When we talk about marketing, direct mail, negotiating, and finding great deals they all have one thing in common, they require motivated seller to happen.
In the equation to find a deal a motivated seller is a key component required to no matter if you are looking for high equity, or to buy subject to. The term motivated seller is thrown around quite a bit, but what factors exactly make a motivated seller “motivated”?
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The 5 “Red Flags” In Determining Motivated Sellers
In some of my previous posts I mention the term “red flag”, in the case of a motivated seller red flag refers to a demographic and or trigger event that occurs in the sellers life that, for some reason or another, encourages them to contact you the real estate investor and sell at a discount or on terms as an alternative to a retail sale.
As real estate investors, realtors and wholesalers we all market to a demographics of people. Therefore, it is best to try and focus your marketing efforts to targeted groups that may have a reason not only to sell at a discount, but also have equity or reasons to consider creative financing.
Red flags are precisely that, they are demographics of home owners that fit certain criteria that may encourage them to sell at a discount now or in the future. If you can identify leads that fall into more than one red flag category, then you will really hit a gold mine in your deal sourcing.
For instance, do you think a seller who owns a rental property with multiple code violations, a recent eviction and delinquent taxes is motivated? You better believe it.
If you further compound this with approximations of equity (either LTV records or deed date) you can really take your real estate business to the next level.
1. Code Violations
This is one of my favorite “red flags”.
Code violations are typically provided at the city level, and each city will have their own code department. Usually they have either a form you can submit in person or online to get this information. Once you are able to get your hands on this data it usually provides you with a gold mine of information.
For instance, in my market (Dallas – Fort Worth) the cities provide you not only with a list of properties with code violations, but also note what the code violations are for.
These range from overgrown grass to broken windows. This can easily help you identify properties that are in need of repair.
2. Delinquent Taxes
I have seen delinquent tax bills as high as $45,000 on a $100,000 house.
Tax foreclosures at the Sherrifs sale, at least here in my market the county, are a long process and there is no rhyme or reason behind when it occurs.
The city could decide to move forward with the process with $1,000 in back taxes or $10,000 you never know . You can usually obtain these records from your local tax office and they are a great “red flag” to help gauge potential motivation.
3. Distressed and Abandoned Properties
When you are out on an appointment or have some free time to drive the neighborhoods, driving for dollars can be another great “red flag” group.
When driving for dollars keep an eye out for properties that don’t share the same look and feel of the neighborhood. Junky houses are easy to spot, but sometimes you have to be very observant to find vacant properties.
For instance you may be driving along and identify a property with a lawn doesn’t seem to be kept up compared to the neighbors, a house with newspaper crammed into the mail box or piling up on the door way, vacant notices posted on the door, boarded up windows or broken windows, the list goes on.
After you have practiced this for a bit it becomes second nature and these houses will jump out at you. Usually individuals who own homes like these will need to sell at a discount now or in the near future. So make sure to write down in your mailing database and start mailing them.
4. Burnt out Landlords
When generating a mailing list a common category suggested for the data is “absentee owners”.
The vast majority of the time, the people on the absentee owners are simply land lords. From experience I can tell you people that fit the category of “tired land lord” tend to own only a few rental properties.
However, that is not to say you can land a whale with a land lord that is looking to cash out and has 20+ rental properties in their portfolio.
Probate properties by definition tend to be of older construction and thus higher equity, not only that but now the property is an estate or has interest split amongst heirs.
Because the property is often times older, they usually need repairs in some form or fashion whether it’s simple cosmetics or more complex work such as foundation or roofing.
These are only a few of the red flag groups that you should consider incorporating into your mailings. There are many more such as: pre-foreclosures, short sales, notice of default, judgments etc.
Alone these groups in and of themselves usually have a decent level of motivation; however, if you combine multiple “red flag” groups, you will really bring your results to the next level.
Are there any “red flag” groups that you have utilized in your business successfully?
Be sure to leave your comments below!