August 20, 2021 | home-buying
Writing a Home Offer Letter? Consider It Carefully.
In a hot real estate market, it’s not uncommon for a seller to see dozens of offers. Most offers will include details like an expected closing date, mortgage financing info, and offer price— but some sellers go the extra mile and include a personalized offer letter to help set them apart from the rest of the crowd.
Personalized offer letters have been a long-time homebuying practice, but in recent years, experts are warning against it. One state has even taken steps to outlaw them due to potential Fair Housing Act violations that could ensue. In this article, we’ll cover what you need to know about these “offer love letters” and whether or not it’s a good idea to use them.
What is a home offer letter?
An offer letter is a personal note attached to your formal home offer that seeks to appeal to a seller’s emotions. These letters often include an introduction, photos, and short bits about careers, hobbies, or interests of their family. Buyers also usually add details about the house that they love and how they can picture themselves living there.
All of this is done in hopes of making a personal connection with the seller that may sway them in the potential buyer’s favor. These types of letters are especially popular in booming seller’s markets where numerous buyers are vying for the same house.
Pros and Cons of Using a Home Offer Letter
On one hand, a personalized offer letter may woo a seller to go with your offer, but under a different set of circumstances, the very same letter could have the opposite effect. Here are some advantages and disadvantages to consider.
It may give you an advantage. Selling a home isn’t just a financial decision for many people— it’s an emotional one. Many sellers take comfort knowing that the home is going to another individual or family that will be able to love it as they did.
A seller could find a reason not to like you. Though you may think you’re making a connection with the seller, you never know what could give them a reason to not like you. Even seemingly harmless mentions of what you do, where you work, or characteristics of your identity could lead to someone finding a reason to pass on your offer and go with another buyer.
It gives you an opportunity to let a seller know about areas where you are flexible. If you are flexible on certain aspects of your offer— like the proposed closing date, for example— you can mention that in your offer letter.
It could lead to a Fair Housing Act violation or the perception of a violation. The National Association of REALTORS® warned that an offer letter could be used (knowingly or through unconscious bias) to discriminate against a homebuyer. This could occur unfairly to another homebuyer that you’re competing with, or it could happen to you.
It can make you seem desperate for the home, which lessens your negotiating power. If you don’t word your letter carefully, you may come off like you want the house a little too much. A seller can take advantage of this and present a counteroffer that is much higher than you initially planned for.
The Controversy Behind Offer Letters
The biggest danger with a personalized offer letter is the potential for discrimination and violations of the Fair Housing Act. Passed in 1968, the Fair Housing Act was designed to prevent discrimination in real estate by prohibiting the refusal to rent or sell housing on the basis of:
- National Origin
- Familial Status
The concern with the letters is that a potential buyer could give clues or reveal these characteristics to the seller, which could then be used for or against the buyer— consciously or unconsciously.
For example, two homebuyers submit offer letters for a home. One letter describes their growing family and how their kids will love the treehouse. The other doesn’t mention children at all. If the seller uses this information to make a decision that favors one party based on their familial status, that seller has discriminated against the other homebuyer.
The National Association of REALTORS® has been warning agents about the risks of delivering these love letters to sellers for several years. Instead, they urge agents to:
- Let buyers and sellers know about fair housing laws and the potential downsides of sending these letters
- Remind sellers that their decision should be based upon objective criteria— such as the offer price— only
- Avoid assisting clients in drafting letters if they insist on sending one
In July 2021, Oregon became the first state to outlaw offer letters. Starting in January 2022, seller’s agents can no longer accept communication of any kind— including handwritten notes— that reveal or hint at the buyer’s race, skin color, sex, religion, sexual orientation, nationality, marital status, or familial status.
And though it might be legal in other states, some brokerages and agents have taken it upon themselves to enact a policy to not accept letters nor help their clients write them.
Proceed Cautiously with Your Offer
Should you choose to go ahead with writing a personalized offer letter (provided it’s legal in your state), it’s important to be aware of these pitfalls.
To avoid getting yourself in any kind of hot water, experts recommend only including objective criteria related to the offer, such as financial details, the likeliness of the sale to close, and what you as a buyer can bring to the table. It’s also better to focus on any details that you particularly like about the house— like a spacious backyard or welcoming entryway— and avoid details about yourself or your family.
If you ever have any questions about whether or not it’s a good idea to send a letter, you may want to consider consulting a real estate attorney for advice.
Looking for a mortgage lender?
Learn more about Amplify's mortgage loans and apply today.