Is this seller motivated?

Question

I talked with a seller who contacted me through craigslist. He texted me once, and I didn't respond for a couple of hours, and then he texted me again. Then, after the second text he sent me, I responded and we talked on the phone. He says his house is about to go into a foreclosure auction on July 27th. He said he will move out in 2 weeks if we come to a deal. The only problems are that he thinks his house is worth 220,000 but the comps I looked at suggest his house is 175,000 and his house is 50 mins away from where I live. Do you think he is motivated to sell and should I meet up with this seller or will it be a waste of time?

Tom Mole · Answer

@John Baker, you asked if this guy seems motivated. I would say he's motivated to make money, but that's all. Let's take a hard look at the evidence. Perhaps I'm wrong.

• You found him on Craigslist (consider the source). 
• He was impatient to talk to you, despite the implication that he has "other investors" he's already talking with.
• You have to drive an hour out of your way to discuss the deal. (Not a big problem, if everything else vets.)
• He is under extreme time pressure and yet he wants $55k more than market value. (This is a BIG deal.)
• There is no profit to be made in this deal. (The biggest problem)

You wondered if this is going to be a waste of time to drive out there to talk to him. My No-BS assessment based on what is in this thread is this: there is no deal to be had here!

You can go out to talk to him. Invest your time and gas then hope he likes you enough to drop his asking price down to some place closer to just over ARV (after repair value). He'll tell you that his price is very reasonable because the property will be worth the price after to make just a few thousand dollars of repairs. And you'll want to believe him since you've invested your time and money to have this conversation. If you have any doubts, he'll remind you that there are several other investors ahead of you offering him more money, but he'll let you have the deal because he likes you.

If you're smart, you'll call him in the morning before you head out. Tell him that unless he can accept $100k less than he was asking (he wants $220k, you offer $120k), then there is really nothing left to discuss.

I think @Micah Copeland may be wrong. The evidence suggests this "seller" is trying to con you into a bad deal. I wouldn't waste my time unless I could get the place for a substantial discount based on the current market value. Investors do not pay retail and do buy based on current state and condition, not what it "could" be,

This shouldn't be discouraging. Just go find a better deal. This one stinks. Someone should have already told you that.

Christopher Telles · Answer

One would think that since the potential seller is in foreclosure he would be motivated. And perhaps he is, but from what you've explained so far he doesn't seem motivated enough for his property to be an attractive investment.

The comps say its worth $175,000. He says he wants $220,000. Forget his motivation, where's there something for an investor to be motivated? Maybe he'll come around as the clock moves closer to the finish line for him, but still..

There needs to be a compelling reason for you to want to buy this property. If he owes $113,000 you pretty much need to buy the property maybe at $140,000'ish to be able to earn a 20% return on the deal regardless of whether you'll turn it for a gain or hold it for cash flow.

I would agree with you and others, its worth the trip to meet him, and look over the property. Nothing can replace an eyeball to eyeball meeting with a seller to turn things towards your favor. So meet with him, but remember the end game isn't just to get the deal, the end game is to get a good deal.

Happy hunting!

Jesse T. · Answer

What is the loan balance?  Are there unpaid property taxes?

How you would be able to close before the 27th if you can agree with him on the price?

Bryant Moran · Answer

I'd say he is motivated. But he may not be interested in doing business with you, he may be speaking with other investors. My suggestion, is keep up with him. You're supposed to be persistent. Bring him comps and proof of what you're suggesting.

John Baker · Answer

Wow, thanks for the excellent analysis. I really appreciate it. The most I can offer him is 123K if I want to wholesale it. I won't fall for the "I have other offers at retail price." I stick strictly to the calculations I made (0.80*ARV-repairs-profit). I used 0.80*ARV since it is a hot cash buyer area (I checked on MLS). I will defintley call him in the morning and discuss the price with him. He said he is willing to negotiate if the offer is "reasonable." But I think I should let him marinate a little and when he can't sell for his asking price, I can grab the deal for a much lower price than what he is asking. Thanks again.

John Baker · Answer

Thanks for all the responses guys! I really appreciate it.

Andrew Sky · Answer

Until you meet with him, there is no way to know.  He is feeling you out and you are feeling him out.  He has a deadline - due to foreclosure, but it's not his only option (he can file bankruptcy, try to do a short sale/loan modification.

He knows what his house is potentially worth probably has spoken with investors and real estate agents alike. Go meet him as right now, nothing is gained and nothing is lost.

John Baker · Answer

The loan balance is 113,000. He says there are no unpaid taxes on the property, but I will do a title search to confirm that. I'm not sure how to close before the 27th since I am new to real estate investing, but I will call my title company to find out.

John Baker · Answer

I'll build more rapport with the seller when I visit his house so that I can get the deal. I don't think I built enough with him over the phone because he said he is talking to other investors. He did text me today and asked if I was still coming over to meet him tommorow, and I responded to him. I will bring comps and a power point on my IPad if he turns out to be the analytical personality type.

Micah Copeland · Answer

@John Baker

I think its safe to say he's motivated since he is going through foreclosure if he doesn't reach a deal. I would take the trip out to meet with him.

Is this seller motivated?

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