5 Steps to Finding Motivated Sellers
The best way to find motivated sellers is to learn who they are, where they live, and approach them diligently. If you are just starting your real estate career, whether your goal is to buy-fix-and flip homes or purchase properties for long term rentals, the first and most critical step is finding a good deal.
Good deals don’t come to you. They are not mass advertised, and they won’t just show up at your doorstep. You have to find them.
The best way to begin your search is by identifying distressed properties and the people who own them. These property owners are more motivated, than your average seller and homeowner, to sell their property below-market value, which works to your advantage as an investor looking to make a profit.
How To Find Motivated Sellers And Why Is It Important?
Finding motivated sellers is important because the real estate industry is changing rapidly and becoming very competitive. We are entering an era where everyone is flipping homes: celebrities, billion dollar trust funds, even tech companies, like Zillow. At the same time, the actual supply of good deals is shrinking every day. Faced with these challenges, it becomes vital for every real estate investor, new and seasoned, to source projects for themselves.
This article outlines for you the five simple steps to find high potential motivated sellers and the lucrative properties they own.
Step 1: Identify Who Has Potential
The first step is to thoroughly understand and identify who are potentially motivated sellers. There are many different reasons why an individual may be searching to sell their property quickly and cheaply.
They may have gotten a new job halfway across the country and start next week. They may be out of county, or even out of state and no longer want the hassle. They may be behind on paying their medical bills, their property taxes, even their personal taxes, and may choose to sell their home to do so.
Furthermore, motivated sellers are not just individuals. They may be businesses, municipalities, other real estate investors and organizations that have properties that need to dispose of their properties. It is vital to brainstorm all the different potential scenarios, and situations that may be specific to your area, so that you know how to search for them.
Step 2: Find Their Information
As technology continues to advance, it is becoming even easier to find the actual information needed to contact motivated sellers. Depending on the type of seller you identified above, these are a few places where you can start your search.
Arguably, the most motivated sellers are those who have just inherited, or are about to inherit, property. Visit the probate department at your local county courthouse, and pull cases of decedents, who have died, leaving their real estate assets behind. Probate is a court supervised process that’s sole purpose is to make sure, an estate’s properties are sold quickly, so that any remaining debts and creditors can be paid off. Pulling such information from the courts is becoming even easier, as some counties make their records accessible online.
While you may no longer read newspapers, they still provide a very value resource: public legal notices. In the newspaper you can find postings for forthcoming foreclosures sales, property tax delinquencies, and bankruptcy hearings. There are even websites that allow you to search multiple newspaper notices across the entire state. The beauty of legal notices is they must provide the contact information for the parties involved, or in the case of foreclosures, details about the sale, such as where it will be taking place.
If you don’t want to wait until a sale has been posted publicly, go back to the courthouse, searching this time for foreclosure complaints. In the state of New York, in order for a lender to begin the foreclosure process, they essentially have to sue the current homeowner. Once a complaint has been started, the homeowner typically has 30-60 days to come up with the money or potentially face a deficiency judgment against them on top of losing their home. This leaves investors a short window to make an offer they can’t refuse. Court filings will also clearly identify who the borrower is, and where they live, giving those who take the time to search these cases a distinct advantage.
State Tax Department
The New York Department of Taxation and Finance is a huge resource to find motivated sellers. For example, on their website you can find not only individuals, but also businesses that are behind on their personal income taxes, and strongly motivated to pay them off. While this type of debt is not tied to real estate, per se, should these individuals own property it may be a potential asset they will consider selling to get out of water.
For Rent Signs
Identifying underperforming rental properties can be an additional and widely accessible way to find motivated sellers. If your initial strategy in real estate is to buy and hold properties, this may be an ideal approach for you, especially with the passage of the most recent statewide rent control law. Landlords with rental units that are in poor condition, that are being offer at below-market rents, or are sitting on the market for an excessive period of time are all good indications of a motivated seller in the making. Fortunately, there are multiple rental listing sites that make it convenient to search and find these types of motivated sellers.
Finally, consider simply taking your search online to find motivated sellers. Sellers are just like anyone else, they are people, who will turn to the internet to vent, to ask for money or to search for the solution to their problems. Search sites like GoFundMe, where individuals faced with difficult situations can raise money online. You are able to specifically search for causes, such as save my home, or pay off debt. Check sites like Craigslist and Facebook to find motivated property owners. With these you are able to search for specific keywords like, “need cash fast”, as well as for sale by owner and rental listings.
Step 3: Confirm Their Property Is Right For You
Once you have your list of potential sellers, confirm that their property is right for you. No matter how motivated a seller may be, if the property requires too many repairs, is in an area of declining value, or is simply not your cup of tea, it is not worth your time, effort, and energy to reach out to them at all. Familiarize yourself with their specific property, area, and local comps. Drive the neighborhood, if you can, or talk to the local city department to see if there are any serious problems with the home. If the numbers don’t hold up, don’t be afraid to cross a property off the list. Undertaking a preliminary analysis, before you reach out to the owner, will allow you to keep your search focused and your pitch clear.
Step 4: Contact Them
Now that you have successfully narrowed in on a specific target audience, it is time to reach out to them. Safely assume that motivated sellers are being approached by real estate investors, agents and brokers, daily. In order for you to stand out, consider putting traditional methods, such as direct mail and flyers, and adopt a more personalized approach to market yourself.
In this digital age, the phone has become something very personal to everyone, even the oldest of the Baby Boomers. Pick up the phone, call them and be genuinely interested in learning about their situation and offering a solution. Partner with a digital marketing firm to advertise to them directly on social media, or just message them directly. Open up a conversation, provide them information that will have meaning to them. If they are local, take it a step further and knock on the door, like a friendly neighbor. Meet them face-to-face, so they get a feel for who you are, and you get a feel for their level of motivation.
Make sure that your message is clear, yet understanding, and your communications focused without being too aggressive and pushy. Use message and medium to communicate to begin to establish trust with these potential sellers.
Step 5: Maintain Contact
In this same regard, it is essential to maintain contact with a motivated seller, even if the first response is a no. Very rarely will you land a sale on the first or even the second point of contact. In the same way that you are trying to gauge their level of motivation, a motivated seller will also be gauging your level of seriousness. Remember, they don’t have time to waste either. Therefore, if you leave the table too soon, you potentially leave the opportunity open for a different investor to benefit from. Strike a delicate balance of maintaining your interest and keeping in consistent and meaningful contact.
The Next Step
You have just learned the five simple and best ways to find motivated sellers. At this point you may feel there are many options out there, which is good, because there truly are. Now that you know where to find the properties, it is time to strategize, who your team will be to help you go full steam ahead, once a motivated seller says yes.