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The Risks Of Personal Offer Letters In Real Estate

While these introductory personal offer letters seem innocent enough, there are some very real & serious risks associated with this new strategy.

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Over the years, real estate has continued to change and evolve. Even ten years ago, the industry looked completely different than it does today. From marketing strategies to protocols, many elements have changed– and mostly for the better. Thanks to television shows and an intense seller’s market, one of the latest changes has grown tremendously in popularity: including a personal offer letter. On the surface, this practice seems smart, personable, and a way to stand-out in a multiple offer situation. However, with a closer look, there are risks involved with this new practice.

The Risks Of Personal Offer Letters In Real Estate

Most of these personal offer letters seem to follow the same template. Eager homebuyers introduce themselves via the letter. They typically include a brief bio about the buyers, the reason they love the home, and why the seller should pick them. Some even include a photo to accompany the letter. While these introductory personal offer letters seem innocent enough, there are some very real and severe risks associated with this new strategy.

They Could Violate Fair Housing Laws

What many of these letters subtly provide is information regarding the Fair Housing protected classes. Also, including a photograph of the buyer can give inadvertent details like race, familial status, or sex. It is against federal law to pick a buyer or reject a buyer, based on any of the protected classes. Cambron Elsey, a Charleston, South Carolina Realtor with The Boulevard Company, says, “Submitting these offers could be a violation of the Fair Housing Act. By giving information to the seller about my buyers, buyer’s family, life goals, reasons for wanting the property, the sellers could inadvertently select a buyer for the reason that qualifies them based on race, age, religion, ethnicity, or marital status. Additionally, the personal note could unintentionally disqualify us in a seller’s mind if they don’t agree with the information I, or we, provide on the buyer.”

While some sellers may want “a nice family” to buy their home, it’s a violation of Fair Housing laws to pick a buyer based solely on their familial status. When personal letters accompany offers, sellers run the risk of liability in violating Fair Housing laws. It’s crucial that both the listing agent and the buyer’s agent work together to avoid either party violating the Fair Housing Act.


Some Real Estate Boards Do Not Allow Them

While including a personal letter is not illegal, some local and state real estate boards have created rules that prohibit a real estate agent from utilizing these personal offer letters in the negotiating process. Associations like the New York State Association of Realtors raised concerns about the potential for violations and have since banned the use of the letters. A real estate agent that violates association or board rules is subject to discipline and fines.

The reason many agents, local Realtor boards, and state associations are hesitant to include personal offer letters is due to the potential for discrimination and violation. As Elsey explains, “As a Realtor, I am held to a higher ethical standard. I must encourage my clients to submit offers based on their ability to purchase a property financially and with agreeable terms. Encouraging personal letters takes away from the meeting of the minds and draws on beliefs outside of factors that encourage ratification.”

How To Win A Multiple Offer Situation Without A Personal Letter

Personal offer “love letters” to sellers have become common practice in multiple offer situations. In fierce seller’s markets, buyers are frequently competing for a winning offer. For many, they are relying on the personal letter to set them apart from the competition. Elsey says it’s not uncommon for buyers to request including a letter, “with low inventory, buyers often compete to win the house of their liking. What many buyers fail to understand, and agents fail to explain, is an offer is almost always stronger based on the purchase price and terms, not purchase price and a pull-on the heartstrings.” Elsey continues, “buyers believe that if they can offer a glimpse into why they would be the best next owner for the home, they can win over the seller.”

However, relying on a personal offer letter is not the best strategy for winning a multiple offer situation, as sellers are not obligated to read the letter. Instead, Elsey suggests, “If a letter is included, it should not contain any mention of race, religion, sexual orientation, age, marital status or education. It is a fine line to walk.” Other tips for presenting a strong offer:

  • Attach a loan pre-approval letter with the offer
  • Avoid including contingencies, if possible
  • If able, offer over list price but subject to appraisal
  • Keep the requests to a minimum (conveying personal property, home warranty, surveys, etc.)
  • Be flexible and let sellers know you’re flexible and willing to work with them to get the home closed

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Jennifer is an accidental house flipper turned Realtor and real estate investor. She is the voice behind the blog, Bachelorette Pad Flip. Over five years, Jennifer paid off $70,000 in student loan debt through real estate investing. She's passionate about the power of real estate. She's also passionate about southern cooking, good architecture, and thrift store treasure hunting. She calls Northwest Arkansas home with her cat Smokey, but she has a deep love affair with South Florida.

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