3 Types of Motivated Sellers (& How to Win Deals By Solving Their Problems!)

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Finding it hard to get your first property or to scale your portfolio? Sick of competing with retail buyers and investors in this hot real estate market? 

I have a secret to building your portfolio—and building it quickly! Learn to NOT compete.  

Really? YES!  

Instead, learn to be a problem solver.

According to 2016 Attom Data, in midwestern areas of the U.S., off-market real estate represented 24 percent of all transactions, and that number is growing each year. What’s this mean? There are plenty of motivated sellers out there and deals to be had. 

Your job is to understand the different types of motivation, find out how to reach those who are motivated, and understand how to solve the problem that seller has.

3 Types of Seller Motivation

Seller motivation generally falls into three buckets:  

• Financial distress
• Emotional distress
• Property distress

When you are able to find a seller whose motivation hits more than one bucket, you are more apt to find a great deal. Remember though, this isn’t all about finding a screaming deal for you. When you can solve someone’s problem and you become known for that, deals will find you!

Related: Creating Your REI Story: How to Be “The One” the Motivated Seller Chooses

Financial Distress

A seller who is under financial distress might have experienced one of the following life events:

• Death 
• Divorce
• Job loss
• Bankruptcy
• Rehabs gone wrong

And while this isn’t an exhaustive list, this type of seller is generally looking to exit the property to solve a financial issue related to a life event.

Perhaps they can’t afford the payment on the property. Or the tax bills have been piling up and someone is about to take the house. Or maybe they can no longer afford repairs and want to move on. 

This type of seller is likely to be looking for top dollar on the property. They’re even more likely to be looking for someone to solve the financial pain the property is causing them.

Emotional Distress

A seller who is under emotional distress might have experienced one of the life events below:  

• Death
• Divorce
• Job relocation
• Seniors who need to downsize
• Investors who are done with rentals (due to evictions, bad renters, deferred maintenance, rehabs gone wrong, etc.)

Notice the life events may be the same as someone under financial distress. However, the motivation to sell is different. 

This means your approach needs to be different. This seller may not have to sell for financial reasons, but the property is starting to cause serious emotional distress for them. 

Last year, I picked up a property that another investor was rehabbing. He was completing the rehab himself and quickly realized he was in over his head. It made sense; he had a new kiddo at home. It was a great deal. We picked it up and used our systems to complete the rehab quickly. That way, the investor could move on to another project that was more in his comfort zone and spend time with his new family.

Property Distress

A seller who is suffering from property distress is probably experiencing one of the following issues:

• Deferred maintenance
• Property repair (i.e., fire, natural disaster, accident)
• Death on the property 
• Property taxes aren’t paid
• Property is dated

When a property is in distress, it is generally a safe assumption that the seller is also motivated by financial and/or emotional distress. A combo of solutions can help address the issues.

Where to Find a Motivated Seller

While you could scour the MLS to find deals, motivated sellers oftentimes are so overwhelmed by the life event that put them in their predicament that they don’t know where to begin. So, you will have to find them.

You can find motivated sellers in myriad places (with the last two being my favorites!):

• Obituaries
• Court filings (i.e., divorce, bankruptcy, probate, tax liens, foreclosure)
• Lawyers
• Property managers
• Senior move managers (Yes, this is a real profession!)

How to Solve Motivated Sellers’ Problems

Once you find a motivated seller, have a conversation with them. Find out how they think and feel, and figure out how you can solve their needs. Check out the book Finding and Funding Great Deals by Anson Young for great scripts and hacks.

Here are a few ways I’ve been successful at solving a motivated seller’s needs:

• Highest offer
• Cash offer
• Large earnest deposit
• Quick closing
• Long closing
• Flexible closing
• Ask for no repairs
• Allow the seller to rent back for a period of time
• Pay their closing costs
• Take care of anything they leave behind
• Hire a mover for them

Case Study

Last year, I found myself in a nightmare situation, working on my mother’s property from over 1,000 miles away. I was a motivated seller! 

In working out my strategy, I had several investors tour the home, and I was very clear on my needs and the reason I was offloading the property:

• Property distress: The home was dated, largely unmaintained, and we found out it had just gone into foreclosure. (Surprise!)
• Financial distress: I had to pay for upfront costs to manage the estate, keep up the property, and sell it (obviously not something that I planned for!).
• Emotional distress: Aside from my mother’s death, all of my parents’ belongings (including my childhood belongings) were packed in the house. I didn’t want someone tossing everything into dumpsters. Instead I wanted time to hold an online auction to give the belongings a new home.

After meeting with 10 investors over three days, I had seven offers in hand. Five of those seven investors lost out due to the simple fact they weren’t willing to help me solve my emotional distress with regard to wanting to hold an auction. Of the two offers left, here is the one that won. (Revisit my “distress list” above to see how many boxes this offer checks!)

• All cash offer
• Flexible closing (I had to negotiate the probate system)
• Asked for no repairs
• Paid my closing costs
• Allowed for two online auctions AND removed and donated all other items not sold

Related: Game Changer: How to Identify Motivated Customers

Conclusion

What I learned going through that process was priceless to my investing strategy.

First, there are myriad places outside of the MLS to find motivated sellers. In this case study, it was the senior move manager who connected me to the investor who brought the winning offer. Second, the investor took the time to truly understand my motivation to sell and how to really solve my problems.

Third, because she understood my motivation, she could create a win-win for both of us that made it a no-brainer to sell to her. She was a problem solver, and I guarantee her business is booming because of this skill.

So, I’ll leave you with this: Whose problem are you going to help solve? What do you think of the above advice?

Weigh in with a comment below.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.