I’m trying to get a park under contract that I have hard my eye on for seven years. I have developed a relationship with the owner who now says he ready to sell it to me. We have agreed on a price. It’s a decent, stable, small park. The owner has owned it for about 35 years. I know the park. Here’s the challenge: The owner is a fairly wealthy guy, but not very educated at all on real estate business. I have presented a reasonable, no frills purchase agreement. I think he has difficulty understanding the verbiage, even though I have gone over every part with him. He basically wants a a sheet of paper that says “I’m selling you the park as is,” with the only warranty he’s agreed to is the title. I don’t think he’s trying to hide anything or put one over on me at all. He just doesn’t see the "need’ for all the pages, etc. He’s old school and thinks his word is good enough. He doesn’t even have leases with the tenants, saying they can leave whenever they want. The question is: How far would you go in reducing the contract in simplicity (and substance) to purchase the park? If you suggest how I need to sit down with him and explain this or that, I can tell you emphatically that’s not the answer. I’m fairly skilled in negotiations and human behavior. He shoots from the hip, digs his heels in, then that response becomes an immovable object. It’s a park I will be purchasing at a value add price, which, by the way was his ‘shoot from the hip’ number. So how far would you go ?
I’d imagine he has a trusted attorney (even one that just does evictions for him) that he can take your contract to and have him read and explain that it’s reasonable. A 3rd party that he trusts might be your golden ticket.
Mike,
That’s a perfectly reasonable assumption. One I suggested. He said he’s not hiring a lawyer, every time he’s hired one he’s gotten screwed. I told him he could sit down with my attorney, I would pay for it, and he would explain the contract, but of course my attorney represents me. He rejected the idea. At one point he said,“You know the seller usually writes the contract.” To which I replied, “No problem. Get your attorney to create a contract and present it to me.” He rejected that, stating, “NO! I’m not hiring a lawyer!”
Here’s an example of his thought process: The purchase agreement starts off listing the BUYER, my LLC and the SELLER, his LLC (that he’s only had for 2 years). He asked why I had the SELLER as his LLC, and not him. I told him it was because the LLC owns the park and he owns the LLC. He told me that wasn’t right, that he owned the park. I explained it 2 other ways, he still disagreed, said he was going to ask his CPA. Next meeting he says, “You were right.” I’ve even asked him to have his CPA review the document with him, to which he replied, “Well, no, he’s not a lawyer.” I’m not making this up!
I’d just go with it. Work with your attorney to understand the risks but put a 1 page agreement together and go ahead and do your diligence, etc. Any deposit have your attorney hold (I’d probably aim for no deposit in this case). If you see something during DD either renegotiate or back out.
In my opinion dealing with situations like this are what get you the deals.
I regularly buy parks on a one page purchase agreement. Mom and Pop like to keep things simple.
I have a 3-page contract that is simple and works. But wouldn’t enter into an agreement without the protections…
Wow you definitely have your hands full!
Yup. Large contracts can stall or kill deals with ma and pa’s. Best to use a very simple contract in this case. Just make sure that 1) the DD timetable doesn’t start until you have confirmed receipt of all your requested dd items and 2) That you can back out at any time during the DD and Lending period at your sole discretion. Those two things will give you all the security you need.
Thank you for your responses. This is precisely why I submitted my scenario to members of this forum; industry people helping industry people when they have no horse in the race. I have heard you and been encouraged. I’ve slapped my ego into submission, and have put my eyes back on the prize, and I’m going to chunk my thrice revised contract and deliver the kind of no nonsense (and in a more sophisticated world, no sense ) contract to satisfy his “my word’s good, we don’t need to put it in writing” philosophy, and try and get the deal done. Thank you again for the wisdom and experience of your responses.
I agree with Westewart. If you have done your research and have been eyeing this park for 7 years, you should have a very good idea of it’s fair value. With no agent involved, there is room for both of you to come out on top. No leases? I will give a lease to any desirable tenant who wants one, but for the most part a Month to month agreement often gives you an easier way to get rid of a bad tenant. I bought my Park on a 1 page agreement directly from the owner 44 years ago. IF I had it to do over again, I never would have bought it. I could have made 3 times the appreciation by putting the same amount of $$ into single family dwellings with 1/10th the work.
Wow Unclebob9. I’m sorry to hear that. Do you operate a POH’s model?
Call your escrow or title company and find out exactly what they need to sell the property to you. They most likely will insist on a standard PSA, and you can have them explain it to your seller.
Dealing with the same thing right now trying to buy a retail sales lot. These people just don’t operate in the same litigious world we do. As far as I can tell, as long as you have a due diligence period to verify EVERYTHING and minimal downside, you pretty much have to just close your eyes and do it. But I can’t stress enough minimal downside.
@MWC,
Just have him write up the contract himself or You can go down to the local stationery store and buy a simple purchase contract.
Get all your terms on there and go open escrow. Escrow will include all the local legalese needed to close the deal in their escrow instructions.
The Buyer is “Your Name and/or Assignees”.
The Seller is “His Name in a representative capacity for XYZ LLC”
RCSD-S_6-16_markup_web.pdf (305.5 KB)