What makes a real estate deal, a deal? Well there are many reasons why, but one of the most significant sources of great real estate deals has nothing to do with the real estate itself.
Sure…there are rundown homes that are selling for pennies on the dollar, but its selling for pennies on the dollar for obvious reasons!
Where the hidden “gems” are found is within the people who own the home. It’s actually the situations that they are in, such as foreclosure, divorce or maybe a death in the family that present the opportunity.
It’s the situation that gives the real estate investor a chance to get the property cheaper than it is actually worth.
Why are these situations so valuable? They present a possible problem to the current owner, where they may need to sell the property very quickly and at a price more favorable to the buyer, namely you!
The urgency to solve their existing problem gives you a chance to be a problem solver. This generally creates an opportunity if you know how to solve problems.
Uncovering The Hidden Gems!
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Since the majority of the time, “distressed sellers” aren’t in plain view; we have to search for places that will provide us the information that will give us hints as to their possible situation. These “hints” of information can be found at your local County Recorder’s office.
The County Recorder’s office has a myriad of information that can lead you to where the deals are. Here’s some of the examples of listings that you may investigate through public records and some other tips that don’t require research via public records:
1) Notice of Default
This is a notice that the bank sends out to the borrower notifying them that they are delinquent on their mortgage payment. This information is readily available as it is public record. Ask your County Recorder clerk to assist you on finding this valuable information.
2) Notice to Condemn
This is a notice that is sent out to the homeowner notifying them that all or a portion of their property doesn’t meet building or zoning code for that particular county.
The homeowner has a certain time frame to fix it, or the County will force the owners out and condemn the property.
You don’t want to deal too much with the major fixer upper type, but sometimes people put on add-ons to their homes, without hiring a contractor to do the work.
The results are sometimes not up to building code, which if not fixed within a certain time frame, can lead to the County to condemn it.
3) Notice of Divorce
This is a preliminary filing to an inevitable divorce. Usually before the actual divorce, there is a hearing, and that hearing produces a formal date in which a divorce will be finalized.
4) Delinquent Property Taxes
These are self-explanatory; however there are certain laws on how the State proceeds on recouping property taxes. You would do best to talk to an attorney about the process in your State.
5) Pending probate court cases where the beneficiaries live out of State.
These cases are assigned to an “executor” to liquidate the assets for the beneficiaries. They can be a relative or possibly an attorney.
You would simply contact the executor to see what price range the beneficiaries are asking for. Most times, the beneficiaries want to sell fast, because they have no interest in handling the affairs in a different State or they don’t have the time to.
6) Out of State owners can usually qualify as a possible lead to a good deal. The property or situation though, has to dictate the reason as to why these owners would be motivated.
7) Rental houses
The idea behind rentals is that some rentals are on the market, because owners may have tried to sell in the past with no success, and are now stuck with a property that they really don’t want.
A good indicator you might want to look for, are houses that may have uncut trees or grass within the front yard. Broken window or graffiti may also be a good indication of an unwanted property. These are all things that are cosmetic, and can be fixed up with a cleanup crew.
8) For Sale by Owner
Some of these homes may not have enough equity to pay a realtor. These are prime candidates for a subject to type deal.
When doing any of these deals, you should always let the seller talk more, while you listen to their situation. People who are in difficulties tend to talk about their problems to make them feel better.
If they don’t like to talk much, ask pertain questions as to why the house is selling or how quickly do you need to sell the house.
By understanding their situation, you can better understand how you make an offer on the property. As a real estate investor, you are always looking for a reason to give you, the real estate investor, and a benefit in the deal.
Here are some of those benefits you are looking for:
1) Lower price offering.
2) Subject to deals (see my other article on this topic).
3) Flexible pay plan or price offering.
4) Low to no down payment required.
Other approaches to finding motivated sellers;
- Find the data
The list of motivated sellers can include landlords that are out of state, absentee owners, longtime property owners, landlords with delinquent taxes, landlords in probate, pre-current and current foreclosures and more.
As said earlier, the data of prospective motivated sellers can be found at the local county recorder’s office and the court house among others.
Apart from there, they are a wide range of other places you can find the data of motivated sellers these include;
- Data provider
A wide variety of real estate data providers can assist in finding the list of a wide variety of motivated sellers.
These companies offer very up-front data but definitely the quality of the data depends of your price. Hence, they offer their as regards to the price you pay.
Because the information from the public records might not be very recent, using these data providers can go a long way in helping you ease the stress of looking for recent motivated sellers.
- Specialized websites
Some specialized websites can also assist in getting a compiled list of motivated sellers. You only need to be specific by typing type of property you need, the market value of the property, the zip code among others.
You just have to use keywords that will improve your search results to be able to get the list of motivated sellers that you desire.
- Create marketing collaterals
After the earlier stage of finding the data of motivated sellers, there is therefore the need to create marketing collaterals for yourself. Your marketing collaterals will include;
- Direct mails which will involve the brochures, letters, postcards etc. that you will send to your potential sellers.
- Website congestion page is a page where the motivated sellers drop their contact information so that they can be easily contacted when the need arises.
- Customer service team or Google voicemail account as well as other forms of phone lead acquisition system can go a long way towards creating a good marketing collateral.
- Launch a direct mail campaign
Before you go over to this stage, you must have already had an established group of motivated sellers. These groups of sellers are the people you will have to send the direct mail.
Ensure the sent mails are thoroughly followed up with schedules. This also implies you should await responses.
Many a times, sending just one direct mail will not instigate a reply. You need to send more than one; just as many as necessary. It does not just end at writing anything and sending, your email content should be very compelling.
The direct mail should additionally be personalized so as to encourage response. Usually, responses are at about 5% in all. For instance, if 300 direct mails were sent, about 15 responses will be received.
- Shuffle your leads
Certainly, you will fail in your direct mail campaign if you do not filter your leads. It will not make great impact if you send the mails to the wrong persons.
You can begin by understanding very well the type of property as well as the size of the property involved. You also need to be aware of the market value of the property.
From the various sources you gathered your list; it is possible that there will be duplicates. Look into this and eliminate every duplicate property listed.
Be very certain that the sellers are willing to really sell their property and focus on those serious sellers.
Conclusion
The main theme in these techniques, are twofold: getting a good deal for you the investor, and picking up the property before it becomes known to everyone else!
Another good idea is to have a handyman check the property to ensure that it is in good condition and if repairs are necessary, to get an estimate on the cost. This combined with the seller’s situation, gives you a better idea on what your offer is going to look like.
Happy Property Hunting!
