So I bought my first park through what I’ll call a “warm” connection - someone who lives in my same town, I already knew of him, I got to know him a bit, and I had come to trust that the numbers he showed were real. Things have turned out rather well, he was definitely truthful.
Now that I’ve gotten funds together, I’m finding myself blocked in getting my second park. I’ll spend a week looking at a whole bunch of listings, make some contacts with brokers (although it is hard to get through a lot of the time), but then something else will come up and before I know it, several weeks have elapsed and I’m back to looking at listings. I always try hard to really cut through my own BS to get to the essence of what a problem is, and I realize in this in this case it is much more of a “cold” situation. No idea who I’m really dealing with, if their numbers are a complete fabrication, etc. A much more unknown situation than the first park.
Would love to hear how others who have been here have navigated this situation…one additional piece of info is because I’m a west-coaster, it’s unlikely I’d be buying out here, thus I can’t just take a weekend and go drive a dozen parks in the mid-west or great plains states where I am mostly looking…
My rule has always been trust but verify. We cannot help that brokers and owners bend the truth (overstate income and understate expenses) to justify their inflated price. Get it under contract in good faith - then the first thing you look at is their books and accounts to see if they have been truthful.
For internet based listings I have even started to make my sending the earnest money to the Title Co. contingent on Seller providing the financials (and 24 hours to resolve objections) to show they reflect the listing to minimize wasting my time. If the Seller disagrees with this provision then you already know the numbers aren’t what they are saying and can either reduce your price with a revised offer or walk away. I would rather waste my time getting something under contract and backing out than hopelessly chasing (residential) brokers for more information to see how little they have vetted their Seller’s numbers. They pay attention to contracts attached in email, and properties under contract - very little else.
It really comes down to the source of the property as you already mentioned. You have less of the number twisting with the direct mail and pocket listing strategy, along with “warm” connections.
How do you protect yourself from losing money here? We put a park under contract and whe n we got the rent roll we found a bunch of problems and decided to cancel the deal. We were out $200 bucks to the title company and now the seller wants $600 for legal fees incurred to look over the contract before we get our earnest money back. We are trying to fight the $600 cause it doesn’t state in our contract that we are responsible for any fees. But the $200 is lost. Any tips on how to incurr less expenses?
I always use a title company that doesn’t issue a processing fee for backing out of deals - I just call before I use them and ask specifically that question. For most title companies this is the cost of doing business and absorbed by the deals that go through. Stewart Title for example can write just about anywhere and doesn’t do this. It’s mostly these smaller Abstract Companies.
As for your legal fee issue you can call that out as a provision if you’re concerned it will happen in the future. “Buyer will not be responsible for any legal fees incurred by Seller to review the contract” type language.
@beckyg, Frank and Dave has this in their contract…
In the event that PURCHASER elects to cancel this Agreement at any time this paragraph shall serve as authority to the Escrow Agent from the SELLER to act upon the “single order” of PURCHASER to distribute the Earnest money to PURCHASER. Additionally, this paragraph shall serve as the SELLER’S release of the Escrow Agent from liability for disbursing the Earnest money to PURCHASER;
I think this protect you from a seller who tries to use your earnest money for his/her expenses.
We did use frank and Daves contract which is why we don’t plan on being liable for the 600 sellers fees but that isn’t stopping the title company from holding up our money so far
