Finding Motivated Sellers

Clients often come to me in search of advice on how to find motivated sellers. The obvious assumption is that a motivated seller will be more flexible and more willing to give a better price and/or more favorable terms than a non-motivated seller. While this is not always the case, finding motivated sellers, understanding the source of their motivation and marketing to them can result in a win, win situation.

When finding motivated sellers, there are two main factors to consider. The first factor is whether you are in a Buyers or Sellers Market. Typically you will find more motivated sellers in a Buyers Market as sellers have fewer buyers to sell to. In a Buyers Market, supply is higher than demand. Alternately, if a seller needs to sell in a hot Sellers Market, sellers have the advantage. Finding motivated sellers in a Seller’s Market can be more challenging.

The second factor to consider is the reason for the seller’s motivation. There are two general causes of motivation. The first type of motivation is caused by the physical property itself and the second is caused by the seller’s personal circumstances.

Something wrong, defective or overwhelming with the physical property itself initiates the seller’s desire to sell. An example of this would include a landlord who found out that his or her tenant had a ‘grow op’ in their rental home. The police and health authority condemned the rental home until it was remediated at the expense of the landlord. If the landlord does not have the financial means, resources or knowledge to remediate the home, then the landlord becomes a motivated seller as the home is uninhabitable. The physical property was the cause leading to the seller’s motivation.

Another example of property motivation may include a home that had a flood filling the basement with water. The water damaged the drywall, insulation and studs causing rot and mold to the point that it became a health concern. Maybe the insurance policy did not cover flood damage and therefore the homeowner is burdened with the clean up. Unable to manage the situation, a seller may simply want someone else to clean it up and the seller is willing to walk away. Again, the motivation is caused by the physical property.

The second type of motivation is caused by a seller’s personal situation. The physical property may be in excellent condition, however a seller may be in the midst of a job layoff. The cost of a mortgage, property taxes, insurance and utilities now becomes a financial burden causing the seller to sell.

Another example could include people moving out of a home due to a job transfer and/ or divorce resulting in financial burden from a vacant property. Although the vacant property is the result, the cause started with the seller’s personal situation.

The main difference between whether the motivation stems from the physical property itself or the seller’s personal situation is essential to understand when speaking with a seller.

When the cause of motivation is the property itself, the seller is often easier to work with as they already view the property itself as a burden and want someone else to deal with it. The seller has already distanced themselves emotionally from the property.

On the other hand, when a seller becomes motivated through personal circumstance such as job loss, divorce, health reasons and the like, they are often more emotionally attached to the home and see you (the investor) as taking advantage of their unfortunate personal situation. This scenario often takes more time, patience and skill to work with a seller effectively.

To find properties where the real estate itself is the source of motivation, look for uncut lawns, dead grass, broken windows and/or snow that has not been shoveled even though someone lives there.

On the other hand, if you want to work with sellers who are going through personal issues that require the sale of a property, then you’ll need to target different sources. The physical property itself often looks just like any other house on the block. The personal issues are often hidden behind closed doors.

Finding those who have missed mortgage payments and are facing foreclosure starts at your local courthouse, not your bank. These properties will not be listed as “pre-foreclosures” or “foreclosures.” Depending upon your province, they are legal proceedings known as “Certificate of Pending Litigation” and/or “Statement of Claim.”

Instead of pursuing motivated sellers directly, an alternate method of finding motivated sellers may include target marketing to a specific motivation. This allows sellers to come to you instead of you pursuing them. This can be used for either type of motivation.

Advertising with wording like “Missed your mortgage payments? We can help. We buy houses quickly,” could work. Similar wording could work for divorces too, such as “Going through a divorce? We can help. We buy houses cash.” Or, target marketing for physical property motivation could include “House repairs too much to handle? No problem. We buy houses in any condition.”

Start with understanding your current Real Estate market. Then determine the type of motivated sellers you want to work with. In doing so, your marketing efforts and effectiveness will be much more targeted with greater results.

Finally, when dealing with any sellers, motivated or not, please remember to treat them with dignity and respect. As Steven Covey wrote in his #1 best selling book - 7 Habits of Highly Effective People, “People do business with people they like.”

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