The success of real estate investors depends on a single requirement: the availability of motivated sellers in their market.
Unlike realtors, who have to satisfy a lot of requirements to make a profit, real estate investors simply need to satisfy this requirement to excel at their business. Of course, other steps like in-house processes, marketing campaigns, filtering leads, and creative finances are also very important, but it all starts from finding a motivated seller in the first place.
If these deals are so convenient, then why aren’t all real estate professionals after them? Well, the short answer is because they don’t grow on trees. Seasoned real estate investors will tell you, and if you are new to real estate investing you’ll soon experience first hand – getting a hold of motivated sellers is not an easy task.
That is, unless you know exactly what to look for and where. Join us as we examine effective methods to find motivated sellers in your real estate market. But first, let’s take a closer look at the target audience itself.
If you are reading this, chances are you already know what a motivated seller means. Bear with us, because we need to define the term to lay the groundwork for the analysis down the line.
A motivated seller is a homeowner who:
Your typical real estate seller is in a position to refuse an offer that’s considered unacceptable. However, the urgency and the need to sell a house forces sellers to accept deals that are otherwise bad. And this puts motivated sellers at the mercy of the real estate market.
If you examine the reasons that pressure homeowners to become motivated sellers, your strategy for acquiring lists will bring better results. In essence, there are two types of causes: either the homeowner faces a change in life circumstances or there is an issue with the property itself. Let’s talk specifics.
Imminent foreclosure. The borrower is behind on mortgage payments and the lender (usually a bank) has started a procedure to seize the property which serves as a collateral. During the pre-foreclosure phase, homeowners are short on time and they don’t have negotiation power. REIs can get a good deal even if the lender has already repossessed the property, because banks don’t need the house.
Delinquent property tax. The homeowner hasn’t paid annual property taxes for many years (depending on the State), so the county is about to sell the house to get its taxes. As the date for tax foreclosure approaches, homeowners are desperate to sell the house and accept offers that are significantly below its market value.
Absentee owners. This is not their residence, so they don’t manage it actively. Usually these are owners of a rental property who got fed up with the duties of being a landlord (dealing with tenants and house maintenance). Absentee owners are more likely to accept low offers.
Out-of-state owners. People who have settled their life elsewhere, but this property has remained behind. The property is rarely (if ever) used – maybe a short visit once a year – and owning it becomes a financial burden. These types of homeowners are already detached from the house, so they might accept a lower offer.
Code violation properties. Houses are in code violation if they don’t satisfy the county’s safety or sanitation requirements. The issues include a neglected yard, waste water leaks, structural issues (walls or roof), and unlawful occupation by an active crime syndicate (drug addicts, gangs, etc). Homeowners are willing to sell the property, but the investor has to pay the fine and fix the issue once they buy the house.
Property in probate proceedings. This is the process to transfer property of a deceased person to their inheritors. Sometimes, the upkeep costs of the property are too high for the new estate heirs so they end up selling it at a discounted rate. It’s easier to get a favorable deal since the house was a “gift” to the seller, anyway.
Moving to a different home. Homeowners have to move soon, so they need cash to start a new life elsewhere. It can be a new job, divorce, bankruptcy, or another legal reason. Also, some owners need a bigger or smaller home than the one they already have, and sometimes, they might need to relocate fast.
Now, where do real estate investors find motivated sellers? Do they go from door to door asking people if their house is for sale? Well, yes, knocking on doors is a legitimate method, as you’ll find out below. But if you take a look at the reasons homeowners become motivated sellers, then you’ll notice that the motivated sellers can be viewed as a group and targeted as such. Because of this, a lot of the talk about motivated sellers revolves around finding a list full of potential leads.
We will describe the techniques that are used to find motivated sellers lists, and after that, we will share a number of alternative methods to do the same, but on a smaller scale.
Real estate investors have to consider many different groups of homeowners to find deals. In practice, what works in one county might fail in another. So, yes, you’ll have to look in all sorts of places, but don’t get overwhelmed by that fact. If you are methodical about it and if you keep your focus, you will eventually get to a good real estate investor list.
Generally speaking, there are three ways to find a list with motivated sellers: by accessing public records, through networking, or by compiling a list on your own. Let’s take a closer look at each of them.
Counties are obliged to keep a public record of legal disputes, taxation records, court proceedings, marriages (you won’t be needing those), etc. The title on these documents might differ (for example, Tax Delinquent List, Tax Assessor’s Roll, or Tax Forfeiture List) and the authority that is responsible to issue them might be called differently (eg. Tax Collector, County Treasurer, or similar), but local governments have to keep records, particularly about the properties within their county.
Since the county is responsible to sort the records for all properties (and their owners), the data ends up on lists. There is a separate list for most types of motivated sellers we described above: delinquency tax lists, code violation list, fire damaged properties, absentee owner list, courthouse records, etc. Again, don’t focus on the way we label these lists, but keep in mind that one way or another, each county has to keep track of these types of public information. And also, the office that publishes the records might differ from county to county.
For example, if you are looking for a code violation list within a county, you might get this info from the zoning and planning department. However, the health department might also have its own code violation list for a certain type of hazards.
Court records are another instance. Data on divorces, deaths, and estate heirs is public information that is available to everyone.
Real estate investors can choose from two ways to get these lists:
1) They can request access to these lists directly from the city officials; or
2) They can hire data companies for the acquiring of documents and reports.
Perhaps the greatest benefit of getting the public records on your own is the fact that you’ll get the lists for free. Also, the county updates the records daily, so you are getting accurate information that is actionable right away.
Of course, there are also drawbacks – you are spending your time to get the lists. Not to mention all of the bureaucracy you have to deal with (filling out forms, complying with procedures, and that sort of stuff), which can be a drag. You will need to be very careful in the way you approach the staff as well, because county employees might not understand which record you are asking for, nor why you need it. If you check real estate investor forums, you’ll find reports of REIs being told off by county officials as if their inquiry for public records on tax delinquent properties is illegal, which it certainly is not.
This is the digital option and it’s convenient because it prevents you from wasting time on this task. Depending on the data service you hire, these companies can also offer you property stats and reports that you’ve never even heard of, but which can advance your understanding about your real estate market.
Then – what are the drawbacks? If you got your info through a data company, everyone else can get it online, too, and if other real estate investors reach the motivated seller before you do, it might be too late to get the deal, anyway. And not only do you pay for these lists, but these data services might offer something that is already publicly available (literally a few clicks away) and charge you for it as if they did some real hard work.
Real estate investor networking goes along the same lines as it does for many other professionals. The typical approach is to travel more, to attend events for real estate professionals and investors (use the fact that they are already gathered in one place), to visit conferences and seminars, to host open houses, and to be friendly and approachable at any social setting you can think of.
However, there is no playbook on networking you can follow to get motivated seller lists. Do note though, that the public records are managed by people. They are county employees, code enforcement officers, local city government, all sorts of inspectors, lawyers (divorce attorneys?), coroners, etc., and if you build a relationship with any of them, you can get your real estate investor list. Don’t worry, if you ask for the same list from the same office in the county on a regular basis, your friendship with those officials will burgeon naturally. If you didn’t have people skills, you wouldn’t be a real estate investor, would you?
Just be prepared to face rejection. This applies to both sifting through public records and to the people who can provide you with access to them. Building relationships takes time, and sometimes, you won’t even get the opportunity to make a connection.
For some, networking comes as second nature, for others, it is an art difficult to master. If you need some inspiration, you can always listen to one or two success stories featured in our podcast.
Given all the trouble that comes with searching for real estate investor lists, some REIs go ahead and buy them as a finished product. The source can be a data service, a colleague, realtors, marketeers – everyone who holds them. And they aren’t cheap because both parties know that these are leads with the potential to bring you profit. But is this the right thing to do?
If you are a regular reader, then you know our stance on buying contact lists for marketing, so the same would apply to motivated seller lists. If these lists are so hot, then why would someone share them with others? Yes, these motivated seller lists can be of help to your business, but do proper vetting before you splurge on them.
As the saying goes, you can only be 100% sure the job is done right, when you do it yourself.
It might seem like real estate investors have a bigger priority, like closing deals, than making a list of motivated sellers on their own. However, in the real world, this is only true if there are leads in the funnel. If there are not, then real estate investors do all sorts of stuff to get them.
Beware though, because making a motivated seller list by yourself is either time consuming or it requires a very creative approach. You’ll get an idea of what we are talking about as we go through specific examples.
Sometimes, the result of these efforts is not a list, but rather, it’s a handful of leads. Regardless, keep in mind: these methods do work.
Go for homeowners who have already expressed their need to sell a property by listing the house for sale, or by searching for solutions on the internet.
These are properties that have been offered through an ad on a popular real estate listing (a multiple listings service, Craigslist, Zillow, etc.) for some time, but didn’t sell. It may be because they didn’t make an effort to “stage” the property, or the house is in poor condition, or the ask price was unreasonably high. Some homeowners list a house there just to check their options (i.e. how much they could get for the house), but if you come across a motivated seller whose ad has expired, you will probably hit a good deal, since they are more likely to accept a lower bid the second time around. The issue is, there are many such real estate listings and pulling up expired ads from all of these is time consuming.
Marketing usually takes place after you have a list of motivated sellers in your hands. For instance, you may launch a direct mail campaign to all code violation property owners in your real estate market once you’ve acquired their details. Still, you’d be missing out on a lot of motivated sellers if you rest solely on lists when you create your marketing campaigns.
Design your ads in a way that will allow you to catch as many new leads as possible – Google adwords are a perfect example of this. A large portion of the motivated sellers in your market will try to find a solution to their problem through a search engine, so you can invest to appear as a top result through paid ads. Social media networks, like Facebook and LinkedIn, allow you to target their users through paid ads, too; and you can also go for options like Craigslist that offer you the option to place ads for free.
On the subject of finding motivated sellers online, you can also make an effort to appear as a top result on search engines when users type in certain keywords (eg. “How to sell my house fast in X”). This will drive organic, or unpaid, traffic directly to your website, but you must optimize your website’s content in order to do so. The process requires consistency over a period of time, maybe a year, but if you do it right, you’ll have motivated sellers contacting you for deals.
You wouldn’t be an entrepreneur if you weren’t up for hacking or improving the existing business processes – sometimes, a creative shortcut is just what you need to stand out from other real estate investors.
The house is on sale, but the only way to find this out is by word of mouth or through some exclusive real estate lists. Your best shot at learning about an off-market property that is for sale: networking and keeping up with the latest news in your real estate market.
This is where your creativity really comes into play. You have to be resourceful to tap into motivated sellers that other real estate investors wouldn’t think of. For example, you can follow obituaries – a house that lost a household member is more likely to be up for sale than any other. This technique isn’t without its flaws, though – many real estate investors do this nowadays and some folks find it distasteful to be flooded with direct mail about selling their house as soon as they’ve lost someone close to them.
Other real estate investors target empty nesters, i.e. parents whose teenager has just moved out, or families who are expecting a new baby. Obviously, the empty nesters might want to downsize, while parents that are expecting will need a bigger house soon. In essence, you can come up with a lot of ways to find useful lists by correlating data that’s overlooked by other real estate investors in your real estate market.
Some real estate investors use freedom of information (FOI) requests to uncover public records. On its own, documents obtained through FOIs might not seem related to motivated sellers. However, if you request information strategically, you may end up discovering a new market. For example, it’s widely known in real estate circles that a change in public school zoning can bring new dynamics to the market because suddenly more families would like to leave the district (or move into it). If you craft your FOI request in a certain way, you might get a whole list of potential motivated sellers before the public – and other real estate investors – find out that this real estate market exists. But you have to be creative.
When all else fails, you can roll up your sleeves and do the hard work yourself – if you know how to talk to people, there are many deals to be had by doing real estate investing the old fashioned way.
You’ll need to drive (or walk) around a neighborhood to find a property that fits the description of a motivated seller’s house. The signs you should look for include: notice for code violation, overgrown lawn, boarded up windows and doors, distressed house, mail piled up at the mailbox/door, and similar indicators. You’ll spend a lot of time and gas on driving for dollars, but eventually, you might come across a motivated seller.
Maybe you’re not aware, but real estate investors like to live dangerously. Seriously, the practice of leaving signs on lawn or signposts is illegal in some states, however many real estate investors do it. Bandit signs bring mixed results when it comes to finding motivated sellers. The issue is not the fact that you might be fined, or that the sign may end up being removed if you place it on private property; rather, it’s the complex logistics you need to worry about.
How many bandit signs do you distribute per neighborhood? Where do you place them? And who will do it? If you do it on your own, it will take a lot of time; and if you hire someone else to place the signs, they will charge you for the service, but it’s very hard to inspect their work. All of these factors make bandit signs suitable only for finding deals when your real estate market is limited to a small and specific part of town.
We are literally talking about going up to people’s houses and knocking on their doors. Usually, this is combined with driving for dollars. For example, you see a foreclosure notice on the property, so you knock on the door and introduce yourself and your business. But door knocking can also be done with properties that have already popped up in your research – they may be on your list, or you may have found them through a data service.
The method has its merits, but it’s best done in combination with other methods and by real estate investors with really good people skills.
Cold calling is the equivalent to knocking on doors, the only difference being – you are now talking on the phone to strangers. Similar to door knocking, you can’t simply do it indiscriminately, like calling every phone number in the phone book. Rather, you need to combine it with other methods for finding motivated sellers to get good results.
Some of the REI professionals out there offer scripts to make the process easier for novices and to give structure to the call itself. You can be outright rejected or cursed out during a cold call regardless of the script on your desk, so this method is not for the faint of heart (or ear, for that matter).
You probably have your own private vehicle and you wear clothes every day. The most simple way to advertise your business is to make your car a moving banner, or to wear a shirt bearing the message “I buy houses cash.” This is a great conversation starter and it will attract motivated sellers either directly or indirectly. Chances are, some of the people you meet on a daily basis know someone that needs to sell a house to a real estate investor like you.
Speaking of word of mouth marketing, asking for testimonials and referrals can bring your quest for motivated sellers to a whole other level. People are influenced by social proof when it comes to trivial purchases (“my friend bought X and is satisfied, so I’ll give it a go”), so you can bank on it, even more so, when the stakes are high and homeowners are selling their house. The feedback from the people you’ve helped in the past can help bring new motivated sellers to you.
The biggest drawback to this method for finding motivated sellers is the fact that you can do it only once you’ve closed a number of deals. Some real estate investors offer cash for referrals (finder’s fee, usually in the hundreds of dollars, not a commission on the transaction) and you can do it too, if you believe that this type of incentive will work for your business and you have the budget to follow through.
There you have it – your guide on finding motivated house sellers. Let me guess what you are thinking about what you just read: “Is it worth it?” All that effort, be it data mining, be it pestering local government employees, be it hard work on your part – does the hunt for motivated sellers pay off? The short answer is yes. Even if you close just one deal with your plain “I buy houses cash” t-shirt, or through an ad campaign, or by sending a message to addresses on your motivated sellers list – the profit in tens of thousands of dollars is definitely worth it.
While processing all this information might seem overwhelming (we included many different methods, after all) you can cut your research short by eliminating those methods that don’t work for you. And if the techniques you employed for years don’t bring new leads, at least not like they used to, you can try some new methods that were mentioned in this guide. At the end of the day, the goal is to make your real estate investor business stand out from the competition, and acquiring a unique list of motivated seller leads is a great way to achieve that.
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