How Homebuyers Win Bidding Wars Without Having the Most Cash
Flattery is a tried-and-true negotiating strategy, but homebuyers in hot markets are making a bizarre art form out of kissing up.
In Austin, where homes are selling at record rates, it's common for homebuyers to include a personal appeal along with their offer paperwork and financing details. Usually that means a letter, to introduce the seller to the buyer's family and wax on about what the buyer loves about the house. But buyers are stepping up their games: Recent personal entreaties have included YouTube videos and baked goods, says Andrew Vallejo, a Redfin agent. "After they toured the property, they left a note for the seller on the kitchen counter about how much they loved the house," he says of one recent couple. "The next day they came back and hand-delivered cookies to the seller and to five or six of the seller's neighbors."
Cookies might be new, but the offer letter is an old staple of hot markets. There’s plenty of anecdotal evidence to indicate that the strategy works, though only in certain regions. The Internet, meanwhile, is awash with advice for prospective homebuyers. So there’s a good chance that a house-hunter attempting to sweet-talk will be going up against another one with the same strategy, which usually involves a variation on a common theme. The first step is flattery: "I love those drapes! I won't change a thing!" The second step is more flattery, by way of aspiration: "Your lovely home is key to the life I want for my family." These can be powerful sentiments but probably less compelling if the seller is receiving several letters that all say the same thing.
In a crowded field, getting weird is one way to stand out—for better or for worse.
One of Vallejo's colleagues in Denver heard from a buyer who offered asking price—and two homemade pies. One on contract, one at closing. The two sides struck a deal last week at $300,000, but the seller turned down the desserts. Last month, real estate website Trulia published a blog post suggesting that buyers cozy up to sellers by getting quirky—for instance, writing an offer letter in the voice of the family dog. “My mom couldn’t stop talking about your home when she came back to the car after the viewing,” reads an example from the blog post. “My tail was wagging and I was nose-nuzzling her to death, but it was clear her attention was captivated elsewhere.”
Questions are in order. Do personal letters really help buyers get ahead? What about those written in the voice of a family pet? And who turns down pies?
That last one is a head-scratcher. The answer to the first two questions is that it depends. Linda Rheinberger, a regional vice president for the National Association of Realtors, says that sellers in her market of Las Vegas are interested only in verifying financing, not hearing about a child's favorite color or how a married couple met. "That sounds like a circus act to me," she says of personal appeals.
But Redfin data show that during the first six months of 2015, letter-writers were 14 percent more likely to have an offer accepted than would-be buyers who didn't send a note. 1
The intersection of tight markets and savvy buyers may also help answer for a stranger manifestation of the offer letter trend: the giveaway sweepstakes. In the past year, homeowners in Maine, Maryland, and Texas have staged contests in which they promise to give their home to the author of the best letter—and recoup the home's value by collecting a nominal fee from all entrants.
“People need a reason to hope in the world,” says Deanna Railing, who plans to give away her log cabin-style home in Columbus, Ind., to the author of the best 250-word essay on a life well-lived—assuming she receives 4,500 paid entries, enough to collect the $675,000 she wants for the home (she'll return the entry fees if she doesn't hit that number). Another homeowner, Christina Summers in Temple Hills, Md., is asking entrants for $100 and a chocolate recipe to honor her grandmother—who lived in the house and, yes, loved chocolate.
Houston real estate agent Michael Wachs probably knows as much about offer letters as anybody. Earlier this year, he and his wife held a contest asking entrants to send a check for $150 and 200 words on why they wanted Wachs's two-bedroom house. In the end, he received only 1,200 paid entries, too few to recoup the $400,000 value of the house—but plenty to make him an expert on the current state of the offer letter. "People would send these emotional, heart-wrenching stories," Wachs says. "It's horrible to say, but after you read a bunch, they start blending together."
Which isn't necessarily an argument for a creative approach. Wachs says he received entries in the form of poems, songs, and snippets of dialogue. One entrant made a mock-up of a book that lionized Wachs for making home-ownership accessible to people without the means to buy under ordinary circumstances. Wachs says he was uncomfortable with the undue praise. And he's not much of a poetry guy. "If I were to do this again, I'd tell people to just brush up on their Strunk & White."
(Corrects description of data on offer letters in the footnote to eighth paragraph.)