Question for you this evening. Made my first offer on a MHP. It is listed by a broker and in the offering it mentions there are 13 POH and 6 Park Owned RV’s. As part of our offer I had asked for the seller to convey the 13 POH and 6 PORV as was stated in the materials. When I received the counter offer back they made a note in regards to the park owned homes/rv’s…
“the number of Mobile Homes and RVs owned were for
the month of September 2019 and these change on a monthly bases, therefore they will be different by the time of closing.”
What is the deal with this? They claim the park is 100% occupied last 5 years and they have a waiting list and blah blah but then hit me with this little diddy. Thoughts? Thanks!
The owner is selling them in real time. You should not offer any premium for them in your offer as a result in any counter you make because of this specifically. Treat your entire offer as a tenant owned / occupied property…and use this as justification for a reduced purchase price.
Should I be concerned about ending up with more POH’s than originally mentioned? That is the thing I am worried about. If they sell them off thats great, but I get the feeling I might end up with more POH’s than I would like. Is it typical that those numbers change on a “monthly basis”?
Its one thing to say the seller intends on selling one or more before closing, but the changing on a monthly basis sounds like they pick up more as well. Am I overthinking this?
We don’t care either way. If the seller conveys a POH then they must convey it with a title. If they are unable to supply a title then the title company shall deduct 5,000 per home from the purchase price and seller shall provide a bill of sale.
You will have to spend time and effort to get the title later under certain scenarios.
When the seller has a home as a lien holder then you have to be careful that he has put the right kind of owners in those homes and you won’t be evicting them all upon closing.
This is not an ideal situation. The seller is trying to collect some last minute down payments from tenants before selling to you.
I read their counter as a general statement - that it’s possible that the number can change due to people moving in and out. I suggest you confirm what they meant. To me, It sounds like they didn’t address your ask - which was that you simply want them to convey/transfer the homes. If they officially can’t (don’t have the titles), they can do it with a bill of sale - they shouldn’t have a problem with that. It’s up to you to negotiate the value of the homes if you already haven’t done it - my advice is to use NADA and craigslist to get market value, subtract 20% and subtract the cost it will take to make the homes livable.
By making the statement that the number can change, I’d be concerned by the amount of possible change - are tenants constantly moving out, getting evicted, disappearing and as a result is the park owner constantly getting homes? The number shouldn’t change much - I doubt that he will be able to sell those homes during your contract negotiation and I doubt that a significant amount of tenants will move out - you can add language to your contract to protect yourself - but if you do the seller may think you are ‘nickle and diming’ them.
You can list the units to be acquired in the contract with a price assigned to each. Then, if one of those units fails to deliver, you take the price allocated to that unit from the final purchase price. We did that recently in an acquisition with 8 homes. We allocated $70,000 of the price on homes and during due diligence, the seller sold one of the homes to a tenant for $10k. The purchase price of the park remained the same, but the amount paid for homes was reduced to $60,000.
If the seller won’t agree to this type of a contract, then you can assume you will not get any homes or any rent derived from the home itself (e.g. underwrite lot rent only).