The Truth About Mobile Home Park Earnest Money

Earnest money is the financial tool that begins the process of buying a mobile home parks; an addition to the purchase contract. You cannot avoid it, so you need to learn all about it. And here’s what we’ve learned in over 200 mobile home park purchased completed in the past 20 years.

Keep mobile home park earnest money amounts low

You need to keep earnest money amounts low for two reasons 1) you cannot put a bunch of different parks under contract if you use large earnest money amounts (you’ll run out of money) and 2) you might, in some cases, have trouble in getting it back. Fortunately, the mobile home park industry is based on low amounts of earnest money, like $1,000 to $10,000. Don’t get into the trap of offering more.

Use only a real title company

Before you ever put earnest money up, make sure that it is only going to be held at a legitimate, well-known title company. You cannot trust your money to some jack-leg attorney or – worst of all – the seller themselves. Big title companies are regulated. And they cost the same as tiny ones. Use only the biggest names in the business, like Chicago Title and Stewart Title.

Never put up more mobile home park earnest money than you can stand to lose

We never put up more money than we can afford to lose. Sure, we’d be upset if someone ran off with our $2,000 check, but we’re not going to go bankrupt over it. The sad truth is that earnest money amounts can be lost to seller shenanigans. One of the most common is for the seller to threaten to sue the title company if they release the funds, thereby tying up your money in court until you can find a way to get it back.

Use a construction that minimizes your risk

Make sure that your contract gives you the sole right to ask for the earnest money back, without any input from the seller. While this will not 100% protect you, it certainly improves your odds of success. Most sellers are not going to try to rob you, but it never hurts to be prepared.

Trust your gut instinct

Don’t send in earnest money if you think that there could be problems. If you think that the seller is flaky, if things just don’t add up, then don’t go forward. Your brain is extremely complex, and the fight-or-flight reflex has been well honed for thousands of years. Go with your gut.

Conclusion

Earnest money is part of the mobile home park business. You cannot buy a park without it. But follow these tips to ensure that you have few problems, and none that you can’t survive.

Frank Rolfe Mobile Home Park Investment Expert
Frank Rolfe has been an investor in mobile home parks for almost 30 years, and has owned and operated hundreds of mobile home parks during that time. He is currently ranked, with his partner Dave Reynolds, as the 5th largest mobile home park owner in the U.S., with over 250 communities spread out over 25 states. Along the way, Frank began writing about the industry, and his books, coupled with those of his partner Dave Reynolds, evolved into a course and boot camp on mobile home park investing that has become the leader in this niche of commercial real estate.