What Is a ‘Motivated Seller’ in Real Estate and Is It the Same as ‘Distressed Seller’?

From this article, you will learn the reasons why some real estate owners are willing to sell their properties for a discounted price and how you can find these deals.

The knowledge I’m sharing with you comes from my over 20 years of experience as a real estate agent.

Let’s start with the definition of a motivated seller and then see if they are the same as distressed home sellers.

Motivated Seller Definition

Motivated home seller means an owner of real estate who has an urgent need to sell the property.

Motivated Seller Meaning

A motivated seller needs to sell the property to get cash fast. This seller is often experiencing a crisis and needs to sell the house to avert a disaster and get relief.

The greater the stress, the more motivated the seller. The more urgent the need, the more willing the seller will be willing to reduce the price for a quick sale.

The hardships motivated sellers most often wish to avoid include:

• Unaffordable monthly payments
• Negative impacts to their credit
• Lawsuits and judgments
• Ongoing indebtedness
• Loss of investment
• Homelessness

Property owners face these situations because of changes in their finances brought on by job losses, job transfers, the death of a breadwinner, an inheritance, or changes in the market.

Examples

For example, a job loss can prevent property owners from making their monthly mortgage payments. The property could go into foreclosure, and the owner could lose the home.

Foreclosure has drastic consequences, and this threat can create a very motivated seller.

Another example is homeowners who need to relocate quickly for job purposes. They need to sell so they can avoid having to make two house payments.

They also may be unable to purchase their next home until they sell their existing home.

Homeowners are not the only property owners that are motivated to sell.

Landlords may be unable to continue managing their properties or find a good property management company to do this for them. They may just be burned out.

Investors may have vacant houses they need to sell in order to procure funds for their next deal.

Property owners like these need to sell as quickly as possible. They are in a crisis and need someone to rescue them and solve their problems.

They will often sell for a significantly lower price than market price due to their urgency.

This creates a lucrative opportunity for real estate investors and wholesalers who know how to find motivated house sellers (read also how to find motivated sellers for free).

In real estate, there is a similar term — ‘distressed seller’ sometimes used interchangeably with ‘motivated seller’. It’s important to understand the difference between them.

Distressed Home Seller Definition

In real estate, a “distressed” property seller is a seller of a property that is in pre-foreclosure or is foreclosed upon. In the second case, the seller is the lender.

Distressed Home Seller Meaning

As you see from the definition provided above, “distressed” refers to the status of the property (foreclosed or in pre-foreclosure) and not to the emotional state of the owner.

“Distressed house seller” may seem the same as “motivated house seller” but it’s not always the case. Not every motivated seller owns distressed property.

For example, a person who wants to urgently sell their house, that does not have a mortgage or lien attached to it, is a motivated seller. But they are not a distressed homeowner.

Sometimes, however, you may hear the term ‘distressed seller’ applied to a motivated seller referring to their emotional state making them want to sell the property fast.

But this doesn’t comply with the official industry terminology.

There are many kinds of these sellers. To learn more about each of them in detail, read my article on types of motivated sellers.

#1 Real Estate Investors

If all real estate property owners were willing and able to hold out for the highest possible offer on their properties, investors would have limited opportunities to profit from real estate.

Motivated sellers are the bread and butter of the real estate investing business. Below are the types of real estate investors who seek them.

Fix and Flip Investors

When an investor purchases a property that needs rehab, repairs it, and quickly sells it for a profit, this is called a property flip.

For finding homes to flip, investors look for sellers who are motivated to sell their properties at enough of a discount to allow the investor to make a comfortable profit after repairs. One of their favorite ways is finding foreclosures for sale.

In some regions, there is a high competition between home rehabbers for motivated sellers. This makes residents of such neighborhoods overwhelmed by real estate investor direct mail marketing or cold calling efforts. If you are one of such investors, we have a sample letter to motivated sellers and a sample letter for distressed homeowners for you.

Fixing up a house can be costly, and even with the most careful inspections, unanticipated repairs are common.

Some properties may only need cosmetic repairs and upgrades.

These are ideal for several reasons:

• The repair cost is generally lower
• The odds of unanticipated costs is lower
• The repairs take less time

Some properties are older and need more extensive repairs, but still have the potential for profit.

In addition to the repair costs, real estate investors must also factor in the amount of time the repairs will take and the likely amount of time the property will sit on the market before it sells.

The greater the cost and the longer the holding time, the more motivated the seller will need to be.

Sellers that are the most motivated will be willing to let the property go for the lowest prices.

Fix and flip investors typically purchase from the following motivated sellers:

• Owners of run-down homes or vacant homes
• Owners of homes damaged by a disaster
• Tired landlords
• Distressed property owners
• Lenders who have purchased foreclosed properties
• Heirs
• Vacant homeowners
• Owners of housing with building code violations or zoning issues

These sellers are typically in a crisis situation and need relief.

This gives investors an opportunity to rescue these motivated real estate sellers and make a nice profit at the same time.

House flipping has been attracting a lot of aspiring investors in the last decade. If you are interested in becoming a flipper, read this comprehensive guide about pros and cons of flipping houses as a career.

Landlords

Some landlords enjoy great success with their rentals. These landlords are always looking for new opportunities.

The rental market offers a lot of opportunities, and there is high demand for affordable rentals and for high-end rentals in more affluent neighborhoods.

Landlords typically have to use a mortgage to purchase properties, and at the same time, they need to be able to keep their rents competitive with the rest of the market.

They need to keep their mortgage payments low enough to allow a positive cash flow from the rent their tenants pay.

Landlords must provide the tenant with repairs when anything goes wrong with the rental. For example, they may have to replace a hot water heater or other appliance unexpectedly.

The difference between their mortgage payment and the tenant’s rent payment must be high enough to allow for these repairs.

Landlords look for the following types of motivated sellers:

• Vacant property owners
• Properties owned by other landlords who want out of the business
• Distressed property owners
• Heirs

Some landlords use more creative methods of purchasing properties. For example, they may assume an existing loan or use owner financing.

This works best for motivated sellers who have little or no equity in their homes.

While every seller would prefer to cash out, motivated sellers will accept whatever solutions are offered to them that will help them solve their problems and reach their goals.

Lease-Purchase Investors

Lease purchase investing is a popular no-money-down technique where investors lease the property from the homeowner with the option to buy.

Investors then assign or sublease that property to a third party for profit.

These investors typically purchase property from motivated sellers who cannot sell at a discounted price, usually due to limited equity or negative equity in the property.

These sellers typically cannot afford to bring money to the closing table, so they cannot sell their properties outright.

Sellers in this situation are most often people who urgently need to relocate. They may have only bought the house within the past few years and have not yet built up equity in the home.

This is worsened in situations where housing prices have not increased.

Sellers would almost always prefer to sell the property outright, so they can cash out and be done with it.

However, this may be their only option to solve their immediate problem and avoid having to pay two house payments at the same time.

Finally, motivated sellers are also sought by lead generation companies for real estate investors who sell leads to all of these investor types, as well as to property wholesalers whom we will discuss in the next section.

#2 Real Estate Wholesalers

A real estate wholesaler enters into a contract with a property seller and assigns that contract to an end buyer for a higher price.

The difference between the price the investor agrees to with the original seller and the price the end buyer pays is the profit. It’s also called an ‘assignment fee’.

This form of investing is a quick way for investors to make profits with minimal money down.

The profit per house is not usually as high as profits for house flippers, so real estate wholesalers need more deals.

This means they need a steady source of motivated property sellers and ready buyers. This requires consistent and skillful marketing and networking.

They can work with almost any type of motivated real estate seller and nearly any type of property as long as the seller is motivated enough to sell at a low enough price.

If you are reading this article because you want to become one, read also this comprehensive guide on how to get into wholesaling real estate.

#3 Real Estate Agents

Most of the real estate agents strive to build their business by getting more property listings rater than getting buyer clients.

To get listings, they have to market themselves to homeowners who plan to sell their homes. Realtors typically charge nothing up front, but they make a commission when the house sells.

The real estate business is very competitive. According to the National Association of Realtors (NAR), there are over 106,548 real estate brokerage firms in the United States.

Each of these firms can be home to hundreds of agents, all of whom are competing for listings.

Real estate agents obtain listings by referral and by marketing themselves to the following types of homeowners:

• Homeowners trying to sell their homes on their own (FSBOs)
• Homeowners who have already listed with an agent but their listings expired without selling
• Homeowners who call their brokerage offices for help selling
• Divorcing couples
• Homeowners in pre-foreclosure
• Banks that own foreclosed properties
• and more

Homeowners usually talk to multiple agents before they select an agent. Even when an agent succeeds in getting the listing, the sale is uncertain.

Success in selling a property in most of the cases comes down to one factor: price.

Sellers tend to overvalue their homes. Overpriced homes do not sell, even with an agent’s best marketing efforts.

Motivated sellers are more likely to list their properties with an agent rather than ‘by owner’. This ensures they get the fastest possible sale.

They are also more likely to price the house at a low enough price to make it sell in the time frame needed.

Motivated sellers follow their agent’s instructions about staging the house to make it attractive for prospective buyers.

This helps the house sell faster, to the benefit of both the seller and the agent.

These motivated sellers are the ideal clients for real estate agents. Since real estate agents only get paid when the property sells, they cannot survive without motivated sellers.

Developing a reliable channel of motivated seller leads is especially important if you want to become a real estate agent for investors.

If you belong to one of these categories of real estate professionals, you may want to learn about the best places to find distressed properties from our guide on this topic.

If you are looking for a list of motivated seller leads or getting fresh leads meeting your personalized criteria right in your mail immediately after they appear, I can suggest two best options for you.

1. HouseCashin Investment Property Marketplace

Use the HouseCashin Investment Property Marketplace to find motivated sellers who need to sell their property asap due to various reasons.

This platform is designed specifically for helping motivated sellers find investors who would buy their home fast and preferably for cash.

Many of the listings on the Marketplace are “for sale by owner” properties listed by motivated sellers.

2. Motivated Seller Leads from Real Estate Bees

Real Estate Bees have another convenient and affordable solution for you.

REB network of web platforms generates and provides wholesalers, investors, and agents with contact information of highly motivated property sellers.

Thanks to expert-grade content for motivated homeowners, landing pages, and opt-in funnels meticulously fine-tuned for conversion, the leads are pre-qualified, highly converting, and always recent, unlike in many other sources.

You can choose from various lead acquisition models. One of them even allows to get leads for free, on certain terms. Learn about them here.

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About the Author

Kristina Morales is a REALTOR® with over 20 years of professional experience. She actively practices real estate in Ohio but also has practiced real estate in California and Texas. Conducting her real estate business in three states has allowed her to gain unique experiences that make her a well-rounded realtor. She obtained her Bachelor of Arts in Business Management and her MBA with a concentration in Banking and Finance. Prior to real estate, Kristina had an extensive corporate career in banking and treasury. She ended her finance career as an Assistant Treasurer at a publicly traded oil & gas company in Houston, TX.