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How To Finding Highly Motivated Sellers, Creative Investing
By
Sep 6, 2005, 09:54
While the vast majority of sellers are inflexible in their prices and terms, a small percentage of sellers are highly motivated to sell.
We call these highly motivated sellers? I don't - They don't want their property and are willing to do seemingly irrational things to get rid of it. The secret to buying property creatively is to look for these don't wanters in the 1 percent of sellers who are highly motivated. Don't be discouraged by the other 99 percent of sellers who are not flexible. The process is more than mere bargain hunting. It's hunting for the right kind of seller, then trying to determine if the property is a good value.
What causes someone to become highly motivated? There are 20 reasons, which conveniently spell the words DON'T-WANTER CONDITIONS.
D Divorce
O Obsolescence of property needs major fix-up
N Negative cash flow
T Transfer
W Wrong management approach
A Arrears in payments
N Negative location
T Taxes
E Estate situations (deaths)
R Retirement
C Competition with neighboring properties
O Out-of-area owners
N Neurotic fears
D Debts
I Ignorance of investment principles and market conditions
T Time constraints
I Investment capital needs capital for another investment
O Ornery partner(s)
N Need for status symbols (a new Lexus beats an old building)
S Sickness
If you'll scan the preceding list, you'll see that the majority of the reasons for motivation have to do with the seller's personal situation as opposed to problems with the property. Your goal is to find an excellent property in the hands of a seller with personal problems. Then you attempt to help this particular seller come up with creative solutions to solve these personal problems. Hopefully, the solution doesn't require that you come up with a large down payment.
How many people have personal problems? Take a city like Los Angeles. There are well over 1 million individual properties in the five major counties surrounding LA. In any give year, approximately 40,000 of those owners will default on their loan payments and receive a letter from the mortgage company threatening foreclosure. About 5,000 of these properties will actually be foreclosed on, and many more will be sold for substantial discounts just before the foreclosure sale.
And that's just one source of flexible sellers. Every year, about 70,000 people move out of Los Angeles, and many of those people own homes that they have either sold or are still trying to sell. Every year there are almost 50,000 divorces, 10,000 bankruptcies, and 75,000 deaths. In other words, there is a lot of opportunity; if you know where to look for it.
Le me say a quick word here about ethics. After I rattle off a list of misfortunes like these, it's possible you might be saying to yourself that you don't want to take advantage of someone's troubles. Actually, it's just the opposite. These people need you. They no longer want their property. It has become a burden to them an albatross around their neck. They need you to help them get rid of it as quickly as possible, and they will be grateful for any help you can give them.
There is no better feeling in the world than to help someone and, in the process, to help yourself. As the saying goes, Help thy brother's boat across and has reached the shore.
Before you become too excited, realize this: Only one in twenty sellers is going to have problem this severe. Less that half of these will own properties worth buying. So the odds are slim but not impossible.
Most of the ads in the newspaper are not flexible and 95 percent won't be interested in your creative deal. Almost all of the properties listed with Realtors in multiple listing books are not flexible and sellers have been told by their real estate agents that they will get top dollar. But there are highly motivated sellers out there are plenty enough for you to find at least one good property per year.
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