Bob Diamond’s program on motivated sellers can be your express ticket to success in real estate investing, despite your lack of capital money or credit. The “motivated” seller has a problem that is being created by his real estate. He is consumed with the problem created by the real estate and will be flexible if you will promise to solve his problem. The flexibility can come in the form of financing or some substitute for financing that can allow you to control or benefit from the property using either a loan from the seller or his granting of an option or other right to you in exchange for your promise to help solve his problem. A perfect example of a motivated seller is a seller who has a rental property that he cannot manage. That may be because he does not know what he is doing, does not have the time, or perhaps is old and would like to retire from the property management business. If you will agree to take over management of the property, you can promise to pay the seller from the proceeds generated from rents. There must be a difference (profit) between the rents and monthly expenses on the property, including any money you are paying to the seller each month. To know what the true expenses of a property are, look at the seller’s tax returns to see what he reports to the IRS as his income and expenses. The seller will resist your efforts to see his tax returns, but you MUST see them. The seller will tell you that he does not report all of his income and that he overstates expenses. Tell the seller that if he cheated on his taxes he had his benefit by paying less taxes, but he gave up the chance to sell the property for more then his tax returns indicate the property is worth. Many inexperienced landlords are purchasing rental properties because the stock market has been performing so poorly. It is my prediction that over the next few years, any of these landlords will find that the land-lording business is not for them and they will want to get out. This will be especially true when the stock market and other alternative investments become attractive once again and the amateur landlords decide to get out of the business. There should be a flood of rental properties on the market and many opportunities for a creative real estate investor to acquire a lot of property without putting a lot of money out of his pocket. Another example of a motivated owner is the owner in foreclosure. If an owner is in a property he or she cannot afford and the bank is going to foreclose, in the time leading up to the foreclosure sale, the owners are generally very flexible. They will do pretty much whatever you want to save their credit or remain in a place to live. The owner in foreclosure is not concerned so much about the sale price of the property or the fact that you might not pay on the mortgage. He is already going to lose the house at foreclosure sale.
I want to point out some of the ways to find motivated sellers:
The most motivated sellers in the market are going to be people in foreclosure who are about to lose their house. Foreclosures are publicly conducted sales and are always advertised. Once you receive the list of foreclosures, you should go about contacting owners in foreclosure by mail, telephone or by stopping by to talk to them about your situation, about their situation and how you can help them. The owners in foreclosure will be the most flexible. They will allow you to take property subject-to an existing mortgage, assume existing mortgages, enter into joint-venture agreements, and otherwise be flexible.
2. Look for “Don’t Wanters.”
There are always sellers in the market who have a property that they do not want. There may not be anything wrong with the property but, for some reason, the people do not want the property anymore. Example are landlords who are tired of land-lording; older people who are being forced to go into a retirement home; the family of people who have been forced to go into a retirement home who now own a property they have no use for; people who own vacation or second homes who do not use them anymore; and any people who have a property they cannot take care of. You should keep your eye out for these people who can be found because they own a neglected or vacant property, who call you if you put up signs saying “I Buy Houses” or place ads saying “I Buy Houses,” or who might come to your attention through the grapevine as you let people know that you are interested in buying a house in the area or condition.
3. Send Letters towners of Vacant Houses.
The ownership of real estate is a matter of public record. It is also a matter of record among the neighbors of vacant properties. When I see a vacant house, I will sometimes go on the internet to check who owns it through checking the county real estate records, county tax records, or using one of the public data bases such as Lexis which can give ownership of property information. This information can also be gained by going to the county court house and checking with the land records division which might be called the recorder of deeds or just the land records, to the tax collector to ask who owns the property, or simply by knocking on one of the neighbors doors and asking. Vacant houses are usually unwanted houses. Sometimes the sellers are not motivated enough to put the property on the market.
4. Contact Banks and Mortgage Companies That Have
Foreclosures.
Banks and mortgage companies are in the business of making loans and collecting payments. They are not in the business of owning and managing real estate. If the borrower does not pay the mortgage, the only way the mortgage company is going to be paid is by the foreclosure process. If the property does not sell at the foreclosure auction, some banks maintain websites giving lists of foreclosure properties; others give them to realtors; and still others just keep an in house list and sell them privately. There are lists of websites in my Internet Directory and you should call banks and check with their REO departments to see if they have any foreclosure properties for sale.
5. Foreclosure Tax Sale Lists.
In my area, there are tax foreclosure sales monthly in addition to the monthly mortgage foreclosure sales. Tax foreclosures happen when the property owner fails to pay the real estate taxes. If the taxes go unpaid for enough time the taxing authority forecloses, sometimes wiping out all other liens. The list of foreclosure properties to be sold is published in advance and includes the owner name and property address. From an investor’s standpoint, tax foreclosures are not much different from mortgage foreclosures. There are different procedural and legal rules but the same business rules for foreclosure investors apply. Thus these investor opportunities are handled in the same way as the mortgage foreclosure.
6. Advertise “I Buy Houses.”
An effective way to get a motivated seller to call you is to place a small ad in the newspaper or on a sign posted on the side of the road which says “I Buy Houses, Any Condition, Any Location and then the phone number.” I have found that ads in the free newspapers that are distributed in most communities that have lots of coupons are often the most effective. When a potential seller calls you, they may or may not have some idea that you are the house dealer and are not going to pay top dollar for the property. This will generate a random selection of motivated and moderately motivated sellers. Find out what the seller’s motivation for selling is and ask them what the lowest price they would accept for the house is. If they are looking for full market value or are otherwise not offering you anything, just politely decline to visiting the home and wish them good luck. Do not spend your valuable time visiting a house if there is nothing in it for you.
7. Contact Divorce Attorneys.
Often, people involved in divorces need to get rid of property quickly. Sometimes the spouses are so angry at one another that they want to make sure there is no profit just so their ex-spouse does not get anything. Become known in the community of divorce attorneys as someone who will purchase a house quickly. To generate leads from divorce attorneys, you should send letters and a business card explaining what you do, and you should consider running an ad constantly in the local legal newspaper or bar journal. This is not the kind of thing that will generate a lot of calls, but when calls are generated, they will probably be worthwhile. Make clear in your letter to the divorce attorneys that you purchase houses in any place and in any condition and that you will close quickly. These are not matters where you will be able to obtain seller financing, but you should be able to purchase the homes cheaply enough so that you can use a hard money lender or partner to put up the cash that you will need to acquire the property.
8. Contact Estate Attorneys.
You should also consider contacting estate attorneys. Estate attorneys are usually separate and distinct from divorce attorneys, but your ad in the legal newspaper or bar journal will attract both. Your ad should not specify that you buy from only estates or divorces, but instead that you buy houses in any place, in any condition and can close quickly. Estate attorneys often have to liquidate property that has been vacant for some time period, sometimes not well maintained and certainly not wanted by the heirs of the estate. Sometimes there are many heirs who will be dividing up the proceeds and they are not so much interested in getting top dollar for the property, but instead just want to get rid of it. If you can make an all-cash offer and close quickly, you can often bag great estate deals. With hard-money lenders who are lending against the value of the property rather than the price you are paying or because of your money or credit, you can sometimes borrow one hundred percent of the money you need to acquire and fix up the property.
9. Scan Classified Section of Newspaper for Ads Which
State “Owner Financing,” “Lease-Purchase” or “Handyman Special.”
These are all key words that point you to motivated owners. The owner is communicating in the ad that he is flexible. Flexible and motivated owners are generally synonymous. This can be an excellent way for finding a property to live in when you do not have good credit or a lot of money.
10. Look at Government Websites.
The Department of Treasury, Internal Revenue Service, Department of Housing and Urban Development, Small Business Administration and other government entities have properties that they need to sell. Often these properties are sold at auction and sometimes they even include financing packages. Even if they do not include financing packages, often they are sold at very cheap prices to allow you to borrow enough money from a hard-money lender to complete the purchase and fix-up of the property without taking money out of your own pocket.
11. Look in the Multiple Listing Service for “Lease-Purchase”
or “Handyman Specials.”
MLS is an acronym for “Multiple Listing Service” is a database of properties for sale maintained by real estate agents. If you talk with an agent, he or she should be able to point out properties to you that are listed as lease-purchase or handyman specials. Properties listed as “lease-purchase” or “handyman special” are usually owned by a motivated seller. They are so motivated that up-front they are offering a form of financing (lease-purchase) or is admitting that he has an undesirable property by stating it is a “handyman special.” These are the kind of buyers that you can sometimes negotiate terrific deals with. You are much better off negotiating directly with the seller and you should demand that you be able to talk directly with the seller. Do not go through real estate agents or middlemen to try to negotiate these deals. If the deal is too good, there is a chance the real estate agent will try to divert it to someone else but, more typically, if the agent does not understand the deal or does not see how he is going to get paid his commission, he will present it in such a negative way that it will never get accepted. Cut out the middleman, go directly to the seller and talk to them. You should still pay the real estate agent that found you the property his commission, but do not let him do the negotiating. When you are negotiating with one of these sellers be sure to ask for more than you possibly think you will ever get. Do not be afraid to lowball the offer. You may be surprised when you discovery just how low someone will go.
12. Look for Expired MLS Listings.
Your real estate agent can print out lists of properties where they were once listed but the listing expired without the property being sold. Those sellers who failed to sell their house the first time should now be a little more motivated. Contact them by telephone, mail or by visit and talk to them about their situation. The sellers are often so turned off by real estate at that point that they would be more flexible and interested in talking to you about making a deal.
13. Make Multiple MLS Offers.
One technique to finding motivated sellers is simply making a lot of offers. If you make a bunch of offers with terms such as owner financing or other concessions to help you with the down payment and closing costs, some percentage of them will be accepted. It is more likely to have an offer like that is accepted on a house that is owned by a “don’t wanter” because it is vacant, a handyman special, or if the property has been sitting on the market for a particularly long time. This is not the kind of thing that will generally work with a newly listed house in a great neighborhood. Pick out the houses that have been listed for a long time or are cosmetically unattractive and need some paint and tender loving care to fix up and just make a bunch of offers. Make sure to include clauses that will allow you out of the deal if you do not like it, which is a clause that allows you to inspect the property and reject it for any reason within ten days of seller’s acceptance of the agreement of sale, or make offers with very short times for seller acceptance and if the seller indicates after the time for acceptance that he wants to enter into a contract with you, if you already had another deal come through, then simply reject the seller’s counteroffer or acceptance of property.
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