Park Purchase Presentation Notes May 2002
In 1996 the Duvall Highlands Homeowners Association
began the process of trying to purchase the park from the present owner. At
that time, the project didn?t get completed because most of the residents
weren?t willing to do the preparation work that is necessary to put together a
park purchase proposal. We feel that the timing may be right for the
Association to try to do the park purchase again.
There are several reasons that it would be a good
idea if we could join together to purchase the park and run it as a
cooperative:
1. Being a shareholder of the park would give the
individual residents more security. As it is now, the park owner could decide
to sell the park or develop it into a more profitable investment such as
condos.
2. There are new financing programs sponsored by the
National Foundation of Manufactured Home Owners, Inc. and the state mobile home
owners associations that would require a small downpayment,
and in many cases the monthly rent amount has actually declined. Also, due to
the current low interest rates, now would be the best time to get the most out
of each dollar spent.
3. By having the cooperative of shareholders run the
park, the park could become more of a community than an investment. It would
also allow us to maintain the park in a fashion that benefits the homeowner
rather than the investor/owner.
4. Property values of individual homes would likely
double.
In previous park purchases, many common concerns
among residents were that:
1. Most residents can?t afford large down payments.
2. Only a portion of the residents in each park are
willing or able to participate as a shareholder.
3. Residents often can?t afford a large rent increase
to pay for the park.
4. Some residents couldn?t qualify for an additional
loan due to derogatory credit.
5. Residents typically can?t afford large up front
costs, fees, and down payments.
6. Residents must be able to pay market price for the
park, or they will lose out to other investors.
7. Residents must be able to act quickly when a property
becomes available.
The National Foundation has developed three financing
programs that help solve these problems. The program that seems best for our
situation is for The National Foundation to work with our consultant (presently
me) and attorney to form a residents? cooperative in the park. This is a
corporation that will be used to actually buy the park from the current owner.
The cooperative would get the money from several sources including putting a
first mortgage on the park itself, selling cooperative shares to the residents
interested in participating (who will pay for those shares by borrowing 95% of
the stock purchase price using The National Foundation?s share loan program),
and from the small amount of cash required as down payments. Sometimes the
Foundation can also arrange down payment assistance loans from a local
municipality.
After the purchase of the park, the other residents
(who chose not to become shareholders) remain as tenants and their rents offset
the cost of operating the park for the shareholders. A large difference between
the shareholders and the other tenants is that the shareholders monthly
mortgage amount should remain constant however the tenants rent will be subject
to normal rent increases, much the same as they are now.
The biggest hurdle in buying a park is the desire and
determination of the residents to succeed. It takes a huge commitment and a lot
of work on the part of many people. I have already begun to perform some of the
tasks necessary to initiate the park purchase project. In my contacts with the
National Foundation of Manufactured Home Owners, they have been kind enough to
provide me with resource materials, professional referrals, and a Resident Park
Purchase Checklist.
1. Evaluate
your situation ? Is the owner likely
to sell? Do residents want to buy? Do we have a core group of committed
homeowners willing to work on the project and see it through to completion?
This is the purpose of this meeting and the membership drive.
2. Develop
an initial game plan ? Try to
determine the most likely method you can use to purchase the park (Co-op).
Determine what financing resources are available locally.
3. Organize the
homeowners ? The purchase process can only be initiated within the
homeowners association. Anyone interested in becoming a shareholder must be a
member of the association.
4. Survey the
park ? We need to determine which residents want to participate and what
they can contribute to the process, both in talent and financially. The
Foundation has developed a Resident Questionnaire for this use that will be
distributed to anyone interested in becoming a shareholder, only after they
have become a paid member of the Duvall Highlands Homeowners Association.
5. Determine the
value of the park ? We need to determine the price that we think we will
have to pay for the park. This price should be in line with the current market
value. This purchase price information must be kept confidential, so that our
interest doesn?t drive up the price. In fact, the Foundation suggests strongly
that none of the residents even mention the possibility of the park purchase, a
price, or the sale of the park to anyone remotely associated with the park. The
Foundation has developed a Valuation Questionnaire to assist us in determining
the value of the park. I have already completed this questionnaire and have
submitted it to the Foundation.
6. Determine
needed repairs ? We need to check with the city and see if there are any
problems in the park that need correcting.
7. Assemble the
conversion team ? The conversion team is the group
of professionals that will assist us in making the park purchase a reality. In
addition to the consultant, which is the job I have been performing, a real
estate attorney has been strongly suggested. We have been referred to an
attorney that operates in
8. Seek
financing alternatives ? The National Foundation has loan programs for
residents to finance both the park purchase and the purchase by each resident
of their share. It has also been suggested that they may also offer loan
programs that will allow any shareholder to refinance their home with their
share financing which may be able to offer a lower interest rate.
9. Determine
negotiation strategy ? This is a key area of course so we feel it would be
best to leave the negotiation up to our attorney and our Foundation
representative. Otherwise it could be very problematic for us as tenants since
negotiations can sometimes get a little heated.
10. Evaluate
transaction alternatives and determine the impact on individual homeowners
?The goal is to determine how much we can afford to pay for the park and what
the financial impact will be on each participating resident. Remember that we
do not need 100% resident participation, often 50% or less is all that is
necessary.
11. Negotiate the
purchase price of the park ? After we have worked out a game plan and
strategy with our attorney and Foundation representative, they will approach
the owner of the park. We have to demonstrate to the owner that we are capable
of purchasing the park at a reasonable price within a reasonable time period.
It is imperative that we keep the negotiations and details of our strategy
confidential to avoid rumors and price increases.
12. Finalize
financial arrangements and close the purchase ? Once the terms of the
purchase has been agreed upon, we will begin working with the lender to enable
them to begin the loan underwriting process, the appraisal, and ultimately the
closing of the sale. This process can get lengthy depending upon the terms of
the sale agreement and the necessary park repairs. Often during closing, the
initial shareholders will be meeting with other residents who have not joined
as shareholders to explain the transaction and encourage their participation.
Progress Report
For weeks now, I have been obtaining information
about the park for the purpose of completing the many questionnaires and
surveys required by the National Foundation. I mailed the completed
questionnaires and surveys to the Foundation representative on
Since mailing the documents to the Foundation
representative, I have received an email from him stating that he will be
traveling to our area in the near future and would like us to put together a
meeting at that time for him to answer all our questions. In the meantime, he
and I are working together to get all the necessary information so he will be
able to prepare us an initial financial analysis.
In addition, he has instructed me to obtain an
attorney to guide us through the entire purchase. He has given me the name of
an attorney that he has worked with on other buyouts that would have experience
in this type of a project. I will be contacting the attorney to obtain
information from him regarding his retainer and other pertinent information. In
my research, I have also found that, in creating a cooperative, we will legally
be required to create a document called Articles of Organization and we will be
responsible for the creation of Bylaws. I have obtained a copy created by an
attorney for a park cooperative and I am in the process of revising them for
our use.
One of the most important tasks we need to begin,
that is completely outside my area of expertise, is going to be fundraising so
that we will have enough money in reserve to pay for the preliminary expenses
of the park purchase. I?ve already performed a lot of work on this project and,
as you can tell, there?s going to be much more to do. Since there is so much
involved with the park buyout, I have created a Duvall Highlands Homeowners
Association web site to keep everyone informed about our progress. The web page
will contain any updated information about the park purchase, as well as
notification of meetings, copies of newsletters, and other information about
the park and the association. The web address is http://members.fortunecity.com/dhha
While I feel that the park purchase looks pretty
promising at this time, it is important to establish that the park is not
presently for sale and we do not know if the owner will be willing to sell it
to us. If we ultimately find that the owner is not currently willing to sell
the park, it is our plan to re-submit our offer annually to let the owner know
that, should she ever decide to sell the park, we would like the first chance
at purchasing it.
To get all of this going, we first need you to be a
paid member of the association, then, I will need you to complete a Resident
Questionnaire and return it to me or my mom as soon as possible. If you have
any special skills or abilities that could help us in the preparations for the
purchase, I would appreciate it if you would list them on the questionnaire
prior to returning it to me. It will be very important for us to do as much of
the work ourselves as we can to keep the costs down. Any help you can give me
will be greatly appreciated. If anyone has any questions, please contact me and
I will do my best to answer them. Anything I can?t answer, I?m sure our
Foundation rep will be able to answer when he visits.
