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

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

3 min read
Marcus Maloney

Marcus Maloney is a value investor and portfolio holder of residential and commercial units. Marcus has been named the “Equity King” for his impressive ability to find real estate opportunities with massive amounts of equity.

Experience
Marcus, a high school dropout, went from G.E.D. to M.B.A. Although his education has a major impact on his investment philosophy, the real impact came from his upbringing.

Marcus thrives on completing successful transactions. As a young kid, his parents and grandparents faced many challenges; as a result, it made him think of ways he could help. His mother and grandmother were avid investors—not in the market but in people. Marcus was a recipient of those investments. And his early years were hard work growing up on a farm.

Marcus was a strategist at an early age. To relieve the burden of his family buying him clothes when it was time to return to school, he decided to make a small investment that paid big dividends. Marcus decided to purchase a small piglet at the beginning of summer, feed it until it became fat, and then sell it to a local farmers’ auction before the school year started. This was one of his first transactions and the beginning of his adventure of finding equity in every opportunity.

Marcus’ hard work continues today: He has completed over $3.3 million in wholesale transactions. Currently, Marcus is a licensed agent who wholesales virtually in multiple states while building his investment portfolio. Although wholesaling provides great money, he saw the opportunity to buy some of the deals he found and convert them into cash flowing rentals.

Marcus currently holds seven rentals, two of which are commercial units. He’s also done the unimaginable and purchased a school, which was converted to a daycare center. Again, he turns what is a marginal profit into a significant equity position. He leverages the equity by using the BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategy to increase his portfolio without any money out of pocket.

Marcus has been featured on numerous podcasts, such as the Louisville Gal Podcast, the Best Real Estate Investing Advice Ever podcast, FlippingJunkie, and many others. He’s currently a featured blogger for BiggerPockets, the largest community of real estate investors in the world.

Along with completing transactions and working to build his portfolio, he provides mentorship to aspiring investors. This is done through one-on-one interactions and through his successful YouTube channel and blog.

Marcus does utilize his M.B.A. for more than real estate. As a consultant for a successful non-profit institution south of Chicago, he uses his expertise in the development of human capital. His philanthropic efforts help existing stakeholders develop in their capacity to serve those in need of assistance.

Education
Marcus completed his M.B.A. in 2011 from Olivet Nazarene University.

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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!