Seller wants No Tax Returns or Bank Statements

Hi everyone,

Hope youre awesome.

Park under contract. Definite mom & pop. Pop passed away 18 years ago. Mom’s been trying to take care of things.

They have provided haphazard the list of items we asked for in due diligence.

They sent us a request to sign an addendum, they would not have to provide tax returns or bank statements on advice of their attorney, as these items have personal information on them.

They provided ledger cards showing payment of rent & late fees.

Any suggestions?

TIA

If you plan to have a bank finance the deal have them black out the personal information like SSN on the Schedule C, and offer to sign a confidentiality agreement. If they still will not provide then it’s a red flag.

A ledger card is like an IOU from Dumb and Dumber.

3 Likes

Many small business owners will inflate expenses and deflate income when filing taxes. They may be concerned that this info may negatively impact your assessment of the value of their property. Refusing to provide their tax returns is only a small red flag when dealing with mom and pop operations. It is often necessary to compensate for the lack of hard facts. Mom and pop record keeping is often lacking requiring more creative due diligence.
You will need to be cautious of deferred maintenance issues in a community of this nature.

2 Likes

We have bought parks without both items not present and had bank financing and one in particular was bought at auction with NO information (ZERO) We use seller’s tax returns and bank statements like a second opinion IF given. We develop our own P&L etc. since lack of information can easily be developed being an experienced buyer to satisfy a lender since a lender desires a knowable borrower and have walked away from deals lenders approved but we noticed problems we were uncomfortable with. Our onsite due diligence takes less than one day and much information is gathered by simple observation!!

Thanks everyone for your insight.

As we move forward, they seller has provided both park and personal bank statements.

After seeing the statements, Im thinking the the reason they didn’t want to share the bank statements, is a lot of the park money is going into their personal checking account.

They’ve also provided the 2019 ledgers and lot rent receipts.

Regarding repairs & repair receipts, the son has done most of the repairs in the park so my eyes will be wide open for deferred maintenance.

So we continue on…

I will keep you posted!

Update: We stepped out. There was a lot more going on than the seller was willing to admit. They were shutting down the business, before we even got to close.

The city was pulling the water meters, before our close date

They sent a letter to the tenants telling they had to move

We said, thanks but no thanks to that can of worms.

Thanks for all of your input.