Posted by David Alexander on August 11, 1999 at 17:29:34:
But, I’m already there now, if you knew me, you’d know I don’t back down easily.
But, I like your idea.
David Alexander
Commercial Property contracts, MH Park - Posted by David Alexander
Posted by David Alexander on August 11, 1999 at 17:15:31:
Dealing with these parks, they’re telling me it is standard to put up 2% earnest money, which would be over 16k, they are asking for 10k, I offered a 100 bucks. Everything else is agreed upon except this. I’m guessing they want to know I’m for real.
The contract is written that I have 90 days to approve the deal, after that the money is non-refundable. Doesn’t scare me, if the deal is right which I believe it is, I’ll find the money.
Talk to me, Solutions. Only one that comes to my mind is offer some of my mortgages as collateral. Any other thoughts or should I just call their bluff, or just go play elsewhere.
David Alexander
If your doing Brain surgurgy why go through the legs? - Posted by Dirk Roach
Posted by Dirk Roach on August 13, 1999 at 03:16:53:
Hi David,
I would play it someting like this:
“You know Mr. Jones I can understand why you want me to put up the 10k, because you want to see if I am serious. I’ll tell you something I buy property like yours all the time. In fact before I waste MY Time, I really need to see if YOU are serious, too. I really am too busy to pay all my due diligence people and my team for nothing.
So I have no problem putting up the 10k in escrow, but also at the same time I want you to match it. So what we need to do, I suppose is aggree on who we are going to use for this escrow so that WE CAN BOTH put our 10k’s into it and knock this deal out quickly.
Or I can give you a note for 20k right now.”
Just make sure that the note is payable only in sucessfull closure of the deal.
I mean here is the thing David, it’s all a matter of perspective and realities. One perspective and One reality is YOU are doing this turkey a favour for even considering to buy his mobile home parks. YOU can buy anything YOU want to anywhere YOU want to.
I have found that when you go into any negotiation with your hat in your hand you lose.
Heck YOU are the one in control of the deal. Fair is Fair.
Dirk
I respectfully disagree with you all - Posted by charles (del)
Posted by charles (del) on August 12, 1999 at 09:39:05:
If I was the seller I would require atleast a $5000 deposit or tell you to get lost. This is now standard practice. If you do not have $5K available I feel that you are not able to play the game. What are your plans to buy the property. Owner finance or flip?
Obviously I always try to limit the amount of deposit when I buy but typically I put down between $1K and $10K.
As you know you can get the money back but it is a reasonable gesture on your part in return for them showing you their private property etc.
Sometimes I think there is too much emphasis on NO money down on this site.
If it is a good deal and you are a serious buyer then put up the $10K.
Re: Commercial Property contracts, MH Park - Posted by Ray Alcorn
Posted by Ray Alcorn on August 12, 1999 at 24:43:00:
Hi David,
I’ve been on both sides of this issue numerous times. The last time was as a seller, and the “soon-to-be public company that couldn’t afford to tie up monies all over the country for every park they had under contract” buyer talked me into taking a note for the earnest money because I was determined not to be taken off the market without being paid for it. I made the CEO personally guarantee the note, and included some language that was going to make his life miserable if he jerked me around. What happened? He beat me up in due diligence and then couldn’t perform on the finance contingency. The company that wound up buying the park was a Fortune 500 company, and they offered a note, and I agreed, and never got the note! They closed two weeks early. Moral of the story: It’s never a deal until the check clears.
Actually Doug mentioned the way I have most often been successful in avoiding actually putting up the money… Give them a signed check, with language in the contract to direct how to treat it. I have also used a note, and I would guess you could use anything of value , e.g. your mortgages or a note secured by your mortgages, as long as both parties agree it has VALUE. I’ve used car titles, a motorcycle, and some other things I probably shouldn’t mention to show I’m serious and should be taken seriously. The object of the exercise is to keep you from tying up the property with no hope of closing. Everybody wants to close, because if there is no close, then nobody profits. So the trick is to get you the time to put your deal together, and give the seller a level of comfort that you are serious.
I have structured the deal as a pure option… $1,000 for thirty (or 45, whatever) days, at XXX price, subject to satisfactory due diligence. If there is a problem, the option is never exercised, and the money returned if the seller can’t cure the problem within a specified time. Otherwise you’re out the thousand. You can also sell the option, but that’s another post.
Another tactic I have used, but this takes some nerve, is to volunteer to do the preliminary due diligence (e.g. site visit, market study, verification of expenses and taxes) without a contract, with the understanding that you be made aware of any other offer and have the opportunity to beat it. This is a little risky for the seller, and buyer, but does serve the purpose of leaving the seller with the property on the market, and the buyer in the loop and in the running to get it bought. I will often go look at a property, poke around the market, analyze the financials and run a title report before I even meet the seller. If other buyers come along at the same time I’m looking, then I’ll go to the next deal. Bidding wars rarely result in good deals. But then I may be back in a few months after the other buyer didn’t.
One other method that I have seen, is to write language in the contract that gives the seller the right to continue marketing the property and taking backup offers while you are doing due diligence, combined with one or more of the methods above (i.e. note or check).
Bottom line, whatever method you use, it is doubtful that it (the earnest money) will be collected on unless it is cash. Even in the case of cash, you should have language in the contract calling for you to have sole approval rights of all due diligence items.
Hope something here may help. Good luck, and let us know how it goes.
ray
Welcome to the Show - Commercial Property contracts, MH Park - Posted by Michael Morrongiello American Note
Posted by Michael Morrongiello American Note on August 11, 1999 at 17:26:21:
When you dealing in commerical type property’s you are dealing with a much more sophisticated seller. Many of them are PRO’s and in turn the negotiations can be much more intense and arduous. You can always try to negotiate a defferred earnest money deposit. “$100.00 -$1K upon signing of the contract and then within 10 days +/- the balance shall be paid…” in this way you still get to take the deal off the street and do you “sniff test” to see if it does make sense. You also limit you down side exposure.
Personally, I much rather play on the field where I am the PRO and for the most part I am dealing with amateurs (mom n’ pop) type seller. This is mostly the residential arena.
Michael Morrongiello
Operations Manager
Re: I respectfully disagree with you all - Posted by David Alexander
Posted by David Alexander on August 12, 1999 at 10:05:01:
I guess in your world throwing 10k to the wind is smart, every deal I put together has been to create notes, so I guess you would say I’m cash poor and equity rich. But, for this is what I do in the beginning here of my Investment career, I go for cash flow. But, on the other thought, I’m always able to get the funds to close the deals I do. So, with your parameters, you would miss out on people like me who would get the deal done, once the due diligence is done, maybe it’s a sort of arrogance, but unless you show what you have to sell, you can’t sell it.
David Alexander
I agree…it’s a show - Posted by DougO(NM)
Posted by DougO(NM) on August 11, 1999 at 18:09:51:
I just sent off a purchase offer today on a $800K +/- deal and wrote in $100 earnest money. I haven’t heard anyting from the seller yet, I’ll be interested to see what they have to say. Last time we didn’t even offer earnest money and that seller didn’t bother to ask for it. I like Michael’s suggestion. As far as “being serious” goes, isn’t it fair to tell the seller that when they show YOU they are serious about selling and sign the offer, THEN it’s time for you to show how “earnest” you are. Why waste a check ? (That you will write in the purchase contract can’t be cashed until closing anyway )
Doug