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SHOW NOTES FOR EPISODE 108 – HOW TO FIND MOTIVATED SELLERS
Buying properties below-market is the goal of every real estate investor. However, finding those properties is not always easy and usually requires a very motivated seller. In this episode, Bill discusses motivated sellers – what makes them motivated, where to find them and the best way to approach them.
Generally, when you are looking for properties, your goal is to find properties that are undervalued – below market value.. Not only does that help you in getting “instant equity” when you buy, but it also gives you a buffer, should there be a market down-turn. It’s just smart business.
However, if you have done good research and you have pinpointed a market that for some reason is about to rebound economically, that may be the exception. You may want to pay fair market value and buy as many properties in that area as possible.
In these markets, we can afford to pay fair market prices as we expect the market to begin to appreciate, thus making today’s fair market price tomorrow’s bargain.
However, if you have a motivated seller, you are more likely to still buy under market. So, how do you find properties that are undervalue?
It takes work to find the “diamonds in the rough” but when you do, it’s well worth it
What Makes a Seller Motivated?
- Sometimes there’s something wrong with the property
- It’s out of date compared to others in the area
- Poor management
- Declining economy
- Filled with drupe dealers, pimps and prostitutes
- Needs major repairs (fire, foundational issues, mechanical, environmental
- Sometimes someone is just flipping it. They want to make a quick buck but don’t want to do the work to bring it up to par
- One of the best ways is to find sellers that are just motivated to sell:
- Can’t find buyers to buy the property at the price they want
- Burnout, because
- Self manages and tenants call the shots, instead of him calling the shots
- Tired of chasing down the rents every month
- Tired of calls in the middle of the night to unclog toilets,
- Other reasons owners are motivated
- Estate sale (death of original owner)
- Failing health
- Inherited property
- Lawsuit
- Retirement
- Bankruptcy
- Foreclosure
- Relocation
- Divorce
- Losing Money
Now that you know what you are looking for, how do you find motivated sellers?
- You can ask – “Why are you planning to sell?”
- Places you can find motivated sellers:
- Bankruptcies are published in financial papers or websites
- Divorces can be found through the local courthouse
- Foreclosures can be identified through banks
- Most of the time there is no way to tell, so you have to
- Do regular direct mail to as targeted a list as you can so that when they do sell, you are on their mind (see podcast episode#106 – “Using Direct Mail to Get Great Off—Market Apartment Deals”
- Timing is everything
- They may get 4-5 letters from you and when they have the need, they’ll remember
Where do you find motivated sellers?
- Lists
- List brokers
- County courthouse
- County Assessor’s office
- Banks – Real Estate Owned (REO) Department – For Foreclosures
- Send letter
- I’m an investor
- What types of properties I want
- I will buy “any” property in that type
- Establish credibility
- Say you will call on a specific date and DO call on that date
- Call
- When you call and if secretary answers say, “He/she is expecting my call”
- Don’t be discouraged by “No.” Be persistent!
- Average sale is after the FOURTH attempt – average salesperson/prospector quits after 2nd attempt
- Follow-Up
- Regardless of what happens with the call, write banker a note saying
- “a pleasure speaking with you”
- Reference something you discussed
- End with “I’m looking forward to doing business with you”
- Put banker on contact list
- Write every month
- Call every quarter
- TIP!
- Bankers want to get rid of properties November & December
- They generally don’t want foreclosed properties listed on year-end reports as it can affect stockholder confidence in the bank
- Evictions
- Local Housing Court
- District Court
- Wherever people do evictions
- Health Violations
- Local Board of Health officials
- Ask them which properties are in need or have outstanding violations
- Tax Liens
- City Hall
- Tax Office
- Ask which properties have been taken back in tax title or have tax liens
- Condemned Properties
- Building Department
- Out-of-State Owners
- County Assessor’s office
- Multi-family owners
- Put on list
- Contact every 3-4 months
- Residential Real Estate Agents
- Some have experience with apartment buildings
- Driving for Dollars
- Run down properties in good neighborhoods
- Ask tenants for the owner’s number – say you want to fix the place up
- If you get the number for the property management firm – tell them you want to buy and would “probably” keep them on. Sometimes their agreement with the owner gives them a commission on a referral that buys
- Craig’s List Ad
- I Buy Apartments – Any Size Any Condition – Call 555-5555
- Commercial Brokers
- Local Board of Health officials
- Regardless of what happens with the call, write banker a note saying
- Send letter
In summary, there are many ways to find motivated sellers. You should not just focus on one method but use a variety and have many deals coming at you from different sources.
Always look for new ways to find motivated sellers as markets are constantly changing.
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