Rental Property Investor · San Francisco, CA · Member since 2015 · 236 posts · 156 votes
Just wanted to get the BP's universe feedback on this topic of coming up with an offer letter for a seller of the property you are trying to acquire.
What are the pros? Cons? Tips? Advice?
Does this really make a difference especially in the Bay Area Market (San Francisco, Oakland, East Bay, etc.) that I'm in? Would this make you stand out from a all cash buyer?
If it's for a primary residence, I always have my clients do it. With every offer, I include signed disclosures (if available) and contract, an offer summary with majority of the terms spelled out in plain writing, and an offer letter. In the letter, I describe a little of who my sellers are, why they love the home and community, how many homes they have looked at (shows they're serious), and like Chris said, anything that lines up with the motivations of the sellers. The letter to the sellers is more about emotion, and like you said, standing out in competition with an all cash offer. Another thing to think about is the general format. I have seen many many examples of letters written "Dear Seller..." and directed at the seller. I personally think that sounds a little corny, and so I use more of a narrative format for my clients and leave all offer terms out of the letter, leaving them to the offer summary. I have had a fantastic response doing this, and I highly recommend you ask your agent to do it.
For an investment property, unless there is some significant personal reason (need to have an address in a school district, rental is for your adult children, etc), I wouldn't recommend a letter. The offer summary tends to be more applicable with the price and terms. Frankly, up against someone who wants to live in the home in a multiple offer scenario, those will be the strong points anyway.
Unless you're offering full price or above list price in a multiple offer situation, a letter like this is useless in my opinion. No matter what you write in the letter I would always interpret it as "I want your house and I want it cheap. He's some phony letter explaining why I want to buy it cheap." Make your best offer and let it speak for itself.
I usually just ask the listing agent directly the reason why the sellers are selling. Listing agents have been very straight forward with me. I've even gotten answers like "this is an investment properties so $$ talks for the sellers, a letter would be useless". Other times I've gotten "sellers has been living here for decades and one of them past away and the home is now to big so they need to sell, attaching a letter wouldn't hurt". All in all, it depends on the personal attachment that a seller has with the property. The more the sellers are attached to the property, the more useful a letter will be.