Paying a Lot Less for The Next Property You Buy


In this blog, I'm going to share with you a secret that took me 11 years to learn that will help you save thousands of pounds with every single property you buy. In my book, ‘Property Magic’, the Amazon Bestseller, I talk all about this secret. The key to paying a lot less for the next property you buy, is to find and help a motivated seller. So, what is a motivated seller? It’s someone who's got a property that they need to sell, and for them, the speed and certainty of the sale is more important than maximising the revenue. You would think that surely everyone who sells a property wants to get as much money as they possibly can. I agree. The vast majority of people, probably 95% of people, fall into that category. But there's this 5%, a much smaller group of people, who want to sell a property, but actually it's the speed and certainty of getting it done.

Selling A Property

If you’ve ever sold a property, you'll know what a difficult, stressful, and frustrating process it can be. You put your property on the market with Estate Agents, people look around, you get people traipsing around your house. Sometimes, a few will make silly offers and then eventually an offer will be acceptable. This is normally less than the asking price. But in a booming market, it might be higher than the asking price. The Estate Agent’s job is to make sure that the person is someone who can actually complete the deal. So, have they got the required deposit? Can they get a mortgage? All of these things. A very interesting statistic that you should know, is that one in three sales fall through. What that means is even once an offer has been made and accepted, months and months later, it could fall through. The buyer for some reason decides not to proceed.

Normally the biggest problem is actually arranging the Finance. For some reason, they can't get financing. They have to pull out the sale. Imagine for the owner of that property, they're back to square one. They might've thought, "Fantastic. I have someone who wants to buy the property”. Mentally, they’ve moved on. Mentally, they spent the money and suddenly they're back to square one. So that can be very difficult and stressful.

Finding Properties in a Rising Market or Property Boom

One of the best ways in a rising market, like the certainty in 2020 and 2021, is by looking for properties that have technically been sold already. Speak to the agents about them and let them know if they fall through, you're very interested in buying. Obviously, it's got to be in the right area, the right kind of property that stacks up. When you search on Rightmove and Zoopla looking for properties, there's a little box you can tick to say ‘Please Include Properties That Have Been Sold Subject to Contract’ or that they're ‘Under Offer. Most average investors won't bother ticking that box because they think, "Well, if it's already been sold, I'm too late. I've missed out on that." To a certain extent, yes they have. But remember, if one in three sales fall through, and you're there ready to move quickly, you might be able to secure a deal at a lower price than the seller originally agreed to. So, it's just a very simple way of finding these kinds of deals in a booming market.

For my first 11 years of investing, I was buying properties through Estate agents. I was going to auctions as well, looking for deals. But the big problem with this is competing with everyone else.

 

Below Market Property (BMV Property)

Back in 2006, I met a gentleman called David who was living in Leeds, investing in the Northeast in Durham. He attended my Property Investors Network meetings, he travelled all the way from Leeds for a Birmingham pin Meeting. I had a drink with him in the bar as he had been recommended by a friend to attend.

David explained to me how he was buying properties significantly Below Market Value (BMV). What does that mean? Well, let's say the value of a property is £200,000. He was buying properties at £150,000. He was buying it at a 25% or more discount off the true value. Now, I must admit when I first heard this, I thought I'm not sure if I believe that. Why on earth would someone sell a property 25% less than it's worth? Why would someone do that? I just didn't get it. He elaborated that sometimes people have circumstances. Maybe they've inherited a property and it's not really cost them anything. Maybe they bought it years and years ago and it's gone up in value over time and they just don't want it anymore. Maybe they're a tired landlord. Maybe they've got some time restricted problem. Maybe they're emigrating. Or maybe they're selling a house because they need a bigger house as they've got a baby coming. They could even be divorcing. Whatever the reason is, these people have a problem associated with the property. If we can solve that problem, they might be flexible on the price and on the terms of the sale.

David was talking about one property a month, significantly Below Value. But interestingly, he was doing it by going directly to the vendor. He wasn't going to an Estate Agent. He wasn't going to auctions. He was going directly to the vendor. I'll explain a little bit about that in this blog later on. But first, I want to tackle something that's really important. When I first heard about this, I was unsure if it seemed fair. I like to think of myself as a pretty fair, decent person. I don't want to rip anyone off. The idea of buying a property from someone 25% Below Market Value, even if there was someone who had agreed to it, surely it's not fair for them. I really struggled with that for a while. David then explained to me, "Well, Simon, you’ve got to put yourself in the shoes of the person." We probably wouldn't sell a property Below Market Value, but it might be a great solution for that person.

    Let's say someone bought a property a long time ago, and maybe they're going to lose it, maybe they're going to get repossessed. If they get repossessed, which is where they can't pay the mortgage, the bank takes it back from them. They will sell it often for a lot less than it's worth. Ideally the bank will try and get their money back. By the way, if they don't get all the money back, they can chase the owner of that property for up to six years to get the difference. If it sells for more than the debt, then that owner will get the difference. The problem is when someone's repossessed, it's not just what they owe the mortgage. There's a whole load of extra costs that are added. They’ve got to deal with administration costs, court fees, solicitor fees, getting the house boarded and gated up. The property then has to be sold. They will then have Auction House fees if an Estate Agent has covered it. All of those extra costs get added on to what the owner of the property owes. Very often when the property is sold at a discount to investors, it doesn't cover the debt. As an investor yourself, you might've thought about looking for repossessed properties through Estate Agents or auctions, because guess what? They're often sold at a discount. There's nothing wrong with you buying those properties. You didn't know the owner. Someone's going to buy it. Why shouldn't it be you doing it?

    “But here’s something you need to know, write this down. All sellers become more motivated with time. As time rolls on, they become more and more motivated.”

    If you buy a repossessed property, all that cost has already been incurred. But, there's a different way. What if you could find that person who was in financial difficulty. By the way, that's just one of many reasons why someone might sell a property Below Market Value. But let's say you can find that person. You explained to them that you can help them. If they're repossessed, they are going to have all these costs added. In reality, the property is going to be sold at a discount. You might be able to buy it at the same price, maybe 75% of the value, that an investor would pay after it's been repossessed. But because you were doing it before they've been repossessed, they don't have all those extra costs added onto the debt. Also if they're not actually repossessed, it doesn't ruin their credit rating. So, it means they might be able to go and borrow money in the future at not too much of an expensive rate.

    Whereas if they’re repossessed, it's going to ruin their credit rating and it's going to be very expensive for them to borrow in the future.. We really need to put ourselves into the shoes of these people to really understand. What helped me really get this was when I was sat in front of my first Motivated Seller.

    Buying Property From a Motivated Seller

    It was a property in Nottingham and it was passed to me by a Deal Sourcer, so that's someone who finds these kinds of people. And he passed this lead to me. He was investing in London and only wanted properties within the M25, anything outside of that he didn't want. I met him at a networking event and he said to me, "Simon, anything in your area, I'll send the leads to you. if you turn it into a deal, you can pay me a fee." He gave me a load of leads. Some in Birmingham where I live. Some around the country. But this one was in Nottingham, not too far from where I live I guess. 

    I turned up at this house and it was just a normal semi-detached property on an ex-council estate. I walked in and I met the owner of this property and his wife. There was no for sale sign outside the property, which I thought was a bit strange. The guy wanted to sell the property but didn’t go through an Estate Agent. I’ll explain why in a moment. This gentleman had lost his job.

    But this property, the guy wanted to sell but he did not go through an estate agent. I'll explain why in a moment. So, what had happened, this gentleman, he had lost his job. He had lived in the property as a council tenant, but actually had the right to buy. He bought it many years ago at a real discounted rate. 

    He lived there for a number of years. As the value had gone up, he'd remortgaged, taken the money out, spent some money on house improvements and had some nice holidays. He had done pretty well with this property. He then hurt his back and couldn’t work, this meant he was unable to pay the mortgage.

    If you don't pay your mortgage, you get repossessed ultimately. He knew he didn't want that to happen. So, he was borrowing money, had got some loans, some credit cards to try and pay the mortgage. The problem was that when he got back into work, although he could afford to pay the mortgage, he could not afford to pay the other debt that was a very high interest rate. He was being repossessed regardless, he was going to lose his home.

    I was sitting with him at the kitchen table and he pushed this piece of paper across the table to me, and it was an eviction note. I'd never seen one before, but it said that 30 days after I was there, in 30 days time, the bailiff would turn up and remove him, his wife and his daughter from the property. This was a pretty sad situation. I wanted to understand what all of his debts are. We added it all up. I asked, “If I could clear all of this, would you be happy?” he said, "Well yes, I like that. But I'd also like to get a couple of thousand pounds because I like to take my wife away on a holiday. It's all been a very stressful process, and we need a break." We calculated how much he wanted overall.

    At the time, we could do something called Sale and Rent Back where you could buy a property from someone and they could stay living there as a tenant. Now you might think, why would you want to do that if they'd been in financial difficulty?. Well, he could afford to pay rent. He just couldn't afford to pay the mortgage and all the other bills. I agreed to do a Sale and Rent back at a fair market rent, the normal market rent. For as long as he wanted, he could stay in the property. 

    He said, "If you could do that, Simon, I'll be absolutely delighted." In other words, I was buying the property at a massive debt. I actually worked it out as I walked out at the property, once the deal was agreed. I was buying this my very first Below Market value that I didn't even find, someone else found it. A Deal Sourcer found it for me. I was buying at 36% Below Market Value. That meant that I was able to buy it, and at the time, we were able to buy it with Cash Bridging someone. I didn't have the money, so it was someone else's money. We did a same day remortgage, and the remortgage was higher than the purchase price. So on the day I bought the property, I paid back all the bridging and I had money put into my bank account. 

     

    I had a tenant there from day one. Now, just to be very clear, we can't do the same day remortgaging now. There are other creative strategies we use to minimise the money you use to invest when buying from Motivated Sellers. We can't do Sale and Rent Back anymore. So if you're buying a property with someone, they do need to move on. But still, this just proved to me and gave me the belief that there are people out there who might be motivated to be flexible on the price and on the terms in sale.

    What do I mean by the terms? It might be that someone doesn’t sell it at a discount, but maybe they will agree to do a Purchase Lease Option. where you've got the right to buy in the future at the full market price today. Or maybe they do Vendor Finance where actually they will help fund the deposit for you. This is the key when you're finding Motivated Sellers and really good deals in your area. Not only can you save a huge amount off the price, but you could structure them to be no money down deals. Remember the vast majority of sellers are not going to be that motivated. It's about finding these truly motivated sellers, and you've got to believe that they're out there.

    Thinking Motivated Sellers Don’t Exist In Your Area

    I have a funny story I talk about in my book. Tony, who is now a very good friend of mine, approached me at a Property Show I was speaking at in London. He had read my book and really liked it. It talks a lot about Motivated Seller in there. But he just couldn't quite believe that anyone in his area where he lives would be Motivated to sell at a discount. He felt quite uptight and frustrated that I would suggest this was possible.

    So, he came to the show and he confronted me. He did it in a very nice way. He said, ""I loved your book. I thought it was really eye opening, but there's one thing I'm really struggling with. I don't really believe that there's anything such as a Motivated Seller and that anyone would sell a property at a discount in my area." I said why, where did you live? Tony said, "Well, I live in Poole in Dorset. It's a very expensive area." I know Poole very well. I've got family there and it is a very expensive area. Instead of arguing with Tony because I had belief, I said “You know, you're absolutely right. In the next edition of Property Magic, I'm going to have to put a little footnote. When I say there are Motivated Sellers everywhere, I'm going to say, there are none in Poole in Dorset.” He looked at me a bit surprised I'd said this.

    I said, you see “The thing is Tony, there's never been any deaths in Poole. No one's ever died there, so no one's inherited a property. No one's ever been in financial difficulty. No one's ever got repossessed. No one's ever had to emigrate. No one's ever had to move for medical reasons.” I listed all these reasons why someone might be motivated to sell at a discount and he suddenly went, "Ah, okay. I understand." He realised he was looking at it from his point of view. He was assuming that everyone was like him and he would never sell it at a discount so why would anyone else do it. So, to really understand is putting yourself in the shoes of these Motivated Sellers. You've got to understand what's going on for them and realise that actually maybe selling at a discount is more important because they get speed and certainty than getting the full market price.

    When most people want to sell their property, they put it on the market as much as they possibly can. They're probably happy to wait till a buyer comes along who's prepared to buy that property at that price. But here's something you need to know, write this down. All sellers become more motivated with time. As time rolls on, they become more and more motivated. Such at the point, someone might've had a really low offer they rejected in the past. In fact, It's a great question to ask an Estate Agents, "Has there been any offers on this? Have there been any rejected?" If there is an offer that's accepted they often won't tell you how much that is. But if they've been rejected, they're happy to tell you that. We've had a lot of clients who've actually bought properties and they’ve ended up paying less than an offer that was initially rejected by the owner. At the time it wasn't good enough for the owner. But as time went on, the owner got more and more motivated thinking, "I need to sell this property," and they accepted a much lower offer.

    “If you want to get those questions, there’s a free PDF that’s going to be linked below this blog. You can click on the link to the PDF, which has the five questions you should ask agents to get them to bring great deals to you.”

    Ethical Win-Win Solutions for You and The Motivated Seller


    We want to be ethical. We want to make sure we have a win-win. We're obviously looking for good deals ourselves. We're not doing it as a charity but we're also not trying to take advantage. M genuine belief is if you try to understand and help this person. You think, "How can I help this person and put them first?" Really trying to understand what's going on for them, is when you’re more likely to be able to find a great ethical solution that's going to help them out. So, buying directly from sellers is definitely one of the best ways of doing this. You're not competing with others. 

    How do we find these people? Well, we might do marketing. We might do adverts online. We'll have a website. We might do Facebook adverts. We might create leaflets which works really well. We might send letters to registered landlords who might be interested in retiring or there might be a tired landlord. We might contact newspapers. Even though newspapers are a dying industry, guess what? Some people still read them and it's a great way to find Motivated Sellers. These are all strategies that you can use to attract motivated sellers to you. People for whom speed and certainty is more important than the amount of money they get from the sale of the property.

    Getting Estate Agents Bringing Deals To You


    There are also ways of working with Estate Agents where they bring the deal to you. Obviously, don't go to an Agent asking, "Can I have all your Motivated Sellers? I want to buy Below Market Value." They won’t think very highly of you as everyone wants to get the best price. But there's certain questions you could ask to get them thinking about the circumstances of sellers, where actually, maybe those sellers are more motivated and agree to sell at a bit of a discount.

    If you want to get those questions, there's a free PDF that's going to be linked below this blog. You can click on the link to the PDF, which has the five questions you should ask agents to get them to bring great deals to you. You've got to remember that an Estate Agent in the UK represents the seller. In some places around the world, you have an Agent representing the seller and one representing the buyer. But in the UK, we generally just have an Agent representing the seller. The seller is the client. The agent wants to look after that client and get the best possible deal for them. But in reality, if the property is not selling, that Agent is not helping their clients.

    We as investors, we want to buy lots of property. We should be the perfect people to work in partnership with Estate Agents to help sell their client's properties. The only problem is most investors have no idea how to speak to Estate Agents, how to build that rapport and get them to find good deals. So, by standing out, by asking slightly different questions, you can actually position yourself in a much better place.

    Property Market Crash & Motivated Sellers


    You might be sitting there saying, "Well, this is all very well Simon, but I don't believe deals can be done like this, especially in a booming market." Let me talk a little bit about markets. So first of all, the last time the market came down significantly was in 2008, 2009. Because the market was coming down, most people were not interested in buying property. There was a massive oversupply of property on the market for sale. It was what we call a buyer's market, prices are coming down and some sellers were desperate to sell their property before prices came down too much. They'd sell at a discount just to make sure they could get out before it went down too far. So, that definitely happens.

    Many people ask me is the property market going to crash in 2022? The answer is, I don't know. Nobody knows what's going to happen. But after the boom that we've experienced, very often there is a bust. So if there is a bust, it's going to be a great time to be looking for these Motivated Sellers. I's definitely easier to get these kinds of deals when the market's coming down. When the market's booming, I think it's harder to find Motivated Sellers because most sellers have the belief and expectation that if the market's going up, then someone will come along and pay them more for their property. So it is harder in a rising market. But I want to tell you categorically, there are Motivated Sellers in every market at every time. It's about you finding them.

    There's a great saying by Henry Ford, who was the founder of the Ford Motor Company, if you believe you can or believe you can't, you're absolutely right. So, if you want to find Motivated Sellers, you've got to work on your belief that absolutely they're out there. If you look on my YouTube channel, many of my past students have done case studies where they talk about how they found someone who's got a problem. They've looked for the ethical win-win solution to help that person solve the problem.



    So, I do hope this blog has been useful and valuable to you. If you want to pay less for your next investment, saving thousands or even tens of thousands off the purchase price, what you need to do is look and find Motivated Sellers. Help them solve their problem. Come up with ethical win-win and you will save thousands of pounds on every property you buy, going forward.

    I am also doing some live online training all about how to find these great deals. Specifically, what you can do in the current market to find great deals. It's a live online training, which means you can actually get to ask me any questions you want, or you can just listen to other people's questions. So, there's going to be a link below this video where you can come and register for that training. I'd highly recommend that you do that.

    FREE Deal Sourcing Training  - LIVE

    Access no-cost LIVE training with Simon Zutshi where he will be sharing how to find the best property deals in your area.

    To register & find out MORE about how you can access this valuable Deal Sourcing training session at NO COST - click here.

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