If you do not find a motivated
seller, you can’t begin to make money in real estate.
When people are selling a house and are eager to get rid of it, the only
thing they care about is solving their problem. You may think they care
most about the money involved. That’s simply not true. You may think
they want to sell a house. That’s not true, either. This goes back to the
most important question: Why do people buy a home? To spend a lot of
money? No. Because it’s good to buy a home? No. It’s important to
understand why people buy homes; then you’ll understand why they sell
them, and then you’ll also know how to negotiate with potential motivated
Owning a home involves paying mortgages and spending money for
taxes, insurance, and repairs. Many people could rent something for a
lot less and live in a nice place with everything taken care of. But they
buy homes based on the emotions of security and status, which is why
some people live in houses that are too big and expensive for them. They
also buy houses to get into better school districts for their children. But
mostly, their decision has to do with emotion, not rationalization.
People also sell homes for emotional reasons. They either have a problem
or they’re avoiding problems. They have pain they want to “fix.”
They’re getting divorced; they’re getting remarried; they have to move
out of the city or state; they’re starting a new job. Sometimes, they have to sell their homes quickly. They may have to pay off the mortgage to
have money to buy another home. Or they’re in over their heads financially.
Or they’ve had a change in their life—a divorce, a family debt, a
job change, or money problems.
Your job as a real estate investor is to discover their problem and solve it.
Loss of job. Financial problems. Estate sale. Job transfer. Illness and no
health insurance. Recent divorce or remarriage. Overextended credit,
tax problems, tired landlords. These events can all lead to motivated
sellers, because here’s an example of what happens.
A homeowner has $400,000 in debt and the bank is demanding payment;
the house may be worth $555,000, but the homeowner may not
be able to get the money to pay off that debt or stop foreclosure. It’s
possible the home will be foreclosed and the owner’s credit wrecked.
You can help turn this into a win-win situation.
Perhaps all the sellers really want is to get $5,000 cash to pay off the
bank and move. If not, they could be foreclosed upon and end up in real
trouble. You could help the seller and the bank by putting the house
under contract for $405,000—$5,000 to the seller and $400,000 to pay
off the loan. Contact your network of buyers, investors, and real estate
agents; perhaps you could find a buyer who would pay $455,000 for the
$550,000 house. If it is a good deal, the buyers will come. At closing,
the bank has its loan paid off, the sellers have been saved from foreclosure
and have $5,000 to move, the end buyer gets a great deal, and you
earn $55,000 (less any closing costs you had to pay) for finding a good
deal and putting a buyer and seller together.