Related: The 6 Steps of Buying an Investment Property
So what is a motivated seller?
When a property owner is willing to sell their asset for a price 10-30% below market value, they could be considered a motivated seller. Such sellers also offer very favorable terms like property financing, 0% interest, and no down payment.
Motivated sellers fall into two main categories:
- Motivated and actively marketing their properties – These real estate owners are taking action to sell their properties through the For Sale By Owner (FSBO) method or by getting listed with a realtor. In addition, they could be actively reaching out to cash buyers and wholesalers online.
- Motivated but passive – Despite being aware of the need to sell, some property owners don’t make any effort to market their properties. They might be paralyzed by the fear of making a mistake, too busy to take action or just ignorant of the help available.
Related: How to Motivate Unmotivated Sellers When Buying an Investment Property
Here are some of the reasons why property owners become motivated sellers:
- Divorce – According to a recent study by the Center for Disease Control (CDC), thousands of people are divorcing every year. And the rate is significantly higher for 2nd and 3rd marriages. In most cases, divorce means a change in living arrangements for some or all the parties involved. As a result, there can be a great motivation to sell property before, during or after a divorce.
- Physically distressed property – Property could get distressed due to storm damage, flooding, fire, vandalism, deferred maintenance or age. Such problems usually lead to an accumulation of bills, fines, and violations. Property owners that cannot afford these costs are likely to become motivated sellers.
- Job dynamics – Losing a job, getting a new job or relocation by an employer often requires a change of address. With such job dynamics, people can be very motivated to list their homes for sale.
- Foreclosure and financial default – Defaulting on mortgage payments is the main reason why property owners fall into foreclosure. Other factors that could lead to foreclosure include code violations, balloon mortgages, underwater mortgages, failure of insurance firms to pay claims, property tax delinquency, fraud and income tax issues. People who are on the brink of losing their homes often become very motivated sellers.
- Estates – At times, people inherit property that they can’t or don’t want to take care of. Such heirs are likely to sell the property quickly to avoid it becoming a burden. Property owners that are nearing the end of their lives could also be very motivated to sell.
- Tax law changes – The recent changes in the tax law require investment property owners to sell within a specific period before their liability goes up. Such laws are, therefore, a great motivator to sell.
So how do you go about finding motivated real estate sellers? Here are 3 steps for anyone thinking of how to find motivated sellers:
1. Get the lists
There are several places where to find motivated home sellers:
- For Sale By Owner (FSBO) Sites – For any real estate investor thinking of how to find motivated sellers online, there are numerous FSBO sites out there including Craigslist, Redfin, eBay, Facebook, Fizber, and Zillow.
- Attorneys – An estate, divorce, and probate attorney can be a great source of leads for investors considering how to find motivated sellers.
- Local authorities – Investors can get a fresh and accurate list of tax and land rate defaulters directly from the county.
- Data providers – There are numerous real estate data services out there that sell lists of the most profitable investments in a clean and workable format. While some lists are relatively affordable, others are quite costly.
2. Filter your motivated seller leads
Buyers thinking of how to find motivated sellers can filter their leads based on several characteristics:
- Absentee property owners – People are more likely to part with an investment property that is not their primary residence. Prospective buyers should take note of this when doing their investment property analysis as you want to make sure the property is actually a profitable one.
Related: How To Do Investment Property Analysis
- Out-of-state property owners – Individuals that live out-of-country or out-of-state are usually less attached to their properties. Such people might be willing to sell quickly to avoid the stress of managing their property from afar.
- Long-term property owners – Single family homes, multi-family homes or condos that have been owned for ten or more years are likely to be free and clear. Since such properties have high equity, owners might be willing to sell them at a huge discount.
- Tax defaulting property owners – Such property owners are in a financial crisis and are thus ready to sell quickly before losing everything to tax foreclosure.
3. Create a marketing strategy
Once the list has been segmented, it’s time to come up with marketing ideas to find motivated sellers. Here are some of the most effective real estate marketing strategies:
- Cold calling – Quite often, the most effective approach for how to find motivated sellers is to simply pick up the phone and call the sellers on the list. However, investors must do their due diligence first on each of the properties being sold. For instance, they should know what comparable properties in the area sell for, as well as be conversant with the latest developments in the area. This will make negotiation easier and result in bargain deals.
- Direct mail campaign – If the list is well targeted, direct mail can be a very effective strategy for marketing to motivated sellers. If the budget is tight, investors could simply send out printed letters, brochures or postcards themselves. However, there are direct mail companies that can provide the service for a fee to any investor thinking of how to find motivated sellers.
- A website squeeze page – This is a page where motivated sellers of real estate properties can leave their contact information with prospective buyers. Investors can promote their squeeze page address to sellers via social media or email.
Conclusion
When it comes to how to find motivated sellers, it takes more than one direct mail or phone call to get a response from a seller. Investors might, therefore, need to make several follow-up efforts before a successful sale. However, it should be noted that not every individual contacted will respond. For example, when it comes to direct mail, a 4-5% response rate is considered good. This means that 200 pieces could yield about 10 responses. Therefore, investors thinking of how to find motivated sellers in real estate should be patient and persistent until they find the best property that will yield a good return on investment.
Do you have a free Mashvisor account? Use our Property Finder to find lucrative investment properties that match your criteria in a matter of minutes!