Motivated sellers are, hands down, the best. Because they want—and often NEED—to sell, motivated sellers are typically more willing to negotiate everything from the sale price to contingencies to close dates. They are, in short, ideal partners—the more motivated sellers you can add to your lead list, the better off your real estate investing business will be.
That said, motivated sellers shouldn’t be glossed over—that’s a mistake too many real estate investors make when dealing with these property owners. Sure, they’re motivated and, sure, everything seems to be moving forward. The reality, though? If you treat them like a slam dunk, you risk losing them and the deal to another investor. It happens—and it happens a lot.
Think about it. If you’ve sniffed them out, chances are other wholesalers and rehabbers have, too. It’s not uncommon for these sellers to approach multiple real estate investors right off the bat. Remember, they need to sell and, in their mind, reaching out to a few potential buyers will ensure they have an offer at the end of the day. If you’re too lax in managing the relationship and don’t keep moving things forward, you could wind up wasting a lot of time and walking away with nothing—no deal, no assignment fee, no close, nothing.
So the big question: how do you manage motivated sellers? And what, specifically, should you do when you have a motivated seller on the hook? Start here:
#1. Understand Their WHY
Every seller has a WHY—in other words, why they’re so motivated to SELL. Anyone who wants anything has a why. YOU have a why—why you wanted to start a real estate investing business. Was it to gain financial freedom? Spend more time with your family? Ditch your day job and do something you love?
The best WHYs go deep. We recently worked with a motivated seller who was going through a messy divorce and wanted to sell her home. Even though that’s a rock-solid reason, there seemed to be more to the story than that. As the relationship between us and the seller grew, she started organically sharing more. We found out she was recently divorced and that, for her, the sale was two-fold. First, the house had too many memories and she wanted to move on. Second—and likely the most motivating—she had racked up lots of bills in the proceedings and was concerned about a foreclosure. With that in mind, we could move quickly and structure the deal appropriately.
In many cases, your real estate agent will give you the scoop on a motivated seller before you get in touch. In other cases, the seller will explain their situation in an email, voicemail or on the lead gen form on your site. No matter how much or how little you know, spend some time during your initial call getting to the bottom of their why. Ask “why are you looking to sell?” and see where the conversation goes. Don’t pry, but try to understand as much as you can so you can make an informed offer.
#2. Go Low—and Expect to Offend
This trips up many first-time real estate investors. Sometimes, a property is listed online or on the MLS so you know the asking price. Other times, it comes up in conversation. And other times, still, you’re talking about an unlisted property—the seller is just getting started or is trying to gauge the market. Regardless of the circumstances, it’s essential you take what you know and calculate a low-ball offer. To do this, calculate your MAO or WMAO—Maximum Allowable Offer or Wholesale Maximum Allowable Offer—and inflate your margin a bit. For example, if you normally use 70% in your calculation, use 60% or 65%.
“Normal” WMAO Calculation
WMAO = (ARV x 70%) – Estimated Repair Costs – Assignment Fee
“Low Ball” WMAO Calculation
WMAO = (ARV x 60%) – Estimated Repair Costs – Assignment Fee
In this scenario, our motivated seller’s property had an ARV of $250,000 after $42,500 in repairs. We used $7,500 as our assignment fee.
“Normal” WMAO Calculation
WMAO = ($250,000 x 70%) – $42,500 – $7,500
WMAO = $125,000
“Low Ball” WMAO Calculation
WMAO = ($250,000 x 60%) – $42,500 – $7,500
WMAO = $100,000
We wound up offering her $100,000 and she immediately scoffed at the price. While that may make some wholesalers uncomfortable, we were fine with the reaction. In our experience, if they don’t push back on an initial offer, you’re probably offering way too much. We expected the no. But it also gave us a jumping off point to have an important conversation…
#3. Talk About THE MARKET
Most sellers don’t understand the real estate investor universe—how market conditions, supply and demand and the condition of their home play into your offer. With the low ball offer in place, you can discuss your process:
- You pulled comps to see what’s happening in the market and what comparable properties are selling for
- You assessed the fair market value of their property, taking into account what’s selling and the repair work that needs to be done before listing their property—repairs they’d need to pay for if they were selling to a retail buyer
- You calculated an After Repair Value (ARV) and, based on the repair costs, closing costs and other considerations, this is what you can offer them for their property
This step is important because 1) it shows you know what you’re doing and have a firm understanding of the market 2) it helps the seller see it’s all data-driven, and you aren’t trying to pull a fast one and 3) it illuminates the value behind your offer—not just the cash payment but the fact that you’re buying their property as-is and with no closing costs and no contingencies. If they listed their property, they’d pay at least 6% to the real estate agents plus lots of additional fees, plus rehab and renovation costs—or they’d take a massive hit post-inspection.
While some sellers—even some motivated sellers—will hold their ground or stay in that “offended zone,” many will come around. Make sure you speak confidently, clearly and avoid using industry jargon. You never want a seller to feel like you’re intentionally deceiving them or talking down to them. Instead, clearly and plainly explain how you got to your offer based on comps, the state of the property and market conditions, and see where the conversation goes. If a seller is motivated, they’ll usually come down in price. It may not be as low as you want, but it could land at the 70% mark—in our case, that $125,000 WMAO—or, at least, much closer to it.
That happened here. Our seller admitted to wanting $150,000 for the property, but was willing to go down to $135,000. It wasn’t the $100,000 low-ball offer but, remember, that offer was based on 60%—a 40% profit margin—and not 70%. At $135,000 we were just $10,000 off from our “true” WMAO, leaving plenty of wiggle room for a future rehabber.
#4. Be Fair, But Firm
Just $10,000 apart—but, in the seller’s mind, $35,000 apart—we could really start to negotiate. As always, we were firm but fair. It’s important in this step to hold your ground. We came up from our original $100,000 offer and lobbed $115,000—still $20,000 off from her ask, but more than we’d offered initially. She actually held her ground, in this case, sticking with the $135,000 ask. We came up a bit more—in this case, to $120,000—and explained we couldn’t move beyond that.
When she passed on the $120,000, we suggested she take a day or two to think about it and get back to us—no hard feelings if she ultimately decided to pass. She agreed and we waited.
#5. Close the Gap—and the Deal
The waiting paid off. After 24 hours, she called and asked for $125,000. Knowing that was our “true” WMAO, we agreed. Gap closed. Deal closed. And everyone walked away happy.
These five steps are easy to replicate with any motivated seller—and, more importantly, will enable you to better connect with motivated sellers and close more lucrative deals even faster.