Have you been looking longer than you would like and still can’t find the right home listed for sale in the neighborhood where you most want (or need) to live? The simple fact is that homes in the most desirable areas don’t come on the market very often and those that do are snatched up quickly. Do we really have to wait for great homes to come on the market before we can buy one in a great neighborhood? Nope. We can try making an unsolicited offer to buy an unlisted home.
A growing number of homes are sold in response to unsolicited home purchase offers. Statistics vary greatly by location, but we know that many homes are sold without ever making it onto the Multiple Listing Service (MLS). These could be homes “For Sale By Owner” or “pocket listings” that sellers want their agents to market out of the public eye for personal reasons. Some homeowners haven’t considered selling, but might if they receive the right offer – they are potential targets for unsolicited offers.
The process for making an unsolicited offer is not unlike how we would go about making an offer for a listed property. Let’s look at an overview of one approach to identifying and purchasing a property by making an unsolicited offer.
Identify Preliminary Target Neighborhoods. Write down the most important characteristics of your potential new location. Schools, work commute, noise, traffic, and potential for future price appreciation are often important considerations.
Identify Property Feature Requirements. Create a list of features you require in your new home and tag each of them as either Must or Preferred. If you have features that would automatically disqualify a property, add the feature to your list and tag it with Must Not. For example, here in California, where the ground shakes a lot, I’m not comfortable with hillside houses built on stilts and would label stilts a Must Not.
Meet With Your Broker. Share your selection criteria with your broker and identify neighborhoods that might meet your needs. Discuss current home values in those areas and any other costs that might be associated with owning a home there, such as homeowner association fees, special taxes, assessments, etc. Review recent sales activity in the area.
Get Pre-Qualified. Create a family budget and establish financial boundaries for the purchase and long term costs of home ownership. Meet with a financial planner if necessary. Then contact at least three different mortgage lenders to determine the buying power of your budget and to shop for financing that best fits your needs. If you have the resources to buy with cash, skip this step.
Meet With Your Broker Again and Create A Target List of Properties. Refine your search criteria and begin driving neighborhoods to identify homes to add to your target list. Submit candidates to your broker regularly so that each can be researched regarding current market value, size, features and the most recent sales activity.
Prioritize The Target List. A long target list of properties is better than a short list, since most unsolicited offers are initially rejected. To save time on your first round of offers, do the deepest research on just the top two or three properties on your list. For these properties, establish price and term strategies.
Develop A Story. Why should someone who has not already put their home on the market now want to consider selling to you? Unless you come in with an above-market price, many won’t. But some may be motivated by the opportunity to help others while they see a silver lining for themselves.
Make Inquiries. Beginning with the top property on your list, have your broker submit inquiries to determine if the home owner is interested in looking at an unsolicited offer. If they reply that they are, probe carefully to find out why so that you can address their specific needs or motives in your offer.
Develop A Strategy. Your strategy is the approach you use to link your story with the home owner’s needs. The more information the seller provides in response to the initial inquiry, the better you can tailor a strategy that motivates the home owner to consider a sale.
Submit Offers. Submit only one unsolicited offer at a time. Try to present the offer in person with your broker. If the homeowner’s preference is to have the offer delivered, submit it with a single page summary that explains your story. Most residential purchase offers are valid for three days; make your offer valid for at least a week, maybe two. This gives the homeowner time to hire a broker, analyze the offer, and make a decision to sell. Your offer is, of course, subject to inspection and you’d need to do a walk-through prior to negotiating if the homeowner does decide to sell.
Keep Making Offers. If your first offer is rejected, move on to the next property on your list. Expect a lot of rejections and owners that just plain won’t respond. Too many brokers use the “I have a buyer for your home” letter as a standard marketing piece, even when they don’t really have a specific buyer for the property. Owners have become used to depositing those letters immediately into the trash. Your broker will need to develop a more unique approach that gets the owners attention and lets them know you’re serious. Success with unsolicited offers is often a matter of timing. Continue to scan the MLS and other listing sources, but you’ll also want to keep making unsolicited offers as you find additional unlisted homes that fit your needs.
This process can just as easily be applied to other types of properties, such as commercial spaces and land. It is especially effective when used to acquire properties that could be developed to make better use of the site.
I hope you found this information helpful. If you have questions about making an unsolicited offer for an unlisted home or buy/sell/investment strategies, drop me a line!