Seller selling poh before closing


#1

I am in the final steps of this deal and hope to close by the end of September. Waiting on appraisal and a few things for title work. The seller has an offer on a poh that was a rental when we started this deal. Tenant moved out and he spent $1500 rehabbing the home this past month. He now has someone that wants to buy this 1989 14x56 for $5800. He is being up front with me and asking how I feel about this, as he has put the money and time into this home and others he would keep the money as he still owns the park. My plan is to sell as many poh (16 total) in this 40 pad park to help pay down debt. This would take one away I was planning on doing this with. On the plus it’s one I don’t have to deal with and it is now a lot rent paying tenant. I am thinking of agreeing as he has been upfront with me and has continued to spend money on numerous repairs sense being under contract including reroofing 3 poh.
My main question is, this being my first deal…how would you “veterans” deal with this type of situation and should I be doing something different in the future (or now) in your opinion?
Thanks


#2

I think different people would view this situation differently. In my opinion it’s a gray area.

I would either ask for a discount of 60-80% of the value places on that POH when the purchase offer was first made, or I would just not worry about it and give him my blessings for him to sell the home. If I’m on good terms with the seller and he seems to be making an honest effort and keeping the park in top shape during the sale period, I’d be inclined not ask for anything other than that he continue to try and run the park well during the escrow period.


#3

I would insist that you screen the applicant. Chances are he is willing to accept any applicant with a heart beat and you are going to end up evicting them after you own the park.
Get your screening standards established and do the rescreening yourself. Do not allow the present owner to do it.


#4

@Kurhof , as per your post:

  • “I am in the final steps of this deal and hope to close by the end of September.”
  • “…(Seller) has continued to spend money on numerous repairs since being under contract including reroofing 3 POH.”

As per your post:
You are under contract , hopefully to close by the end of September AND the Seller paid to “Reroof 3 Park Owned Homes”.

Now, what do you mean by “Refoofing”?:

  • Paint With Rubberized Roof Coating: ie…Kool Seal ?
  • New Shingles ?
  • New Metal Roof ?

There is a big price difference between "Painting " the Roof and physically “Installing New Shingles /or/ New Metal Roof”.

Inititially, when we purchased our Mobile Home Park we “Painted” a lot of Old, Metal Roofs.

In recent years we have gone to having “New Metal Roofs” installed.

“Installing New Metal Roofs” is one of our highest costs of keeping a POH.

Installing a HVAC Unit is the other high cost.

IF your Seller (while under contract) intentionally installed New Shingles or a New Metal Roof on 3 different Mobile Homes, you have a good Seller.

Now IF your Seller (while under contract) “Painted” the 3 Roofs, the Seller is still intentionally trying to maintain the POHs. Their financial layout is definitely less with “Painting”. However, the Seller is actively involved trying to keep up with maintenance.

As a Buyer you have to evaluate IF the continued maintenance on the existing POHs outweighs selling the 1 POH.

IF you allow the Current Owner to sell the POH, at the very least you will have someone paying you Lot Rent.

IF you owned the POH, it could potentially stay empty for month/s, it could be vandalized and you would be getting $0 in Lot Rent.

We wish you the very best!


#5

In my opinion you should let him sell it and screen the buyer (as mentioned by Greg). The park is more valuable with less park-owned homes. Still make sure he isn’t holding a note on it. One less P.O. means less maintenance for you. Just make sure the home stays in your park. Also you will maintain a good relationship with him and if he has other parks will be more likely in the future to let you get first go at them if this sale goes smoothly. As a broker I can tell you good buyers are shown the best stuff before everyone else.


#6

Thanks everyone for your insite. It’s reassuring to see my thoughts are pretty much in line with what you are posting.
Kristin, to answer your question they are new metal roofs. The seller states in the last 3 months he has stuck 15k into the park on improvements. That definitely makes this decision easier…


#7

@Kurhof , as per your post:

  • “…they are new metal roofs.”
  • “The seller states in the last 3 months he has stuck 15K into the park on improvements.”

We just installed:

  • New, Metal Roof
  • Mobile Home
  • Singlewide
  • 16 x 76
  • $4,178

Thus, it is feasible that the Seller spent $15,000 on Park Improvements in the Last 3 Months.

We wish you the very best!