Unsolicited Offers to Buy Property
Today I got three different letters addressed to the business I manage claiming to be people wanting to buy the business.
I get these a lot. Usually two or three a week and often duplicates because we have both a physical address and a post office box where our business gets mail. The first few times, I asked my boss if she wanted me to pass on their names.
She laughed and said, “No, call them and ask if they have anything they want to sell to us.”
She wasn’t joking. That’s how competitive the real estate market is right now. Anything you can do to stand out from the crowd or get insider access to a piece of property is an important part of real estate investing.
I posted some hints for the letter writers on my Facebook page because honestly, these poorly written, generic letters with hand addressed envelopes — usually not standard business envelopes — aren’t exactly inspiring me to believe the letter writer has the backing to buy this business property.
Seriously, if you can’t afford professional looking letters, can you actually put together a pro forma and secure financing for a multi-million dollar property?
Turns out, it’s not just storage facilities these letters are targeting, so I did some research.
Is this unsolicited offer to buy my property a scam?
Because most of my friends, okay, all of my friends, do not manage storage facilities most couldn’t relate to the letters I was talking about…except that they are getting virtually identical letters offering to buy their homes.
Turns out, this is a marketing technique that real estate agents have been using for years. It’s just a little more stepped up now and more well-known because there is so little availability in the housing market.
That offer to buy your house for cash might actually be from someone who fell in love with the property and wants to turn it into their home, but more likely, it’s a real estate agent who has clients wanting to buy and nothing available to sell them.
Or, if the emphasis in the letter is buying for cash, you might be the target of a real estate investor who thinks they can buy your home relatively cheap and flip it. Unfortunately, all the house flipping shows and money-making seminars about it have convinced everyone they know how to invest in real estate and make big bucks.
So, it’s not a scam, but it’s not exactly the truth either. Chances are the person making the offer sent out hundreds or even thousands of those letters hoping to get one or two people to take them up on the offer.
Is it slimy marketing? Yes.
Is it effective? Sometimes.
I recently rented storage to a person who got an unsolicited offer to buy their home. It was almost quadruple what he paid for the house 25 years ago and he was close to retirement, so taking the quick deal made sense to him.
The problem becomes what taking the deals means to the housing market in general and society as a whole. It means the price for single family housing continues to skyrocket and most families can’t afford to buy anything that’s one the market.
Another tenant I talked to today wants to move back to the area where she grew up. She and her husband have been making offers since last fall and are constantly outbid, even though they are usually offering $20,000 to $30,000 over the asking price. Successful home buyers are waiving appraisals, agreeing to eat the cost of improvements or even foregoing inspections.
One friend who successfully purchased a home last year fell back on the old real estate trick of writing a letter to the seller appealing to them as a family buyer. For her, telling them that she intended to raise her children in the home meant something.
Why send these letters to businesses?
The storage industry has been one of the most profitable aspects of real estate investment for the last two decades. And with business needing less office space, the demand for that type of commercial property is in decline.
Real estate investors still believe that property is a tangible investment so they want to move to whatever aspect of real estate is booming.
At our business, revenue was off less than 1/2 percent in 2020 and rebounded and more in 2021. That’s attractive to investors.
They’re not wrong.
But sending letters to us is barking up the wrong tree. My boss is a real estate investor too, so if you have a self storage business to sell cheap, she might be interested.