It is a common topic between all real estate investors & a very important one at that.
Motivated Sellers
Motivated sellers are the lifeblood of any real estate investment business and one of the main reasons real estate investors fail.
Let's take a step back and think of a second.
You are trying to get a property owner to sell you there house for 30 - 50% of the ARV (sometimes less).
To many non real estate investors, this may sound impossible or even down right fraudulent.
As real estate investors, we are not looking to purchase properties at retail or close to retail (unless you live in an area with great appreciation).
So what is a motivated seller?
A motivated seller is any property owner has a motivation(s) to sell their property in an urgent time frame.
The more motivated a property owner is, typically the better deal you will receive.
The best motivated sellers are property owners who have multiple motivations or reasons that they need to sell.
Motivated sellers come in all shapes and sizes, circumstances, situations and underlying reasons. The property owners that you are dealing with will typically be going through a very difficult time in their life, which urges this motivation we are speaking of.
Your ability as a real estate investor to prospect, market, generate, nurture and close the motivated sellers you come in contact with will determine the amount of success you have in this business.
Remember, marketing has no purpose unless you are directing it at a group that is willing to listen.
Who Should We Target?
We have put together a quick list of motivated seller groups that we feel have helped turn us the most deals in our business. This list in not in order from most effective to least effective because every farm area will have a different response rate to these targeted groups.
Let's get into them.
1) Delinquent Property Taxes
One of our favorite lists to target are delinquent property owners. These are property owners that have failed to pay their property taxes for a certain amount of time. In our local municipal, typically, the auction process will begin after three years of unpaid property taxes. This is a very beneficial list because there is a time line implemented for these sellers. They have to sell their property prior to this date or the property is going to be seized by the county. As we spoke of before, we are looking for multiple motivations. When families have failed to pay their property taxes, most likely they are in some financial distress, which can lead to the multiple motivations we are talking about.
2) Inherited Properties / Probate
Often heir's or family members who have acquired a property through the passing of a family member, do not want to deal with the subject property. In many circumstances, probate owners, will not be made aware that they are taking possession of a property until the final judgement is determined. On the other hand, inherited homes are granted to new owners through a will that was passed down through the previous deceased owner. Once, this property is inherited, there is a high probability that the resulting owners will not want to take the property. With that being said, the owners who do take control of these properties are a great lead source to market too.
3) Absentee Landlords/ Absentee Homeowners
If you speak to a real estate investor, 80% of the time, you will hear them say that this is their favorite list to target. If you are in an area with not a lot of competition, they may be right. The problem is that as this is an effective list to market too, it is also the most popular list to market too. As a marketer, you want to be marketing to unique lists or list's that do not have a lot of competition. If you are going to target popular groups with a lot of competition, then you have to get creative with how you reach them.
4) Divorce
If you have ever had a family member or friend go through a divorce, you know they can get ugly. One of the largest assets that is typically fought over is the home. Once the recipient is granted the property, they will typically try and liquidate the property ASAP before the other party can renegotiate. This gives investors an opportunity to purchase the property. Investors can purchase a house from a divorced couple far more easily than a typical consumer because the couple is in a rush to get everything complete.
5) High Equity Owners
The first filter in any productive group or list will be high equity. This means that the homeowner or property owner has at least 50% equity in the property. When we say equity, we are referring to a homeowner owing $100,000 on a $200,000 property. This gives the motivated seller to sell at a discount without having to go through a short sale process of any sort. This makes the transaction less complicated and easier for the homeowners to settle on a number.
6) Pre-Foreclosure
Another common group of motivated sellers that new and experience investors tend to test is pre-foreclosure's. There are several different reasons that a homeowner may fall into the pre-foreclosure category:
Behind on payments
Underwater On Mortgage
Balloon Mortgage Due
Fraud
Code Violations
All of these issues and several others can put the owner on the brink of losing their home. Typically when homeowners are in pre-foreclosure they are also going through some type financial distress and are looking for a solution to their issues. You can be the one to help!
7) Distressed / Maintenance Deferred Property
Everyone seems to get motivated seller confused with distressed property. While distressed properties can produce a motivated seller, that is not always the case. A distressed property is typically a property that has had maintenance deferred for several years, is in need of advanced cosmetic repair, mechanical's, capital improvements or foundation work. This could be caused by several factors. These are factors which would force the homeowner to sell the property at a discount due to the condition.
8) Occupied for 20+ Years
Typically if you find a homeowner that has lived in a property for 20+ plus years, they are an older couple or older individual. They also probably have a lot of equity in their property giving them the power to sell at a discount if necessary. These homeowners will typically be looking to downsize or relocate and usually do not want to deal with the hassle of listing the property, paying commissions and waiting for it to sell. Older folks are typically motivated and at a point in their life where they like things as easy and simple as possible.
9) Job Loss / Job Relocation
If a homeowner loses there job, they are put in a position of financial distress. This can possibly force a homeowner to fall behind on their taxes, mortgage, bills etc. Likewise, a job relocation has the ability to force a homeowner to have to pay 2 mortgages. This gives motivation to the homeowner to sell the property they had to relocate from to prevent the double payments.
Wrapping Up | Motivated Seller Leads
There are many different avenues and groups to reach your target market. Each one of these groups has a specific buyer persona (or multiple) or a good example of a person who would be in this group to market too. Get creative with how you reach these folks. There are several different avenues/mediums that you can test and iterate on to find out what works in your area.
In the comment section below, let us know which group you have had the most success with and what medium you used to reach them.
HS Property Funds
Funds to Help, Problems to Solve
(315)516-8023
www.hspropertyfunds.com