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Why you should find out the seller’s motivation when buying a house

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Why you should find out the seller’s motivation

It is often said in property “you make your money on the way in”. Getting a good purchase price can kick start your investment returns and give you a bit more equity than expected.

To help you get the best purchase price you need to find out why the property is being sold and what the seller’s motivations are to sell the property.

If you know the seller’s motivation, a buyer can structure the deal to make their offer the most appealing and create a “win-win” situation for all involved. It is a great idea to just be direct and ask the real estate agent why the property is being sold.

Often an agent won’t want to disclose the exact reason the property is for sale, so some further questioning may be required.

Typically there are four motivations for selling a property that offers favourable opportunities for buyers:

Bankruptcy or Debt

When a property is sold with a mortgagee sale, the bank’s main concern is getting the money that is owed to them back, it often takes a while for a property to get to this state due to the legal process involved.

If a buyer can find a mortgagee sale with little competition they may be in a position to offer an under market price with quick settlement conditions. If the property is being sold because the sellers are in debt, they will be highly motivated to get the best price for the property, however, they will likely be under pressure from the bank or lender to fulfil their financial obligations so a quick and easy settlement will be favourable for both parties.

Breakup or Divorce

Divorce is becoming more common between couples and it is often a messy situation. If the divorce is relatively amicable, couples will want to move on from each other and finalise the process as quickly as possible. It is likely that a couple going through a breakup or a divorce will want a quick settlement on their property.

If a buyer knows that the property is being sold as a result of a breakup or divorce, they can negotiate a quick deal and settlement with the seller to help them move on.

Urgency

Urgency is typically seen when a seller has already committed themselves to purchase another property without selling their current property. The seller will be very uncomfortable at this stage as they may need to look into bridging finance or need the sale proceeds for a deposit on their new home.

Other factors that may result in urgency include new job opportunities, moving interstate/overseas and upsizing/downsizing.

A good indicator that the seller is urgent to sell the property is if the agent is regularly following up with you. If the sale is urgent, a buyer may find that price is not the main priority for the seller and this may create a great opportunity to get a better purchase price if you can provide a strong contract and a quick settlement.

Death

This is a highly emotional time for all involved and it is often left up to the children or family members of the deceased to sell the property once the owner has passed. The sellers will likely have a strong emotional connection with the property and may not what to sell to just anyone, particularly someone looking to demolish the property.

In a time of grief, buyers need to make the sellers comfortable and meet their needs. This can include a long or short settlement, favourable conditions around finance and a strong contract to make sure the sale will go through. Be sure to ask the agent what the sellers actually need and structure the deal around this.

With everything that we have discussed around selling motivations, it is important to state that we are not promoting or supporting buyers to be unethical or have a “vulture” mentality when purchasing a property or dealing with sellers. It is often about creating a win-win situation for all involved.

Although the price is typically very important to buyers, it is not always the most important thing for sellers.

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