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Probably the most important tool I have in my offer-making arsenal consists of three pages:
- Cover Letter (1 page)
- Purchase Contract (1 page)
- Follow Up Letter (1 page)
Why have these three documents been so important? It's pretty simple.
Simplicity Is King
When I'm dealing directly with the owner of a property, it is imperative to be concise, succinct, and to-the-point about what I'm proposing to them.
The reality is that 99% of the people you'll be making offers to are not real estate professionals. They aren't trained to scrutinize a contract and understand the ins and outs of the “legalese” in painstaking detail. The average boilerplate contract can be very confusing and complicated. If you've ever wondered why some lawyers are able to charge $500+ an hour to interpret these documents for the average person… it's because they're overly complicated to begin with.
For example, take a look at this page below and tell me what comes to mind:Source: mirealtors.com
I don't know about you, but when I see a document like this (along with the 23 pages behind it), my mind starts shutting down.
It's overwhelming, it's intimidating, and especially if you aren't familiar with the contract (I suspect 99.99% of the population fits into this category)… who knows what mysterious, complicated or even threatening clauses could be buried in there?! With this in mind, I try to make every effort to communicate my offers in a very simple, seamless, idiot-proof manner (think middle school reading level). If I fail to do this, a lot of my offers will get ignored simply because they are confusing.
After making hundreds of offers to people over the years, I've learned that if a property owner doesn't understand what I'm trying to do with their property, it will make them uncomfortable. To avoid exposing their own incompetence to a total stranger (aka – me) – many of them will just walk away and look for someone else who is going to make the process easier for them. This is an area where many real estate investors miss out on opportunities. When a seller sees page after page of mind-numbing legal jargon, they get confused and a confused mind says “No”.
On the same coin, this is an area where YOU can jump in and seize these opportunities because in the next few minutes, you're going to learn know how to make your offers simple, easy to understand, and easy for people to say “Yes” to.
It all starts with making a good first impression.
A cover letter (Page 1 of 3) is a vital component of your “offer package” because it explains all of the pertinent details of your proposal in terms that anybody with an 8th-grade education should be able to understand.
A good cover letter should give a high-level overview of why the offer is being sent, what costs are involved, and why the recipient should seriously consider accepting the offer. This is nice way of holding their hand and gently nudging them in the direction of saying “Yes” to your proposal.
(Note: This example below doesn't contain the exact verbiage of my Cover Letter, but if you want more information on the specific words that I use, you can get my word-for-word template at the bottom of this blog post)
A simple, one-page cover letter is crucial to explaining all the basic details of your offer. It will help the average person see past any confusion they might have – regardless of what your purchase contract looks like.
In my days as a banker, I've seen Purchase Contracts in excess of 50 pages (I'm not kidding). Depending on the complexity of the deal, which attorneys are involved and several other factors – a purchase agreement can be a ridiculously complicated document. This may make sense for a multi-million dollar commercial real estate transaction… but the truth is, that's almost never what I'm dealing with.
In most cases, I'm going after some pretty modest deals and my offers are going to include terms that are very simple:
- There is no financing involved.
- It's a cash sale.
- I am buying the property AS IS (accepting any/all pre-existing issues)
- The property owner has anywhere from 1 – 10 days to accept the offer.
- The deal needs to be closed within 30 days (in most cases).
- I am allowed to back out of the transaction at any time if the seller fails to disclose something to me.
That's pretty much it.
So what does this kind of contract look like? Here's a basic outline (note: you can get a copy of my actual contract at the bottom of this blog post):
If you're making offers that are this basic, you don't need to include paragraph after paragraph of legal “fluff” that has nothing to do with your offer.
A 1-Page Contract is Significantly Less Intimidating for the Recipient.
Think about it – what goes through your mind when you start thumbing through a 12-page contract vs. a 1-page contract? Which one causes you to ask more questions? Which one causes your subconscious defense mechanisms to kick in? Which one causes your mind to go numb with confusion?
When I designed my contract, I wanted to include ONLY the most essential items that actually mattered in the real estate transaction. My goal was to keep out the bulk of the confusing terminology because it only served to cloud the minds of my average recipient.
If you've ever looked through one of these “standard” purchase agreements, you may have noticed that most of the language is completely inapplicable to your specific offer.
Why? Because the whole point of these “standard” contracts is to include as much boilerplate language as possible – so that the contract will apply to as many different kinds of deals as possible. Of course, this is great for real estate agents (because they don't need to re-create the wheel with every deal they close), but it usually doesn't serve your purposes very well – especially when you're trying to steer clear of confusion and keep your offer as simple as possible.
What About Wholesaling? Is This Contract “Assignable”?
I was sure to include section “9. Assignment” in this contract, which contains the necessary language to make this purchase contract fully assignable. This means I have the ability to use it for wholesaling if/when I need to (aka – selling the contract to a third-party buyer without ever taking ownership of the property myself). It's a nice feature to have and I've been able to use it on several occasions by assigning this type of contract to other investors when I don't want the hassle or liability of owning it myself.
Follow Up Letter
If, for some reason, the seller doesn't respond to my written offer (either they get cold feet, or they somehow didn't receive my original purchase agreement), the “Follow Up Letter” is my last attempt at catching some of those sellers who may be on the fence about selling their property to me.
If you're making offers the way I am, there are inevitably going to be some purchase agreements that just don't get accepted. Finding amazing deals is a numbers game, so when people don't respond (or respond negatively) – rather than just ignoring them and moving on, a simple letter like this allows me to keep the doors of communication open with the property owner.
This is our last chance to figure out why the seller didn't accept the initial offer and whether there is any chance we can come together and agree on a mutually acceptable sale price.
Here's an example of how you could put this kind of letter together (note: if you want a copy of my exact follow-up letter, it comes along with the Contract Package at the bottom of this blog post):
In my experience, this letter has resulted in deals getting closed about 20% of the time (when the discussion would have otherwise just been finished).
It's not always effective, and it's not always worth doing (e.g. – if there's a deal you made an offer on, but you aren't necessarily crazy about in the first place), but if you really want to chase down a property owner on a great potential opportunity, it's usually worth the extra effort to follow-up with people. You just never know when this kind of extra communication will motivate a person to keep their mind open about accepting your offer.
ProTip: Use Electronic Signatures
Another helpful tool that can be used to eliminate obstacles and make it even easier for sellers to say “Yes” is a service called DocuSign (affiliate link).
If you establish a line of communication with the other party via email, you could easily take the language from the Offer Cover Letter, put it in the body of your email message, and then send the purchase contract via DocuSign. This video explains how it works…
Affiliate Disclaimer: The link above is an affiliate link and at no additional cost to you, I will earn a commission if you decide to purchase this particular tool/service. I recommend this resource because it is helpful and useful, not because of the small commission I make if you decide to buy it. Please do not spend your money on this unless you feel it will help you achieve your goals.
As you can see, the examples above are meant to show you the format of my letters and contract, but not the exact wording. I do this for a couple of reasons:
1. You may very well be a better writer than me and I don’t want to imply that my letters are the most persuasive pieces ever written. I've had a lot of success with them, but there are all kinds of directions you can go when composing this kind of written communication, so don't be afraid to get creative and test some of your own writing out (and if you start getting a higher rate of acceptance – let me know, will ya?!)
2. I'm not an attorney and this post shouldn't be construed as legal advice. I paid one of my local attorneys to create the contract that I use and in my experience, it has been widely accepted by closing agents all over the United States (probably because of how basic it is – without reference to any state-specific items).
A purchase contract doesn't have to be wildly confusing. The terms of my offers are always very simple and as a result, my contract doesn't need to include all the extra, pointless, legal boilerplate that doesn't even apply to the projects I'm working on.
I'm willing to bet that if you work with your attorney to create a contract that is clean, concise and to-the-point, you might just find yourself with a few more acceptances that you're accustomed to. It will probably cost at least a few hundred bucks, but if that's what you need to do to take your offers to the next level, what are you waiting for?? We're talking about a HUGE upside potential for more revenue here!
Want to Use My Letters and Contract?
Like I said before, if you want to take the information shown above and develop your own Cover Letter, Purchase Contract and Follow Up Letter – go for it!
It may cost a few hundred dollars and take some time to refine your documentation… but I have no doubt that you are fully capable of creating your own versions of these forms and taking your business to the next level. It's not difficult, but it does take a bit of time and mental energy.
On the other hand, if you'd rather cut to the chase and get started using the exact templates I use – you are more than welcome to get immediate access to my versions of these documents below (note: this package also comes with a short video tutorial explaining all the technical details about how to fill out this contract correctly).
Whatever you decide to do – I appreciate you taking the time to check out this blog post and I wish you all the best as you continue to send out offers. Keep up the great work!
Note: When you sign up as a REtipster Email Subscriber, I’ll send you an instant $20 off “Discount Code” for this item, and if you enroll in the REtipster Club, you'll get access to this item for FREE. There's no pressure of course – just want to make sure you're aware.