Did you know that nine out of ten real estate investors fail miserably because they cannot find motivated sellers?
Here’s the problem you face.
Everyone is spending thousands on mailings and online ads to get leads. They’re out putting up bandit signs and knocking on doors. They’re calling every FSBO and Craigslist Ad they see. They are out in droves, spending money like a drunk politician.
This means you’ll never find motivated sellers now if you keep doing things the way you have. You’ll wind up buying overpriced deals from the big money wholesalers or off the MLS!
Luckily for you, there’s a solution. Let me introduce you to a way to find motivated sellers now that few, if any people are using!
Before we dive into this, let me share why you should listen to me.
- I’m a licensed real estate instructor, not some internet marketer trying to sell you some high-priced training program full of half-baked theory.
- I’m a successful real estate investor with a strong track record as a wholesaler, rehabber, and landlord.
- I’m also a licensed real estate broker and Realtor, so I could lose my license if I feed you a bunch of crap that isn’t true.
So, let’s get rolling!
They Want to Sell, But Are They Motivated Sellers?
I know this sounds obvious, but if you do any kind of marketing, you’ll get a lot of calls from people that want to sell their home for retail.
Sadly, lots of investors have no idea how to tell the difference, so they tend to waste a lot of time trying to make something out of nothing.
In their desire to get a deal, they will drive all over town to meet with sellers without qualifying them first. You need a simple set of standards, a template of sorts that you can apply to a seller within the first few minutes on the phone with them.
When you start getting results from your efforts, make sure to prequalify sellers to determine their needs, motivation, and expectations before you invest much time with them.
Ask lots of questions.
Ask about their story and take some notes. If they spill their guts over the phone, keep them talking, get their story, and then close for the appointment. You can’t buy a house over the phone, so get the appointment. That’s the only way you can get the deal.
Before you hang up, make sure you know how long they have lived in the home and how much they owe on it. These two tidbits could save you time. If they bought it last year and didn’t put much money down, they may not be able to sell. They could be extremely motivated, but if they’re broke and heavily financed, you can’t help them without a short sale.
Ask pointed questions like
- Do you live in the house?
- Are you current on the payments?
- How long have you owned it?
- Is it currently rented? (if they aren’t living there)
- Why are you wanting to sell? (if they don’t say)
- Does the house need any work?
- When do you need to sell by?
How to quickly determine if they are motivated.
Here are three simple criteria I use as a start to determining motivation.
1. Do they live in the house they want to sell?
If they are, that’s strike one.
Owners that are snug, warm, and safe in the comfort of their home aren’t usually motivated. If they don’t have a moving deadline that they have to meet, why would they be?
It’s better if they do not live in the house, and better yet, if they do not live in the same state. From an owner’s perspective, when they live out of state, their perceived equity tends to lose value. The further away they are, the less it seems to be worth. These owners can become very motivated because of the maintenance responsibilities and costs that come along with owning out-of-state property.
2. Are the mortgage payments current?
People that are not in financial trouble don’t tend to be very motivated, unless there is another motivating factor applying pressure on them. Things like bad tenants, or deferred maintenance can cause seller motivation.
3. Do they have a story?
This is the big one!
I’ve never met a motivated seller without a tale of woe. Dreadful things sometimes happen to good people.
If they call about selling their house and invite you over, there is a slight chance they may be motivated. If you’ve got nothing better to do, go take a look.
But, if they start telling you a sad story of what’s happening to them, pay attention.
Motivated sellers use words like “must, need, or have to” when talking about selling their house.
If they have a sad story about why they need to sell their house, get the car started and head over there.
How to “cut to the chase” if you think they are unmotivated.
If they seem gruff or overconfident on the phone, they may just be fishing for an offer.
Sometimes sellers (especially old guys) feel like they just must see what you’re willing to offer, so they will call and preface the conversation with something like…
- “I don’t need to sell…”
- “I’m just wondering what it’s worth…”
- “You said you wanted to buy it, so drive by and call me back with an offer…”
You will at once know that the seller isn’t motivated and is only fishing for a high offer.
At that point, consider using my stock answer that cuts to the chase with those “I don’t have to sell” statements.
“Great, I’m in the business of helping homeowners that have either distressed properties or a personal situation that requires they sell their home quickly. Do you have a situation that I can help you with?”
This is the “put up or shut up” question. Say it very nicely. Then stop talking. There is no telling whether their response will be positive or negative.
A truly unmotivated seller will hang up on you before you finish the question.
PERFECT!
You just saved yourself a lot of time and effort, dealing with some crusty old bored curmudgeon that was once a used car salesman. They do love to negotiate over anything.
Finding motivated sellers is your primary focus, but you may first have to weed through some time wasters. If you get good at that, it will save you lots of time.
Why mass mailings aren’t best for finding motivated sellers.
Once upon a time they asked a famous bank robber, “Why do you rob banks?” His reply was “Because that’s where the money is!”
His answer seems perfectly logical to me.
That’s why it seems illogical to mass market to every person that owns a property. I mean, it’s very common for people to market to “out of town owners.” The theory is that they are more likely to want to sell. I tend to agree with this, but when thirty different investors are sending the same stuff to the same set of people, it stops making sense.
The most successful mail campaigns will give you a return of around 1% if you are lucky. The larger the campaign, the more likely you are to have a hit on a motivated seller. That’s not very good odds!
Wouldn’t it make more sense to spend your time focusing on homeowners that are in a moment of pain?
It’s kind of like this…
Have you ever noticed that trauma doctors do not do mail campaigns?
Can you imagine if they did?
Trauma doctors don’t have to advertise, because they already know where the trauma patients are…
THE EMERGENCY ROOM!
No extra effort needed.
Now wouldn’t it make sense for you to go where the motivated sellers already are?
Where is this magical place you ask?
Your local courthouse.
Nothing happens in real estate if the county government isn’t involved. Every sale, mortgage, lawsuit, lien, eviction, and probate case are on file there.
Whether it’s the Court System, Tax Collector, or Code Enforcement, if something bad happens to a homeowner, this is where it happens. There are a couple of exceptions, one is deferred maintenance, but even that will eventually show up in Code Enforcement.
When you consider what a gold mine the county offices are, why would you ever send out a mass mailing?
Let me give you a few examples of what waits for you at the courthouse.
- Burned out or inept landlords
By searching the local eviction filings you will be able to locate landlords in distress. I have done my fair share of evictions, but the irritation factor never seems to go away. Imagine the mental state of an inexperienced landlord that doesn’t have a lot of experience. Don’t you think they could me motivated to sell, or at least partner with someone to take the management burden off them? - Foreclosures
In judicial foreclosure states, this is the most-worked category. These poor people get stacks of “I buy houses” mail in the months follow the filing of the foreclosure action. The trick is to get to them before anyone else, and to do that you just need to check every day. Don’t say that you don’t have time! It only takes a couple of seconds to pull up the county website and look. If you check every day you will usually know about the foreclosure filing before the homeowner. If your mailing shows up on the same day as the process server, it’s a good sign for them to call you. - Probate cases
People that own property die. Often their heirs do not want the property or are too far away to deal with it. They are a rich source of deals if you get to them first. - Arrests
Whether they are guilty or not, people that own property get arrested and need funds to defend themselves. If convicted, they should be even more motivated to make a deal with someone. It’s not always bad people doing bad things.
I have a friend that once imprisoned for an accident. He is a great person. I can’t imagine him every doing anything to hurt anyone. One night he had a couple of drinks at a cocktail party. As he and a friend drove home, he hit another vehicle and it wreck killed his friend. He lost everything and was sentenced to five years in jail.
He didn’t own property but imagine someone in his situation that did. I’m sure that even if they didn’t want to sell it, they would love to have a partner to rent it out and take care of it during their incarceration. - Property tax issues
Nonpayment of property taxes is good indicator that the owner may be in financial distress. This would be the only list I would consider sending a blind mailing out to. It’s not foolproof as some owners may just be procrastinating but keep an eye on them as they progress through the tax default system of your county. Some will eventually pay, while others may want to sell. - Code enforcement liens
If there is a “bird dog” to find distressed property this is it. Depending on how big your town is, there is a good chance that you can’t drive every street there looking for distressed and vacant property. Why not tap into the “nosy neighbor network?” You can count on neighbors with nice houses to call code enforcement and complain when someone starts bringing the neighborhood down. Keep an eye out for anything related to code enforcement and it will pay off.
We’ve just scratched the surface of what kind of deals you can dig up at your local courthouse. I hope this helps you on your way to finding motivated sellers.
Disclaimer: I am not a licensed attorney, nor a licensed CPA. All statements made above are to be considered opinion only.
