we will discuss how to find motivated sellers of either type. The final factor likely to affect a seller’s level of motivation is the state of the economy itself.
What You Need to Know About Buyer and Seller Markets
The economy plays a big role in finding motivated sellers in different pockets of the country. The economy will be discussed in much more detail later in the book when we cover negotiations, but it is important to understand how it affects motivated sellers. Important definitions are as follows:
Buyer’s Market (weak market): when the real estate market is not moving very quickly. There tends to be little or no appreciation, or even depreciation. Sellers tend to be more open-minded to creative ways to sell their homes. There also tends to be higher unemployment in the surrounding area, and overall not a very good economy. NOTE: most markets are a buyer’s market right now in the U.S.
Seller’s Market (strong market): a real estate market that is moving very quickly. There tends to be high appreciation. Sellers may be getting multiple offers in one day on their homes, and bidding wars are common. There tends to be a high employment rate in the surrounding area, great retirement/vacation facilities, and an overall good economy.
When the market is very strong, sellers are able to sell their homes more easily, even if they are very distressed. If the market is a buyer’s market, it can be very difficult for a seller to sell their home. The odd part about motivation and finding motivated sellers is that no matter what the economy is, a buyer’s or seller’s market, motivated sellers are always available! You will just need to look harder or you might find fewer in a really strong seller’s market, and vice versa in a really strong buyer’s market.
Techniques for Finding Motivated Sellers
The kind of motivation you are looking for is not someone just wanting to sell their house but someone who needs to get rid of either their good debt or their bad debt. These sellers won’t come knocking on my door, however, nor are they ever obvious. You must try several different approaches and determine what works best in your area. It’s a bit like fishing. Try a spot and a lure and see if they work. If they don’t work, move to a different spot and try on new lure. Here are some ways that have worked for my students and me over the years:
1.Craigslist - Craigslist is my favorite way to find sellers. I like it for 2 reasons:
1)Everyone uses it now
2)It is FREE
I look in Craigslist for the “For Rent” properties. You can find homeowners in there who have not been able to sell and that is why they have decided to rent their home themselves. You will also find Real Estate agents trying to rent homes for their clients along with property managers (in most states they must also be licensed agents) advertising their homes for lease. See later in this section what to say to sellers when you do call them. Talking to Realtors is a little different and is covered later on in this book. Check out my bookstore on my site www.wendypatton.com to get your copy today.
2.Bandit signs – Bandit signs are the small signs you see on the street corners or on telephone poles around your city. They are called bandit signs because in many cities they are illegal to post and you can be fined, but investors still put them out and take the risk of the fine over the potential profit of a deal they may bring. They might say “Cash for Your Home” or “Stop Foreclosure,” etc. One of the advantages of buying a house on a busy street is to be able to advertise with a bandit sign in your own yard. Then it may not be illegal. Check with your city to see what its ordinance states. An investor I know owns 30 houses in a subdivision. She purposefully bought the one on the busy entrance corner so that she could advertise on the lawn and pull people back into the subdivision to look at the other houses. There are many companies that make these signs and they are not expensive. This way, if you lose them, someone removes them or they blow away, it does not cost you much.
3.Advertisements in the newspaper – Generally I find my sellers through ads either they have placed in the paper or ads I have placed in the paper to fish them out. There are several ads that you can run that will attract sellers to call you. Several of my favorite ads are:
Ad #1
This ad will draw in the seller that is considering something long term and those that want to rent their home out. In other words, when a person responds to this ad they are ready to do the most important part of an option – lease and do it for a long period of time. This type of person does not need any cash out or they would not respond to this ad. The types of people we really want are the ones that have not been able to sell their home so they are considering the four letter word: RENT. There is a script that I use later in this chapter for calling the For Rent ads in the paper. Use the same script, but only after they call you.
Ad #2
The above ad will draw in the nicer homeowners to call. We are executives in this business, right? I am, and hopefully you are too, so there is nothing disingenuous in this ad. However, the seller will naturally assume you are looking to live in the property. Later, you will need to break the full facts to them slowly. This will be covered when we handle this and other seller’s objections.
Ad #3
Ad #3 will bring in those sellers looking to sell and they are starting to get very motivated. This ad can bring in sellers that are behind on payments or just getting motivated.
Ad #4
Ad #4 brings in sellers that are behind on payments – foreclosures, but also those that have two house payments. It brings in sellers with good debt and bad debt. This is a great ad to bring in lease option sellers.
There are many types of ads you can run. Experiment with them in your area. Also use different types of papers. You can try your little local papers or your larger metropolitan area papers depending on your budget and your target market. Also, I have tried some in the For Rent section and some in the For Sale section depending on the ad.
4.Tear-off Flyers in local drug stores, convenience stores, party stores – wherever you can get them posted. These tear off flyers can say the same things as the signs and ads. The tear off parts should have your phone number, website if you have one, and a short statement like “We Buy Houses.”
5.Realtors® - to let them know what type of homes you buy and how you can help them sell their listings. This will be discussed in much more detail when we talk about working with Realtors® in later chapters. This is one of my favorite ways of finding deals. I currently find 90-95% of my sandwich lease options from Realtors.
6.Long-term M.L.S. Listings – If you are not a Realtor®, then you can hire a Realtor® to do a search for you of listings on the market of over 90 days or 120 days. These are sellers that are getting motivated because their homes have not sold. Also, you can have them run all the expired
