correct any radon levels measured 4 and above - per EPA. The seller wanted to wait for the results of the radon tests before it responded to the inspection corrections.

The radon tests came back ranging from 3.2 to 12.4 PCi/L and an average of 6.4 PCi/L which rated high enough to require repairs in the amount between $1,500 and $2,000 to seal the cracks in the basement and potentially install a ventilation system.

Actual radon test result

One "reality check" about radon tests. Its nice that the EPA puts the fear of God into getting stuff measured. Especially since over 50% of the homes tested in the area we were looking to buy a house in require corrections. However, while we think it was worth the $100 to know, the test was only performed in the basement and the basement is not (nor will it ever be) a place we intent to create any living space. If there is living space in the basement or if one spends any amount of time down there (laundry, workshop, bedroom, den, etc.) a high measurement SHOULD require mitigation. I'm told that floor to floor, the levels fall off substantially from the basement such that the first floor is typically 50% less and the second floor is 40% less which is ok if you are at 6 PCi/L in the basement but NOT ok if you are it 12 PCi/L. We intend to have the basement sealed, and may also invest in a small vent to pull some air through the basement - but beyond probably won't go overboard in mitigating radon because the basement is primarily storage.

Our preference was to only assume 20-30% of these major costs and leave 70-80% for the seller to cover before we moved in. Within the 20-30% was our ability to decide how we wanted to spend the money, the order we wanted these repairs corrected, and most important was our ability to select the brand, style, color we wanted.

Price Negotiation

After the radon results came back the sellers countered with an offer to take $1,000 off the price of the home as well as give us the appliances within the home (on the original flyer the seller said all appliances stay). Knowing the numbers, the appliances at best were only worth about $800 so while the seller's counter indicated their interest to negotiate price, their offer still involved us moving into a home with a roof that was near end of life and being liable for a majority of the cost of its replacement. Our biggest worry was if we had to move within a year, would the next buyer also want a new roof - if this was the case, than we would get even less for the house than we paid for it.

Appliances, while useful to the move in buyer (from a cost savings perspective) are troublesome to the seller because while there is a great market for used appliances, they must be priced at a significant discount over the purchase price to be attractive. On top of that, you still need to get these bulky things out of the home. Our opinion is that we wanted to select our own appliances which were GREEN - all Energy Star rated rather than just reuse someone else's old appliances (some of which were more than 10 years old already).

Upon refusing the counter, and sticking to my inspection corrected offer, the sellers came back with $2,500 in concession without the appliances. I explained to the realtor that while we were heading in the right direction, the seller seems intent to not assume any responsibility for the costs of the worn out material aspects of their house. When the realtor opened the door to the possibility of the seller now considering the other offer which was more than the price of our inspection corrected offer, I responded that this is a risk we were willing to take to get the house. However, I did say several new things would now need to be disclosed to the other seller, like the outdated water heater, the high radon level, and other areas of the house in disrepair. Since the sellers are now knowledgeable of these items, they MUST disclose them to new potential buyers who could pull the house price down even further. The realtor agreed with my assessment, and thought she would wait a while to get back to the sellers and then let me know.

Later I talked  to my parents who were concerned that I should be happy because the sellers came down at all and that I should just take the offer. However, I remained convinced that my strategy was good, and knowing that  my offer was not contingent on financing meant that if the sellers rejected my inspection corrected offer they were effectively turning away a "clear to close" offer to buy their house. I also told the realtor that I was prepared to find a different house if this offer fell through.

A few hours later, the realtor called and informed me the sellers agreed to my price.

Recommendations for Sellers and Buyers of Homes over the Internet

• Pictures, Pictures, Pictures - show the good and the bad - every room in the house if possible is ideal - if you can take a picture of the house on a sunny day to show "optimal" room lighting that would be ideal.
• Appliances - either include them or not include them and be DONE with it as opposed to using them as a "possible negotiating" point later on. This can backfire to the point where the seller is not only stuck with them but also has to pay to have them removed
• Know your purchase date of all your major appliances (furnace, water heater, AC, etc.)
• Know dates of other major repairs on your house (mainly roof) but also any electrical and plumbing updates are also helpful.
• Flying out to see the house should be in the plans, but if it is not possible, have multiple family or friends be your eyes, ears, and nose. The key thing is location, but having a house that isn't musty smelling, has lots of light, and doesn't have a constant hum of traffic can only be determined by actually visiting the house.

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