I received a call recently from an Austin homeowner looking for a place to rent. After further questioning I learned of her situation. The neighbors have offered to buy her home, and she is willing to consider selling it. The neighbors have outgrown their smaller home and would love to move up to her larger home while remaining on the same street. The homeowner is now exploring rental options in case she were to sell.
“Have they indicated a price they’re willing to pay?”, I asked? No.
“Have they provided a pre-approval letter indicating their financial ability to buy?”, I asked. No.
“Well”, I said, “you’re out looking for a place to rent but you haven’t first established that your prospective buyers are legitimately interested. How do you know you’re not wasting your time? Do you really want to spend time looking for a home to rent before knowing that your neighbors aren’t just daydreaming about your house, and that they might turn out to be flakes?”
“No”, she said. “I guess not. What should I do?”
When you, as a home owner, are approached about selling your home, and your home is not on the market for sale, there are a couple of up front requirements you should request before you spend even 3 seconds thinking about it. Assuming you are open to the possibility of selling and you wouldn’t simply say “no thanks” immediately, you would tell the prospective buyer the following:
“Send me a letter indicating your interest in purchasing my home. Include with your letter the price you are willing to offer, when you want to close and attach to it a pre-approval letter from your lender”.
Then you forget about it entirely and don’t do one darn thing until you receive that letter. I’ve learned this after almost 20 years of managing rental property and receiving unsolicited inquiries from tenants. They call out of the blue one day and ask “would the owner be willing to sell the property to us?”
Before I got smart, I use to answer “I don’t know, I guess I could ask and find out”.
Then I’d ask the owner who would typically say, “I don’t know. Maybe” What are they willing to pay?”
Then I’d go back to the tenant and say. “She’s not sure. Maybe. What are you going to offer?”
Then the tenant would say, “well, what is she willing to accept?”
… and thus was launched a cumbersome back-and-forth which rarely resulted in the home actually being sold. Over time, I learned to treat unsolicited offers/inquiries as without merit until proven otherwise.
What was missing was a well defined process to follow when responding to such unsolicited inquiries. Since the process is being launched by an unsolicited inquiry/offer, it should therefore be the responsibility of the party making the offer to do so in a way that allows the potential seller to know that the offer is serious. Absent that, the offer deserves no attention or effort.
From a negotiation standpoint, make the buyer provide the first number. Without an offer amount, it’s not an “offer”, it’s simply a inquiry, and one without merit. By requiring a “letter of interest”, that includes an offer price and a pre-approval letter from a lender, the owner forces the buyer to establishes credibility. Then, knowing that a credible person is interested in purchasing her home, the owner can then proceed with evaluating whether or not a sale would be prudent.