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4 Types Of Property Sellers That Bargain Hunters Look For
Unlike stocks where nobody would sell you a $10 share for $9.50, property investors make it a habit to find properties selling at $950,000 when the value is $1,000,000. This supports the old saying that you not only make profits when you sell, but also make profits when you buy. It could be ridiculous to you when hearing about property owners being willing to sell their apartments for less than what it is worth. But be assured that these cases are as real as it gets.
You might even think that sellers that sell below property value are as insane as the weather. Again, be assured that they are not. What exactly are their state of mind?
Sellers in distress
Everyday, stressful situations arise for property owners. People lose their jobs, fail in business, file for divorce, migrate to another country, etc. These problems create financially stressful situations for property owners. For a lot of them, the quick and easy way out is to sell their properties quickly and raise cash. The emphasis is “quickly”. This is when bargains become available in the market.
You might feel that buying from these owners are exploiting them. But you are actually more of a savior to a seller in distress. They want to get rid of their properties fast and you are providing them the opportunity to do so. They are willing parties willing to part with their properties at below what it is worth. Nothing wrong here. You are doing them a favour.
What sellers are interested in from this transaction is not solely based on the price. They are seeking relief and a peace of mind that a quick transaction provides. What they put on the value of time and emotional stress makes up for the “loss” they made on the property sale.
The world is getting smaller and smaller with the use of technology. The biggest technological revolutions have made traveling cheaper and keeping in touch over long distances easier. You can even video chat over your smart phone easily these days with a friend in London while you are in Beijing. And with the biggest multinational corporations operating world wide, it is often that corporate staff are transferred from country to country for exposure and direct work requirements.
Before you think about why any sane person would not want to keep their properties and make a rental income out of it, you have to be mindful that not everyone is interested in property investments. You cannot project your thoughts onto the world and assume everyone will have the same mindset as you. These country hoppers are just not interested in managing an investment property. They probably make good money as a corporate high flyer anyway. And since they have to leave for a long term assignment in Japan next month, they will want to settle everything by then.
Relocating sellers are not in desperate need of money. They just want to get it over with so that there is one less item in their in-tray. They are also the easiest sellers to deal with and more willing to negotiate on price.
You might think that retirees will be shrewd on property price since they are piling up their retirement funds. But you can be very wrong with this. Remember not to stereo-type sellers and make your judgements based on observations and facts.
Retirement sellers are no longer interested in living the high life in a lavish penthouse in the heart of town. Their children have grown up and moved on. What they are more interested in now is being closer to the golf course or club house. They just want to move on with their lives and not having to think about chasing down tenants who are late in payments again. These cumbersome activities can easily eat away precious quality time at the golf course.
They are not short on cash and will be open to your offers. They may even be a mentor to you if they like your youthful style of property investing activities. You might remind them of themselves when they were younger. If you are willing to take on the workload, retiring sellers can be open to proposals on creative financing.
Sometimes sellers simply underprice their properties because there are not aware of current market values. They are too busy to find out recent transacted prices in the area and do not trust a property agent enough to engage one. The government may also have big plans for their property locations and these sellers are not even up-to-date with these information. There may also be something unique about their properties that other people value that the seller is not aware of. For example, the seller could have rights to a pocket of airspace that a major real estate builder highly values.
Ignorant sellers are usually sitting on unrealised profits and are contented with the profits they will make even by selling to you at below value. This explains the complacency. They usually only realise that they have undervalued the property when every offer to buy comes in at their asking price. This is weird as buyers always start off with a low bid. You will of course have tied up the deal by the time other bidders join the party. Those that are honorable will honor the transaction while some sellers will attempt to back out of the deal. You will ask for compensation when a seller backs out. This is also where you find out if your lawyer is good value.
Not all bargains are worth your time
Bargain properties get sold very quickly. You will be lucky to even see a listing if it ever gets onto the public domain. But be mindful that property investments have to make sense. You have to be able to sell it at a higher price to profit from it. Or make a positive monthly cash flow from it to be a worthwhile investment. In a declining property market, a bargain now can become a blood sucker in future. Maybe the seller has in fact outwitted you.