Buying a House Out of State the Smart Way

Whether you're an experienced home buyer or someone who's purchasing their first home, buying a house out of state comes with its own unique complications. And if you're trying to sell a house at the same time, there's even more to keep track of. Before you buy a home out of state, you need to research the neighborhood, visit the property at least once, find a good real estate agent, and make a competitive offer. We’ll cover how to do all of that so you can effectively buy a home out of state.

Research the neighborhood

The first thing you should do once you know what state you're moving to is research the neighborhood you're most interested in. Research crime, schools, commute, and lifestyle. However, you need to make sure your research is comprehensive. It's also essential that you see the property in person before you make an offer or finalize the sale. The images you find on home listings are designed to display the property in the best light.

 “The very first time I looked at a crime map of my desired location, I was terrified. I then brought up the crime map for my current location, which I felt comfortable enough to walk my dog alone at all hours . . . what I found was that my current location actually had a massively higher crime rate than the area I was looking at. So, I'd definitely suggest that people have a baseline area when researching statistics so that they don't get unnecessarily concerned,” said Lindsay, a customer service agent at Clever Real Estate.

Don't hesitate to ask your agent any questions you have about the home, neighborhood, or city. It's also a good idea to talk to locals if you can. A casual conversation about the area can be highly revealing about what it's like to live there.

Find a local real estate agent

Even if you spend tens of hours researching the neighborhood and city that you plan to move to, you still won't know everything about the area and the home-buying process. The best way to navigate this process is by finding a real estate agent who specializes in the location you want to move to. Clever is a great resource for this.

Clever helps more than 30,000 people find reputable real estate agents every year. You want an agent by your side who knows the area and can help you find properties that meet your needs. Clever will assist you with the agent interview process to ensure you find the right one. Get matched with agents in the area you’re moving to today.

When you interview a real estate agent, ask them questions about the area. You don't want to hire someone who only answers positively about a city or neighborhood without noting any concerns. Let's say the area you're moving to has higher crime rates than the state average. Even though this is common in big cities that have higher populations, it's something the agent you're interviewing should mention.

Once you find an agent you believe can help you find your dream home, make sure they understand the level of communication you expect from them. If you want them to give you updates every few days or weekly, communicate this expectation beforehand to avoid misunderstandings later on.

Research state and local laws

Before you make an offer on a house out of state, research state and local laws. For example, every jurisdiction has zoning laws that govern how a piece of land can be used. If you need to use an area of your home as an office, it's crucial that the state or local laws don't prohibit this use.

Property taxes

One uncertain element of buying a house out of state is that the property taxes will invariably differ from those you currently pay. In states like New Jersey, property tax rates are significantly higher than 2%, which means that you may be required to pay at least $6,000 in property taxes every year on a home that's valued at $300,000. If you'd like to move to a state with low property taxes, consider the following locations: 

• Hawaii: 0.32%
• Alabama: 0.40%
• Colorado: 0.55%
• Wyoming: 0.56%
• Louisiana: 0.56%

However, low property taxes might not make up for high home values. While the effective tax rate in Hawaii is just 0.32%—one of the lowest in the country—the state has some of the highest home values at an average of more than $800,000.

The amount you spend in property taxes every year depends on the assessed value of your home, which can change periodically. Before you buy a home, it's a good idea to estimate the property taxes that you'll need to pay.

While there are plenty of websites that list the effective tax rates in each state, the resource at the Tax Foundation is among the best. It lists effective tax rates by state and county.

Once you find the tax rate for the state you intend to move to, use an assessed home value calculator to identify the home's assessed value and the amount of property taxes you'll owe. To perform this calculation, you'll need to know the assessment rate percentage, which you should be able to find on the county tax assessor's website.

Insurance requirements

Buying a house out of state before you move also means dealing with different insurance requirements. While anyone who buys a home usually needs to purchase at least one type of insurance, the amount you pay and the level of coverage you receive can depend on where you live.

Homeowners insurance covers some of the losses that might accumulate if your home catches on fire or a criminal breaks in. While most lenders require it, this insurance isn't mandatory in any state.

However, let's say that you're moving to Alabama. This state maintains the Strengthen Alabama Homes initiative, which provides homeowners with an insurance policy discount if they bolster their homes against high winds and severe thunderstorms with FORTIFIED construction.

Insurance premiums can vary by state as well. In states that experience a lot of wildfires and natural disasters, insurance rates can rise rapidly from year to year. Before you buy a home in another state, think about whether you need additional coverage. States like Florida and Texas are at a high risk of flooding, which means that flood insurance might be a reasonable addition to your policy.

As for private mortgage insurance (PMI), it typically varies by mortgage type, down payment amount, or lender. For example, FHA and USDA loans automatically require mortgage insurance. Before buying a house out of state, make sure you request information from your preferred lender about their PMI requirements.

Short-term rental laws

If you're buying a secondary home or a vacation home that you intend to rent out when you aren't living there, know that the short-term rental laws can vary from state to state. These laws can also change at a moment's notice, which is why you should look for any updates before you finalize your move.

For instance, if you're buying a house out of state in California, know that it has some of the strictest rental regulations in the country. In cities like Los Angeles and San Francisco, legislation has been introduced to impose stricter rules on short-term rentals.

In Arizona, the state has limited the ability of county governments to ban short-term rentals. States like Ohio mainly require homeowners to register their properties as short-term rentals before they list them online. A simple Google search like "[state] short-term rental laws" can help you learn more about the specific regulations in the state you're moving to.

Find the right lender

Finding the right lender is necessary to avoid paying high interest rates and unexpected fees. You can apply for a loan with an out-of-state lender as long as they're fully licensed to operate in the state you're purchasing a home in.

You might want a local lender who's more familiar with the state tax rules and closing laws that apply to home purchases. Make sure your lender provides you with a pre-approval letter before you start looking for a house in another state. This calculator will tell you how much house you can afford based on factors like your income, debt, and credit score.

Keep in mind that certain loans come with income caps and loan limits. However, these restrictions can vary based on location, so make sure you're aware of the limitations in your area. You must also find out if you need to be at the closing in person. Many states allow the closing process to occur virtually.

Ready to make the move?

Buying a house out of state can feel overwhelming, but the process becomes much easier with the right preparation and support. By researching neighborhoods, understanding local laws, and working with a trusted real estate agent and lender, you can avoid costly surprises and make a confident purchase. Whether you're relocating for work or investing in a second home, following these steps will help you navigate your out-of-state move smoothly and successfully.