Due Diligence tax returns

I have sent the seller a request for all the due diligence information that is in the due diligence manual. He is refusing to send his tax returns because it has his SSN # on it. Obviously he can tape over it or block it out but he said if we don’t proceed without his tax returns its a deal killer. Any input on this would be great. This is my first park.

Refusing to give up tax returns and/or bank statements is not uncommon. Maybe he’s fudging the numbers. Maybe he’s been really lazy with accounting. Maybe he’s just really concerned about privacy. Could be any number of reasons.

You should be able to recreate the financials based on your own research and get pretty damn close to the real numbers. The biggest red flag as far as you’re concerned is financing. If he’s carrying, that’s not an issue. If you’re getting a bank loan, it could be a big issue. Owners with a lot of experience and relationships with lenders like F&D may be able to get loans without those documents, but for a first-time buyer? Probably a different story.

I didn’t even bother asking on the park I just bought. Thorough DD is far more important and should reveal the true picture.

I wish we had that magic ability, but banks require certain documents to make loans, and are not prone to fudge on those. I think you can probably get around the tax returns – maybe – with some banks, but they are going to want to see really solid, accurate financial statements. If the seller has been keeping the books with a crayon in a spiral notebook, then they will have to carry the note.

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Most likely the owner has been fudging on the expenses - probably overinflated. Obviously they do not want you to see those expenses as it would drive down the cap.
Income property investors are notorious for this practice. :speak_no_evil:

What is the possibility of an owner knowing the importance of a tax return to a buyer and banks OVERSTATING on his tax return his income since possibly the extra return from overstating would be much grater than the added tax!!!