Could a heartfelt letter help — or hurt — your chances in today’s bizarre housing market?
Desperate homebuyers have been using ‘love letters’ to stand out. Here’s why that’s risky
Leo Masic had an embarrassed smile on his face when he found the cover letter he had sent in with his offer to buy what is now his very own condo in central Salt Lake City with big windows and a sleek kitchen.
“The letter’s a little cheesy,” he said sheepishly, reading it from his laptop.
“For one, I ended it saying, ‘With warmth.’”
Masic laughed, shaking his head.
“What was I thinking? Obviously I was pretty desperate.”
He can chuckle about it now, but Masic — like so many other house shoppers in Utah and across the West — certainly was desperate as he tried and failed again and again to buy a home in the raging, mid-pandemic housing market.
The 27-year-old set out to buy a condo in Salt Lake City proper in December 2020 — at the end of what had been the most chaotic year in Utah’s history to try and buy a home. Seeing prices skyrocketing, Masic said he decided to pull the trigger, not wanting to “get priced out of my own city.”
He ended up looking for several months, losing a gut-wrenching seven offers.
“It was a very heartbreaking process,” Masic said. “It was a lot of ups and downs of thinking, ‘This has got to be the place. This feels so right. I feel really good about my offer.’ And then finding out 48 hours later that I didn’t get it.”
The year COVID-19 hit the U.S. threw the national housing market into upheaval and spurred record-breaking home sales, especially in the West. The pandemic brought Utah’s already simmering housing market to a rapid boil, as many Americans reevaluated their priorities, left big cities and searched for homes with more space at lower price points.
To date, 2020 continues to be the No. 1 year for Salt Lake County home sales, even though the frenzy has extended well into 2021. Prices have continued to skyrocket as supply continues to lag woefully behind demand.
If buyers want any sort of a chance, it’s now the norm — if not expected — that they submit an offer tens of thousands of dollars above asking price.
That’s what Masic was up against: aggressive offers and all-cash buyers that he simply could not compete with.
In fact, when his real estate agent first sent him the listing for what is now his two-bedroom, one-bathroom condo — just half an hour after it posted online — Masic said he originally declined to even consider it when he saw it was listed for his maximum purchase price: $320,000. Knowing he wouldn’t be able to offer more, Masic said he told his agent, “You know what, I don’t even want to waste your time.”
“But what my agent told me was, ‘You just need to go for it. You never know what’s going to happen.’”
So Masic did what many other buyers in the same situation did in 2020 — the only thing he could do to try and stand out from the crowd. He sent in a cover letter along with his offer, which he kept at asking price.
And it actually worked. The seller picked his over two all-cash offers.
“I felt pretty shocked,” he said. “I thought it was too good to be true.”
‘Love letters or liability letters?’
The use of cover letters is a practice that became increasingly common amid 2020’s wild housing market, said Matt Ulrich, president of the Salt Lake Board of Realtors.
“Desperation probably caused it to become so prevalent,” Ulrich said.
Nationally, one of the more eyebrow-raising and laughable anecdotes is one told by Redfin CEO Glenn Kelman, who in May tweeted as an example of how “bizarre” the U.S. housing market has become, about how a Bethesda, Maryland, homebuyer working with Redfin “included in her written offer letter a pledge to name her first-born child after the seller.” And yet, “She lost.”
But it’s a strategy — if not done correctly — that can come with risk.
Ulrich said he used to have clients submit letters to “paint a beautiful, warm, fuzzy picture,” but as they started to become more common, real estate agents have since been advised to avoid them. Agents now often advise their clients to not to accept the letters, even if they’re sent in.
“We’ve discussed it as not being appropriate. My feelings on it is it’s not,” Ulrich said, explaining that cover letters, if not written carefully and correctly, can open the door to discrimination lawsuits.
“I don’t have any buyers do them any more, and I actually encourage my sellers not to accept a cover letter because of the implications.”
Sellers could violate the Fair Housing Act if they choose their buyers based on race, religion, sex, familial status or other characteristics that could be easily gleaned from a cover letter (especially if eager buyers choose to include a photo of themselves or their family, hoping to tug at sellers’ heartstrings).
That’s why the National Association of Realtors warned against cover letters in an October 2020 post titled, “Love Letters or Liability Letters?”
“Buyer love letters are a tactic used by some buyers in an attempt to stand out to a seller, especially in hot markets with low inventory and bidding wars,” the National Association of Realtors wrote. “Seemingly harmless, these letters actually raise fair housing concerns, and could open real estate professionals and their clients to fair housing violations.”
In fact, the state of Oregon recently banned homebuyer “love letters” due to potential fair housing law violations, NPR reported. There is no such restriction in Utah.
Risk aside, Ulrich said cover letters will rarely sway sellers, most of which only have eyes for the highest bid.
“If they can be done professionally, (focused) on the property and taking personal issues out, I think they can probably be OK,” Ulrich said. “But for the most part I’d recommend steering away from those letters.”
Could a cover letter ever help?
Masic said his real estate agent told him the cover letter would by no means be the “silver bullet” to buying a house. He also said his agent insisted he keep identifiable information out of the letter, and only write about the property itself to avoid any risk of impropriety.
“When I crafted this offer letter, I really did make sure there was no sort of demographic information,” he said. “I really tried hard to make sure I only spoke about the place.”
Masic’s letter fawned over the condo’s central Salt Lake City location, its modern kitchen, its renovations, its natural light, its big windows — how buying it would achieve his hopes of living in the city within walking distance of amenities rather than the suburbs. That was basically it.
So when Masic’s agent called with the shocking news the seller had accepted his offer, Masic naturally asked, “Why?”
The seller “really liked your letter,” Masic recalled his agent telling him. “He thought your letter was compelling. He wanted to sell it to somebody who really wanted to live here, really wanted to make this a home, and wasn’t looking for a quick investment opportunity. He didn’t want this to go to somebody who’s trying to flip the place.”
That’s when Masic said his agent told him there were two other offers, both all cash, while Masic’s was a conventional loan purchase.
It was a unique situation, Masic said, where the seller appeared to have a philosophical position of wanting to sell the property to someone who would actually live there and care about it as a home, instead of someone looking to make a quick buck.
Masic said he feels like he completely lucked out.
“The majority of sellers are looking for the highest bid, which is fair,” he said. “I don’t blame anybody who’s taking that approach. But I think there is a small subset of sellers that do have a more maybe sentimental approach as far as they want to see their home go to somebody (who would make it their home).”
Masic acknowledged the success of an offer hinging on a cover letter is likely rare, like what Ulrich said.
“It’s absolutely right. My real estate agent was really honest about that, that the letter was not going to be a silver bullet. It probably wouldn’t help me out in the majority of cases, but it was worth doing the letter because situations like this condo can happen.”
Even though the cover letter appeared to work in Masic’s favor, he said the fact that homebuyers feel desperate enough to pour their hearts out in a letter shows a dark side to the insanity of today’s housing market.
“In an ideal world, you wouldn’t even need a cover letter. I think ideally there would be enough of a housing supply where you could (submit) a decent but reasonable offer and allow your offer to stand on its own merits without having to resort to these sorts of emotional appeals.
“But unfortunately with the way things are,” he added, “I think a lot of buyers who are in my situation where you can’t afford to make these crazy offers that are well above asking, we have to sort of resort to almost begging the seller to even consider our offer because we know it’s not even going to stand up financially to some of these other folks.”