Real Estate Investing: The MARLA Formula

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The ability to quickly separate the motivated sellers from the time-wasters is a valuable skill that will save you time and frustration. That's exactly what the MARLA formula is designed to do. M is for Motivation. A is for ARV (after repair value), R is for Repairs, L is for Loan balance, and A is for Asking price. The 5 magic questions are:

1. Why do you want to sell your house?

2. How much would the house sell for?

3. What repairs does the home need?

4. What is/are the principal amount(s) of your mortgage(s)?

5. How much do you want for the house? Follow-up: Is that the least you'll accept?

Now that you know that questions, let's look at why you're asking them.

"Why are you selling the house?" reveals MOTIVATION. If the answer is indicative of a MOTIVATED SELLER, that's a good sign. If the seller shows no sign of motivation, then it's your call. I figure I've got them on the phone so I may as well get answers to my other four questions and make an offer, but that's me. Some sellers withhold information until you build rapport, then they'll spill the beans that they're MOTIVATED. Be patient.

The second question provides an idea of the home's worth. Sellers generally have a pretty good idea of their home's market value. For now you can use the sellers number but be sure to do your own due diligence before you close on the house. You may have found a good deal if the seller doesn't know the home's market value. Ignorance is expensive. Ask them what they want.

You'll need to know what repairs the home needs to put it in good sellable condition. That's the point of the third question. Make a list of the repairs that need to be done, if any. Ask the seller for a repair estimate. It's common for seller to provide a high estimate which will work in your favor.

You'll get information on the existing mortgage from the fourth question. Motivated sellers won't hesitate to tell you so don't be timid, just ask. This is an excellent question because unmotivated seller will not want to reveal this information. That's great. You've saved yourself time by quickly eliminating an unnmotivated seller which frees you up to move on to the next seller.

The final question gives you the seller's asking price. It's a good idea to ask a quick follow-up question to see if the seller is being truthful. It's amazing how quickly sellers will drop their asking price by thousands of dollars in seconds.

It's possible you'll have enough information to make any offer at this point. At the very least you'll know if you're dealing with a motivated seller or not. The next could be a few strategic follow-up questions or formulating an offer which is the subject of another article.

How to Make Money Buying & Selling Single Family Houses Learn more at the Real Estate Blog (http://www.realestateinvesting123s.com)