Ah the love letter… in today’s raging hot market, with extremely low inventory and bidding wars becoming the new normal, it’s become almost a necessity for prospective buyers to include a love letter in their offer package to sellers. These love letters are written to essentially attract the sellers’ attention and explain the many reasons why they should pick you as the buyer.
However, as love letters become more popular there are also more warning signs being thrown up. The National Association of REALTORS® warns that sending love letters could open real estate professionals and their clients up to fair housing violations. In fact, last year, Oregon was the first state to ban buyer love letters.
There are, however, alternatives you can advise your clients to consider in order to get a leg up on the competition.
Adding things to a love letter like photos of your clients and/or their pets is a novel approach, but that’ll likely have a negligible effect on the seller. At the end of the day, money talks. The best alternative to a love letter is cash. Be sure to always advise your buyers to make the highest offer that they are personally comfortable with, not the number that they think will be highest.
An alternative to this is the all-cash offer. Of course, making an all-cash offer is not possible for most buyers, and if another buyer can offer all cash, then they’ll likely be the buyers who end up purchasing that particular property. However, there are other avenues that you can advise your clients to take, including companies like Ribbon, Knock and FlyHomes that can lend them money to make an all–cash offer.
In the current competitive market that's already full of contingencies, a great alternative to sending a love letter to the sellers is to waive one or two of these contingencies and reduce the burden on them.
Removing the financing contingency and/or the appraisal contingency can do a lot more to make your buyer’s offer more attractive compared to sending a love letter. During the height of the pandemic, many buyers even waived inspection contingencies, although this is never recommended and should only be considered by experienced homeowners.
Tighten the Terms
Another excellent way for your buyers to increase their chances of winning an offer is to tighten their terms. If it’s possible to reduce the timeline from when you submit their offer package to closing, your client's offer will be much more enticing to sellers. Some tactics for doing this is to shorten the length of the escrow period, as well as getting the loan pre-underwritten so that you can remove the financing contingency completely.
Use an Escalation Clause
Seller’s agents are usually tight-lipped when it comes to the exact number of offers and the highest offer their clients have received. An underused tactic that you can use to make your buyer's offer package more enticing to sellers is an escalation clause. This clause states the offer, but adds that they will beat any higher offers that are presented by the amount you specify.
This clause is incredibly useful because it gives your clients the opportunity to present the highest offer. However, be sure to advise your clients that they should cap their escalation clause at the highest sum they are willing and able to pay.
Lastly, this step falls on you as the real estate professional. Building rapport with the seller’s agent is critical when it comes to increasing your client's chances of nailing that offer. Naturally, the longer you’re in the industry, the more connections and relationships you’ll make with other agents. But there are new agents entering the industry every day and you need to be able to build rapport with other professionals in a short period of time. This is a vital skill for any agent.
Although love letters are endearing and can have a very real impact on a seller’s decision when choosing an offer, the suggestions listed above are more actionable steps that you and your buyer can take to ease the stressful home-buying process.