Love Letters to sellers.....should you submit a letter to the seller with your offer
You've heard the stories from your friends + relatives---"The seller loved us because we wrote a letter & they picked our offer even though we weren't the highest offer!!!"
Yes. I've had it happen. But letters to sellers walk a fine line when it comes to violating Fair Housing Laws. So here's the thing, you can count on me to be as creative as possible to get your offer accepted & that has included letters & videos & more! One offer I submitted included the offer to design, pro-bono, a website for a charity that the seller founded if the seller accepted my clients offer. They had a very basic website & my client is a skilled designer so we thought it might be a unique addition to the offer to tip in our favor.
Last year, I had two Buyer clients submit a short video to the seller---both offers were accepted! The videos definitely helped, but that's not the whole story. For one of the property's, we offered significantly above the list price, waived the inspections & the appraisal---we literally threw in every favorable contingency possible because my clients were in LOVE with the house--it was their dream house & they didn't want to miss it. The video helped to convince the seller to cancel the open house but, frankly, they really weren't likely to get a better offer.
The other client who submitted a video--that one really did make the difference in getting our offer accepted despite the fact that their purchase would be contingent upon them selling their condo.
So yes, letters or videos to sellers can make a difference. But again, we're skating on thin ice & there's also a very good chance that the Sellers agent isn't going to pass along letters. I make it a policy, when representing a seller, not to submit letters. I'll read them & if there's relevant info pertaining to their job security or financial stability, I may let them know. But often sellers are overwhelmed by the enormity of the process & adding in undue emotional stress isn't helpful---one house one buyer & it's difficult to make emotional connections on top of what really should be a business decision.
That said, some real estate Brokerages will not accept letters to sellers because there have been lawsuits in recent years--it can be a violation of Fair Housing Laws. Oregon actually passed a law banning them & I suspect others will follow. (Here's info to review). If a property is an investment property that has been "flipped" it's highly unlikely that a letter would make any difference---an investor is interested in the bottom line and getting to the closing table as quickly as possible.
Rather than submitting a "love letter" to the seller we need to understand what's important to the seller. Do they need a flexible closing date? Does the listing say 'Subject to Suitable Housing'? Would a screenshot of your credit report help to highlight that your finances are in order? Do you have a substantial amount in your bank account to show that you have proof of funds for your down payment? Have you been solidly employed by the same employer for several years? These are examples of important details that we can discover to craft an offer that gets selected. Some Realtors understand that there is an offer strategy but I can tell you that many don't & THAT is YOUR advantage of choosing to have me on your team!
When crafting an offer I can assure you that I will work to discover the reason the seller is selling, how quickly they want to sell, and what might make our offer stand out--this is what will make a difference! In this market it's going to come down to the offer that offers the most favorable terms for the seller: the best price, the fewest contingencies, & the most likely buyer who be able to get to the closing table without any hiccups. Having your financing in place, understanding the market that you're in & home sales in the areas that you're looking, & understanding the offer/contract process will allow you to be ready to decide what's right for you when working with me to craft an offer that will be accepted.
Remember, you’re driving the bus & I’m next to you as your navigator! My job as your agent is to provide you with the various routes that you can take but you’re the driver making the decisions that are best for you! Ideally you've been reading my posts, watching my videos (& others) and taking the time to learn the home buying steps so that when you're ready to submit an offer, you're able to make a decision that you feel confident about!
When multiple offers are expected on a property one of the tools that we can use is an Escalation Clause. This is a document that is submitted along with the offer package. It states your starting offer but gives you an opportunity to increase your offer, by a set amount (increments), up to a maximum amount (cap).
Here's an example:
List price is $279k and comparable properties lead us to believe that offers could go as high as 10% above the list price. You'll want to use your mortgage calculator or get help from your lender to make sure that you understand the difference between the total monthly mortgage payment at different amounts. What is the monthly payment at $285k vs $305k? This will help you to decide if you're ABLE to offer $305k. You'll also want to look at comparable prices in the neighborhood--keeping in mind what it might appraise for, what the future value & equity potential is, and how close on a scale between 1 & 10 does it land on your scale (you can't use 7---that's the indecisive number, it's either 8+ or 6-). This is how you will decide how much you're WILLING to offer.
Here's what the escalation looks like:
List price is $279k; we're willing to increase our offer amount by $xxxx ($1k, $3k, $5k, $10k) over the highest offer up to $x amount.
Starting offer $279k
Increments of $3k
If the highest offer is $300k then your offer becomes $303k. However, if another buyer is willing to pay $309k then your offer is maxxed out at your cap of $308k. If the highest price is the determining factor then the Seller will go with the buyer that pays $309k.
WHY WOULD WE WANT TO SUBMIT AN ESCALATION?
Because we are in a very strong sellers market where most houses, in good condition, will have at least 3 or more offers (my listing at 15 Coes St North Providence had 12 offers!).
Here are some strong reasons to consider an escalation clause with your offer:
1) When there are multiple offers the sellers agent will call for "Highest & Best Offers"--you get one shot & we don't have access to see what the other offers are. You hear about "Bidding Wars" but that's not really how it works.--there isn't usually back and forth.
2) The Escalation Clause is a written document that you will sign. Part of this clause states that the Sellers agent must provide written proof of the "Bona fide offer" that kicks in your escalation. This is so that we don't just have to take the agents word for it that your escalation has been kicked in. So if the highest competing offer, per the example above, is $299k then your offer becomes $302k and they are supposed to provide us with proof of that offer---info will be redacted for the privacy of the competing buyer but again, this is an attempt at transparency.
3) It's a drag to miss out on a house that your really like by a few thousand dollars so this allows you to cover your bases. Have I had people submit escalation clauses who haven't had to go to their maximum amount? YES!! Many times!
Do we have to put in a cap/max amount: No. But I have had this strategy backfire before on a client. We hadn't signed a contract so they weren't in a position where they had to move forward--another buyer put in an escalation that went way over what we anticipated! I've also had it work as a strategy. We have to talk about all of the options to make sure we're using the strategy that works best for you!
Should you start with the list price: yes but I do recommend that you set your increments at $2k or more (meaning that you would be $2k higher than the other most competitive buyer). Why higher increments? It depends on the house & the price point but you may be able to entice a seller to choose you over a similar buyer who perhaps has another more favorable contingency--maybe they've waived the inspection but you're willing to pay $5k more than that buyer so they may be willing to move forward with you even though you have included an inspection contingency.
What else should do you need to know when submitting an offer? I have a video that cover this here. Watch it but here's also an overview:
To make an offer I need to know:
escalation & if so starting offer & maximum/cap & increments
will you include the inspection contingency
will you include the mortgage contingency
will you include the appraisal contingency & if so are you able/willing to offer an appraisal gap
See also: What Are Contingencies blog post
Now that you've read through this let me know if you have any questions! It's a lot to take in but it's my hope that if you have the opportunity to read posts & watch videos you'll be bette equipped to know what else I can do to ensure you understand your options & the process. I'm always here to help!
You will be charmed by 271 Atlantic Ave the minute you step foot through the brightly colored front door! This two bedroom Bungalow features many updates including a five year old roof, young heating system (gas), and updated plumbing and wiring. A warm and inviting layout with hardwood floors throughout, the living room and dining room receive an abundance of light. Off of the dining room are two bedrooms, full bathroom, and kitchen. The kitchen has been updated and leads to a large deck for outdoor entertaining and a spacious, fenced in backyard. There is a walk up attic which adds additional storage space or potential renovation. The basement is partially finished, ideal for an office, music practice studio, or playroom. The backyard features an oversized deck that overlooks the yard which has a fire-pit and ample room for kiddos &/or fur-babies. The property is complete with a one car garage. Great location---fifteen minute walk to Pawtuxet Village with restaurants, bars, and coffee shops along with the convenient amenities of Post Road nearby.
Welcome home to 15 Coes St, a well cared for and maintained home in the heart of North Providence. Step inside to a spacious living room which features an oversized picture window and newly refinished hardwood floors. Entering the kitchen you'll see a built in vintage hutch with the original mid-Century modern starburst hardware. Originally built with the family table as the center of the kitchen, the cooking area is relegated to a galley kitchen--everything close at hand yet plenty of cabinets. Off of the kitchen, you will find three bedrooms with ample closets and hardwood floors. The bedrooms are spacious and all receive an abundance of natural light throughout the day. The full basement is partially finished with laminate flooring, offering ample room for a media room, office, or any number of configurations to meet your needs. There is also additional room for storage and laundry. The roof is ten years old and the gas heating system has been well maintained and is in great condition; an added bonus--this home has Central AC! A charming yard, ideal for kids or fur-babies, it is the perfect City size and has a working sprinkler system. Easy access to all major highways and all that Mineral Springs has to offer yet tucked away in a quiet neighborhood. This is a perfect home for someone looking to downsize or for first time home buyers who want to be in a great neighborhood.
Buying or Selling? Here's some useful advice!