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6 Strategies to Help Home Buyers Win a Bidding War

October 10, 2019

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As the saying goes, a home is like a personal castle—and when you’re out there battling other buyers to win one, it can seem like a “Game of Thrones.”  Yes, intense bidding wars can even break out in a buyer’s market.

For a buyer, it can be discouraging to hear that multiple offers have come in for the home you have your heart set on. If it seems like a bidding war is brewing, you’ll need a plan to come out on top—and a clear understanding of what your seller is looking for in a buyer.

With your noble quest in mind, here are six strategies to help you win a bidding war.

1. Avoid a bidding war in the first place

Want to know the best way to win a bidding war? Make sure there isn’t one.

“Ask your broker to see if the sellers have a price in mind that would compel them to call off the bidding war,” says Lisa Larson, a broker at Warburg Realty in New York. She says the seller may respond to a bold, preemptive offer.

It’s a strategy that has worked for Tracey Hampson, a real estate agent at Realty One Group in Valencia, CA.

“I always like to speak with the listing agent and simply ask what’s important to the sellers,” she says. For example, they may need a 45-day escrow or want to keep the washer and dryer. Sometimes it really is that simple.

2. Have a pre-approval letter

However, you can’t always prevent a bidding war. So, you may need to dust off your armor and join the battlefield. And one essential weapon is a pre-approval letter.

Don’t confuse this with a pre-qualification letter, which just means that a lender has evaluated your creditworthiness and has decided that you probably will be eligible for a loan up to a certain amount. It’s just a rough estimate.

A pre-approval letter, on the other hand, shows that an underwriter has reviewed all your financial information and the lender is prepared to offer you a mortgage up to a specific amount.

Having that pre-approval letter might help your offer move to the top of the pile.

3. Make it rain

“Cash is king, and all-cash offers hold a lot of weight in a bidding war,” says Brian Morgan, a licensed associate real estate broker at Citi Habitats in New York.

If you can’t afford to pay cash, Morgan says you need to make the down payment as large as you can.

“It’s another sign you are serious and have the ability to afford the property,” he says.

Another way to make it rain is by offering a higher escrow deposit.

“Contract deposits are typically 10%, but a buyer could offer to put more on the line,” says Robert Rahmanian, co-founder and principal at REAL New York. “This move reduces the risk to the seller while increasing the risk for the buyer because they stand to lose more money.”

The third way to impress the seller with a deluge of cash is to simply offer more than the asking price. Rahmanian recommends the strategy of offering slightly above an even number.

“For example, if the asking price is $400,000, instead of offering $402,000, offer $402,350,” he says.

4. Compress contingency timelines

During a contingency period, a buyer can back out of the contract for a variety of reasons. But you can appeal to sellers who are looking to close the deal quickly by reducing your contingency period timeline.

April Macowicz, broker associate at the MAC Group in Lompoc, CA, suggests reducing your inspection contingency—which is typically 17 days—to five days.

Also, the fewer contingencies you have, the better. So you can make your offer more appealing by including the bare minimum of contingencies.

“Most sellers do not want to risk having to put their home back on the market because a sale fell through due to a contingency,” Burns explains. A clean offer is much more attractive.

So, what kind of contingencies should you avoid putting into your offer if you sense you’ll be heading into a bidding war?

“Don’t make a lot of requests for home improvements, or require that your home sell first before you close on the new property,” says Morgan. If the sellers really want to take something trivial like a light fixture with them, let them take it. You can buy another one!

5. Have an experienced agent in your corner

All your preparations could turn out to be worthless, however, if your agent is not experienced in bidding wars. You want to be confident in the person representing you.

“Choose your agent wisely and make sure they have a good reputation with other agents,” says Macowicz. “Trust me, the agent can make or break your deal.”

6. Write a personal letter

Opinions vary on whether writing a personal letter helps or not. Some real estate agents are against it and say they won’t even show it to the seller. Other agents swear by personal offer letters.

Morgan says it can certainly tip the scale in your favor.

“In the letter, tell them how much you love their home and that you look forward to spending many happy years there,” he says. “Don’t be afraid to compliment their property, but be sure to be sincere.”

If the offers are similar, Larson says a letter can help you stand out in a crowd of bidders. Remember, sometimes the best offer isn’t always the highest but the one that comes from buyers who will follow through and see the transaction to a smooth completion.

The post 6 Strategies to Help Home Buyers Win a Bidding War appeared first on Real Estate News & Insights | realtor.com®.

6 Fatal Phrases Home Buyers Should Never Include in Their Offer Letter—Ever

April 29, 2019

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Conventional wisdom dictates that one of the more successful tactics out there to convince a home seller to accept your offer is get personal: Include some sweet and heartfelt information to them in a note, expressing why you’re just dying to buy the house.

“A personal letter from a buyer can make an offer shine,” says Nancy Newquist-Nolan, a real estate agent with Berkshire Hathaway in Santa Barbara, CA.

However, attaching a so-called “love letter” to your offer also gives you the opportunity to stick your foot in your mouth, warns Bryan Zuetel, a real estate attorney and managing broker of Esquire Real Estate in Irvine, CA. Say the wrong thing, and it could turn off or even offend the seller so much that they don’t even want your money.

Trust me: I’ve been a real estate agent for the past six years, and I’ve read dozens of offer letters … and some aren’t pretty. At all.

Don’t want to ruffle the sellers’ feathers? Here are six phrases never to include in an offer letter.

‘I can see our family celebrating Christmas here.’

Sadly, some view other people negatively if they do not share their religious views. And although it’s illegal under the Federal Fair Housing Act for a home seller to discriminate based on religion—or on race, color, national origin, sex, family status, or disability—a claim based on what’s in an offer letter can be difficult to prove in court, says Craig Blackmon, a broker and real estate attorney in Seattle. Consequently, Blackmon recommends that home buyers not reveal their religion in an offer letter—plain and simple.

‘We’re not nuts about your shag carpet, but we’ll just tear that out.’

Here’s a good rule to follow throughout a real estate transaction: Don’t insult any sellers you may be dealing with, or their taste! Discussing changes you’d want to make to the house can be offensive. Put yourself in the seller’s shoes. Would you want a buyer criticizing your taste in home decor? No way!

Andrea Gordon, a real estate agent with Red Oak Realty in Oakland, CA, offered one experience as a cautionary tale to home buyers: “In one case, the buyer went on and on about the huge remodel he would do when he owned the house. But this was a slap in the face to my sellers, who had spent a considerable amount of money in the past five years renovating the property.”

Flattery can go a long way. So, tell the sellers how great their taste in color is, how much you’d love to have their lifestyle, or what an incredible art collection they have.

‘We would do anything to get this house.’

Don’t tip your hand too much—say, by hinting that you’re desperate to buy the home. Doing so can only hurt your negotiating power should the seller come back with a counteroffer.

‘Our lease is up soon, so we really need to close quickly.’

This kind of statement can weaken an offer if the sellers are looking for a longer closing period—or just realize they have you over a barrel, and can negotiate accordingly.

Moreover, it’s important for your real estate agent to communicate with the listing agent and find out what the sellers want, and to learn their backstory. How long have they lived in the house? How many children did the sellers raise in the home? Having this kind of info can help you craft a compelling offer letter that touches their soft spots.

‘Your home’s fenced-in backyard will be a perfect place for my dog to run around.’

You may love pets, but a seller may not feel the same way. In particular, mentioning your dog’s breed could be risky. For example, let’s say you own a pit bull. Considering the stigma surrounding the breed, some people are afraid of these canines—and, even though the sellers will be moving, they may be concerned about their neighbors’ safety.

On the other hand, if you know that the sellers love dogs, mentioning yours in an offer letter can help you find common ground, says Mindy Jensen, a real estate agent in Longmont, CO.

‘Although my offer has a lot of contingencies, I know we can make this deal work.’

This might sound like a no-brainer, but some home buyers still make the mistake of drawing attention to negative aspects of their offer. On one occasion, I was selling a house, and we received an offer letter that said the buyer wasn’t willing to pay full price for the home, but was willing to pay in cash. An all-cash offer is great, but why call any attention to the fact that the seller’s asking price won’t be met? Ultimately, the seller decided to accept another buyer’s offer instead.

Bottom line? Writing a personal offer letter to a seller can help seal the deal, but what you don’t say in an offer letter is just as important as what you do.

The post 6 Fatal Phrases Home Buyers Should Never Include in Their Offer Letter—Ever appeared first on Real Estate News & Insights | realtor.com®.

Does Writing an Offer Letter to the Seller Help? Not Always—Here’s Why

April 24, 2019

Tolga TEZCAN/iStock

You’ve spent months—perhaps years—searching for the perfect house, and you’ve finally found it. But you’re not alone; there’s a very strong chance that other home shoppers are vying for it, too. So how can you stand out? Many experts recommend writing a personal offer letter to the seller.

“If there are multiple offers, we always suggest buyers write a letter of introduction as a way to put a personality behind the number,” says Josh Rubin, a broker at Warburg Realty in New York City.

After all, selling is an emotional process. But does this strategy work? We explored the pros and cons of writing a letter to find out whether it helps or hurts your chances of having your offer accepted.

Why you should write a personal letter

It can appeal to a seller’s soft side: Some buyers use a letter to tell a personal story in the hope that it will resonate with the seller. Tracey Hampson, a real estate agent with Realtor One Group in Valencia, CA, says she currently has a listing with three offers, but the offer she likes best is from a couple explaining how they are having their first child and want to raise him in a safe neighborhood.

“This is the exact same scenario my husband and I were in when we first moved,” she says.

Touching stories like this can strike a chord with sellers and make them feel comfortable about passing on their home to you.

It helps clear up any confusion about financing: A personal letter can also answer any questions or concerns that a seller might have about your ability to finance the home. For example, Hampson once had a buyer who was in the Air Force and was planning on using a Veterans Affairs loan.

“VA loans have some stigma attached to them because of the loan fees the veteran borrower is not allowed to pay, so the seller has to pay for them,” she says. “Also, VA loans usually take longer to close.”

So Hampson included a letter explaining the myths about VA loans. She says it apparently worked; the sellers accepted the offer.

It helps get a seller to work with you in a buyer’s market: A personal letter can also be used to help explain your financial situation.

“Back when it was a buyer’s market, letters were useful in getting the seller to accept a lower price, especially if the buyer had financial hardships,” says Vivian Cobb of Cobb Real Estate in Colorado Springs, CO.

Why writing a personal letter can hurt you

It can undercut your power during negotiations: Believe it or not, letting a seller know how much you want to buy their house could hurt you if you make it to the bargaining table.

“There’s a belief that a letter tips the scales to the seller when negotiating the price and the inspection,” says Karen Kostiw of Warburg Realty in New York City. “The seller may interpret the letter as the buyers ‘showing their hand,’ and it could weaken their position to negotiate.”

It could make the seller uncomfortable: Sometimes a personal letter can veer into TMI territory. An anxious buyer may divulge more details than the seller is comfortable knowing and ruin their chances of getting the home.

“Or, the buyer could inadvertently come off as insensitive, or say something in the letter that turns off the seller,” Kostiw says.

It could bias the seller: Perhaps the biggest con of writing a personal letter is that it could lead to discrimination, which is why some agents prefer to steer clear of them.

“Most letters consist of the buyers explaining their lives to add a touch of emotion to their otherwise dry contract, which is why it has worked for so long,” says April Macowicz, broker associate and team lead at the MAC Group RE in San Diego.

But the buyers might reveal personal information that prejudices the sellers against them. “The Fair Housing Act states that buyers and sellers cannot discriminate on the basis of race or color, sex, religion, national origin, disability, or familial status,” Macowicz explains. But this doesn’t mean that discrimination won’t occur. “And buyers who find out can sue for discrimination,” she says.

That’s why Tory Keith, president of Natick, MA–based real estate firm Board and Park, says some seller’s agents don’t even share a personal letter if it contains certain information like a photo or information about the potential buyers’ status in any protected class, “because rejection of such an offer could be interpreted as a Fair Housing Act violation.”

The post Does Writing an Offer Letter to the Seller Help? Not Always—Here’s Why appeared first on Real Estate News & Insights | realtor.com®.