Your ability to find profitable deals is limited only by your imagination – and your ability to locate motivated sellers. There's good news and better news: The good news is that motivated sellers are everywhere. The better news is that if you live to be as old as Methuselah (the oldest man in the Bible), you could never burn through all of the motivated sellers.
In reality, while there are plenty of motivated sellers, not all of them will make good prospects for your real estate investing activities. It's kind of like finding the perfect person with whom you want to build a life. There might be a million fish in the sea, but – to you – there's only one custom-made for you.
Here's the best news yet: when you dive into real estate investing, you're going to very quickly discover that finding motivated sellers is infinitely easier than finding the perfect spouse because the number of motivated sellers that will be receptive to working with you is much greater than you can even begin to imagine! The greatest challenge you face is determining which motivated sellers are the very best prospects for your real estate investing activities and concentrating your efforts on them so you can more quickly siphon off profitable deals and very quickly reach your financial goals.
In order to reach the level of success that you're dreaming of, you'll have to locate truly motivated sellers that are willing to work with you to make your real estate investing dream a reality. While many sellers are motivated to sell, the majority of the sellers for one reason or another will not necessarily make good candidates for your deal. Before you allow your optimism for this unprecedented real estate opportunity to fade like a childhood dream, I want you to know that this is great news.
An overwhelming number of these sellers are motivated to sell, but they either have bank loans or can't understand how they could possibly benefit by selling their property to you – and no amount of explanation on your part is going to change their mind. It's better for you to know early on if a motivated seller is your kind of motivated seller, because if they're not, you will just be wasting your precious time and resources chasing a deal that won't be profitable to you.
While you may be the kindest, most giving person on God's green Earth, you are a real estate investor, and your primary focus is on making money. By weeding out the wrong kinds of sellers, you can cherry-pick only the most motivated, most profitable deals from which to find the life-changing deals that will be the basis upon which you will reach the pinnacle of the real estate investing community. That should be the focus of your real estate investing activities. There are multiple ways in which you could find motivated sellers.
Here are just a few of the best:
One of my all-time favorite methods for locating motivated sellers of abandoned and/or distressed property is because you can immediately see many of these properties. While a distressed seller can explain to you over the telephone what a potential property purchase looks like, very few sellers have the ability to accurately describe their property to you so that their description paints a vivid picture of the property that you can actually see in your head.
Anyone can describe something, but the question that immediately comes to mind is, “How accurate is the description?” It's entirely possible – even probable – that a seller will neglect to give you a vital detail about a property that could have a major impact over whether you would have an interest in actually looking at a property. For instance, if a seller forgot to mention that the property they are selling has a gaping hole in the roof from a tree that fell against the house, you might not be as interested as you would be if it were in pristine condition.
By driving neighborhoods, you can see this sort of damage right away. It might help you to make the decision not to look at the property – although I'll caution you not to automatically discount a property with this sort of a physical defect. The reason I say this is because the owner of a house with a huge hole in the roof will probably be more motivated to talk to you about selling their property to you because there aren't too many people in the market for a house with that kind of damage – which means that you can probably acquire it at a very good price, with extremely favorable terms.
Overwhelming to the owner, these kinds of repairs are like having a child with a broken bone. The doctor knows that all the child needs is a little TLC and the bone will nearly heal itself, but all the parent sees is their child in pain. The good news is, good investors know how to speed the “healing process” – and usually for much less than the “patient” thinks.
As you drive neighborhoods looking for potential investment properties, look for obvious signs of distress. These signs of distress will vary from property to property, but some of the most common are things such as:
- Unkempt yards
- Newspapers or old mail piled up on the porch
- Broken and/or boarded up windows and doors
- Garbage or old furniture in the yard
Word of Mouth
Don't discount the power of word of mouth in locating distressed property. Regardless of the current national economic picture, there are always motivated sellers. People are motivated for a variety of reasons. Sometimes it is simply because the owner is the kind of person who has no trouble finding hard times due to a missed paycheck, a failed relationship, or a bad decision.
We all know somebody like this or we know of somebody like this. In any event, people talk, and if you get the word out with everyone you know that you're a real estate investor who is actively looking for property to buy, you can have an active army of volunteers letting you know about distressed properties that meet your investing criteria. Sure you'll have to explain your criteria to people you have looking for property for you, but it's still one of the most effective strategies that I know of for locating abandoned and distressed property. To improve the quality of the leads that come your way, it would be in your best interest to offer to pay for the lead that directly results in your making a purchase. This real estate investing practice is known as bird-dogging – and has resulted in thousands of real estate investing fortunes being created almost out of thin air.
Nothing motivates a seller quite like being notified that their lender is going to take their house back in a foreclosure filing. It's a gut-wrenching situation for the seller, because in many cases, they would like to keep their property. But the reality is that when a borrower falls several payments behind on their scheduled mortgage payments, the likelihood of their catching up is very low. When this happens, sellers become very motivated to make something happen very quickly. There's a very limited window of opportunity for which they can locate a buyer for the property or risk losing it in a foreclosure.
By locating distressed property owners who are in pre-foreclosure (when they have missed one or more payments) or full-blown foreclosure (when the lender has filed formal paperwork that begins the process of requesting that they be awarded full “custody” of the property due to the borrower failing to live up to the terms of their mortgage loan), you have a golden opportunity to give the seller foreclosure alternatives that can protect them from the embarrassment and credit damage that always comes from foreclosure. Here's a little-known secret about real estate that the majority of investors tend to miss: the foreclosure market always feeds the abandoned property market. What I mean by this is that when Mr. and Mrs. Homeowner fall behind in their mortgage payments, they're looking for immediate help. If help doesn't come knocking – or it doesn't happen quickly enough – a great many of these homeowners will simply walk away from their property.
As ridiculous as it might sound, some homeowners would rather walk away from their property and pretend that the problem doesn't exist than call their lender and admit their failure. This creates opportunity for you because abandoned property is bad news for everyone affected: the lender, the homeowner, and even local neighborhoods and communities. You can come riding in on your stallion and heroically rescue the Damsel in Distress while turning a tidy profit in the process.
Advertising & Your Secret Weapon
Another broad category of methods you can use for locating motivated sellers is getting the word out in a variety of ways that you're looking for property to purchase. This could be as simple as running a newspaper or radio ad or placing bandit signs in high traffic areas advertising your ability to quickly purchase their property.
Now, that almost every house in America has at least one computer, the Internet has become a highly effective tool for locating motivated sellers. You can advertise online for motivated sellers based upon location, you can check foreclosure filings in most locations though a variety of paid and free resources, and you can subscribe to services that will do much of the legwork for you. There's no limit to the number of ways in which you can find highly motivated sellers who will do almost anything in order to unload properties that they no longer want or can no longer afford to keep.
These are just a few of the many ways that you can locate highly motivated sellers of distressed property that is available today. Once you locate the property, all you have to do is find a creative way to convince the owner to sell to you.