A well-written real estate love letter can reduce a buyer's purchase price by 1% – 10%. If we're talking about a $1 million property, that's $10,000 – $100,000 in savings. Therefore, learning how to write a real estate love letter is essential if you want to save money on your next property purchase.
At the very least, a real estate love letter can help you get a counteroffer when a seller receives multiple offers. Staying in the race is vital if you really want the property.
Yet, most people, out of ignorance or laziness, don't bother writing a real estate love letter when making an offer. Be different from most buyers and write one! If you can make a connection with a seller, it goes a long way. Because being a seller is much more stressful than being a buyer.
This article is actually my second example of writing a real estate breakup letter. Here is my first real estate breakup letter example. Both letters worked and saved my six figures.
Care Enough To Put In The Time
After every job interview, writing a hand-written note can make the difference between landing the job or not. Yet, few people bother to write a hand-written thank you letter either.
I firmly believe one of the reasons why it's so easy to get ahead is because most people don't care enough to try. Folks are kinda clueless when it comes to building rapport with others. Instead of first trying to give, it's all about taking, taking, and taking some more.
There is no downside, only upside, to writing a real estate love letter to try and make a connection with the seller. The listing agent has a fiduciary duty to present all offers as is. Thus, the greater the connection you can make, the greater your chance of getting the best deal possible for a property you want.
Another person's lack of emotional intelligence is your pot of gold! As someone who loves real estate and writing, let me share with you how to write the ultimate real estate love letter.
For background, I have written over 2,500 articles on Financial Samurai since I started the site in 2009. I am a Wall Street Journal bestselling author of Buy This, Not That: How to Spend Your Way To Wealth And Freedom. I have a real estate portfolio that generates over $140,000 a year in semi-passive income. Finally, I've also written three real estate love letters to great success.
How To Write A Real Estate Love Letter
The keys to a good real estate love letter are:
- Finding a common connection with the seller
- Increasing the perception that you are a dependable buyer who won't flake during escrow
- Reducing or eliminating the perception that you are a profiteer/flipper
- Pointing out specific things you love about the property and how incredible the home is
- Describing why you would be the perfect owner of the property
- Sharing information you feel that will make the seller like you
- Keeping the letter to 600 words or less (two pages), but preferably one page
- Be genuine in your real estate love letter
- Introduce yourself and your family members
- Talk about the future of your family
- Mention what you appreciate most about the home
- Make sure the real estate love letter is edited without grammatical mistakes
Below is an example of our initial real estate love letter we sent to the seller with a written offer of $1.55 million. The asking price was $1.95 million with the hope that it sells for closer to $2.1 million.
At the time, we did not know the names of the sellers, only the listing agent's name.
Example Of A Real Estate Love Letter
My wife and I are interested in purchasing your lovely home. We live just a block away on the same side of the street next to Julia's house (a neighbor they knew) at (our address). We first purchased and remodeled (name of our house's original owner) home back in 2014.
The remodel was a labor of love for 1.5 years, but it gave us the experience and confidence to update and remodel an older house again. Not only did we remodel all bathrooms and kitchen, we also painstakingly landscaped the entire grounds.
We love living in Golden Gate Heights and know the neighbors and the neighborhood quite well. Because we work from home, there’s no need for us to commute downtown either.
In 2017, we were blessed with a baby boy and we are hoping to have another child sometime soon. Your family’s house seems like the perfect fit for us and our expanding family.
Further, the house is large enough to have one set of parents move in with us if need be. Our parents are in their 70s, and we would like to make preparations to take care of them when it’s time for them to need assistance.
If we are fortunate enough to buy your house, we would spend several hundred thousand dollars over the course of two years to update the house. We’d paint the exterior, get a new roof, replace the water heater and furnace, update the electrical, change the windows, update the plumbing, remodel the bathrooms and kitchen, and maybe even create a deck to enjoy the western sun.
It will be an extensive and arduous endeavor, but we plan to own the home for decades and take great care of it. Maybe in 20-30 years, when our boy graduates from college, he might be able to move in and start his own life there as well one day.
After working hard and saving diligently for the past five years, we are in a position to pay $1.55 million in cash for your home. We would then set aside $300K over the next two years to pay for the remodeling. There are always unexpected surprises that come up during rehabilitation.
As we have experience selling and purchasing several homes before, we are comfortable with a quick three-week close without any financing contingencies. We understand the uncertainty when it comes to selling a home, as we sold a property we owned for 12 years in 2017 to simplify our lives. As a result, we promise to make the closing process as quick and painless as possible.
The three weeks will give us time to have one of my contractor friends come by to inspect the house and move our funds from our investment accounts to our bank.
Thank you for your time and consideration. We look forward to hearing from you.
Sam and family
Review Of The Real Estate Love Letter
From the letter, you will notice that we made the following points:
- Made sure they knew we were neighbors.
- Made it clear we were long-term owners who planned to raise a family in the house.
- Highlighted their neighbor, whom we also know.
- Made it known we plan to rehab the house and take great care of it.
- By highlighting we plan to put in $300,000 to remodel the house, it makes them realize that we aren't just spending the initial offer price. We also remind them how much time and work it takes to rehab the property if they do not sell.
- Empathized about the stress of selling a property and reassuring them we'd be a trouble-free, 21-day, quick close with all cash.
- Emphasized our desire to grow our family, since they were a large family with five siblings.
- Included our family holiday picture with our son who is as cute as a button.
After two days, the agent got back to me and said they were “very pleased” with our offer! Remember, the agent initially wanted to list the property for $1.99 million. Our real estate lover letter effectively negated any offense a seller may have taken by our low-ball offer.
Thanks to the real estate love letter, we were able to start our negotiation with a low anchor price. From there, we would hopefully agree to a price somewhere in the middle.
Spend Time Writing A Real Estate Love Letter
The goal of your low-ball offer is to anchor low and negotiate your way to a higher price that is still below estimated market value.
The main goal of your real estate love letter is to lessen the unhappiness your low-ball offer may cause. Your letter should humanize your offer and make it clear that you are a serious buyer who is willing to negotiate.
Unfortunately, our low-ball offer was not accepted because they were waiting for an official appraisal. But this was to be expected. Only after they get the appraisal will they respond to our offer.
An appraiser is an independent operator who objectively comes up with a value for a property. The value is based on rebuilding costs and recently sold comps. The appraiser's estimate is just one person's opinion, albeit a person who appraises properties for a living.
I knew with 99% certainty the appraisal report will come back higher than our $1.55 million offer. I also felt with 70% certainty the appraisal report will have a $2 million value or higher.
The Final Price Agreement
We patiently waited for the appraisal to come back instead of trying to make a higher offer too soon. After all, I, too, was curious to hear what the appraiser comes back with.
Even if he came back with a higher number, I was confident that the allure of an all cash offer, a quick close, and a friendly buyer from the neighborhood will be good enough variables to get us a deal.
Besides, if needed, I still have one last strategy up my sleeve: The Real Estate Breakup Letter and a price concession letter! You'll need to learn how to write both types of letters in particularly sticky situations.
10 days later, the appraiser came back with a property valuation of $2 million. The seller countered with $2 million and I countered back with $1.7 million. The seller still wouldn't budge and decided to list the home on the market for five days.
Raised My Counteroffer Price
I decided to increase my offer price by $40,000 to $1.74 million with a new real estate love letter. In the end, they accepted.
Thanks to writing two real estate love letters and one real estate breakup letter, I was able to save between $100,000 – $250,000 off market value at the time.
Below is a Redfin estimate showing how a real estate love letter enabled me to buy about 10% below the fair market value at the time. The $ sign signifies where I purchased the property versus the estimated market value.
Below is another Redfin estimate as of July 2022, which shows an even bigger discount to fair market value. Redfin constantly revises its algorithm. But the truth is, a real estate love letter was instrumental in me getting a better deal. Use my FS20 Property Indicator as one way to buy with confidence.
The Redfin and Zillow estimates are often wrong at the time of transaction. Hence, you must try and forecast where the valuations will go in the future. Always practice predicting the future to hone you real estate investing abilities.
A Real Estate Love Later Saved Me Six Figures Off The Purchase Price
If you don't want to put in the effort to write a real estate love letter to potentially save 1% – 10% off the purchase price, then stick to investing in REITs and real estate crowdfunding.
There's definitely a beauty to keeping things simple and being all numbers. Personally, I'm happy to do both. As a father to two young children, I love earning income 100% passively through real estate crowdfunding. At the same time, I love building a rental property portfolio to see, touch and manage.
Given interest rates have gone way done, the value of rental income cash flow has gone way up. It now takes a lot more capital to produce the same amount of risk-adjusted income. Therefore, I'm an aggressive buyer of real estate today.
And of course, when you put in that offer, don't forget to write that amazing real estate love letter!
Alternative Real Estate Investing Options
Owning physical real estate as an investment can be cumbersome. It's one of the reasons why I sold a rental property back in 2017 when my so was born. Dealing with tenants and maintenance issues can be a real pain.
I reinvested $550,000 of my rental property sale proceeds in real estate crowdfunding to earn income 100% passively. No real estate love letters are necessary when investing in private real estate deals.
Best Private Real Estate Platforms
Fundrise is my favorite real estate crowdfunding platform for all investors. They were founded in 2012 and now have over 400,000 investors and $3.5 billion under management.
Fundrise has consistently been one of the most innovative companies I've come across. Investing in a Fundrise fund is simpler and provides diversified exposure to single-family and multi-family rentals in the Sunbelt. It's free to sign up and explore.
If you are an accredited investor, take a look at CrowdStreet a real estate marketplace. It primarily focuses on secondary metro markets that are lower cost with higher cap rates. These cities include Denver, Austin, Memphis, and Charleston.
Due to technology and the rise of the freelance economy, investing in lower-cost growth cities will be a multi-decade trend. The global pandemic has really encouraged millions more people to work from home and geoarbitrage to save money.
The housing market is very strong and will likely stay strong for years to come. Therefore, learn how to write a great real estate love letter and save.