Real Estate Offer Cover Letter

If  your agent isn’t presenting your real estate offers with a cover letter, you are losing money.  That’s right.  You are out right losing money for not taking the time to write a real estate offer cover letter.

I am a very firm believer that when presenting an offer for a buyer, one of the greatest services that an agent can provide is to include a well written powerful argument describing why the buyer is offering what they are offering in the form of an offer cover letter.

When supported with a well researched offer cover letter, it makes it a lot harder for a seller to counter as aggressively as they may have otherwise wished.

This is because the cover letter gives meaning to the asking price, instead of it just being a buyer’s dream.  There is a huge difference between, “My client is offering to purchase your home at X price for this reason, this reason, and this reason”, as opposed to, “My client wants to purchase your home at X price just because he feels like it.” That is the message that no offer cover letter sends because the proposal is not grounded by any information.

This becomes even more and more true as you work up the scale into higher priced properties.  Can you imagine the impact that a well formulated argument may have on a negotiation for a $2 million home?  It can be huge.

To all the cynics, no, I don’t believe that a seller is going to give away their home because of a one page letter.  But I do believe that it can make an impact of $25,000, $10,000 or even $5,000.  Even at $5,000 the effort is so well worth it, and the truth is that your agent is doing you a disservice if this is not being done.

What Should Be In An Offer Cover Letter?

• Tone – write the offer cover letter in a direct yet respectful manner that gives the seller the sense that you are an unemotional buyer.  The tone should be somewhat down on the market but not too much because then it won’t make sense that you would want to buy the property if you believe the market is really so bad.

• Market details that can’t be denied or argued with should be included.  Granted, if somebody really tries they can argue with nearly anything, but the idea is to present cold hard facts that are the basis for your offer.  Facts are facts and they make the best ammo.  It is a great idea to focus any negative arguments on the market and not directly on the home.

• Describe how quickly and diligently you will work to close escrow in your offer cover letter.  This can give a seller glimpse of the light at the end of the tunnel, should they choose to work with you.  In this market, many sellers value that light at the end of the tunnel enough to make them bend on price a bit extra for you.

• Tell the seller that you love the home. Many buyer’s think that this will cause the seller to be more firm on their price, but I actually think it helps you get a better price.  Here is why.  If it is true that you love the property and think it could be perfect for you yet you are still only willing to spend X amount of money on the property, how much will the next buyer be willing to spend if they don’t love it quite as much as you do?  That is a scary thought for a seller that your offer cover letter should bring to light.

Here Is An Example of A Real Estate Offer Cover Letter I Wrote:

* Names of people and the community have been changed.

May 7, 2009

Dear Agent:

I want to thank you and your clients for being so accommodating to my client’s requests to view the house.  They really love it and are very excited about the possibility of living there once they have completed the numerous cosmetic updates they will want to do once they have closed escrow and prior to moving in.    My clients currently live in the community and enjoy the community very much.  They are looking to move into a bigger property and have seen nearly everything that is on the market (this establishes my clients as people that have a good idea of value and have done their homework).  Their offer is all cash and is not contingent on an appraisal or the sale of their current home.

My clients fully understand the market and have thoroughly reviewed the comps.  They have completed their offer based on the following factors:

• The high end of the market still has a great deal of downward pressure due to the high level of inventory.  In this community alone there are 16 homes listed above $3,000,000 yet only one has closed through the first four months of this year.  At this rate it would take 5.33 years to sell the existing inventory, assuming no additional properties are listed.  This serious imbalance in the supply and demand curve will continue to put a great deal of pressure on price.  There is, unfortunately, no other possible solution to this serious supply and demand problem. (This is a great way to formulate a very strong argument that does not directly attack the seller.  The market is being attacked and the seller is a victim of the market).

• My clients are fully prepared and ready to build a home that will be perfect for them if they can’t negotiate a price that they think will protect their investment.  They have conducted very thorough investigations with multiple builders, including the builder who built your home and G&B Homes who has built eight custom homes in this community alone.  The conclusion has been that including builder fees they can replicate the subject property with equal quality at between $240 and $245 per foot.  If you take a mean of $242.5 per foot and multiply it by the 6,725 square feet that your property has it would come to $1,630,000.  If they were to buy a similar-sized lot with similar views they could arguably complete the project between $2,650,000 and $2,750,000 with plans and permits.  They fully understand building would meantime, work, and headaches but they also understand the result would be new construction designed and built exactly as they want. (This paragraph makes it clear that my client has alternatives should they not be able to strike a deal).

• The majority of the newer construction in this price range includes a greater amount of covered outdoor space.  It has become very popular to build large loggias for dining and entertaining that can be accessed through large disappearing walls of glass.  My clients are somewhat concerned that if they were to sell the property sometime in the future they would have some trouble since buyers’ demands as to covered outdoor living space is so strong.   They are also a bit concerned with the privacy issues due to the golf course exposure and will look to add landscaping. (Puts a little doubt in the seller’s mind that their home may be becoming outdated and could lose more value if they do not sell now).

Having said all of that, I do want you to understand that they have considered all of it and have decided that they very much do want to purchase the house.  There are also plenty of positives.  They love the layout.  It works very well for their lifestyle.  They think the kitchen is great and very comfortable.  They are excited about the idea of having such a large great room for entertaining separate from the family room.  They are also very much into art and have a great collection.  Your home offers dramatic wall space for display.  Finally, the upstairs room will make an ideal office for Mr. Smith.   He likes to have views while he works. (Try to end on a positive note so the seller does not feel to beat up).

It is our hope that you will give this offer serious consideration.  If we are successful in making a deal you will find yourselves in escrow with A+ people.  In this market that means a great deal.  We very much look forward to your response.

Respectfully yours,

Daniel Beer

I hope you have found this post helpful.  Also, please feel free to share any cover letter techniques or experiences by leaving a comment below.