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The Downside of Motivated Selling

Talk about your proverbial “Two Edged Sword” this is IT! Motivated sellers are a prize and a curse all in one little, tidy package. On the one hand it can be a really fast sale for a representative and a really great buy for an investor or owner. On the other hand it can be filled with panic attacks and angry neighbors. So what do we do with these prized gems of the investor game?

Any professional or aspiring champion agent should know you’ve got to find the pain behind the method. If you have a seller who, for example, is facing impending economic travesty in their life such as the end of an employment contract you probably want to get a move on, get some offers and get the property sold. Keeping them in the home too long could prove disastrous. In another scenario where the seller may have inherited the property and the liability thereof it may behoove you, as a seller’s rep, to consider rehabbing, staging and going for the big bucks.

Investors, for obvious reasons, love motivated sellers. You’re going to deal with some unreasonable offers from investors such as “I never pay more than 50 cents on the dollar.” Don’t blow this investor off because they may be a good client once they face a bit of reality (send them to my seminar … I’ll fix ‘em) about buying homes that aren’t burnt out shells! But you’re also going to get offers from investors willing to pay close to retail for the right home in the right area and motivated seller to us (them) means negotiating room on price and points.

Homebuyers, especially first time, may really not have any clue about how to handle purchasing from a motivated or distressed seller. You may have to coach them through such things as understanding what “as is condition” means and why they can’t ask for too many seller concessions. Obviously if there is plenty of available equity you simply bump the sales price to cover the concessions and consequently keep the neighbors a little happier.

Why are the neighbors upset? Good question! Because distress sales generally lower the property value for neighboors in similar homes. Remember, once that distress sale goes on public record any subsequent appraisals in the area must use that sale as a recent comparable sale. This is certainly something you as a seller’s rep want to keep in mind while you are discussing the sales price of the home. You really don’t want to become known as the agent who destroys property value but you also don’t want to let your seller deal with unknown factors in other agents who may not have read my articles.

Here is a simple list of motivated sellers who just aren’t going to be able to do anything short of “dump” their property:

Recently lost job or source of income and running out of savings.
Recently suffered or currently suffering major illness.
Divorce – enough said.
Recent death of a spouse or partner who helped with the costs of living.

Let’s face it, you’re probably not going to get any of the above to wait and see if you can get the highest market value for their home. In fact you’d be doing a disservice to them should you miss the deadline and the property goes into foreclosure or bankruptcy.

These are tough times and you’ll almost need to be a psych major to help these people through. Heaven help you if one of the offers falls through before closing! I’ve literally seen people break down and sob at the closing table because of the amount of stress that is relieved when the liability is transferred to the new owner.

On the other hand you should coach the following into going for the highest market value:

People who are moving to a new home but can afford to carry the property for a while.
A seller who has inherited the property and “just doesn’t wan to mess with it”.
Any investor who is ready to retire and liquidate their holdings. (Pssssst … call me about these, I may buy quickly)
Someone who has recently divorced or lost a love one and is downsizing but not under financial duress.

As you can see these are good candidates for a complete home staging and marketing campaign.? They also, generally speaking, come with much less stress and excitability.

I hope this article helps you to anticipate my next article entitled “Targeting Motivated Sellers”.

Ken Cook is Director of Operations for Novation Mortgage. Georgia’s top funder of investment grade real estate funding. He is also a successful real estate investor in the Atlanta metro area. Since 2001 Ken has successfully facilitated over 2000 real estate transactions.

(c)2006 Ken Cook. All rights reserved. Permission to reprint this article is granted with the following limitations: The article must not be edited except for spelling. This copyright must be included immediately following the article as it appears here. This article may not be included in any materials commercially available for sale or where any fee is charged even for other materials without prior written consent.