If you want to succeed with real estate, the number one priority is for you to find motivated sellers, and lots of them.
If you can’t do this, then the rest of this process isn't even worth talking about, because this whole game begins and ends with your ability to find sellers who will accept your low offers and play by your terms.
What Is A “Motivated Seller” Anyway?
In my mind, a “motivated seller” is a property owner who is willing to do at least one of the following things:
- Sell their property for a VERY low price (when I say low, I mean REALLY low. Think somewhere in the neighborhood of 10% – 30% of market value)
- Sell their property with VERY flexible terms (i.e. – we’re looking for a seller who will finance the property for you, require no money down, and charge 0% interest)
Obviously, these types of sellers will have to agree to a pretty ridiculous offer. They’ll have to sell their property almost entirely on your terms and in your interests. Things that, in theory – no sane person would ever be willing to do.
If you want to make your next real estate investment a “sure thing”, you need to be in the position where you have virtually nothing to lose and everything to gain. The seller on the other hand, needs to be in a position where they are willing to lose everything and walk away from their property with very little or nothing to show for it.
I know it sounds crazy. It might even sound impossible… but I’m going to explain to you exactly how I find these sellers on a regular basis and get them calling ME, asking me to buy their property for whatever price I feel like paying.
If you’re skeptical, I understand. I realize this may sound too good to be true. After all, who would ever agree to such outrageous terms like this? Are there really deals like this to be had out there? Are there actual property owners who will sell their property for next-to-nothing?
The answer is a resounding YES.
Step 1 – Getting The List
It all starts with your ability to find a targeted list of property owners who are highly motivated to sell.
Let me reiterate, we are NOT looking for just any list of property owners. We are looking for a very specific demographic of people who (statistically speaking) are much more likely to sell their property than the average property owner.
There are several different ways to go about getting these lists, and depending on what areas of the United States you're working in, some methods can work better than others.
Option 1: Working with the County
What I'm looking for specifically is the county's delinquent tax list. This is a list that every county has, and it contains a GOLDMINE of information that can help you track down some of the most highly motivated sellers in that area (for more information on how to get your hands on this list, I explain it in great detail in this blog post).
Working directly with the county has its pros and cons.
The biggest benefit is that the data is as fresh and as accurate as it will ever be, because it's coming directly from the county's database in real time. This is an important point – because working with current and accurate data is CRUCIAL when doing a direct mail campaign. Without it, you could end up wasting a lot of time and money on mail that doesn't reach the right people (which can be detrimental to your results in every subsequent step in this process).
The downside is that many counties can be very difficult to work with. Some of the lists these counties provide (assuming you can get them at all) can present some MAJOR hassles when it comes to sorting and organizing them. It's not impossible (and in some cases, the county's lists are fairly easy to work with), but there are definitely some counties around the country that make this a very cumbersome, time-consuming process.
Option 2: Working with a Data Provider
There are MANY different data companies that will provide these lists in a very clean, workable format. Some are expensive, others are relatively cheap. Some are very good at generating certain types of lists, others great at generating lists for other purposes. None of them are perfect in every way, but if you know what types of property owners you're looking for – there's probably a solution out there somewhere.
I put together a comprehensive comparison of several of the data services in this blog post, so be sure to check it out if you're not sure who to work with.
In the earlier years of my investing career, I worked with a company called AgentPro247 to get these lists. The primary benefit with this service was that it was relatively inexpensive to get access to these lists, and they were a great resource for property research.Here's a quick overview on how the system works:
Keep in mind that all of this information is of public record. You or I could literally look up any of these properties in a matter of minutes and find this kind of basic information.
The downside to AgentPro247 was that some of the counties in their database (particularly, the ones in more rural areas) had data that was outdated and/or incomplete. For this reason, I found it wasn't always the best solution in every county, but where it does work, it can work wonders.
As you can probably imagine, this data is used by many different people and companies to create bulk mailings. If you've ever gotten a piece of junk mail before, chances are – they found your name and information from this kind of information database that contains these public records.
Why Direct Mail Works
Most direct mail campaigns are not very effective. Why? Because a lot of direct mail marketers send out hundreds of thousands of mailers on a regular basis with very little targeting criteria. For most of these people, a 1% response rate is generally considered “successful” (and I consider it “pathetic”).
We are going to be much smarter. You see – the goal isn't to have a massive number of recipients. The goal is to have quality recipients. If we want to get a higher response rate (and thereby, make our mail campaign more worthwhile), this will only happen by obtaining a quality list.
As mentioned in the video above, AgentPro247 allows us to pick out specific types of properties and owners on a number of different levels. By doing so, we can put together a direct mail campaign that will get a MUCH better response rate than 1%. On average, my response rates are usually in the 5% – 10% range (and even higher on occasion).
It is very important to have current information and the right recipients on your list. If you don't apply any narrowing (or if you're working with outdated information), you'll end up wasting a lot of time and money.
With this in mind, I like to target my lists based on a few key characteristics:
Property owners who live out-of-county (or out-of-state)
People who live out-of-state tend to be much more disconnected and disengaged from their investment properties. Many of these people had to move away unexpectedly and for whatever reason, they just don't care about their property. These people have a vested interest in liquidating as soon as possible.
Property owners who don't live at their property (absentee owners)
For obvious reasons, people are much more likely to part with an investment property than they are with their personal residence. Don't expect people to sell you the roof over their head for pennies on the dollar – it usually won't happen.
Property owners who have owned their property for 10 years or longer
On occasion, I like to sort my lists with this criteria because properties that have been owned for a longer period of time have a much higher likelihood of being owned free and clear. When properties are owned free and clear, the owner has more equity to play with, which gives them more freedom to sell their property at a HUGE discount.
Property owners who have delinquent taxes
Many of these owners are at the end of their rope financially. They literally don't have the time or money to wait for a higher offer. If they don't sell the property to you, they will lose everything to tax foreclosure. Of course, you'll have to take care of the taxes once you buy it – but these delinquencies will often times give you a lot of leverage to make a low-ball offer.
Properties that are in the right price range
If you're not interested in buying a million dollar property, then don't solicit to people who own these properties. It's that simple. If you have the ability to screen out the properties that are clearly out of your price range to begin with, then do it! You'll only be wasting postage if you mail to property owners that you never intend to purchase from.
As you can imagine, there are many other philosophies and methods with which you can sort your lists (and I'd encourage you to test out some of your own methods as you see fit), but these are the most common sorting methods that I've seen used throughout the industry.
Direct mail certainly isn't free, but when it's done right – it works. There is no better way that I know of to reach a targeted audience in a short period of time. If you haven't tried direct mail yet – I'd encourage you to give it a shot. You may be pleasantly surprised.
Got your list? Click here for Step 2!
1/9/16 UPDATE: This post has been up for a few years now and I haven't heard any real “negative” feedback. However, I have heard of various cases of investors who have tried this list-pulling method and haven't gotten a good response rate.
Unfortunately, this is a risks inherent in any direct mail campaign. There can be a lot of potential reasons why this happens and it usually depends on a couple of key factors:
Key Problem #1
One problem may be due to the area you are trying to send your mail to. Some states and counties have some very old and/or bad information that they make available to the public. I've found that this usually happens in counties that are VERY rural, because they don't have the tax revenue to keep a solid public records system. When a county doesn't provide good data, this means that the data available from services like AgentPro247 won't be any better. When our list data isn't current or accurate, it usually translates into a much lower response rate (because at the end of the day, we aren't reaching the right people).
One way to verify that you're working with current and accurate data in the AgentPro247 system is to verify the date it was last updated (this is a good practice before you use ANY data from the AgentPro247 system). Here's how you can do it…
And generally speaking, it's not a bad idea to do a test run whenever you're trying to break into a new market. Send out 100 – 200 mail pieces in the new area you're trying to work and see what kind of response you get.
Do this BEFORE you blast out of the gate with 1,000+ mailers. If your response rate is terrible, you should be able to quickly determine that the lists in AgentPro247 cannot perform adequately in this area (and you'll figure this out before you invest a fortune into a lousy campaign).
Key Problem #2
Another problem could simply be the way you are narrowing down your list. For example: are you filtering out the owner occupied properties? Are you choosing only tax delinquent owners? Have you specified the property type you're looking for? Have you specified the market value of the properties you're looking for? Are you eliminating all the duplicates on your list? Are you getting rid of the properties without addresses? Are you filtering all the junk out of your list?
It's important to screen out as many of these “unwanted” properties as possible, because if you're blasting out mail to just anybody – a lot of your recipients won't be in a position where they need to sell now. This means a lot of them won't call you, and the ones who do won't be willing to play by your terms (which is simply unacceptable).
It all starts with specifying very clearly who you're going after, because those are the people you'll end up doing business with.
Other problems that can hurt your response rate:
These issues are usually less influential, but they can have an effect on the results you see in a mail campaign:
- What kind of mail are you sending out (is it the optimal color, size, type, etc.)?
- What are you saying in your postcard/letter? Do your words move your recipients to respond?
- How are you fielding your responses? Are you answering calls directly, routing them to voicemail, directing them to a website?
- If you're routing them to a voicemail system, what does your voicemail message say?
If you're experiencing a consistently bad response rate – it's probably because of one or more of the things listed above. Without knowing the specifics of your situation, my initial suggestion would be to make sure you're working with current data (no more than one month old), try sending mail to a few different areas and/or tweak your “list filtering criteria” a bit (Problems #1 and #2 above).
Lastly – if you think you've done everything perfectly and you're still not getting the response rate you want out of your target area (and if you don't want to target a different county or state on AgentPro247), you may have to go directly to the county to get your lists.
Fair Warning: This method is usually more expensive & cumbersome to do – BUT if you're finding that AgentPro247 simply isn't producing accurate data in your area, you can usually circumvent this problem altogether if you're able to get this information directly from the county (and it's usually worth the trouble in the end). I've got a very detailed blog post that explains exactly how to do this – you can click here to read more about it.