The Wrong Questions
I often get the same three questions, week in and week out, from different buyers. These are typically asked by newer investors for investment properties, but there are also some buyers that ask these questions for residential homes. They are:
- Why is the vendor selling?
- Is the vendor motivated?
- What was the price the vendor paid for the property?
I believe that these are questions which often do not provide any valuable information to the Buyer, and in fact, the answers may be misleading.
Granted, #1 and #2 are closely related, but they do often get asked separately and they could provide two different answers. For these two questions, a Seller may not even provide a truthful answer to their Realtor for fear of being vulnerable or having this information leak out. So any answer to these would typically need to be taken with a grain of salt. With respect to motivation – they’ve gone through the process of listing and making the property available for sale, so in actuality, every vendor that puts their property up is somewhat motivated. Also, if there is motivation, it may be based on time of sale or price, or a combination of the two, so unless this information is offered up at the request of the Seller to bring interested buyers to the table, it is often meaningless or incorrect which doesn’t help. If the listing agent says something like ‘the owners are getting divorced and they can’t stand living with each other’ then they have breached their fiduciary duties to their client so the likelihood of getting some information like this is very low. Typically the only way you can find out vendor motivation is to put an offer in front of them. This is often the same for the listing agent as I am often surprised at how seller’s act when presented with an offer. So, if someone has seen a home and is asking this question, I often suggest to put their thoughts on paper and see for themselves. In my opinion this is the only true way to determine why they’re selling and their motivation level.
With respect to the price paid by the vendor, it is typically only helpful if the purchase transaction was recent, since market conditions change, along with the state of the property, or the area in which it was purchased. These are slices of time, and may indicate a ‘bottom’ for their sale price, but this is not always the case. They could have put money in to the property, or re-mortgaged the property, so it is rarely a true indicator of what the seller will want to get out of the property. For these reasons, it is often a data point that doesn’t really help a buyer.
The best way to ask these questions is through an offer to purchase if there is an interest in acquiring the property. The offer will reveal the motivation, and at what price the seller will be interested in moving the property when an acceptance is worked out between the parties.
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