Verification of buyer

I have a buyer for my park. He’s putting down about a third with me carrying the balance, amortized over 30 and due in 7.

What kind of vetting/due diligence should I do on this buyer? A bank wouldn’t make a loan without knowing a lot about him; I figure I shouldn’t either. How do I know he won’t go in and muck up the park?

He’s using an agent. I should expect to be able to talk to the buyer, shouldn’t I? I’m sure I should run a credit check; any other suggestions on how to ensure this transaction has a happy ending?


Usual back ground as you would on screening a tenant, defiantly a in person meeting to get a good feel.
There are no guarantees as to how they will operate the park but you will need the guarantees of a iron clad mortgage contract. 1/3 down places enough skin in the game for the buyer to be concerned that he holds up his end. As long as he makes the payments the business is his to operate as he chooses. If he messes up you repo and clean up/resell.
Have your lawyer draw up a formal mortgage contract to be signed. Make sure the buyer understands he will be responsible for your lawyers fees related to the drafting of the mortgage.

I have seller financed a few SFHs but never a park. This was how I covered myself:

  1. I always made it a point to have a conversation with the buyer. In your case, I would meet with them over lunch. Ask them questions about their management and plans to get an idea of how competent they may be.

  2. I always ran a credit check and required the buyer to fill out a personal financial statement with bank statements. In the case of a large transaction, you may want certified letters from the bank stating account balances * I always wanted to be sure the buyer wasn’t investing with a credit card or something goofy like that.

  3. Require they sign a personal guarantee. This should make the note more marketable. For that matter, consult with a few note buyers to ensure you are structuring this thing properly to be marketable and that your buyer is the right kind of guarantor. You may decide to sell the note down the road.

  4. You’ll want to make sure they are paying the taxes and have the appropriate insurance coverages. I make my borrowers provide their insurance docs each year and I always check to make sure the taxes are being paid. In your case, I would call the insurance provider and see if they’ll notify you if coverage lapses.

  5. You’ll want your lawyer to write this promissory note. Consult with them on foreclosure proceedings. e.g. What happens if they don’t pay?, What should I do if their insurance lapses?, What should I do if they don’t pay the taxes?, What are the steps for foreclosing in your state?

The large down payment should insulate you from a lot of the risk and making the note marketable will allow you to sell off your interest in the park should it start looking troublesome. You might also look at setting your note up with a servicing company if it makes economical sense. I’ve never looked into this personally, but I know they are out there.

What if the so-called buyer flips the park the day after it is sold??? The big investors are doing it and wow without knowing lots of details about the buyers and or investors you need to be very comfortable about lots of issues since I assume you have not done this before even committing to this loan, Personally with all the properties we have owned and sold we never were the bank but have had sellers carry notes that made DAILY tours of their properties and thus when we buy presently we use only banks etc. or have the cash to pay in full. Yes still looking for quality parks in the Midwest and destination south parks and can close in 30 days.