When you make an offer, you want to put your best foot forward. If you and your offer are taken seriously, there is a better chance you’ll have your contract accepted.
Your offer package should achieve two goals: (1) communicate the terms of your offer (of course), but also (2) build your credibility.
If your reputation as an experienced investor precedes you, then ignore the rest of this article. But if you’re a newbie, then listen up! Otherwise, your chances of getting your offer accepted dwindle.
Because communicating your credibility is such an important part of the offer-making process, your “Offer Package” should be more appropriately called the “Credibility Package.”
Components of a Good Offer (Er, I mean Credibility) Package
Your offer package should consist of the following documents:
- Cover Letter. Start out the package with a one-page cover letter. This cover letter should talk about you and your team, what’s included in the offer package, and how excited you are to proceed with the deal. It should be upbeat and convey confidence to the broker and seller who will be reading it.
- Letter of Intent (LOI). Follow the Cover Letter with the Letter of Intent, which contains the terms of your offer, such as price, down payment, and closing timeline. This is used as the basis for negotiating the deal. Once you and the seller sign the LOI, you can forward it to your attorney to draft the purchase contract.
- Proof of Funds Letter. In my article “3 Steps to Get a Proof of Funds Letter for Your Next Multifamily Deal,” I spoke about how to get a Proof of Funds letter from a potential investor. It’s easy to produce and doesn’t obligate your potential investor to anything. While not always necessary, it makes your offer more serious and sets you apart from other buyers making offers.
- Information About You and Your Team Members. Especially if you’re a newbie and don’t have a track record, it’s vital that you emphasize the team you’ve built around you. End the package with your bio as well as that of your most important team members (such as property manager, CPA, real estate attorney, etc.).
Trust is Key to Getting Contracts Accepted!
Trust plays such a crucial role in business. The less trust there is, the longer things take, or more likely, things never happen.
For example, a well-known buyer with a track record of closing on similar deals can often command a lower price than his competition because his reputation precedes him. The seller is more likely to consider a lower price if he knows the buyer will perform.
On the other hand, if you’re not a well-known buyer and/or you’re a newbie without much of a track record, you have to work extra hard to earn that trust with the broker and seller.
You can build trust long before making an offer by meeting with the broker in person and then staying in touch.
In addition, submitting your Offer Package with the components I’ve outlined in this article continues to build trust with the broker, and it makes it easier for the broker to advise his seller to take you seriously as a buyer.
What challenges have you come across when making offers? What’s worked for you for being taken seriously?
Leave a comment, and let me know!