Are Motivated Sellers Stupid?

Seriously. Why would anybody sell their house for less than it is worth? Do they just not know that they could get more for it than what we as investors are paying for them? Do they not know that we are flipping houses for more than we buy them for? Are they just stupid?

No. Absolutely Not.

Maybe some don’t make the wisest decisions, but I don’t believe that the people we buy from are stupid. There are some of you out there that might believe they are stupid. That’s just not fair to them and to you.

Let me explain.

I just recently covered the pros and cons of buying houses from motivated sellers instead of from banks. In that post I mentioned how there is less competition and that you can get better deals when buying from motivated sellers (private sellers). When most people hear about and consider marketing to buy houses from motivated sellers, I think they have the misperception that the people they are buying from will probably be facing foreclosure. Why else would a sane person sell a house for dirt cheap?

When I was getting started in the house flipping business, I thought the same thing. But, it’s not really like that at all. My wife and I hardly ever buy from people facing foreclosure. Not that there is wrong with that either.

The problem is people’s perception of what real estate investors that buy from homeowners are doing.

Are Real Estate Investors Ripping off Homeowners?

This is what this all boils down to. There is a misperception that the houses investors buy can be sold for more than we are buying them for. Therefore, we are taking advantage of people. I recently was told by someone that they will only buy from banks because they don’t want to rip people off and that’s not the right thing to do.

I was taken aback. First, because it insuated that I rip people off. Second, because they are thinking about things in the wrong way. That’s fine if they feel that way, but if they don’t fully understand the reasons why homeowners sell their houses to investors and house flippers, they are missing out on great opportunities because of their ignorance.

Now, I’m sure there are investors that intentionally take advantage of sellers, but I honestly feel they are the exception and not the rule.

So the issue is whether the homeowners are stupid because they are selling their houses for less than they can get. That’s what the idea is.

Why That Idea is Just Plain Wrong

The premise of that argument is that had the sellers listed their house with a Realtor or sold it ‘For Sale By Owner’ they would get a better price. This isn’t necessarily true.

The house needs too much fix up.

Usually, the houses we buy are in such disrepair that only investors are likely to be making offers on them anyway, regardless of whether they are listed or not. Many of the houses are in need of repairs that banks aren’t willing to accept. When a ‘normal’ buyer goes to get a loan to buy the house, the bank will want certain repairs made. Guess what, someone will have to pay for those repairs. What if the seller doesn’t have the money to make them?

Now consider if we investors did not buy these houses. What would the seller do then? What options would they have?

We do buy these houses and the sellers are usually very happy that we did. It’s really a good feeling to know that we are helping people out of situations that they don’t want to be in and don’t know how to get out of.

The seller just doesn’t want to mess with the house.

This really happens more often that I would have ever imagined. They know they aren’t getting top dollar but they don’t care. They want to make a certain amount and that amount is fair enough for them to avoid having to deal with the place.

This happens for a lot of reasons. Some of those are:

They don’t want to deal with tenants any longer.
They inherited the house and don’t have the time or energy to deal with it.
They want the money immediately for something else (business, vacation, medical, etc.).
They don’t want to wait for the house to sell and have it sit vacant for a long time.
They are getting a divorce and want to everything to be done yesterday.
They are buying another house and need their old one sold right away.

There are a lot of reasons why people would sell for less than what they might possibly get by listing the house and selling the conventional way. They aren’t stupid and they know they are taking less, but it is solving their problem.

Conclusion

So, if you are one of the people that feel that buying from motivated sellers would involve taking advantage of people, I hope that you will reconsider and see that that is not the case.

Motivated sellers aren’t stupid, but if you want to go on believing that, go ahead…less competition for me. 🙂

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.