Identifying a Real Seller

Perhaps the most frustrating part of a Broker’s job is marketing a Seller’s property only to find out, after hours of work, that the Seller was never going to sell. The earlier in the process you can identify a Seller who will waste time the better off.

Here are some of the telltale signs that a Seller is really looking to sell their property.

Motivation to sell is the seminal piece to understand. When seeking to uncover and understand the motivation to sell it is important to gain as deep an understanding as possible. This is because the more specific the reason the more likely it is to be real. Motivation to sell has many incarnations from waning interest in managing a property to affirmative, financially-based decisions to sell. Some of the more salient motivations include:

Lack of energy and desire to continue managing a property. Running a property or portfolio takes a lot of time and there are a lot of moving parts and at some point an owner may simply choose to “retire” and sell the property. Closely related is the fact that many inherited properties trade because the new owner lacks the predilection or ability to manage their new property.

The property’s goals have been achieved. Professional real estate investors have plans for their properties going in and when they reach their goal they generally either look to sell or at least reevaluate their situation. Regardless of the original plans – property repositioning, a certain profit or hold time – when the goal is reached that may trigger a sale.

Partnership problems crop up often and if they cannot be solved the only option is to sell. Failed partnerships, including divorce, provide ample motivation for a sale of at least one partner’s interest.

The need for capital is a huge motivator. Needs may range from paying college tuition to freeing up capital for another development project. Capital needs are sometimes accompanied by time constraints.

Once a Broker has identified a motivation to sell the next step is to ensure that the terms of the sale are reasonable and customary. If the sale is contingent on the sell side for finding a 1031 the Seller may not be real. Here is where a Broker can explain the way 1031’s work and how much time the Seller actually has to find a new property. If the Seller baulks it is probably time to move on since making deals contingent on a 1031, or anything else, is a red flag.

Unreasonable conditions generally indicate a hesitancy to sell and perhaps Seller’s remorse which is the feeling of regret after deciding to sell a property. Seller’s remorse can cause a Seller to behave in ways meant to sabotage the transaction. Aside from the oft-mentioned 1031, conditions can include a very short closing period, uncommon closing terms or a last minute renegotiation.

Price is reasonable. In today’s market that means the price is high but not ridiculous. If the price is extremely high it makes sense to educate them on the market and see how they react. If they still want a crazy price you should stay in touch periodically because things change.
Some Sellers are slippery and fail to return calls, share information such as rent rolls or DHCRs, allow showings and generally communicate in an inconsistent manner. Slippery Sellers are less likely to actually sell.

Taking a listing that is not likely to sell is a huge time and resource waster. These tips will help you tighten your sales pipeline.

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