The Meaning of a Motivated Seller in Real Estate
The phrase "motivated seller" in real estate listings can mean a number of things. But, primarily, the term signifies that the property owner is eager to close the deal on a piece of property quickly. The desire to close quickly can be for any number of reasons. It's important for buyers to get a sense of those reasons, and how accordingly to temper the offers they make.
What Makes a Seller Motivated?
While the term "motivated seller" has a whiff of desperation about it, a seller might order the agent to "tell buyers I am motivated" for any number of reasons. They include:
- The price might have room for further price reductions.
- The seller prefers the cat-and-mouse negotiation game.
- The seller is willing to make selling concessions for the buyer.
- The home is in or near foreclosure.
- The home is ready to slide down the hill (please, buy it before the next rainstorm!).
- The seller wants to see an offer, any offer before canceling the listing.
- The home can't go any lower in price without falling into short sale territory.
Who Is Motivated to Sell?
Sometimes it's not the seller who is motivated, but rather the real estate agent. Listing agents (who represent sellers) routinely advise their clients to set a reasonable asking price from the outset, a price indicated by a comparative market analysis of the home.
But sometimes sellers harbor unrealistic beliefs about their property's value and, refusing their agent's advice, insist on setting a higher price. When they do so, the agent might say in the ad that the seller is "motivated"—to deliberately encourage buyers to submit a less-than-list-price offer. Figuring that if the agent can't get the seller to see reason, maybe a bunch of submissions of lower offers might do the trick.
Yes, it's sort of reverse psychology—not to mention a waste of everyone's time, if the seller holds fast. In a way, it means the listing agent is working on the buyer's behalf, as well as his client's. And it could be the best approach to getting a deal done. After all, if the home doesn't sell, none of the agents get paid.
How to Deal With Motivated Sellers
If you're a homebuyer, treat these sellers like any other seller who has a product to move. First, decide if you really want to buy the home.
- Ask the listing agent why the seller is selling. If it's not a viable reason to sell, you might be wasting your time if you don't want to pay list price.
- Consider a lowball offer just to see how the seller responds. If the seller doesn't issue a counteroffer, you will have your answer. On the other hand, a full-price counteroffer could signal the seller's desire to negotiate further. Counter the seller's counter. Don't give up.
- Wait for another price reduction. Most agents ask for a price reduction after a certain number of days from listing inception, such as after 30, 45, or 60 days on market.
- Try to find out other motivating factors. The seller might have concerns apart from pricing. It could be buyer possession, owner financing, or a seller rent-back expectation.
- Ask about other offers. If the seller has turned down offers in the past, try to find out why, and overcome the seller's objections to those offers. You might find out you would be pleased to offer slightly above those rejected offers.
The bottom line is that advertising "motivated seller" often means nothing. How much to offer depends on the comparable sales and the price that buyers feel comfortable offering based on those comps. Frankly, every seller should be a motivated one—or they are not real sellers at all.