Catering To The Needs Of Distressed Sellers
There is a lot that goes into completing a successful real estate transaction. Aside from negotiating the best terms and taking care of everything else on the buying side, you may have to cater to the needs of the seller. If the seller is involved in a foreclosure or short sale, their particular scenario may make the entire transaction that much more difficult, as they are most likely being forced to sell against their own will. This adds an entirely different variable to the equation that must be addressed.
There have been some changes made to speed up the length of these transactions, but they are still largely at the mercy of the seller and the lender that holds the mortgage. If you want to move the process along, you need to motivate the seller or renter to get out as quickly as possible. If not, you could very well be waiting for months on a deal that will never close.
Most homeowners facing foreclosure do not want to sell their home. There could have been a sudden loss of income, injury or other unforeseen circumstance that forced them into their current situation. That being said, they will initially not be very receptive to selling and walking away from a home that they may have lived in for years. The closer they get to the actual foreclosure date, the more real it becomes and the more they know they need to do something. Even if they know the foreclosure is imminent, there are still ways to extend the process and buy some time. Even though this may be delaying the inevitable, it does give them an opportunity to plan what they want to do next. As a buyer, this is the time where you have to walk the fine line between motivating your seller and giving them a reason to continue to drag their feet.
The biggest issue that homeowners currently face during a foreclosure is finding somewhere else to live. A few mortgage “lates” could be a red flag, but a foreclosure makes it incredibly difficult to rent in a subsequent location. Once you find out why they are in this situation and if it is only a short term setback, you can either assist them with finding somewhere else to live or offer a cash incentive. Every day that they are in the house and do not close, it is costing you money. By offering to pay for a month or two of rent at a new residence is a small price to pay for getting the property 30-60 days before you would otherwise. If you look at the big picture, it makes good business sense. Even if you don’t want to offer any cash incentive, you can use your contacts and make some calls to other landlords or fellow investors you may know in the area. Regardless of how generous the cash incentive may be, nobody is going to willingly sell unless they have somewhere lined up to live. This may turn out to be a win for you and for the landlord you refer them to, but nothing will happen if you aren’t proactive with your actions and think outside the box.
If you don’t know why a seller is in their current situation or what they want out of the transaction, it is very difficult to help them. You can entice a homeowner with a large amount of money, but if they are intent on staying until the end of the school year it probably won’t make a difference. Before you can try to motivate, you need to know their motivation and goals for the transaction. Some sellers are looking for time, others are looking for money and some just want the foreclosure off of their credit report. Before you can work on motivating your seller, you need to know what they are looking for out of the deal.
Once you know what they want, it is up to you and your team to try to make it happen. Some homeowners are hoping for a miracle that will probably never come, but they want to hold on to any hope for as long as possible. As an investor, you need to make any distressed seller aware of their situation without jamming it down their throat. This is a delicate balance, but many times the situation will not feel real unless you attach dates and consequences with it. Many homeowners have extended the process for months or have been able to work something out with their lenders that allow them to stay. These situations are more the exception rather than the norm, but that doesn’t stop homeowners from clinging on to this hope. If you want to speed the process along, you need to share any communication you have had with the lender regarding dates and actions. If your seller knows what is going on they will be more likely to act.
The more upfront and honest you can be to your sellers, the more likely they will sell to you. Even though they may be facing foreclosure, it doesn’t mean they have to sell to you. They can file a bankruptcy as a last ditch attempt to stay in the house or work with another investor that comes along. Your personality and approach to the deal will often times separate who a distressed seller ends up selling to. You can motivate with cash or a contact for a place to live, but if you are pushy and abrasive they will most likely find someone else to work with. By finding seller motivation, you can focus on what they want and ultimately close your deal that much quicker.
