February 12, 2024

10 Most Common Types of Motivated Sellers That Real Estate Investors Need

10 Most Common Types of Motivated Sellers That Real Estate Investors Need

Motivated sellers present massive opportunities for real estate investors, so knowing how to spot and negotiate with them is a must. But in order to find motivated sellers, it’s important to understand who they are, what is motivating them to sell, and how you can help them.

Before we dive into the different types of motivated sellers, you may be asking yourself the following;

What Does Motivated Seller Mean?

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In real estate, a motivated seller is someone who needs to sell a property quickly. These sellers are often facing personal or financial distress and may agree to sell their property at a lower price than market value due to the urgency of their situation. Many motivated sellers cannot sell their property to traditional real estate buyers, either due to the property’s condition or simply a lack of time, which is where investors come in.

Why Are They Important for Real Estate Investors?

While motivated sellers aren’t the only people selling real estate, they’re one of the best ways to snag a deal. Since motivated property sellers want to sell as quickly as possible, they tend to be less concerned about getting their property’s full market value. As a result, finding property owners with a strong need to sell their property can result in a high ROI for you.

10 Types of Motivated Sellers to Look For

Many buyers don’t know where to find the different types of motivated seller leads, but you can start tapping into this lucrative demographic once you do. Savvy investors who can identify these property owners are often the most successful since they save valuable time and effort by closing deals with people who are already highly motivated to sell.

If you aren’t sure where to start looking for motivated sellers, here is our list of the top ten most common types you will likely encounter in today’s real estate market:

Owners Facing Foreclosure

Homeowners facing foreclosure are among the most common motivated seller leads. In many cases, these sellers are in financial distress, and their top priority is to save their credit. By selling the property, even at a lower cost than market value, their bank may agree to forgive their remaining mortgage debt.

These sellers tend to be experiencing a major life event, such as job loss, bankruptcy, or a death in the family. Generally, they are going to want to exit the property as quickly as possible to solve their financial issues.

Investors can help this type of seller by offering to purchase the property quickly, as-is, and for cash upfront. This way, the property owner can salvage some money rather than lose it all and damage their credit in foreclosure.

Banks in Possession of REOs

On the flip side, banks in possession of homes that have been foreclosed upon are also motivated seller leads for real estate investors. Foreclosed homes typically go to auction and get sold to the highest bidder. However, if a home fails to sell at auction, the lender – usually a bank – retains ownership of the property.

Banks in this position are losing money and risk vandalism of these properties the longer they remain vacant. So their main goal is to get these potential liabilities off their hands, which means they’re typically willing to negotiate a price well below market value.

If you can find an REO property in good condition, or if you’re willing to put in time and money to flip a potentially damaged house, lenders will usually be prepared to sell the house for a low cost simply to recoup some of their lost money.

Beneficiaries of Inherited Property

When a homeowner dies, their property may be passed down to their heirs through a will. There are a couple of different reasons these owners tend to become highly motivated home sellers. In some cases, an heir might not be able to afford the home due to high property taxes, or they may wish to avoid the stress of maintaining multiple properties.

Another common scenario occurs when multiple heirs inherit a home and can’t agree on what to do with it. They may want to sell quickly and divide the shares to avoid infighting. Again, an investor can help speed up this process so that the heirs see their profit as soon as possible.

Owners of Damaged Property

Hundreds of thousands of homes in the U.S. have been damaged in natural disasters over the past year alone. Unfortunately for these property owners, home insurance doesn’t cover many types of natural events and damage. In addition, after a natural disaster, it is common for owners to become motivated property sellers due to the high cost of fixing the damage or simply because they are tired of living in a dangerous area.

While damaged properties can result in plenty of investment opportunities for investors, these owners must be treated with empathy and patience. Helping them through a difficult time is your focus here.

Absentee Owners

Among the most common types of motivated seller leads are absentee owners. These property owners do not live at the property; often, they live out of county or even out of state. They are typically not emotionally invested in the home, so once they encounter problems maintaining the property, they tend to want to sell quickly.

In some cases, absentee owners are investors who have hired an external property management company to maintain their property. However, this situation can result in mismanagement and frustration for the owner, resulting in motivation to sell the property instead.

Owners with High Equity

These are homeowners with high equity who have paid off all of, or at least a majority

of, their mortgage. These motivated home sellers may want to sell and move out of the country or have inherited free and clear property for which they have no use.

In many scenarios, these owners can sell for below market value and still end up with a good amount of cash, so they tend to be less likely to negotiate over a long period.

Retiring Investors

There are many reasons why a real estate investor may choose to retire. Most are simply ready to retire and cash in their remaining assets. However, other investors may no longer be able or willing to manage their properties or plan to start a new business venture.

Long-time owners may have properties that have peaked in value, and they want to cash out while interest rates are low and loans are easy to access. Others may have properties with deferred maintenance costs that they can’t afford anymore.

Whatever the reason, retiring investors can be highly motivated property sellers since, in many scenarios, they are looking to sell quickly. Networking in-person and at real estate investor events can go a long way in terms of making contacts with investors who may become potential sellers in the future.

Owners Experiencing a Personal Crisis

Many life changes can result in a personal crisis for an owner, such as divorce, unexpected job loss, or a death in the family. In addition, personal problems can result in motivated home sellers since these drastic life changes tend to indicate a shift in their financial situation.

Perhaps the owners can no longer afford the payment on the home, or they can no longer afford repairs and just want to move on. In any case, this type of seller is looking for a way to solve a financial dilemma resulting from a drastic life event.

In many instances, owners must sell their house and downgrade to a less expensive one. It is a top priority to sell the home quickly, so they’re typically willing to negotiate the price down quite a bit.

Couples Expecting a Baby

In addition to reading baby books and trying not to panic, homeowners with a baby on the way typically plan to upgrade to a larger home to accommodate their growing family. This can put a lot of pressure on the owners to sell before the baby arrives, all while dealing with doctors’ appointments and baby showers.

Couples in this situation want to sell quickly, which means buyers can snag property for well under market value. Investors can help owners here by making the selling process as simple and stress-free as possible.

Owners Facing Relocation

Homeowners facing relocation are motivated seller leads for real estate investors since they tend to sell their property quickly. These types of sellers may have to relocate due to a job transfer or some other big life change and have to be out of the property within a short time.

In this situation, the owner must sell fast to avoid paying two mortgages, so they typically don’t have time to deal with the hassle of selling. Their main goal will be getting the ordeal over with to move on and begin their new life.

How Do You Find Motivated Sellers?

Now that you know the different types of motivated sellers, you must start looking in the right places. First, contact local attorneys, banks, and housing inspectors to develop a working relationship so that they may contact you first when there’s an opportunity.

Public records also hold a lot of information about potential investment properties and can be accessed in your local courthouse. The biggest benefit to accessing public records is that the data you receive is always as up-to-date and accurate as possible. County databases are updated in real-time, which is essential for reaching out to a potential seller promptly.

Another method is to work with a real estate lead generation service. These companies can provide high-quality, motivated seller leads in an easy-to-use, workable format. Again, understanding each motivated seller’s needs can help you get the most value out of these lists.

Above all, keep your response rates fast. Motivated sellers may be reaching out to you as you read this, but if you don’t have an effective system in place to follow up with your incoming leads, you may be missing out. Pay attention to what your leads tell you they need to identify motivated home sellers and refer back to the guide above whenever you feel like you need a refresher.

Find Motivated Property Sellers Today!

Motivated property sellers aren’t difficult to find when you know what you’re looking for. Focus on generating motivated seller leads by identifying the owner’s needs, wants, and motivations. Then, ask yourself: how can you, as an investor, alleviate the burden of their property that they no longer need, want, or cannot sell through traditional means?

By understanding the motivation behind these different types of sellers, you can start closing deals below market value and increasing your ROI for less effort. However, making sure you handle each situation with care can ensure a stress-free, seamless transaction for all parties involved.