I’m listening to the home study program. As my time as a SFH investor it has been accepted that Diligence occurs prior to contract. According to the home study it occurs 60 days after contract. At that time the buyer can walk away at any time from the deal.
Are most park buyers on this forum getting the full 60 days?
Are all sellers willing to give 60 day period for due diligence or is it a challenge to get this period of time?
Is it typical to renegotiate the deal when items come up or more typical for a deal to fall apart?
In SFH, due diligence is simple and cheap with little to go wrong (e.g. you will not have a $600,000 sewer repair bill). In MHP, it is costly and intense. Nobody would ever spend $20,000 or more on due diligence without a contract being in place. Thus, you do not begin DD until you have a contract (with the exception of a few items which are free to do).
If you expect 60 days due diligence, you will be losing many contracts. The market is so hot that sellers are expecting less time. My latest contracts have 30 days due diligence, but this varies.
Many buyers are not renegotiating. If you have to renegotiate after due diligence, you may be viewed unfavorably. Of course, don’t get into a bad deal just because you don’t want to renegotiate.
The reason for renegotiating a deal after diligence period because it was discussed in the mobile home university course. I believe the focus was on the discovery of infrastructure damage or needed repairs. Also, the financial information didn’t prove to be 100 percent accurate. What information are you typically requesting prior to submitting an offer? How many times are you walking the park prior to an offer, if at all?
I understand the point of renegotiating after due diligence, but with the market being as hot as it is, my experience is that brokers really frown upon retrades. Yes, we have done it, but they have been very unhappy regardless of what was omitted in the offering.
We typically request very little information before submitting an offer. A typical offering memorandum with financial statements generated by the main brokers are fairly thorough and are enough to get started. Full due diligence is after contract.
If the park is in one of our markets, then we will have driven through the park at some point in the past. If the deal is not in our market area, we will not visit it before submitting an offer. That is not feasible given that most deals never go to contract. You will spend a fortune travelling if you visit prior to contract.
I think the broker-represented sellers are going to push back on 60 days, (they’ll ask for 30 with a financing contingency).
My opinion is, evaluate from your desk what price you’re willing to pay given what you know, and knowing that there will be surprises.
Once you inspect there will be fewer surprises. Your risk goes down and down.
At the end, if you’re satisfied with the level of risk at the price you negotiated, then you close.
If you’re not happy then you have to have a specific complaint about something meaningful (like, worth more than 10% of the purchase price) to renegotiate. Otherwise you’re just wasting everyone’s time kicking the tires and then seeing if you can get a good discount.
For me, reasons for not closing are usually not “priceable” such as local economy just doesn’t feel like a “winner” and/or the banks’ terms are not favorable.
If it’s a specific issue, you’ve done the DD and the expert told you it will cost big bucks to fix, that’s when you can renegotiate.
If you try to sit down with a list of 30 pesky issues that you’ll have to deal with and ask for a reduction in the purchase price, you are unlikely to get to closing IMO.
You have it backwards. Typically due diligence is AFTER the deal is under contract and an earnest money deposit has been made into escrow. Usually it is a period of 45 - 60 days during which the buyer can walk for any reason. After that, the earnest money deposit stipulated in the contract becomes “hard” and non-refundable.