When the list price of a property is way above what the financials will support (50% or more) what is the best strategy: 1. Dont even make offer owner is not in touch with reality. Let time be your friend and maybe owner will see the light. 2. Make an offer on what you think are the financial realities of property (this will look like a low ball and possibly insult owner). 3. Make offer 20 to 25% below listed price and tie it up and then retrade during due diligence (this could be a huge waste of everyones time… ) 4. Some other ideas welcome
I have done 1 and 2 have not had sucess with 2 though. I feel that retrading that significantly 25 to 30 of offer is a bit of disengenous. Especially since you will may need to retrade a bit due to condion of infrastructure.
Thanks
Phillip
Does the seller have any debt? If so, none of the options are possible if it means coming to the closing table with money to cover the loss. In that case, follow the park until it goes into foreclosure. If they own it free and clear, then I’d start with #2, and see what happens. Never do #1 – we have had a ton of deals that started off 100% too high and we got them down, and you can’t predict which one that would be. #3 is not a bad option based on #2, but it’s up to you as to whether the property is desirable enough to you to potentially waste that effort. The only other option would be a Master Lease with Option to Buy – that would allow you to potentially pay what the seller wants, but only after you groom the park to be able to support the debt.
@PhillipMerrill I had the similar question couple weeks ago. If you are interested you can read this topic Mobile Home Park Appraisal vs Industry Formula
We’ve found we have had good luck developing a reputation as a buyer that does not re-trade on price unless something really egregious comes out during due diligence. As such, we tend to make offers we feel are fair, and we neither come up on them, nor go in high with a premeditated plan to re-trade. This helps us get good deal flow from brokers because they know there is less chance a deal will ‘blow up’ later due to re-trading.
All that said, we’ve had plenty of our offers rejected, and a few, then subsequently accepted once sellers see their property continue to sit on the market. So don’t let a potentially good deal slip away because you did not bid on it. Go ahead and bid at a price that makes sense for you. See wha happens.
Good luck,
-Jefferson-
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