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The 3 Categories of Investment Property Sellers

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As I am sure you’re aware, the key to making money in real estate is to get good deals.  As they say, you make money when you buy, NOT when you sell (thank you Robert Kiyosaki).  As such, it is critical to try and target motivated sellers.  But of course, not all sellers are motivated.  The purpose of this post is to define the 3 primary types of sellers you’ll run into when you are trying to buy an investment property.

The first type is the dreaded unmotivated seller.  This type of seller believes that his or her property is the gold standard in the neighborhood, and he or she expects to receive fair market value for it.  These sellers are not big on negotiating, and they will hold out for just the right offer because they are not desperate to sell.  Their properties typically take a long time to sell as they await the perfect offer.  Obviously, you will not get a below market deal from an unmotivated seller, so whenever you run into someone like this, walk the other way.

The second type is the luke-warm seller.  Although this type of seller is marginally better than the dreaded unmotivated seller, you’re still unlikely to get a great deal in this scenario.  A luke-warm seller is typically willing to negotiate, but his or her perceived acceptable price range is fairly narrow and tends to hover around perceived property value.  This type of seller will often convey his or her preferred sales price, and will ask you to make an offer.  Although a luke-warm seller wants to sell his or her house as quickly as possible, there is usually no impending deadline to do so and hence they can afford to be patient and wait for an acceptable offer.  Nine times out of 10, you’ll be spinning your wheels when dealing with this type of seller.

Finally, a motivated seller is your ideal target.  This type of seller REALLY needs to sell their house, and fast.  He or she may be facing a foreclosure or short sale, relocation, divorce, death, or some other life-altering event that necessitates a quick sale.  The best type of motivated seller has tried to sell without any success, and as such typically has all the required information at his or her fingertips.  With a motivated seller, if you can execute the closing quickly, and with cash, you’re highly likely to get a substantially below market deal.

The bottom line is that you always want to try and buy from a motivated seller, and you can increase your odds of success if you are a strong negotiator, are willing to close quickly, and can pay cash.  If you really want to make a killing in real estate investing, pre-screening sellers and only dealing with those that are motivated is the only way to go.

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