The Benefits of Win/Win Deal Making By Dave Reynolds

There many different strategies that buyers utilize when trying to buy a manufactured home community. Some get these concepts from books they buy at Barnes &
Noble, others from articles on-line. But the truth is that the best strategy when buying these properties is called “win/ win” – the concept that at the conclusion of the transaction both buyer and seller are happy and made a fair deal. So why is this the best way to go?

It’s the only way to construct deals on successful properties
You cannot push around wealthy people. I think that most people would realize this. The typical manufactured home community owner is anything but desperate. They normally
own the property free and clear and have substantial assets.  The most prevalent negotiation style in most self-help books is called “win/lose” and that’s the type of posture you take at a car dealership. The plan is to back the desperate car salesman into a corner by making him waste a ton of time with you and then pretend to leave the dealership without buying so that he’ll drop the price as a final attempt to salvage the situation. And that’s fine when you’re working with a poor salesman trying to pay the rent. But that is clearly not the case with the typical owner and would never work – it would only serve to offend or irritate this individual and destroy your working relationship.

It builds a lengthy list of references
One great attribute of win/win is that it makes every seller a future reference. When you treat people fairly that reputation builds over time, and you develop an impressive list of seller supporters. I’ve given a potential seller a list of others that  I’ve bought from, and they are blown away that I could even do that. Since I’ve bought over 300 manufactured home communities over the past 20 years, you can imagine the benefits this has created.

Brokers will bring you more deals
Nothing irritates brokers more than when they see good deals destroyed by the opportunistic buyer that tries to drive too hard a bargain. If you do that even one time, your likelihood of receiving more deals from that broker is greatly reduced.  Since about half the deals I’ve purchased over the past 20+ years came from brokers – particularly pocket listings – you need this team on your side if you want to build a great portfolio (or buy that perfect first deal).

You never have regrets about “what could have been”
They say there’s nothing worse than having regrets about missed opportunities, and when you engage in win/win deal making you eliminate this fear. You give every deal your best shot, and you leave the bargaining table knowing that there’s no way you could have offered more. Although I’ve not succeeded in buying every property I’ve negotiated for, I do have the peace of mind that I tried hard and there simply was no way to construct something that was beneficial for both parties.

It’s just the right thing to do
I have the utmost respect for the sellers I’ve worked with. I believe that taking advantage of older Americans is just not morally right. That’s why I’m glad that I’ve spent my life using only win/win strategies. If win/lose deal making was the only
way to succeed in this business, then most people would say to themselves “I’ve made money but not without feeling bad about it”. But the great news is that the only successful negotiating strategy is also simply the right thing to do. It’s nice those align.

Conclusion
I am absolutely convinced that any buyer who wants to do well in this industry will embrace a win/win negotiating strategy – one in which both parties get a fair deal and walk away from closing happy. Whether you’re buying a single park or a large portfolio, win/win is the technique that gets the job done. You can throw that negotiation book from Barnes & Noble in the trash now.

 

Dave Reynolds has been a manufactured home community owner for almost two decades, and currently ranks as part of the 5th largest community owner in the United States, with more than 23,000 lots in 28 states in the Great Plains and Midwest. His books and courses on community acquisitions and management are the top-selling ones in the industry. He is also the founder of the largest listing site for manufactured home communities, MobileHomeParkStore.com. To learn more about Dave’s views on the manufactured home community industry visit www.MobileHomeUniversity.com. This article originally appeared in the Manufactured Housing Review, subscribe for free here.

Why Cities Often Get the “Grandfathering” Concept Wrong By Frank Rolfe

There are three types of manufactured home communities out there: 1) legal conforming 2) legal non-conforming and 3) illegal. Of these, by far the majority fit into the classification “legal non-conforming”, which means that the property was built in conformance with the law, but not longer meets the modern standards. Another name for “legal nonconforming” is “grandfathered” which Wikipedia defines as “actions taken before a specific date that remain subject to the old rules”. While it’s a pretty simple concept to grasp, there are many times that community owners can become at odds with city government due to their lack of understanding of the legal requirements. Why does this happen so frequently?

How inspectors are classically trained
With most real estate sectors, both the structure and the land are real property. The way that grandfathering works is that the removal of the structure on the land results in the loss of the “grandfathered” rights. Here’s an example. A single-family home was built in 1920 at a lot coverage ration of 70%. In 1968, the law changed and a home cannot exceed 50% of lot coverage. That 1920s home does not have to meet this new criteria as long as it stands. But in 2017 the home burns to the ground. The home cannot be re-built on that lot now unless it is reduced to 50% lot coverage, because its grandfathered
rights were lost. This holds true for duplexes, apartments, office buildings, hotels –everything the inspectors are used to seeing.

But we are essentially parking lots
But a manufactured home community is basically a parking lot for manufactured homes. Our homes are not real property and are not even included in what has been grandfathered. They are simply personal property that falls in the same classification
as a car. A grandfathered parking lot (and most of them out there are under that format) has the full right of cars to come in and out of the spaces at all times. What’s grandfathered here is the actual “use” of the property as a parking lot. But nothing on
the surface has any bearing.

There’s virtually no way to shut down a grandfathered “use”
So here’s the bad news for inspector logic: you can’t really ever find a way to lose grandfathered rights on a “use”. To do so, you have to have zero customers and no marketing or telephone surface for more than six months. The simple act of having a
sign on the property with a working phone number means that the use is still open for business. It has nothing to do with manufactured homes coming in our out, and this confuses and perplexes the inspector immensely, who is often working under orders by their superiors to “get that trailer park out of here”. But cities remain hostile anyway – and they have their reasons. So even though some cities hate the manufactured home
community’s customers, there’s no way to actually enact their evil plan. Why do they persist in this nonsense? I think one of the most logical reasons is the serious economic ramifications of school tuition vs. property tax receipts. If you assume an average manufactured home community has a tax valuation of $30,000 per lot – and the home at $10,000 – the total tax revenue derived from a $40,000 per lot total valuation is $400
in 1% states like Missouri. But, at the same time, the household on that lot has two kids, so the school tuition bill is $16,000.  Even excluding the additional potential costs of medical charges from residents who are not covered under health insurance, the city is losing $15,600 on this sample lot. So do you think they have a vested interest in refusing to let a new home replace that home when it burns down or gets removed?
Sure they do. There are communities out there that probably cost the city $1,000,000 per year in losses.

The only cure is often to use a lawyer
But although the motive is tangible, the law is still the law. But when the city refuses to abide by it, you can’t typically get this resolved without legal representation. You’ll have to find a good real estate OR municipal lawyer to take the lead. It’s typically not a hard issue to fix. Even though the inspector may not be a grandfathering expert, the city attorney will know better and will correct the inspector when there is a lawsuit at stake. We’ve found that many of these issues can be resolved in one phone call – but only when that call is made by a licensed lawyer.

And your success has good precedence
There have been several of these grandfathering cases that have had to go to the State Supreme Court level to get finally cured. The most recent one was the State of Mississippi. In all of these cases, the manufactured home community owner has prevailed. To date, not a single city has ever won. If you were to go to court today, I imagine Exhibit A would be those prior Supreme Court cases. Here’s the Mississippi one https://caselaw.findlaw.com/ms-supreme-court/1701083.html.

Conclusion
Grandfathering is a great protection for the manufactured home community owner. Understand your rights and defend them. Don’t let the city inspector push you around. A good lawyer and a simple phone call will typically cure most misunderstandings.

 

Frank Rolfe has been a manufactured home community owner for almost two decades, and currently ranks as part of the 5th largest community owner in the United States, with more than 23,000 lots in 28 states in the Great Plains and Midwest. His books and courses on community acquisitions and management are the top-selling ones in the industry. To learn more about Frank’s views on the manufactured home community industry visit www.MobileHomeUniversity.com. This article originally appeared in the Manufactured Housing Review, subscribe for free here.