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Why Gauging Seller Motivation Is A Waste Of Time (And WAY Overrated!)

by Marcus Maloney on May 30, 2014 · 7 comments

  
Seller Motivation

I write this article on the heels of working with a motivated Seller.

Its great to know when you have an extremely motivated seller that has no other option but to sale their home immediately. Every investor love to be in this situation. All you can think about is helping them resolve a problem and possible huge margins on this deal, but WAIT things may not be as they seem.

There are many articles written on the importance of gauging seller motivation. The articles are great and the information is highly effective and useful.

Knowing your sellers motivation is great to determine if the seller is truly in a position to sell or if they are just tire kickers.

Again, motivation is important but is it overrated?

Here’s Why Gauging Seller Motivation Is Overrated In Real Estate!

I speak to a lot of sellers a month, and yes this is time consuming but you have to engage in a conversation before you can get to the closing table.

What I have found to be an infallible truth is; gauging seller integrity is more important and under appreciated than seller motivation. Will your seller do what he or she says is the bigger question that must be explored!

“Integrity is telling myself the truth. And honesty is telling the truth to others” – Spencer Johnson (tweetable)

Integrity Speaks To The Core Of Your Seller

I would say 99% of investors (including myself)  ask this simple question:

Why are you interested/thinking of selling?

This is a great question and a wonderful way to begin a dialogue to find out why they are responding to your marketing piece. After the discussion about the property: how many bedrooms, what’s the condition of the roof, and how much do you think the repairs will cost, so on and so forth, I like to take it a step further and ask them;

What Exactly Are You Trying To Accomplish By Calling Me Today?

This question exposes the real reason they are reaching out to you.

Although it may sound a little harsh or brash, it catches the seller off guard because in their minds they have answered this question and they believe I would not ask the same question again. By asking the same question over but using different wording, the seller will give you an honest answer or a different answer.

If I receive a different answer from the opening dialogue question: Why are you interested in selling? It immediately raises a red flag that this person is not being truthful. When I get to the property I will inspect the property a lot closer than normal because the integrity of this transaction may be compromised.

The Deal Is Not Made With Property But With The Owner

If the home owner is a liar then you will have to proceed with caution when doing a deal with this individual.

Some owners are not trustworthy, you can pour a lot of time working a deal and get to the closing table, and the seller changes his/her tune.

Yes; there are legal steps that can be taken, such as placing a lien on the property if you have a signed contract, but who want to be involved in a transaction like this.  Nothing but bad will come out of it.

Yes you may get your money but the seller can damage your credibility by speaking negatively about their interaction with you and your firm to their family and friends, or worse write a negative report about your company on the web.

Real Life Situation

I received a seller form from my website and I immediately called them back (follow up is key).

I listen to the story and I could empathize with them and the position they were in. We discussed what they would like to get for the property and after running some numbers I contacted them and told them what I could pay for their house.

We agreed upon term and  price and I informed them in order to make this happen for you we must fast because of their need. I brought over a standard purchase contract with the agreed upon terms and price. I was shocked at what happened next. The seller looked at me and said “if I sign this then we are locked in and I can not sign with anyone else”.

I was dazed and confused. I said “YOU ARE ABSOLUTELY CORRECT.”

Oh how things change, he was extremely motivated but his motives were deceiving. To make a long story short I went and had some lunch while he talked it over with his family. Unknown to me he was using this time to use my contract to shop the property to other wholesalers in the area to try and get a better price.

I failed to asked my follow up questions because of the heart felt story, I had no problem with the seller talking with additional wholesalers, but the issue that bothered me was the immediate action that he requested and then to find out it was a lie.

Always Do Your Due Diligence On Your Sellers Motives And Integrity

How do you check your sellers motives, what are some of the questions you ask to gauge your sellers integrity?

I would like to know to add to my tool box and I’m sure others would like to know as well?

Be sure to leave your comments below!

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{ 7 comments… read them below or add one }

Sonia Spangenberg May 31, 2014 at 3:11 pm

Marcus as a newbie I love hearing your advice. It is so easy to have a narrow focus when you are first starting out and miss the clues regarding honesty and integrity. I really liked the quote on this and I like knowing there are people out there who value those character traits. But the reminder that there are those that don’t even know what they are or are pulled from them in times of distress is an important message. Thanks for taking the time to share.

Reply

Marcus Maloney May 31, 2014 at 5:27 pm

Sonia,

This is how I evaluate each deal. I learned that you can not have a good deal with a bad person. Thanks for your input

“Enjoying the Journey”

Reply

page June 1, 2014 at 11:00 am

So true, and well put.

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page June 1, 2014 at 10:22 am

Very interesting. I’m currently in a situation that is a great deal for both parties, but the seller is somewhat shifty and has been known to back out of deals. She immediately jumped at the initial proposal but has been dragging her feet and asking for more details, and now nothing. I suspect she thinks she could get a lot more for the property, but my numbers are solid.

I’m training myself to have the “be able to walk way from any deal” mentality, and while this one will be very difficult to leave behind, as you stated in your article, the integrity of the seller ends up being more important in the end. You’ve also given me some good food for thought in the event that I do move forward with her, and she tries to back out during the deal. I’ll need to take this into consideration when we write up the contract with my attorney. Great thoughts…

Reply

Marcus Maloney June 1, 2014 at 5:53 pm

Page,

It is difficult some times to walk away from a deal but some deals can turn into major headaches. However, this may sound contradictory but some sellers are just very indecisive about what they want to do and do not have bad intentions. They may have sentimental attachments to the property, and are not ready for the transition in life which is understandable.

When talking numbers if the seller believe they can get a higher number, I encourage them they can try and find a better deal because I always want the seller to be comfortable and not pressured. Just remember if you have done everything you can to make the deal work and you can not seal the deal then maybe it’s not for you. You have to accept that and continue to push forward. Good luck

“Enjoying the Journey”

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Gary June 1, 2014 at 10:38 am

Great post Marcus! I always ask why they’re looking to sell their property, but never thought about asking it again phrased differently to catch them off guard and to root out true motivation. Excellent idea!

I am curious, did you and the sellers eventually sign the contract? Or did they go with a higher offer from another wholesaler? Would you of signed the contract with them after they did what they did?

Reply

Marcus Maloney June 1, 2014 at 6:19 pm

Gary,

The seller did go with another offer that was a couple thousand higher, but I am ok with it. I didn’t care for the inconvenience, to try and help the seller. I would have proceeded with deal but I would have had some strong language in my contract.

There are always deals to be had, one of my favorite parts of the acquisition process is negotiating. I never try and manipulate anyone because I have a high moral compass but negotiating is a sport to me. I love to see how much I was able to reduce their selling price even if we don’t get the contract. I use every experience to learn to make my skills better.

Reply

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