Chapter 2

HOW TO FIND THE RIGHT SELLER

After you have decided what kind of real estate investor you are, then create your marketing campaign to fit your plan. 

If you’re looking for a property to flip, you need to market to sellers who own property that would make sense for flip.  For example, you more than likely would not want to buy a million-dollar home built in the last two years.  The owner won’t sell it to you for less than it’s worth, so you won’t be able to make any money by flipping it.  So you shouldn’t be wasting money marketing to that kind of homeowner, right?

Sound simple, but it’s a common mistake.  I’ve received calls from confused homeowners asking why I sent them a letter offering to buy their $5,000,000 home for cash, and let me tell you, it’s a short conversation.

Play the odds—there might be someone out there that wants to sell their luxury home that they just custom-built themselves for 60 cents on the dollar, but it’s not likely.  If you’re looking for a flip, spend your time and money marketing to sellers who may have a reason to sell fast and at a discount.  You need to find someone with a strong motivation to SELL, not someone with a garage full of foreign cars or someone who is still unpacking their moving boxes.

If you’re looking for a rental property, then you should only market to properties that you’d like to hold long term for cashflow  Some people like to buy single-family homes as rental properties.  I am not one of them.  So do I market to single-family homes when looking for a new rental property?  NO!  Of course not!  I market to multi-family buildings because that’s what I like to buy for my buy and hold portfolio.

You muststrategically market to find the appropriate property for your approach.

Assume you won’t find a great deal on your local MLS.  Sometimes you can, but the best deals are found away from the view of the general public. 

I find the majority of my deals through direct mail marketing. 

I generate a list of homeowners and send letters to their publicly recorded mailing addresses.  In the past, I used every door direct mail (EDDM) through the post office.  I found it to be inefficient--  I was mailing to people who didn’t have any interest in selling their homes. 

So how you do you find motivated sellers?  The first step is thinking about why someone would want to sell their home off-market instead of through MLS with an agent.  Here are some reasons:

1.  House is in poor condition and the seller is embarrassed.  This is the most common reason.  Many people age in their homes and allow clutter to build up around them.  Their kitchens and bathrooms deteriorate and home improvement projects go unfinished.  These folks all have nosy neighbors,friends, family, etc and they don’t necessarily want everyone they know to walkthrough their messy home or even see interior pictures.  The good news is that these issues are usually just aesthetic and can be fixed easily.

I tell them they can leave any unwanted junk behind and to not worry about cleaning.  They don’t need to fix anything and can just hand over the keys and drive away.  I also offer to close on their timeline, some people want to leave ASAP and other people need a couple months to get ready. Either way, my goal is to make the transaction as easy as possible for the seller—that is the service I offer.

2.  Seller needs a sure thing deal.  People get into bad situations, and people in bad situations can’t allow them to get worse. It could be a pending foreclosure, a health issue, or a thousand other motivating factors that lead someone to needing money fast.  In these situations, sellers cannot risk a buyer getting cold feet or having their financing fall through.  Cash buyers who don’t do inspections or need financing contingencies are hard to find, and offering such attractive terms should come with a discount on the sales price.

Traditional sales take about 60 days to close, involve interviewing agents, getting professional photography, setting up open houses and showings, collecting/negotiating offers, going through the property inspections and appraisals, dozens of emails and calls,and tons of stress.  And sometimes even with all that hassle, the deal still falls through a couple days before the closing. Many people don’t have the luxury of time to deal with everything traditional sales entail, and just want to be done with it already.

A common saying in negotiating is,“Your price and my terms, or your terms and my price.” 

We’re trying to operate in the “Your Terms and My Price” arena.

3.  Some sellers don’t like real estate agents.  There are a lot of curmudgeons out there, and they do not like dealing with agents, banks, or the general public.  But they still do need to sell real estate from time to time.  They just want to show their property to one person, shake their hand, and pick up their check.  Ironically, this type of seller oftentimes will own a lot of real estate.  Do you due diligence on them and know how much they own before meeting—it’s unlikely that you’ll get a great deal from agrump, but if you can make a deal together, then you may end up putting yourself in a great position to get a larger deal done in the future.

4.  Absentee owners don’t want to deal with their property anymore and don’t have the time or resources to get the property ready for sale.  Sometimes these homes will be vacant, and oftentimes they’ll rent the home to a family member or long-term tenant.  This situation is a classic setup for failure. 

You’ll find that this type of owner doesn’t raise rents to market prices, and they run the property at a breakeven or even a loss.  The owner will feel bad about terminating the lease and displacing the tenant-- it’s human nature to not want to upset someone’s living situation after all, especially when there’s some kind of personal connection involved. And forget about having a real estate agent set up open houses and showthe house multiple times for weeks or even months.  They’d much rather prefer to show you the property once, oftentimes as an “insurance guy” or something similar, pass papers and be done with it without spooking their tenant.  The seller then doesn’t have to deal with giving the tenant aren't increase or notice to move, and believe it or not, many people will prefer avoiding this uncomfortable confrontation even if it means they make less money on the sale.  

All the situations above are reasons why people would want to sell property at a discount because they need an easy,quick off-market deal.
Next Chapter