I’ve been in the mobile home park business for more than 25 years and I love owning parks. But, occasionally, a park owner doesn’t share my passion and decides they want out. Then they find that getting rid of their park feels like it’s twice as complicated as owning it. Laws for selling a mobile park in Washington and Oregon can delay you if you’re one of those owners ready to sell, and maintenance issues can reduce its value.
I’ve never sold a park, but I’ve bought plenty of them, which gives me a bit of perspective to share with sellers. I know what I look for when I buy a park, and I’ve worked with every kind of seller. The most successful ones know their options, understand the steps involved, and can work around issues that reduce a park’s value.
While no guide can cover all the nitty gritty of selling a mobile home park, I’m here to give you some of my insights from 25 years of experience buying parks Oregon and Washington parks.
If you were going to sell your car, you’d wash it. So, if you’re going to sell your park, clean it up. You don’t have to put in $40,000 of updates, but you do want to invest in a fresh coat of paint and make sure maintenance issues are under control. Do a quick audit of your park and check the following:
Once you have your park looking its best, there are three different routes you can take to sell it. Depending on how involved you want to be in the sale, you can sell it yourself, list it with a broker, or try to sell to an investor. If you’re a rookie, your best bet is probably going to be working with an industry insider. But, before you choose, look at how each option will cut into your bottom line.
Listing your park with a broker is like selling it on autopilot. Your broker handles the sale on your behalf and is paid on a commission basis. It’s a seamless option, but it can also be a costly one—especially if you hire the wrong broker.
If all this information about brokerage firms is putting you off, then you might consider option two—doing it yourself.
There are some people who try to do everything themselves. If you’re one of those people, then you might be considering selling your park directly by listing it online or in local publications. But it’s not as simple as it seems. You may find the disadvantages far outweigh the benefits.
Selling yourself can be an excellent option—depending on your skillset. Problem is, having the right skillset is rare.
A middle ground between selling your park yourself and listing it with a broker is working with a mobile park investor. They specifically purchase parks as investment properties with the intention of running them. The goal of investors is different than buyers looking to flip your park—they want to see their return through operation, so they’re in it for the long haul.
So, those are your three basic sales channels, but, sometimes, timeline is a driving factor and you want to sell out of your park as soon as possible. In that case, you’ll want to go over the steps to selling your park, taking note of things that may slow you down along the way.
The process for selling your park is going to change depending on how you go about it. The longest and most complex is selling it yourself. There’s no way I can summarize that here. However, selling to an investor versus selling to a broker is going to drastically change your timeline. Here’s what you can expect in each case.
You sign a listing agreement with the broker.
This agreement will outline what the broker will do to sell your property, an asking price, commission rate, and all the other pertinent information. It will also cover the most important item, the exclusivity clause.
You give the broker 6 months with guaranteed commission.
That means the broker gets an exclusive right to sell your park for the next six months, i.e. that exclusivity clause I mentioned. If you sign the paperwork, then two hours later get an offer for a direct buy, the broker is still going to claim commission out of that.
The broker collects offers and negotiates.
This process is long and arduous. The broker will research the property and the price fluctuations that might affect the value. They’ll contact you with offers, negotiate sales, and try to close the deal before the listing expires.
The broker connects with the bank to close the deal.
If the buyer doesn’t have cash on hand, the broker is also going to have to work with the bank to finish out escrow on the deal.
All in all, a broker listing is pretty much a guaranteed six-month time commitment. You may find that you don’t get a lot of bites at first, but then there’s a flurry of activity towards the end. That’s because your broker may only be motivated to sell your park when the listing is going to expire. If that’s the case, then you might find you get a lower offer because of the rush. Remember to choose your broker carefully to avoid this, or go with an investor sale instead.
You contact the investor for a ballpark offer.
This process is streamlined because the investor isn’t selling the park for you. They’re buying it direct to run it.
You begin the contract process.
This is simply entering into the “intent to buy” part of the process where all the details of the deal will be worked out.
The buyer does a property inspection.
This part will involve someone coming to the property and verifying everything that was agreed to in the contract.
You both come to a final price agreement.
The investor and seller come to an agreed upon price, with a deadline for acceptance. Usually, I close within three weeks of coming to an agreement or move on. Either way, if they don’t accept my offer, they have a fair value assessment for their property.
Now as pointed out before, investors want parks that are in good working condition and have high occupancy rates. You might find there are some things that will stop you from selling, or at least cause your park to get a lower value.
If I can fill a place, I’ll usually buy it. But there are some times when I just can’t. That’s usually because the owner has let something slide over time that I’m not sure I can fix. Usually, when I don’t buy a park, it’s because of environmental, maintenance, or legal issues.
If the park is an environmental hazard, I can’t take it on until the issue is resolved. When you sell a park, you have an environmental study done. If that study comes back with issues, it’s going to stall the sale because whoever owns the property is responsible—including any lawsuits. No buyer wants to take on that risk. The most common environmental issues I see stall a sale are:
I will say that I’ve never seen an environmental issue that isn’t solvable. The problem is the time it takes to fix these problems. Keep in mind that if there’s bank lending involved, this will probably kill the sale. Most banks will walk away once the site has a level one environmental report on file—and that just means there’s a potential hazard. Your best bet if you have any environmental issues is to work with a cash buyer who’s willing to wait until you fix the problem.
No park is perfect. I know that, so don’t mind paying full price even if there are minor issues. But that doesn’t mean I want to sink money into a park right after I buy it. When it comes to maintenance issues, the most common problems I see are:
Now keep in mind maintenance issues aren’t always deal breakers. In my experience, if I’m looking at a lot as a long term investment, I might be willing to take on some smaller problems. I’ll simply deduct the cost of the repairs out of my total offer for the park.
If you have maintenance issues, it’s best to have quotes on file for the actual repairs. That way, you can show the buyer how much it will cost and ensure they’re not unfairly undercutting the price due to the needed repairs.
It might surprise you, but legal issues aren’t a deal breaker for me. That’s because I know they’re unavoidable. Any experienced park buyer is going to expect some legalities that are standard, like environmental reports and financial disclosures. But there are a couple that tend to concern me:
In either case, it’s much more seamless to sell when your buyer intends to run the park, rather than flip it. Tenant notification laws change all the time, especially when it comes to closing parks down. As such, before you consider selling your park, check for any recent notice changes.
It can be an exhaustive, and exhausting, process to sell a mobile home park, so most people want to find someone who’s willing to make it faster and easier. And mobile parks are communities. You want to make sure your tenants have a place to call home, but you still want to get the best price.