Homebuyers: Back Up Your Offer Letter with Facts and Figures

In a competitive real estate market, buyers are looking for any advantage they can find to win a bidding war. If you are buying a home and can’t offer all cash or skip the inspection, what can you do to make your offer stand out?

Some buyers opt to write a personal offer letter to the seller explaining why they love the home and what it will mean to them to purchase it. This bidding war strategy can be effective, but I often advise my sellers to ignore these letters. That’s because they don’t hold any weight. A buyer’s adoration of a home’s features doesn’t keep a deal from falling through due to financing issues or a troubling inspection.

Some of my fellow agents jokingly call me Paul “Heart of Stone” because of my tendency to disregard these sentimental pleas from buyers. But my job is to look out for my clients, who are the ones selling their homes. So if you’re planning to write one of these letters, be sure you add some weight to it by doing some (or all) of the following:

Bulk up your earnest money. Earnest money is paid after you and the seller agree upon a price, and it shows the seller that you are serious about buying the home. It is usually 1 percent to 5 percent of the agreed-upon purchase price, and it’s held in an escrow account until the sale is final. If you, the buyer, back out of the sale for a reason that is not covered by a contingency, the seller can keep the earnest money. Increasing your earnest money gives the seller additional assurance that you really want to buy the home. Better yet, make a portion of your earnest money hard (non-refundable) from day one or have it go hard after the inspection deadline.

Prove you have a 20 percent (or more) down payment. An offer with a large down payment is appealing to a seller because less of the home’s purchase price will need to be financed. A buyer’s offer letter will indicate the amount of the down payment, but there’s nothing forcing the buyer to follow through with it. If you have a large down payment, provide the seller’s agent with proof: a bank statement, for instance.

Provide a detailed financial statement. Your lender will vouch for your ability to buy a home, but won’t give the seller and the seller’s agent any more information than that – unless you give the lender permission. Ask your lender to provide details: length of employment, annual salary, amount of savings and credit score. This information will help the seller see that you’re in a position to buy the home.

Waive the inspection contingency. The idea behind the inspection contingency is that it gives the buyer a way to get out of the deal if the inspector finds something wrong with the home. The reality is that the inspection contingency gives the buyer an opportunity to back out of the deal subject to their opinion. This leaves the seller with, typically, two weeks of trepidation about the buyer’s commitment to purchase. If you waive this contingency, you’re eliminating one of the home purchase hurdles, and the seller has one less thing to worry about. But of course you don’t want to commit to buying a home without knowing what might be wrong with it, which is why you can instead conduct a pre-inspection – if you have time. A pre-inspection is done before you make an offer. Pre-inspections can get expensive if you end up doing them for several properties, but if you’re serious about one particular home, it may be worth it.

Stick to the facts. Your personal letter can provide the seller with information that will help in the decision-making process, but that letter is meaningless without additional evidence of your sincere intent to buy. You should also be sure to limit your letter to information that is relevant to the real estate transaction, so that it doesn’t inadvertently put the seller in the position to violate the terms of the Fair Housing Act.

The Fair Housing Act says a seller cannot refuse to sell a house based on race, religion, color, national origin, sex, family status or disability. Some states and municipalities have additional protections in place. So while you may have intended to paint a picture for the seller about how your son and daughter would love having their own rooms, a single buyer whose offer didn’t win could feel discriminated against.

If you decide to write a letter to the seller as part of your purchase offer, make sure the rest of your offer backs it up. A Redfin real estate agent can help you determine how to put your best foot forward; find one here. Check out Redfin’s guide to winning a bidding war for more information. And if it doesn’t work out the first time, check out our guide to recovering after losing a bidding war. Good luck with your home search!

About Paul Stone
Paul Stone is a Redfin real estate agent who works with sellers in Denver. He is a three-time winner of 5280 Magazine’s Five Star Award, which recognizes professionals in the Denver area who provide quality service to their clients. Paul has a master’s degree in conflict analysis and resolution, which helps him as he negotiates for his clients. If you’re interested in talking to Paul about selling a home in the Denver area, visit Redfin.com.