Monday, September 21, 2009

The Letter That Got Us a House...

Last week I promised that I would publish the letter I wrote to the sellers of the house we are buying and which proved effective in getting our offer accepted. Well, I have been traveling on business and running around doing everything to get this house thing off the ground (who knew it could be so complicated?) - so there was not much posting going on last week. This week promises to be pretty sparse as well, but in the mean time, here is a copy of that letter I wrote. What can I tell you, it worked...

For obvious reasons I am editing out some specific sensitive or identifying details.

"Mr. & Mrs. [Seller],

I would like to propose a win-win transaction.
As you know, my wife and I are interested in buying your house on [name of street], however we have been unable to afford your asking price. At the same time, your house has been on the market for several months, and you have not yet been able to find a buyer willing and able to pay the price you are asking.

In an effort to find a way to purchase the house, we have been able to arrange for additional financing, from our family. If you would be able to accept an offer of [purchase price], we can send you a formal and detailed offer (incl. applicable contingencies) in short order.

Prior to sending you an offer, we would, at our expense, have the house inspected. Assuming the inspection did not turn up any issues which we considered material, we would be able to buy the house in “as-is” condition, subject to the applicable contingencies.

Please understand that we are not trying to negotiate a bargain here. We are offering you as much as we can afford to offer, after having exhausted all of our available funding sources.

With due respect, and in an effort to allow us both to get to a satisfactory agreement, I would like to point out a few reasons that I think the arrangement I am proposing would be beneficial to both parties:

a) Government Incentives – the government’s tax credit for first time home buyers is set to expire in less than 2 months. While this is now creating more buying activity, once the tax credits expire, fewer buyers will be on the market. Since we need to take advantage of this tax credit, we must buy our house before the tax credits fade out;

b) Conforming Loan Limits – as you may know, the government temporarily increased the conforming loan limits. These increased limits too are about to expire, and once they do, mortgages will become much less affordable and therefore demand will decrease. Again, we must purchase a house before these limits revert down;

c) Financing Costs - in the months that your house has been on the market, you have no doubt incurred substantial financing costs. I may be wrong, but I believe that even if you choose to rent the house you may find it hard obtain a high enough rent to cover your mortgage costs;

d) Overall Market – the tech stock bubble burst in 2000, when the NASDAQ briefly exceeded 5000. Nine years later, the NASDAQ index stands at 2018 points. Although we might all wish differently, once a bubble burst, many years can pass before assets recover to their former prices. It is more likely than not that real estate prices will also stagnate for years before showing any significant improvement.

Mr. & Mrs. [Seller], my wife and I need a place to raise our family. We love your house and would like to buy it. We believe that given the market conditions, we are proposing a fair deal.

I hope that you agree.



Enjoyed this post? Please consider subscribing to Money and Such by free RSS Feed or by email. You can also follow me on Twitter.


Kim Stiens said...

Interesting! I can see how that would work. It's sweet that you got them to go lower than the price they said they wouldn't go lower than.

Anonymous said...

Very well written and not overly aggressive. Nicely done, sir.

Shadox said...

Thanks for the vote of confidence. I guess the reason it worked was that my letter was true. I didn't actually try to low-ball. The situation was exactly as I described it.

One of my biggest challenges in writing this letter was to make sure that I was not coming on too aggressively or coming across as cocky. Guess it worked. :-)