Sellers Unwilling to Provide Financials

Currently own one park and other real estate (self storage, single family homes).

Working thru the AOS for a second park and our required due diligence items. Have others encountered these issues, are they red flags or not uncommon with ‘mom & pop owners?’

  • Not willing to include security deposits
  • Not willing to provide tax returns
  • Not willing be to provide bank statements

Realtor has been professional thus far, but she is their daughter. She reached out to us after her parents received on of our mailers.

Thanks!

Hi WCP,

I’m in a similar situation with MHP in NC. Albeit we’re under contract, the owner is older and really in breach at this moment. He has NOT provided a single document that we’ve requested and his broker hasn’t been able to manage or have him cooperate whatsoever. Very frustrating because we’d like to close this deal but he isn’t participating in any fashion. One option to broach is to determine if they’re in breach of the contract by not providing any documentation, if that’s the case, then you’ll have decide if legal counsel might suggest to compel them to perform. Good luck! RM

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They do not have the option of not including the security deposits, it is legally not their money it belongs to the tenants. Not really a problem if you work through and are ultimately in a position to close the deposits will simply need to be a condition of closing and a threat from your lawyer should resolve the issue. Until that point I would not be concerned.
For the rest mom and pop have been less than candid on their taxes, common for most, and are for that reason reluctant to provide their returns. They probably have no clue what their real numbers are and are likely overwhelmed by the though of the complexity of having to find out.
I would do the numbers myself quickly then make a very low ball (insulting) offer explaining the reason using your own numbers fudged to work to my favour. The ball is then in their court. Be prepared to walk when they can not show numbers to support their price.

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In this case they’ll really have no choice but to provide Seller Financing, as you’ll never be able to get a bank loan without these documents. We are running into the same thing on a current deal and the seller is at least offering us fairly competitive financing terms.

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I think this kind of thing is pretty common with some mom & pops. I park I have under contract now is similar. Mom and pop take cash and don’t even deposit it into a business account. They obviously aren’t reporting this money on their taxes either so there’s no point in even looking. Although they have no problem providing the security deposits. That one is kind of odd.

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Typical and not necessarily a red flag. The mom and pops often have terrible records and/or have been evading taxes by not claiming all the income. You’ll have to do extra diligence and ask for a longer period if they are unwilling to provide. Could also be an angle to ask for seller financing citing the banks may not lend with no financial records. They probably don’t trust you yet. Best of luck!

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I’d just point out that the greatest of financing terms won’t make up for a bad price. And without the documentation WCP is going to have to do a good deal. more work to determine a fair price. Since WCP isn’t experienced in MHPs, WCP is taking on more risk by developing their own expense estimates.

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What happened with this deal? Let us know.