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My 4 Step Process for Turning Sellers into Motivated Sellers

by Tom Sylvester on December 9, 2013 · 13 comments

  
Turning Sellers into Motivated Sellers

I just did a search on BiggerPockets for “motivated sellers“.  Guess how many items were returned…

We found 1,928 results for ‘motivated sellers‘.

This is not surprising.  One of the (many) keys to being a successful real estate investor is to find motivated sellers.

For those not familiar with the term, a motivated seller is just what it sounds like; a person who wants to sell their property and has sufficient motivation.  Their motivation may come from any number of reasons, such as getting divorced, relocating, inheriting the property, a retiring landlord, etc.  This is different from just any seller, as a person who wants to sell their property and a person that needs to sell their property are at different points in the process and as a result will result in different quality of deals.

Many people seek out motivated sellers when they market.  An example of this would be someone who markets to properties in probate, since the people who inherit the property more than likely do not want the property.  Although I also seek out motivated sellers, often times I get leads of sellers who are not motivated at the present, but may become in the future.  Below are the 4 steps that I take these sellers through in order to create a motivated seller.

Note: The critical aspect of this process is to spend a little bit of time and look out for the best interest of the property owner.  If you put their best interests first, great deals and success will eventually come your way.

Step 1 – Determine Their Motivation Level

The first step when dealing with any lead is to determine their motivation level.  When you first speak to the owner, you will want to gain an understanding of their situation.  Are they selling the house because they need to, or because they want to?  What is their timeframe?  Is their property in good condition that a retail buyer would like, or does it need work?  Are they asking market value or higher for their home?

Unless the sellers has some reason that they need to sell to you (an investor), they are most likely better off to sell the property via another means.  If you were to make a low offer to a seller who is not motivated, they would most likely reject it and it may close the door on the future ability to purchase the property.  Instead of making them a low offer that may make sense from an investment perspective, don’t make the offer and proceed to step 2 .

Step 2 – Sell Their House Themselves to a Homeowner

If it is determined that the person wants to sell their property but is not motivated, I’m completely honest with them that I am probably not their best option.  If the property is in good condition (or even if the seller believes that the property is in good condition), I recommend that they sell the house themselves.  I provide them a quick overview of the process and let them know that this option has the potential to make the most money since a homeowner will likely pay more than myself as an investor.  Additionally, if they sell it without a Realtor, they will save the 6% commission.

Although the above paragraph is completely true, most people will not be successful selling their house on their own.  The reasons why are plentiful:

  • The person does not know the true value of the property
  • The person does not know how to market their property
  • The person does not know the ins/outs of selling a house
  • The property is not listed on the MLS
  • The person does not want to spend the time needed to sell the property

If the seller does end up selling the house on their own, then they are happy.  You spent a little bit of time and helped someone, so feel good.  If the person ends up selling the property on their own, you most likely would not have been able to purchase the house for a price that allowed you to profit anyways.  If the person does not sell their house, then they are starting down the path of being motivated.  Some time has passed, they have spent time and some money trying to sell the house and they have been unsuccessful.  Because you left the door opened when you initially spoke to them, either you will contact them or they will contact you.  This takes us to step 3.

Step 3 – List Their House with a Realtor

When you speak with the seller, they are probably a little more motivated but may not be ready for your offer yet.  Sympathize with them and let them know that even though them selling the property themselves was a good option, it can be difficult because they are not an expert in selling houses.  Prior to this point, make sure you have networked with several local real estate agents.  When you find one that you like and can work with, offer to send them leads of sellers who don’t make a good fit for you.  This will build great rapport with the agent, especially if they get some deals from sellers that you send to them.  Also suggest helping them out if they have an ugly house or a property that is not selling for another reason by always giving them an offer.  We have been able to purchase some properties because our agent brought us a deal that no one else would buy.

Since the Realtor should be an expert in their market, this should give the homeowner a better chance to sell the property.  Again, you only spent a little bit of time speaking to them and referring them to your agent.  The agent will then do all of the work of listing the house and trying to sell it.  If they do sell it, then you most likely could not have purchase it for a price that makes sense.

Because you once again left the door open, set a reminder (maybe using Google Calendar) for right before the contract between the seller and agent runs out.  Follow-up with the seller to see if they sold the property.  If not, then they are ready for step 4.

Step 4 – Make Them an Offer

If the sellers gets to this point, there is a great chance they will be motivated.  They wanted to sell their house, so they tried on their own (without success).  They then listed with a Realtor and tried to sell it with an expert (again without success).  So not only have they not sold their property, probably close to a year has passed.  Additionally, they have probably come to the realization that the property is not worth what they thought it was.  Because you have worked with them along the way, they are likely to contact you to get an offer for the house.  Even if they don’t contact you, you should be contacting them.  Sympathize with their situation.  If they still really want to sell, let them know that you can give them an offer.  It is much  more likely to get accepted at this point then when you initially spoke to the seller.  In some cases, the offer can even be lower than you initially planned to make, and you can cite that things have changed in the past year as the reason.

Real Life Examples

I have successfully used this process several times to turn sellers into motivated sellers.  Below are a few examples.

  • Tired Landlord – A landlord who has owned a property for a while approach us to sell.  He wanted too much money for the property, so we suggested that he try to sell the property himself.  He had a vacancy for a while and listed the property “For Rent” and “For Sale”.  After not selling on his own, we recommended he try a Realtor.  She priced the property around other duplexes on the market, but none of them were selling and this property was in worse condition.  When his listing expired with the Realtor, we submitted him with an offer and after a little negotiation were able to purchase agree on a sales price.
  • Realtor Lead on a Single Family – Because we referred a few sellers to our Realtor and they sold their house with her, our Realtor was more than happy to bring us a house that she could not sell.  In this case, the owner had moved to California and the property was vacant.  Additionally, the floor joists in one of the bedrooms were rotting out and the floor had sunk in.  As a result, no retail buyers wanted the property.  We were able to make an offer over $30,000 less than the asking price and purchased the property.  The best part about this is the win, win, win situation.  The seller sold their long distance property that they could not sell otherwise, the Realtor made a commission on the property that they could not sell (instead of letting the listing expire) and we got a great deal.
  • Vacant Property – We had a vacant property across the street from one of our duplexes.  It has been vacant for several years.  We contacted the owner with an offer but he rejected it.  We suggested that he list it for sale and he might get a higher offer.  He was not interested in doing the work himself, so we referred him to our Realtor.  He actually did not end up contacting her and when we followed up with him a few months later, he was just ready to sell and be done with paying the taxes on it.  We discussed his situation and he wanted to avoid the tax hit of selling, so he owner financed the property for us for 10 years at a 6% rate.  We closed in a week.

Conclusion

When looking or marketing for your next deal, you may come across a seller who is not motivated, but may be in the future.  Instead of passing on the opportunity, spend some time and help them out.  If they sell the property to someone else, you helped them and they may refer someone else to you in the future.  If they are unsuccessful at selling, you may be able to turn them into a motivated seller and pickup a great deal.

Do you have any tips/tricks you use to find or create motivated sellers?
Photo Credit: bolandrotor

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{ 13 comments… read them below or add one }

Sharon Vornholt December 9, 2013 at 3:30 pm

Nice article Tom.

Giving the seller that is not motivated (today) options, usually means they will remember you when they finally become motivated. Always leave the door open on your way out.

Sharon

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Tom Sylvester December 10, 2013 at 4:40 am

Thanks Sharon. It is such a simple thing, yet I’ve seen so many investors that are so focused on getting a deal. They don’t realize that by creating win-win situations they will end up being a lot more successful.

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Roy Schauer December 10, 2013 at 10:30 am

Like Sharon said, good article and good points. It doesn’t hurt to be considerate or nice, and can really pay off in the long run. Example of the homeowner that ends up selling through the realtor, I’m sure they probably have friends and one of those friends might be in a situation at some point that a realtor can’t really help him with but they remember that you work with creative situations. Since they probably don’t know too many people that solve property problems and you were helpful/nice to them, your going to be the one they remember and tell the friend about. And even if they don’t remember how to contact you, they remember the realtor that sold their house (that you put them in contact with) and can find you because of building that relationship with the realtor. Good stuff!

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Tom Sylvester December 11, 2013 at 5:09 am

Right on Roy. And even if we never get a lead from it, we took a few minutes, helped someone and made the world a better place. Maybe we also made a dent in that perception about real estate investors…

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Adam Roberts December 10, 2013 at 7:02 pm

Thanks for the great article, Tom. I just recently started doing mail-marketing and talking to numerous sellers. It’s very intriguing to me the different levels of motivation you can hear in people’s voices/situations, etc. Your article definitely resonated with me there.

Adam

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Tom Sylvester December 11, 2013 at 5:10 am

Awesome Adam. Be persistent with those mailings and I am glad that I could help.

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Andrew Joseph December 11, 2013 at 12:45 pm

Tom – This is a great reminder for me. I’ve heard that 30% of deals come from following up. Yet, I commonly throw out everything that doesn’t work after the first call…

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Tom Sylvester December 12, 2013 at 4:08 am

Glad to help. I hear lots of numbers am an not sure what the actually percentage is, but I have found some of our better deals were the ones we worked on for a while that other investors simply gave up on. Persistence and helping people really pays off.

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Michael Schurter December 11, 2013 at 1:32 pm

Hi Tom,

I completely agree that having an owner try to sell alone first is a great way for agents to prove their value and for sellers to become frustrated and motivated. Selling homes seems easy unless you can’t get anyone to come through the door… One they have listed with an agent, if they are still not getting showings no matter the reason, I have found that this is the best time to bring in my investor clients. We can have an honest conversation about value and usually walk away with a good buy.

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Tom Sylvester December 12, 2013 at 4:10 am

Great advice Michael. In general, I find people need to experience something before they can make a change. So no matter how many numbers I show a seller that says their property is worth $30,000 less than they think, they don’t budge. But if I have them go out and fail to sell it, and an agent tells them (and potentially fails to sell it), they come to that conclusion on their own.

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melodee lucido December 13, 2013 at 2:54 am

Well done article Tom. By doing as you explain here we are above the stereotypical turning and burning the leads investor. This way is more human and kind as well as just plain good business.

One of my early mentors told me to find out in 1 minute if there was going to be a deal done right then—if not end the call—sheesh. I just didn’t like that way of relating to people. While I spend a lot less time on each call than I did in the beginning, I do find out what the seller needs and form a memorable foundation for the future.

If I never do business with that seller I have left a great impression and they may recommend me to a friend or family member in times to come.

Thank you!

Reply

Tom Sylvester December 13, 2013 at 5:21 am

Agreed Melodee. There is a lot more to this business than just making money. By remembering that, treating people like people (and not just leads), not only will that help establish a more successful business that has a great reputation, it will also help people and make the world a better place.

Thanks for sharing some of your experiences.

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Shaun December 19, 2013 at 12:41 am

Great attitude and nice system.
If the worst outcome is you “waste” a little time and help someone out that isn’t a bad tradeoff.

While the term is a little Guruy you definitely embody the idea of a full service real estate solutions provider.

Reply

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