How To Write A Compelling Offer Letter

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An offer letter is a potential home buyer’s first official/formal proposal to buy the property. It’s legally non-binding, which means that a seller cannot hold you to the price or terms presented in the offer letter. However, lowering the price or changing the terms during the negotiation phase unless there is a valid reason, like problems revealed during an inspection, will be negotiating in bad faith.

Necessary Elements of An Offer Letter

A few elements that are necessary in an offer letter are:

  • Your name and your agent’s name. Even if most of their contact will be with your agent, you are the one making an offer, so it’s important to let them know who you are.
  • Your profession is another introduction element that serves two purposes – a seller gets to know you better, and it endorses your financial strength. You may include your yearly salary. It will be a part of your REBNY submit offer form, so you will be conveying this information anyway. If it’s presented directly in the letter, it may make the screening process easier for sellers, assuming they are going through multiple offers.  
  • Add the price you are offering. Adding a justification alongside the price and conveying why you think it’s fair or appropriate may not be a wise idea.
  • State whether you are buying with cash or with a mortgage. A cash offer can make your offer very attractive.  
  • Convey how much you are putting down.
  • Contingencies may not be required everywherein the city, and your agent can guide you on whether you should or shouldn’t add which contingencies you would require and what you are willing to forgo in the offer letter.
  • Your agent’s contact information is a crucial element of the offer letter though you can choose to add your own contact information as well.
  • The mortgage approval/pre-approval letter should be attached to the offer letter.
  • REBNY financial formwill give a snapshot of your financials to the sellers and help them determine if you are a financially sound buyer.

In addition to these elements, there are a few things that you could consider adding to your letter, but aren’t necessary.

  • Let sellers know if there is room for negotiation or if it’s your final offer. If they were looking for a higher price, it would save both you and them time.
  • If you are putting less than 20% in the down payment, a reasonable justification might be beneficial.
  • Mention how long the offer is valid.

Note that adding comps as a justification for an offer, especially if it’s a low-ball offer, can work, but it’s not a standard offer letter element. It works in some markets but not all. It’s best to defer to the agent with whom you are working as they will be able to gauge the best approach.

Best Practices for Writing An Offer Letter

It’s important to understand that the goal of an offer letter may span from simply formally presenting an offer and helping you stand out from the crowd in a bidding war. If it’s the former, a letter containing the necessary elements and a polite appreciation for the property may be enough. But if you have to stand out from the crowd, it’s important to identify your strengths as a potential buyer and discuss with your agent the best way to convey them. A good practice would be to be subtle when highlighting/mentioning your strengths as a potential buyer.

Regardless of the purchasing climate, a few good practices to remember when you are writing an offer letter are:

  • Keep it concise. If the seller has to extract necessary information from a mound of words, it may annoy them and make a bad impression.
  • Keep your writing clear and simple. Do not be overly wordy and increase the chances of getting lost in translation. Use clear phrasing and commonplace terms.
  • Tell them about yourself. A brief introduction may make it easier for them to empathize with you and make the process more human.
  • Avoid arrogance or too much humility. Claims like “I am the best option available to you” or something similar may encourage some buyers to simply reject your offer. Similarly, if you are too humble in making your case and defer too much to the seller, they might not consider your offer seriously enough.
  • Try to gauge the seller’s intentions when you meet them or based on what you have heard from your agent. Knowing if the sellers just want to sell quickly, simply want to sell to the highest bidder, or want to hand over their property to someone who would cherish it, can help you phrase your offer accordingly and make a good impression.   
  • Mention what you liked in the property and why you liked the property. Be genuine. If you praise the renovated bathroom or kitchen because that was the only strength the seller communicated to you, it might feel redundant. But mentioning why you like the location, saying it has ample space for your family, or that you like the unique layout, may make a good impression.
  • The rationale for your price can be a compelling element, but it’s important to back it up with hard market-related facts and data (comps) from your own research.

Factors to Consider

A few factors to consider when writing a letter are:

Fair Housing Act: While the onus of not discriminating with buyers falls on the seller, not on you, an offer letter that may bias the seller in your favor against other potential buyers may be problematic. That’s one of the reasons why some experts discourage offer letters from buyers.

Buyers market: If it’s a buyer’s market and the property has been sitting on the market for a long time, a lowball offer may be appropriate, but you should augment it with comps and convey your commitment to a quick transaction.

Seller’s market: In a seller’s market, you may have to make your offer more alluring than other bidders. Waiving contingencies or demonstrating your strong financials are two of the ways to do that.

Property Type: It may not matter much in a condo or townhouse purchase, but if you are buying a co-op and you can convince the seller that you have the knowledge, team (agent and lawyer), and strong enough finances to easily get approved by the co-op board, it may put you ahead of the competition.

Rental Property: If you are buying a rental property, the seller may have reservations about the new buyer ending the lease of its current tenants, so a surety that you will accommodate the existing tenants can make your offer more compelling.

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