MH #2: Negotiating Fun

October 1, 2009 · 16 comments

I have now officially set up a business with two partners to buy and sell mobile homes (MH); our goal is to continue to do deals similar to the one we did a couple weeks ago…hopefully we can do at least a few per month…

Along those lines, one of my partners came across a potential deal a couple weeks ago, and we finally got it done today, after a lot of very fun negotiations…

One of my partners originally came across the For Sale listing on Craigslist; the MH was listed at $4000, and the seller seemed desperate to sell, as he was moving out of state. My partner and I went to see the place, and it was in very good condition in a very nice park. It was probably worth $4000, but I certainly didn’t want to pay anything close to full-price for it. The seller was desperate, and we knew that given some time, we’d get a much better than full-price deal on his MH…

We originally offered the guy $3000, and he refused. He said that he was in no hurry to sell (despite his Craigslist ad), and that he wouldn’t go any lower than full price…that he’d rather just take it off the market if he couldn’t get that for it. Okay, we were willing to wait it out; we told him to call us when he was ready to compromise.

Last week, he called us and asked if the $3K offer was still good. We said, “Sorry, we just purchased a few properties, and can only afford to buy this one for $2600 now.” He said no…that he needed $3K or no deal. We told him to call us again when he changed his mind, but that we likely wouldn’t be able to give him that $2600 if he accept it right then.

A couple days later my other partner talked to him, and he asked if we’d still be able to give him $2600. It was obvious that he was getting very desperate to sell (he likely was ready to move and didn’t have any other offers), so we told him no, but we could do $2000. Again, he said he couldn’t come down any lower than the $2600.

A couple days after that, he called again, and asked if we could agree on a price around $2200. This seemed fair to both sides, so we said we’d talk to the park management to make sure they didn’t have a problem with us buying the property and to make sure there was no back rent due. Turns out there was about $1000 in back rent due, and until it was paid, we couldn’t purchase the trailer and leave it on the lot.

So, we talked to the seller and offered to give him $500 to walk away, and then we’d just pay the $1000 back rent to the park. He said that he needed more than $500 to just walk away, and that he’d rather it go into foreclosure before he parted with it for that amount (didn’t make much sense, but whatever). So, again, we told him to call us when he came to his senses.

Well, yesterday he came to his senses. With October rent now due, he owed about $1400 to the park, and they were ready to take him to court. He had already moved to Florida, but called us and asked if we’d still give him $500 to walk away from the trailer, at which point we could pay the $1400 and own it outright. We offered him $200 to walk away, and along with the $300 deposit he’d be getting from the park when his back rent was paid, that would total $500. We weren’t willing to give him any more than that. He finally agreed.

Today, we purchased the MH for $1600 — $1400 to pay off the back rent and $200 to get the seller to walk away. Since the back rent also includes October’s rent, we have 30 days to find a buyer before we owe anything additional on this MH.

My partner already has a potential buyer lined up…we’re meeting with her tomorrow night. She has mentioned that she’s willing to put $700 down and pay about $275 per month, so if it pans out, we’ll make a nice profit on this one literally overnight…

16 responses to “MH #2: Negotiating Fun”

  1. kwerner says:

    LMAO! I bet that guy was pulling his hair out every time he came back to re-negotiate with you on the price.

  2. Jake says:

    This was very entertaining :).

    Quick question: Have you encountered any resistance from Mobile Park owners in trying to seller finance your purchased mobile homes? I’m asking because I’ve spoken to a few and most of them seemed to be averse to the idea, even as I explained that it was a mutually beneficial relationship for the both of us. They were almost resentful that I was trying to sell the homes and not live in the park. One even felt it prudent to tell me about this “young wannabe real estate guru” that failed miserably and tried to talk me out of it.

    I have cash to spend and some of these managers seem they would like to continue doing business as usual, even if that means few qualified buyers and and an unfilled park. I had to actually explain to some the concept of seller financing as they had never heard the term…..

  3. Shae says:

    LOL! Wow….congrats on the deal!

  4. J Scott says:

    Jake –

    Actually, our experience has been just the opposite. The park managers seem to be very interested in working with us, as it means they’ll keep their parks filled and those trailers on the lot (it’s expensive for them to lose trailers from the park). So, for the most part, the managers at the parks have been willing to work very closely with us if we agree to keep the trailers where they are and fill them.

    Now, they don’t want us renting out the trailers…they only want us to sell them (even if it’s owner financing). The managers are very adamant about the parks only have owner-occupants and not renters.

    Perhaps you should try a couple other parks…hopefully you’ll get a better reception from management. I wouldn’t want to own MH in parks where management didn’t want me…

  5. That was ‘friggin (is that a swear? if so i’m sorry) awesome! Do you have any pictures of these mobile homes? I’d like to see one as I imagine the picture in my head is not what they really look like.

  6. Mike says:

    What’s your credit criteria for a buyer? Obviously you’re not gonna be getting 700 fica scores.

  7. J Scott says:

    Hey Scott –

    I’ll post some pictures in the next couple days…

  8. J Scott says:

    Mike –

    We have absolutely no credit criteria for our buyers. As long as the mobile home park will allow them to move in, we’re happy to allow them to buy.

    Our rationale is that, for the most part, the homes will be paid off within a few months, so even if they only pay the first few months, we’ll have recouped our investment. Plus, if they stop paying, we can resell it to another buyer and earn even more.

    The only time this can hurt us is if the buyer does a lot of damage to the property while they are there. This is mitigated in a couple ways:

    1. We do as little rehab on these homes as possible, so that we don’t lose money if they are destroyed;
    2. We require our buyers to carry insurance, with us listed as the ones receiving the payment if there is a claim.

  9. Sean says:

    Hey J Scott,

    I have heard you mention that you have a knack for negotiating, but that was really impressive. I am assuming that you are able to do this since you don’t really need the property and had a good feel that he REALLY needed to sell?

  10. J Scott says:

    Hey Sean –

    Yes, it was pretty clear that the seller was in a bad situation, but wasn’t aware of how bad his situation was. Often, people will “put blinders on” when things are getting bad, and just HOPE that everything gets better. While they’re doing this, they tend not to act rationally (in this case, he the rational thing to do would have been to take the original offer, which would have gotten him out of his situation and put money in his pocket).

    While we were about 80% certain that we’d end up buying this MH, the seller just didn’t have the ability to think three steps ahead to realize that things were just going to get worse and worse for his situation, and that future offers would only go downhill. It was pretty obvious to us, but he couldn’t see it.

    In the end, he avoided foreclosure/repossession and still walked away with $500 in his pocket; so as far as I’m concerned, it was a win/win.

    Btw, this is a common trap for people/companies who tend to act emotionally instead of rationally. In fact, I’ve seen Fortune 100 companies that have lost hundreds of millions of dollars in very similar situations. They come close to the end of a negotiation, but the two parties are still a little bit apart on price/terms. Party 1 doesn’t realize that if the negotiations don’t concluded quickly, their situation will start to deteriorate. Party 2 does realize this, and instead of continuing to negotiate, they just “take a break” for a couple days/weeks/months and allows the other side’s position to deteriorate. By the time they come back to the table, generally Party 1 will realize what’s going on and quickly loosen up on their negotiations, though sometimes even big companies won’t see the writing on the wall for several rounds of discussions.

  11. Shashank says:

    Hi J Scott,

    I stumbled onto your site when I was googling for information on investing in mobile homes. That was some great negotiation.
    How did you communicate/introduce yourself to the park manager? Do you just call him or her and say ” i’m an investor and I buy MH and owner finance them to people who pay lot rent…do you have any MH that are past due in lot rents?” A majority of park managers in my area (SF Bay Area, CA) don’t allow for the MH to be rented out. Any advice for a beginner?

  12. J Scott says:

    Hey Shashank,

    Basically, we introduced ourselves to the park manager in the way you described. We would go into the office, sit down with them for a few minutes, let them know exactly what our investing strategy was, and then flat-out ask if they’d be okay with us buying and selling homes in their park. While it wasn’t necessary to get their approval, we’ve heard (and found) that trying to work in a park where you’re not wanted is very difficult and not worth the effort. We found that almost all the managers were happy to work with us, and some were even excited that there were investors who were going to help keep the park full.

    A couple other things:

    – First, make sure the manager knows that you’ll be selling the homes, and not renting them. Many parks don’t allow homes to be rented, but selling with owner financing is fine;

    – Let the park manager know that if the buyer is ever late with their lot rent to call you directly and you’ll take care of it. Most managers are happy to do this (they just want their money), and this way you can find out if there is a problem with the buyer not paying as soon as possible;

    – Many managers will help you find homes to buy (like you said, they know when the owners are past due on balances or are looking to sell) and can also help you find buyers for your homes.

    My best advice is just to be completely honest with the park managers (even let them know you’re just starting out), but also let them know that you will help ensure that they get quality owners and that they get their payments on-time.

  13. Seth S says:


    Is your name on the title of the MH until the final payment is received from the “Buyer”? If so, how do you get around the no “renting” issue that most parks have.

    For the ease of technicalities, lets call the tenant a rent-to-own.

    If the tenant becomes delinquent with the park, does your company/you act as a co-signer for the tenant, thus you are responsible for the overdue/future rent toward the park(if the tenant is evicted?)

  14. J Scott says:

    Hi Seth –

    The buyer has purchased the property and their name is on the title — they own the MH. That said, my company is listed as a lien holder, so the title is clouded (i.e., they can’t sell) until I’m paid off and release the lien.

    While I’m not technically a co-signer with the park, if the buyer walks away and stops paying the park, I’ll certainly step in and make sure that the park is aware of the situation, and pay the lot rent myself (if necessary) to avoid the park taking action against me (as I’m now probably the owner again if the buyer walked away).

    I don’t do MH deals anymore, but this is how they worked for me.

  15. Seth S says:


    Thanks for your reply.

    Have you concluded the MH transactions don’t guarantee high enough ROI for the rather large headache they can/may produce?

  16. J Scott says:

    Hey Seth,

    The ROI on MHs is fantastic, but the actual profit from each is small, so you have to do a LOT of deals to equal something like a single family home rehab. If I were just starting out, I’d most likely start with MHs, but at this point, I’d prefer to do flips.

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