It would be fair to say that most people can empathise with the feeling of being distressed. For some, those feelings of high stress, anxiety and even ill-health can be brought on by a problem with a property they own, potentially making them a distressed seller. As a property investor, you may be in a position to take their pain away and provide an all-round solution. If you want to make a difference, here’s where to begin.
Who is a distressed seller?
A distressed seller can be anyone who owns a property that has become a problem for them. Property related issues may be elevating their stress hormones, which over the long-term will negatively affect their health. They are likely to have reached a stage where all they want is for the property to be taken off their hands along with any debt that may be associated with it.
Distressed sellers may not necessarily be homeowners. The seller may be a private landlord who is struggling, a commercial landlord in difficulties or even a developer who has encountered a significant road block to their plans. The reasons for their stress can be many and varied, so next we’ll look at the common causes worthy of consideration.
The causes of property related distress
The most common cause of distress is likely to come from mortgage payments, or lack of payments more precisely. A change to employment, increasing interest rates or a relationship break-up can all tip the balance towards mortgage arrears. This can negatively spiral out of control if the seller cannot afford the associated selling fees, cannot raise the deposit to rent alternative accommodation or if the property has fallen into negative equity.
On occasion the property may need refurbishment or renovation work to bring it out of negative equity or even to sell. The cost of which may be beyond the finances of the seller. Perhaps the seller began renovation work or constructing an extension for example, and simply ran out of cash before completion. If the property is in a state that is uninhabitable, this will bring its own problems.
Properties that are uninhabitable, for example not water tight or missing a kitchen, will not be acceptable for mortgage lending. Therefore, without the opportunity to be granted mortgage lending, many buyers will be not be in a position to purchase the property.
Other issues that may cause distress can be the need for a quick sale due to personal circumstances such as ill-health, divorce or relocation. Sometimes the seller may need a quick sale if their offer has been accepted on a different property. On other occasions a discrepancy on the title deeds or a planning consent issue may be deterring buyers.
You can help
All of the above causes can effect both private sellers and landlords, giving rise to a situation that may appear difficult to resolve. This is when, as a property investor, creative thinking and a solution focussed outlook can be an invaluable asset. Where other people walk away, you may be able to create an answer that meets the needs of both the distressed seller and yourself.
The first point to take away is that every situation is unique and therefore will require a unique solution. A one-size-fits-all approach will not be the answer. The second point to take away is that property is a people business. Yes the calculations and numbers must work, however, first and foremost you will be dealing with the needs of the seller which will involve listening.
Listening is a skill that needs practice. Have you tried listening to what someone has to say without thinking about your own response or making a judgement? Listening to a distressed seller will be entirely focussed on hearing their pain. Sometimes it may require looking beyond their words to understand the meaning behind what they are saying. After all, it is unlikely that a distressed seller will speak openly about their desperation to sell. Actively listening and displaying empathy will be your path towards finding the best solution.
Putting it together
Identifying and understanding the pain of the seller will give you the information required to delve into your property investor toolkit and bring out the right tool for the job. Perhaps you can help them out of negative equity through a lease option. Maybe you could assist them with their legal fees. If speed is of the essence, arranging a cash purchase could be the answer they need.
Whatever the solution, it needs to work for both sides. The distressed seller has a problem removed and you are able to make a profit. This may require buying at a lower price or agreeing to a delayed completion, however, considering the other potential outcomes this may be one of very few options for the seller.
Where uneducated property investors walk away from sellers in dire straits, having knowledge of creative solutions can be a helping hand when it is needed most. Many investors are not even aware of the options. As experienced educators in property investing, it is our mission to arm you with all of the tools available. To help others to move on, to help turn a property into a great home and to help yourself to grow.