A person’s motivation to sell is rarely just about financial reasons according to buyers agent Patrick Bright. He joins us to explain how you can spot a sellers motivation and why its important.
Kevin: Whenever I ask a seller what it is they look for when they’re looking to buy a property, they always talk about the motivation of the seller. I wonder just how important that is, or in fact, how you can even spot a motivated seller, and what is one anyway? Is it about desperation? Is it about their need to move on or just their desire to move on?
My next guest is a buyer’s agent, and I guess Patrick Bright from EPS Property Search deals with this all the time.
Patrick: Hi, Kevin.
Kevin: Probably a common question you’re asked, as well, about the motivation of the seller: How important is it to know that, Patrick?
Patrick: It’s helpful to know that you have a motivated seller, but at the end of the day, it’s important to buy from someone who is motivated to sell. There is a percentage of people who put their property on the market simply because they’re just testing the market or they’re not highly motivated or the local sales agent has knocked on the door or rung them and said, “Look, would you think of selling? What are you looking for?” They say this number, and they say, “Well, if I can get that for you, would you be prepared to sell?” and they’re looking to get it on the market. That’s not what I would call a motivated seller.
Someone who is motivated has actually bought something else and they need to sell theirs, and they are happy to listen to fair market value, and they are not going to hang out for a Disneyland price.
Kevin: I think you’ve often said in the past – and I’ve read a brief on this – that it’s rarely just about financial reasons that would make someone motivated to sell. Is that correct?
Patrick: Yes. There are a number of reasons, but I think the top few are if there is unfortunately a relationship breakdown that does happen and people need to separate and move on with their lives and they need to separate the financial aspects of their lives, as well, which is unfortunate but reality.
The financial difficulties as we’ve just mentioned do come into play, but I think the main thing that they’ve already purchased elsewhere is very strong, particularly in a rising market. Most people want to find something before they sell because they know they are going to sell it because the market is tight. So it’s often about finding what they want first, getting that, and then they don’t want to have two mortgages. They have to get on with it pretty promptly because a lot of people can’t fund two mortgages at the same time.
They could be relocating for work. There could be difficult tenants. It could be an investment property and they’re having trouble with a tenant who has gone a bit feral on them. It’s not common, but it does happen. That’s why it’s good to have landlord insurance, of course. But they could be giving them some difficulties, so they’re just over it and they want to sell.
There are a bunch of reasons that people do want to shift a property. What you want to do is ideally buy from someone who is motivated to sell, because they are more likely to listen to a fair market price.
Kevin: How reliable is it when an agent does actually put on an ad “Owners have purchased elsewhere”? As you’ve indicated, that is a good motivator. Things like “Desperate to sell,” “Must sell now.” Are those just marketing ploys?
Patrick: Absolutely they are. They wouldn’t publish something like that unless there was some truth to that, otherwise it’s misleading advertising. You’re taking a very big risk to be publishing something that isn’t factual.
I remember when I was a selling agent 20-odd years ago now – getting on – one of the things we noticed was that if you put “Highly motivated seller” or “Mortgagee sale” or “Deceased estate” on a property, the amount of extra interest was dramatic. In fact, if you could get away with it you would probably advertise the fact that the property is a deceased estate even though it wasn’t, just to get extra interest.
Those properties very rarely sell for a conservative price, because most buyers are doing this for their first or second time, they’re not educated, and they go along and they think it has got to be a bargain whatever it sells for. Some of those properties sell for really silly prices, because you have everyone thinking, “Well, whatever I buy it for, it’s a desperate seller and I’m going to do well.”
You do have to do your own independent research. You do need to make sure that you’re making an educated offer on the property or setting an educated, well-researched limit so that you don’t get caught up being that person.
Kevin: How do you approach that as a buyer’s agent? If it were going to auction and under that kind of duress, would you try to secure the property before the auction?
Patrick: It depends on the property. I see every property without a price because I’m going to do my research. Prices that are listed on properties are very often what the agent had to promise the vendor to get it on the market or a price that the vendor says they want, which isn’t often very realistic but the agent needs to run with that initially until they get buyer feedback and then educate them on what the market value is. I’ve been in real estate 20-odd years now and I don’t know anyone who has ever told me their home is worth less than I thought it was. I’m unemotional about it, and they are.
You need to get that independent assessment. Do your own numbers, because you don’t want to be influenced. Let’s say they put a million dollars on the property and it may only be worth $900,000. Then someone says, “Well, if I can get 5% off that asking price, or if I can get it for $950,000 I’d probably be getting a good deal.” But what if it’s only worth $900,000? You’ve now been influenced by that million-dollar asking price.
Ignore asking prices. Ignore price guides. You need to do your own research. That way, you set your own sensible, well-researched limit. Then if their price guide or whatever guide the agent has provided if there is one being provided, you can factor that in if you want to. But you’ve done your own research separate to that.
Kevin: That’s really good advice: make up your own mind rather than be conditioned by the agent. As you rightly point out, everyone wants more than their property is worth, and that is probably what the pitch price is going to be from the agent because they are working for the seller.
Patrick: Correct. There are two types of prices that get pitched. There is the Disneyland silly price that gets pitched because that’s what they need to get the vendor’s agreement to get it on the market, or that is what the vendor has agreed to sell at only, so they have to pitch that price. Or you get the underquote price where it is really pitched low to get a lot of interest, but it’s well below where the vendor would really sell at.
Do not get caught out being underquoted or overquoted to and influenced by a price. I hear people say this at barbeques and gatherings: “I got a great deal.” I say, “Well, good on you. Well done. Just out of curiosity, what were the numbers?” And they say, “Oh, they were asking $1.1 million for it and I wore them down and I got them down to a million and twenty.” The question I would have is was it ever really worth $1.1 million?
People will convince themselves that they have a good deal when they may not have. On occasion, you might have got a great deal because you have got a motivated seller on the other end of it and that was the best offer they got and they took it and they ran.
By the same token, don’t be afraid of properties that have been sitting on the market for more than six weeks because they get a stigma that they’re stale. They may have had a silly price or they may have poorly marketed or they may have been poorly presented, and people can’t see through that. Some of the best property deals I’ve bought at great prices have been from the fed-up seller, if you like, who has been on the market six, eight, or ten weeks or they’re with their second agent and it’s been listed before.
Every property has a digital footprint. If you Google the address, you could find out historical advertising and you could find out how long it’s been on the market or if it’s been with a previous agent. Then you know the seller is a lot more motivated than they were last time.
Kevin: Some great advice there from Patrick Bright, EPS Property Search.
Patrick, once again thanks for your time.
Patrick: A pleasure, Kevin, as always.