How to Find Motivated Sellers
Motivated sellers are real estate gold for investors building up a portfolio. Buying at a discount from current market value guarantees financial success, because profits are built into the deal when the acquisition is made.
There are many ways to find motivated sellers. The information available on the Internet makes it much easier to do this than it was decades ago.
Here are a few methods that are worth trying:
Scan the Multiple Listings
Manual or better yet automated scans of the multiple listings that focus on property listings with price reductions and distressed properties occasionally turn up some bargain buying opportunities. The challenge with multiple listings is that if one investor sees a bargain opportunity, there are probably others that see this as well. In some cases, it is necessary to move fast. In others cases, patience is the key.
When a listing starts at above market values and a price reduction occurs, this is not a bargain deal. This is a situation of the seller being misinformed about what the property is actually worth. Multiple price reductions that take the property listing below market value may indicate something is seriously wrong with the property and it may be in the category of a “distressed” property.
A distressed property needs work to bring it back to the condition of an average home for sale. Real estate investors, who work with distressed properties, are usually building contractors or those in partnership with a building contractor. The really talented ones can walk through a distressed property, check the systems, foundation, etc., and rapidly estimate the cost of making the necessary repairs.
These costs and the carrying costs during the time the repairs are being made are added to the purchase price. The profit is the amount above this total, which the property ultimately sells for after the repairs.
Short Sales
Short sales are all cash sales approved by the lenders prior to foreclosure. Some lenders prefer to get rid of properties by selling them at a discount and avoid the cost of the foreclosure process.
Track Foreclosures
Properties can be bought at a discount in the pre-foreclosure period, because the owners are going to lose the property anyway. The motivation is intense to sell and get something out of the property before losing it.
The only time this is a good deal is when the loan is substantially below the market value, which is rare. Most homes in foreclosure are “under water,” which means the loan is greater than the current market value of the home.
After foreclosures, the lenders who acquire homes typically want to get rid of them.
They will accept offers on properties that are below current market values. It pays to establish direct relationships will lenders in any area and get a chance to buy properties directly before they are listed for sale.
Follow Divorce Proceedings
In many divorces, the properties must be sold in order to divide the proceeds. Divorce proceedings in civil court are part of the public record. Real estate investors can make a bargain offer to the parties of a divorce. They may want to sell fast to get rid of the lingering relationship with the other party.
Deaths
It may seem a bit opportunistic to track deaths as a source of motivated buyers. Nevertheless, this common life event often triggers the sale of a home. Similar to divorce, there may be more than one person that inherits a property and in that case selling it is a way to divide the proceeds among the inheritors.
Ask Around
It pays to have a strong network of contacts by having affiliations with business and community organizations and simply ask people if they know of anyone needing to sell a home fast.
Summary
It is a bit of a treasure hunt to find motivated sellers, but it is worth the effort to look for them.