What pushes distressed homeowners to actually accept offers and sell their properties?
While short sales and foreclosures might constitute a smaller share of total home sales than in the past three years, there are still billions of dollars in non-performing loans and REOs to be had. In fact, there are far more than most can fathom. Recent numbers suggest a greater number of conventional sales, hidden inventory off of the market, and the shifting of distressed debt by mortgage lenders and servicers. None the less; there is still a vast number of distressed properties available to those that know where to look.
Many of these delinquent mortgage loans and distressed properties aren’t alone. There are many new and re-defaulting loans, as well as some that are just being notified of an impending foreclosure. Whether it is banks, corporate asset managers, or simply regular individuals, selling sooner is clearly the best move. Investors of all types are more than happy to create a win-win for those in the shadow of a foreclosure. However, not everyone considers selling to be an option. So why don’t they accept those offers and sell?
For some, it is the price being offered, the strength of the offer, how trustworthy the buyer is, and much more. These issues can often be overcome with the right real estate investing education and negotiation skills. However, there are other specific reasons that different sellers don’t act when they ought to be highly motivated. So what are they, and how can you overcome them?
Banks and REOs
Banks, credit unions, corporate asset managers, mortgage lenders and servicers are typically incredibly motivated to remove nonperforming loans from their books. They often have masses of deadweight loans on hand in the form of both REOs and non-performing loans. More often than not, these properties are being devalued everyday they sit unsold. Still, many home buyers and real estate investors are bewildered at the stubbornness and apparent lack of motivation of these entities to negotiate.
Besides greed, and not wanting to let a dollar slip away, there are two main issues that prevent them from selling. One is process. These institutional sellers thrive on process and procedure, even to their own detriment. And you aren’t going to talk them out of it. Submit offers the way they want, and agree to check the boxes they want, or don’t waste your time. Secondly, it is all about the net sheet. They want to go with the offer which nets them the most. Don’t expect them to figure out your deal is better. Show it on the right form in black and white. Sometimes offers of 30% less or $100k less have been accepted because they perceived it would net them more.
Higher End Homeowners
Even before the whole credit and foreclosure crises started, experienced real estate industry professionals will tell you they learned that there are far more emotions involved when dealing with higher end buyers. It shouldn’t matter if you tell them the sheriff is coming to toss their belongings on the side walk next week, unless you solve their emotional needs. Doctors, surgeons, business owners and others that may even now have good incomes, but fell into foreclosure prioritize other things greater than the foreclosure itself. Their ego and reputation are on the line, and likely a family that doesn’t want to move or isn’t even aware of the situation. No amount of explaining will beat these arguments in their heads. You have to provide a solution. Can you help them do the math, and create a solution that will help preserve their ego, credibility, and family unit? Maybe it will be moving into a smaller but newer rental condo instead of owning a waterfront home. Or it could be moving into an older and larger home, but conjuring up enough proceeds to provide their partner with a substantial renovation budget.
Tapped Out Low Income Earners
While you may be trying to create a win-win, some distressed property owners that have no funds to leave and go somewhere else may just take any offers as a serious threat to their livelihood. They might not see it feasible to move out, especially when local rents have risen and they are barely working. Can you line them up with a rental agent to find something else? Treat them to a luxury tour of rental complexes? Offer to help with moving expenses and maybe even connect them with local assistance programs? Anything you can do to get them to sell to you should warrant consideration, as long as the numbers make sense.
Get to know your sellers. Know what emotions and processes are holding them back. The more you know about a seller’s situation, the more feasible it is for you to create a scenario in which they will sell to you.
