What are Motivated seller leads?

Question

My knowledge of real estate investment is still very basic, if someone could explain "Motivated Seller Leads". My thought process of buying and selling is very linear right now. If someone is "Motivated" to sell, but are unable to, why would you by, unless it requires rehab and is well below area value... If explanation is too lenghty, referral to any books or web references would be greatly appreciated.

John Chin · Answer

@Anthony Johnson, I like to call them the audience with bleeding necks. (not to get too morbid) They have urgent pain. Need cash now combined with a bit of laziness and some level of property neglect. Perfect combo for equity.

Just yesterday I locked up a home ($600k conservative ARV) for $415k. Found the seller (rather, the seller found me) through online marketing (paid traffic). I was one of two people who responded, but dropped everything to meet the seller at the property before her afternoon appointment with another investor. I offered her a one-week close, no inspection contingencies, no loan contingencies, "AS-IS", no closing costs, no fees, no games. I was able to get the signature on contract because I educated her on what most investors will do (tie it up with contingencies to flip w/out closing).

We close Thursday next week. I don't even know how I'm going to fund the deal, but on fat deals, there's always money. I'm putting the underwriting package together as we "speak" for private money. Check in with me in a week to see how it goes :)

Cameron Tope · Answer

Correct! A motivated seller (i.e. a seller that has to sell), has their problems solved when the investor buys the property.

Peter Mckernan · Answer

Hello @Anthony Johnson

A motivated seller would be someone that is in a bad situation realizes it, and wants to do something about it. Examples could be pre-foreclosure, tax lien, loss of job, death in the house/family, divorce, high medical bills, drugs, rental property gone bad, or anyone that was diagnosed with a severe medical condition. Many times people in these situations do not want to sell, so when a buyer gets a person ready to sell it is a motivated seller.

In these situations the person in any of those situation mentioned above may have more debt on the house than what the value of the home is, or the value of the home after rehab and purchase still will not give the investor as much return on their money that would make sense since there is not enough equity.

Peter Mckernan · Answer

@Anthony Johnson That’s exactly it. You give them a way out of where they are, and typically giving those people that way out saves them from a lot more heartache. This is because you as the investor/buyer gives them a way out of the dark place they are in (i.e. foreclosure, the verge of bankruptcy). If the numbers/margins work you can give them a great reset to their current life position.

Steve Bracero · Answer

Hi  @Anthony Johnson

Yes that is accurate. For example if you mail 500 letters to owners, you may get between 10-40 calls and it may take talking to 30 sellers to close a deal. Direct mail is simply a numbers game and catching the owner at the right time to "fix their problem". They need to get out of the property quickly, and it may not be able to list on the MLS. Speed is key here. You are helping the owner at a time where they need a way out fast..

David D'Errico · Answer

to add on to above comment.... They can't sell on the open market.

You are correct in the assumption that it may need a rehab and is priced way under market value. That is where "leads" are found.

Other reasons they may be motivated are that they own the property but don't live there and just want to get rid of it for various reasons (called an absentee owner) or they inherited the property and just want to sell quick but they don't want to fix anything up first

Dan Barrett · Answer

@John Chin basically hit the nail on the head.

I don't think you can discount the impact of laziness, either. We'll be selling our home in a year or so, and it's perfectly fine, up-kept, good neighborhood, etc - but I'm tempted to sell to an investor just to avoid doing paper work. :-)

What are Motivated seller leads?

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