So I may be close to closing my first MHP deal. From Franks recent MHU course I took, there are 2 sample contracts there, the “aaa” and “MHPI”. Other than seller finance and bank financing, I dont know the difference between the 2.
My question is are MHP buyers here using those contracts and just filling in your info? Or are you using a real estate attorney to draw one up from scratch? I am concerned that the latter option may hold up the deal potentially.
I am talking with the park owner again next week and in the event that he does agree to sell like I suspect, I want to waste no time getting it under contract.
Please walk me through how yall do your park contracts?
Thanks,
Tim
You can use those contracts, but have an attorney in your state of purchase review it prior to you using it. You should never use a contract blindly. Make sure you understand what you are signing and if you don’t understand, ask your attorney.
Regarding bank financing vs seller financing. I haven’t read these contracts, but I imagine bank financing stipulates you will get financing provided by a bank to close the deal while seller financing stipulates the seller will ‘carry back’ a mortgage while you bring the down payment to purchase the deal. Theoretically they could be the exact same contract besides those two points. I would need to read the contracts to tell you the difference.
Also, if an attorney is telling you they need to draw up a contract from scratch, find a new attorney. Doing that would cost you a lot of extra money. There are many attorneys out there who will have templates they can work off of and add / delete as needed.
You can go straight to contract when you put in an offer. But if I remember correctly there is also a Letter of Intent in the reference library. The LOI can be used to give the seller an offer on price. Once the seller signs and accepts the LOI, you can than take one of the contracts noted above, and give it to your attorney to review and mark up based on the deal at hand.
If you need an MHP attorney, Ferd Niemann is on these boards. @TheMHPLawyer
Reach and to Ferd and I’m sure he can assist.
Personally, my method is an LOI (which can be negotiated and you may need an attorney). But I use an LOI and if I get to negotiating a contract, pull an attorney in.
I do have the LOI also. My understanding of LOI is that its non-binding and doesnt tie up the deal. Maybe I am just being unrealistic in the time frame required to properly close the deal. I would definitely feel better about an attorney reviewing a doc before signing it no doubt.
So, if I am going to prepare for a realistic timeline. Lets say I speak with MHP owner next week and we agree to a sale price, would you agree with this order?
I agree with that.
You can also make your LOI binding. Many people don’t do this but if your LOI is binding, it can effectively work as your contract.
You could also add in your LOI that they can’t negotiate with anyone else for a certain period of time. That way you take the deal off the market. Personally, I like method #1 noted here when you make your LOI a contract. By doing this, even if you never negotiate a full contract, your LOI turns into the contract. Please note: this is not legal advice, please contact an attorney to discuss everything I’ve noted above.
Good discussion here. As a newbie to MHP buying here I appreciate this idea of making your LOI binding. It raises more questions for me, though, @JD How would you suggest making your LOI binding? Would you delineate the outs that you give yourself as a buyer?
Writing in contingencies for substantive differences in representation from reality that they make during the process would be important, in my book, but how would you/could you word that effectively? We’d greatly appreciate any thoughts that you have on the matter, as this is where we are this very day with an offer that we’d like to make.
@AIMProperties, I am not a lawyer so can’t/won’t provide legal advice. I would recommend you reach out to your lawyer with doing this. I’m sorry I can’t be as much help on the wording, just saying that the idea/concept exists. @TheMHPLawyer can you comment here? Also, @AIMProperties, reach out to Ferd Niemann (@TheMHPLawyer) I am sure he can assist you with this.
I would highly recommend you discuss the contract with your attorney. Problem in using a template is that your attorney is not familiar with it and will have to review each word. if your attorney uses his own template, then he is already familiar with it and can draft it for less expense. Last time I used a template contract it cost more in legal fees to correct the errors that otherwise would not have been present.
I don’t know about the concept of a binding letter of intent. I think you are referring to skipping the LOI and going to contract. An LOI is a simple way to express your interest in writing instead of verbally. Yes, you could call the owner and say I will pay $X dollars for it, but it is much better in writing and that comes in the form of a Non-Binding Letter of Intent.
These steps 1 to 4 are generally correct, but it is best to have your attorney identified at step 1. The time to go from LOI to initial contract is very fast. If you are only then seeking an attorney, at least 1 week will go by and the seller will wonder why you are taking so long to draft the contract.
Step 3 is not that simple. My experience is that the seller will review, redline, and negotiate. The contract will go back and forth with revisions several times before signing.
@mPark I am referring to a binding LOI. If you do that in your LOI, you just need to make sure everything is in the LOI that you could want, protections too. And than if you never actually negotiate a true contract, the LOI becomes the contract.
If you are doing a binding LOI with all the terms of the contract, then you are doing a contract and not an LOI. You are simply calling your LOI a contract.
We have bypassed the LOI and went straight to contract before. In those instances, the price was verbally agreed to, so we went straight to contract.
Yes, very true, it is technically a ‘contract’ . But I call it semantics. I am set up that my LOI reads: “LOI” and states to the effect that we never negotiate a ‘true contract’ (whatever that technically may be) this will substitute to be the contract.
The other issue is that your 1 to 2 page LOI becomes 10 to 30 pages. The point of an LOI is to get offers out quickly without a lot of legal work because most deals fail to go to contract. Then you hash out the details only if you get high level detail on the contract, which is usually price focused.
I cannot image the hours we would waste if we write a full contract each time only to find the seller won’t agree to the price.
I recommend shaving that down to one page and using a “real” contract.
LOI is to memorialize the big points : price, financing contingency, inspection period, closing date (estimated!), earnest money, maybe one or two other things.
The contract is another “memo” but the important thing is that you can show it to a judge and they will force the counterparty to perform. In real life that means one of two things. Either the seller (wrongfully) won’t let go of the earnest money, or the seller won’t actually sell (because they get cold feet, because they sold to someone else from underneath you, etc).
But the reason you have a lawyer write one up is never for those reasons.
It’s for getting all the “what if” written down, and a lawyer is needed because by obvious obvious, both parties to the contract are eager beavers and will ignore the possible downsides.
What if someone sues the park while you have it under contract?
What if your inspection plumber runs over the managers carport?
What if the clubhouse burns down?
What if owner cancels insurance policy and there’s an accident?
What if all the trees suddenly die?
What if there’s a problem after closing but related to events before closing?
Who’s going to read the title insurance policy to make sure you know what you’re getting? Your lawyer is.