When you’re looking for a house, you not only want to buy one that you love, but also get it at the lowest price possible. But that hasn’t been the easiest task in the recent past, due to a lack of houses on the market and fierce competition from other buyers. Successfully edging out your competition and buying any house has been something to be happy about. Getting a break on the price hasn’t even been something most buyers could imagine.
So it’d be easy to understand why a recent study done by researchers at the Indiana University Kelley School of Business and the Cornell University SC Johnson College of Business might sound like a glimmer of hope for some homebuyers. Well, as long as you’re in the market for an older home…
According to their research, people who are selling a “vintage” item that has a past history — like a piece of furniture that’s been in their family for years — are willing to sell it for less money if they feel the buyer values the history of the item and, therefore, will appreciate and take care of it once they own it.
And the assistant professor of marketing at the Kelley School, Kate Christensen, claims that may also apply to real estate. She said, “To get a discount on an older house, real estate agents might encourage their clients to use homebuyer ‘love letters’ that emphasize their experience living in a house from the same time period and their goal of staying connected to the past while enjoying the house.”
It’s not a bad hypothesis. It can certainly be worth a try. But it’s not necessarily a new trick of the trade, nor is it a tactic that’s guaranteed to get you a better deal on a house. And, love letters may not even be something you’ll be able to use at all.
Why “Love Letters” Might Not Help You…
Whether buying an older home that’s near and dear to a seller’s heart, or a newer home from a seller who couldn’t care less about the past or future of their home, love letters have been used to try and pull at the heart strings of sellers for some time. Painting a picture of who you are, and why the house means so much to you, has been a way to not just try and get a better deal, but to get a house at all. Buyers have used them to simply stand out from a sea of other potential buyers sellers have to choose from for years.
But they’re not necessarily something you can count on as a strategy for several reasons:
- You might not be allowed to submit one. “Love letters” haven’t been outlawed, but they were banned in some areas until a federal court overruled the ban. While they’re technically allowed, some brokerages and agents are hesitant to allow them because they (and their sellers) could expose themselves to potential claims of discrimination or fair housing violations, according to this Realtor Magazine article.
Even if your letter is entirely about your appreciation for the house and you stray away from including anything that would identify your race, religion, national origin or other protected category under fair housing laws, the listing agent may not accept any “love letters” just to be safe.
- Sellers tend to overvalue what they have. Cornell University professor Suzanne Shu, the co-author of the study, said that “It’s long been known in behavioral economics that owners will often over-value an item. Yet, we were observing almost an opposite pattern: Owners were willing to take a below-market sales price if the buyer was somehow connected to the object’s past.”
While that may have been true with smaller sentimental items, as almost any real estate agent can verify from experience, most home sellers tend to overvalue what they have on their hands. But if you want some scientific backing for that, check out this article from the business journal from the Wharton School of the University of Pennsylvania.
- It’s probably one of their largest assets. As much as a home’s history may mean to the seller, the chances are the amount of money they can net from the sale of it means more to them. A “love letter” may convince them to accept your offer over another equivalent offer, and it may even get you a slightly better deal, but don’t overestimate how much of their net worth they’ll be willing to part with.
Unfortunately you can’t bank on a “love letter” to either make it into the seller’s hands, or make a dent in the price.
The best approach to getting the house you want is to make the strongest offer you can personally make, and give the seller the best terms possible. But if you can’t make a strong offer, or you just want to get the lowest price possible, your best chance of accomplishing that is to hire a strong real estate agent.
A skilled buyer’s agent can connect with and get your story across to the listing agent, regardless of whether a “love letter” is allowed or not. In fact, your agent’s reputation, demeanor, and ability to connect with other agents can actually be the deciding factor in whether your offer is chosen over others, or you get a better deal on a house.
A recent study revealed that sellers of older items that have a sentimental value will sell the item for less money to a buyer who they feel will love and appreciate the item as much as they do… including older homes. The authors of the study suggested using “love letters” to express how much you love a home in order to sway the sellers and get a better price.
Unfortunately, “love letters” are not always allowed to be submitted, and houses tend to be such a large portion of a seller’s net worth, they are more likely to overvalue their home than sell it to you for less.
Your best bet to get the best deal on a home is to hire a great buyer’s agent who can effectively negotiate on your behalf.