So you’re ready to pursue a deal in the mobile home park industry? Welcome aboard! It’s a thriving business, and it’s not difficult to see why. This is one of the lucrative, yet accessible real estate based industries around. There are many factors within the process, including appraisals, due diligence, and more.
Even though it’s accessible, entering this industry can be a big ordeal. Without the proper guidance, you can easily misstep. This can lead to big losses if you’re not careful. That’s where The MHP Expert comes into play. We’ll offer a wealth of knowledge for navigating this rising industry. Here’s a background on how to deal with short appraisals in the business.
What Does A Short Appraisal Mean?
“It depends on if you’re acting as the buyer or seller, what position you’re going to take,” says Glenn. “You have to clarify that in the beginning.” For example, if you agreed to a certain rate as the buyer, the seller is not likely to budge on that rate. Keep in mind this rate is often different from the listing price. Likewise, the buyers can say it matters a lot that the appraisal came in short.
They can cite the banks not lending them money as the primary issue. This means the bank that ordered the appraisal did not get or use comps that support the seller’s pricing. The resolution is to “re-underwrite on the seller’s financials. This is done with the new purchase price in mind”.
Rent and Sales Comps
At the same time, you should be taking rent comps from your local market to support the projected park rents. Also, you should have gone through all the sales comps for your MSA or Region. Glenn notes in his area of North Carolina, they can use the entire state to support their comps. You also have to look up the sales comps that may not be recorded yet. Chances are if they are recorded, the appraisers has already found them.
Often, the appraisers will go back and make weird adjustments to the underwriting. You have to inquire about this to save yourself from spending unnecessarily. It’s also helpful to contact brokers in that industry. Ask them if they’ve done any sales comps in the last 60-90 days. This can be some extra ammo in helping you to support your position in this pricing. The MHP Expert does this for people all the time.
Working With The Banks
There are a few different considerations besides rent and sales comps. First, you may not even get to know who the appraiser is. Even the buyers don’t always have this luxury. They instead have to deal directly with the bank. This sometimes means having to educate the bank. They may not have ever loaned on a mobile home park before.
The Mobile Home Park Expert
Sound like a lot to keep track of? We know, that’s why we’re here. The Mobile Home Park Expert is committed to assisting you on your journey in the space. Reach out to us today to learn more!