Absentee Owner Motivation?

Question

Hi Everyone!

My name is Colin Stewart and I am a new investor in Dallas/Ft. Worth.  I am marketing to absentee owners to source fix/flip opportunities and I am getting calls -- but I am having trouble converting them from suspects to prospects to deals.  Mostly everyone I have talked to has a tenant moving out within the next 30-60 days and they want to sell.  They do not want to do repairs to the property, but my offers are coming in lower than they want and I am hearing them say they will just list on the MLS.

I am using the "70% ARV minus repair" formula to develop my offers -- and I believe my comps are pretty close.

What are the pros doing to convert absentee owners from suspects to prospects to deals?  Is there anything I am missing?  I feel I am not finding the problem, or pain to solve, so I feel I cannot utilize a someone's circumstance to create motivation.  I have a 15 year sales background working complex sales scenarios with deals ranging from $50,000 to $2M -- so I am savvy with sales, but I'm having trouble finding any problems to solve with the absentee list.  Thinking about ditching absentee owner prospects and just focusing on foreclosure and probate leads so I have more motivated sellers.

Any coaching or advice would be appreciated.  Thank you!!

Bob Okenwa · Answer

@Colin Stewart

If you're working with cash, have you pitched them on an all-cash quick close offer without having to pay realtor fees and get agents involved? Also, the 70% rule is not always applicable and sticking too hard to it can cause one to lose deals. Not saying you should overpay for the property, but if you're losing deals because your offer is too low, you may need to come up a little bit.

As for the MLS, try to let the owners know all that comes with that in terms of fees, commissions, and closing costs and how buyers may request the seller to cover some of these costs. Let them know the average days on market in your area (if it's to your advantage), 30-45 day escrows, buyers who back out of deals, harder to sell properties as-is to retail buyers, inspections that will call for repairs to be made to the home, doesn't want to remotely manage the repairs, etc. I may be missing something that some of the other folks can help with but that's just my 2 cents.

Account Closed · Answer

@Colin Stewart how many offers are you making?

Colin Stewart · Answer

Thank you both -- very helpful.  I have been thinking I need to look at the numbers with a more open stance.  Likewise, I think I need to paint a better picture of what they are losing out on by not working with me as

@Andrew Johnson -- those are some good pointers and I did not think of asking those questions.

@Bob Okenwa -- your right that speed and cash are my advantage, but that did not seem to sway them, they had time on their side.  To you point, I think I can be more flexible on the 70% rule as long as my numbers work.

Either way, just like my sales day job, this is a numbers game and every "no" gets me closer to a "yes".  Speaking with homeowners is such a different sale than I am used to -- but I am hopeful that my sales experience will help me ramp up quickly.

Andrew Johnson · Answer

@Colin Stewart For what it's worth (this is a theory only) if you're going after absentee owners in the Dallas/Ft. Worth area you might be barking up a tough tree.  Here's the reason, everyone knows that the Dallas market (along with Austin, Nashville, etc.) is going extremely well.  So, in their mind, if they price the property competitively they shouldn't have any trouble moving it in 30 days (or at least getting it under contract).  Additionally, unless they bought it last month they probably have a good chunk of equity in the property and if they still have tenants that are paying at the moment.  It's not as thought it's been vacant for the last 6 months and they're just bleeding from mortgage, insurance, property tax, etc. bills.

So, put yourself in their shoes, they have a property that has a fair market value of $200K.  If the want to move it quickly maybe they price it at $180K (or they list at $200K and take the first $180K offer they get).  They have to tack on realtor fees and maybe some rehab so we'll call it 10%.  You probably have a couple of mortgage payments but who really knows what their terms are.  So $180K - 10% = $162K.  Let's round down to $160K to account for the mortgage payments.  The max you'll offer is likely under $140K.

If there's no pain point, I'll never give up the $20K, there's no reason to.  However:

1.) What if my home needs a major rehab that will take months (not days) increasing carrying costs?

2.) What if I'm farther out from DFW where properties don't move as fast?

3.) What if their property manager can't oversee getting the property ready to sell?

4.) What if there are 10 properties for sale similar to theirs within a 3 block radius?

I'm just making things up but they are all potential pain points for a seller.  Now, if the owner wants to sell because he/she thinks it's a hot market and they want to get a return on their investment you're probably sunk.  There's no way (absentee or not) someone looking to reap profits is going to take a 30% discount.  Profits are their motivation, not pain.

Absentee Owner Motivation?

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