(This advanced blog summarizes real estate investing tips and insights Lofty AI has acquired from working with thousands of investors and institutional funds.)
What are motivated sellers?
A motivated seller is property owner who is motivated to sell their property as soon as possible, for whatever reason.
A few common reasons include:
- Impending divorce
- Re-locating for a new job
- Inability to pay taxes or mortgage prices
Motivated sellers' properties tend to sell for 10% - 30% below the market average and typically have very favorable terms. These might include no money down, 0% interest, or a solid financing plan.
Another plus of buying from motivated sellers is the transaction speed. These folks typically have a compelling reason to sell their property, and often want to get rid of it as soon as possible.
Finding a motivated seller is a real estate investors dream. When you do find one, you're able to capitalize on their desperation and put in a low-ball offer that will more than likely be accepted.
How to find motivated sellers (manual)
There are plenty of manual, traditional ways to find motivated sellers.
They take a ton of time and the conversion rates are abysmal.
These manual methods include:
Real estate investors will drive around neighborhoods looking for signals of motivated sellers.
These signals include:
- Mail and newspapers piling up on a driveway
- A neglected front lawn and landscaping
- Run down-property
- Empty lots
- Business signs advertising closures
Investors are really just paying attention to distressed properties or vacant houses.
These owners are typically more difficult to track down or approach. But once you have an idea where these properties are, it is a bit easier to find the correct data to contact owners who are motivated to sell.
Find absentee owners
As mentioned previously, absentee owners are a great group to target. This is because they don't actually live in the property and are probably open to selling at the right price.
Typically, absentee owners are also distressed owners who had to move out due to a divorce, a new job or other reason.
To obtain a list of absentee owners, you want to go to your local county tax office and ask for a list of properties where the owner’s address and the property address are different.
It's possible you're able to find your county’s public records online, but the list may be difficult to navigate through.
Direct mail and email campaigns
This is the most popular method investors use to find motivated sellers.
It involves compiling a list of potential motivated sellers through public records.
Investors will look for certain types of information in these public records to give the notion of a motivated seller.
- The death of a joint tenant
- Recent foreclosure
- Owner is of old age
- An out-of-state owner
- Absentee owner
- Extensive days on the market
The issue with public records is that they're updated very infrequently and everyone has access to them, so there's no real competitive advantage.
Once investors have compiled a list of potentially motivated sellers, they will then send out thousands of letters/emails asking them if they're looking to sell their property.
For these email/mail campaigns, a 1% response rate is considered a successful campaign.
Similarly to direct mail campaigns, investors will go through public records and compile a list of potential motivated sellers.
They'll then find their phone numbers and cold call them.
As you can imagine, this converts at a similar rate as direct mail campaigns.
Plenty of investors today still use Craigslist to try and find motivated sellers.
Unless you've built a script to consistently scrape Craigslist data, you'll need to to regularly monitor the properties section for new deals.
If you're going to take this approach, you want to make sure and track deals that have been available on Craigslist for a significant amount of time, as this can be a good indication of a motivated seller.
When taking this route, remember to update your notification settings so you get listing updates emailed directly to you.
Investors will often utilize Facebook ads to attempt to find motivated sellers.
Although there are a lot of real estate investors on Facebook, it's tough to know what criteria you should be using to directly target motivated sellers.
If you're going to use Facebook, our suggestion would be to utilize Facebook groups.
Contact local attorneys
Local attorneys are constantly working with clients who are needing to sell their homes due to divorce, probate, bankruptcy or any number of situations.
It's generally best practice to network with these attorneys at local business events, but some are open to direct mail.
When searching for a local attorney, you want to find a lawyer who practices the following types of law:
- Family law
- Real estate law
- Estate law/Probates
- Bankruptcy law
Network with inspectors
Like local attorneys, local county inspectors are another group of people who tend to have inside knowledge about their local area.
They may know of homeowners who have had expansion or zoning issues with their property which could correlate with a motivated seller.
As you can probably tell, these methods, just like most methods the real estate industry leverages, are manual and outdated.
There is an easier way.
That way involves leveraging machine learning and learning which specific signals lead to a property selling for significantly less than than market average.
How to find motivated sellers (automated)
At Lofty AI, we use daily updated data to identify properties primed for rapid appreciation and higher cash flow.
We also have a proprietary method of finding motivated sellers.
This method involves automatically searching for specific keywords in a property page's listing description.
When any of these 100+ keywords are used, properties will almost always sell for significantly less than they were originally listed for.
A few examples of these keywords include:
- Short sale
- Investor special
When these keywords are present in a listing description we've found, over time, that properties sell less than they're originally listed for.
This has to do with the fact that many real estate agents aren't great at marketing. They use these keywords to try and be sneaky and cute. But what they're really saying is:
"Give my client a low-ball offer and they'll probably accept it."
It's similar to a real estate agent describing a tiny home as "cozy" to try and make it sound better.
How it works
The image below shows the Lofty AI platform in Reno.
In total, we are recommending 14 single family homes that are both undervalued and primed for rapid appreciation
Now, let's turn the motivated seller filter on.
Once you do that, it filters down even more showing only 4 properties.
Each of these 4 properties have motivated sellers, are undervalued, and are primed for rapid appreciation.
AKA the dream.
With the Lofty AI investing app, you no longer need to send out thousands of emails to potential motivated sellers, or drive around looking for signs of a neglected property.
We show you people that are already looking to sell their property, that also happen to be motivated sellers.
To request a demo to our invite-only platform, just click the button below.