5 Things You Should Know About Seller Motivation
I am often asked by a buyer about seller motivation. What the buyer wants to know is how much less than the asking price might the seller be willing to take. But the reality is sometimes quite different than just being willing to take a lower price on the home.
Motivation is governed by many different things, here are some of them:
1. Income drop. The seller may have lost a job or received a reduction in income for some reason. This is beginning to make it difficult to pay the bills. This seller may be highly motivated to sell, but the limiting factor on his motivation is the outstanding amount of his mortgage. If the offer is for less than is owed he cannot sell unless he either pays the difference in cash or sells with a short sale.
2. Short Sales. This is often caused by the same reason as number one above where the seller can no longer pay his mortgage. But that is combined with the situation that the house is worth less than is owed. Often a seller will be willing to take any reasonable offer that he thinks the lender might agree with…the seller is not making anything in the sale anyway. If you make an offer on a short sale be ready for the long haul. Sometimes these take six months to close.
3. Transfer. If the seller is moving out of town or out of state they are often very motivated. They may have a set time when they are leaving and the option of leaving the house vacant is not attractive. This seller may take a lower offer. The exception is when the seller has a buy back agreement from his company, in which case all bets are off, he may not be motivated at all even though he is moving because his company will buy his house from him if he can’t sell it. However, after the relocation company buys the house…they ARE going to sell it. They will look at all reasonable offers. They do not want to own that house in six months.
4. Divorce. In this case one of the two sellers may be highly motivated and one may not be very motivated at all. It depends on who is paying the mortgage and who is staying in the house. Often a house like this does not sell until a judge orders the sale in order to divide the assets. But sometimes both parties are very motivated to get it done and will take a lower offer as long as it fulfills the goals of both parties.
5. Foreclosures. Obviously, the owner of a foreclosed property is motivated. This house is going to sell, it’s not going to sit on the market forever. However, usually the asset manager has a system. They will not normally accept an offer far below their asking price…maybe 10% is the best you can hope for. Instead, they will systematically lower the price of the house over time until it reaches a point that someone buys it. There are always exceptions and occasionally someone picks up a foreclosure for 25% below the asking price.
6. Estate Sale. Sometimes the house is being sold because of a death. The heirs need to sell the property in order to settle the estate. These are sometimes very motivated sellers, and sometimes they are very unmotivated sellers. Every estate sale is different and it really depends on the amount of heirs and how independent from the heirs is the person settling the estate. I once represented a property that had more than 30 heirs and one executor. The executor was very cautious and very nervous because he felt that all 30 of the heirs were looking over his shoulder. He was not going to be able to please them all. It took a long time to sell that property.
Here are some important links:
My foreclosure page…this is an updated list of all the residential foreclosures in the Mat-Su Valley and it includes videos of the foreclosures…warts and all.
Feel free to call me at 232-7900 or email me at [email protected]
Cartoon from Tundra Comics, used by permission.