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Welcome to the RV Park Mastery Podcast, where you will learn the correct way to identify, evaluate, negotiate, perform due diligence on, renegotiate, finance, turn-around and operate RV parks. Your host is the 5th largest owner of RV and mobile home parks in the United States, Frank Rolfe.
So, you're buying an RV Park, you're in the due diligence period, and suddenly you realize that the deal is not looking like you thought it was going to. The numbers have changed, everything's a little different, and as a result you no longer wanna buy it. But your concern is, how do I cancel this deal even though I have the full legal right to do so without burning the bridge with the seller, without burning the bridge with the broker? How in the world can I cancel a deal without going out there and sticking a dynamite stick in that bridge and ruining it forever after so maybe I can't see any more opportunities? This is Frank Rolfe, the RV Park Mastery Podcast. We're gonna talk all about canceling deals without offending people, canceling deals without ending the relationship with the broker or the seller. So, what is the etiquette? What are the steps you can do to minimize the permanent impact of canceling an RV park deal?
Well, the first thing is don't wait until the last possible minute. You wanna do it well ahead of the end of due diligence. This is a critical mistake that many RV park buyers do. They tied the thing up, they've got 30 days of due diligence, and now what do they do? They don't call the seller or the broker until the final day of due diligence where it all ends at 5 o'clock and they call them up at 3 o'clock. That's the worst thing you could humanly do because the longer you waited, the closer you come to the final hour of due diligence, the more the broker and the seller are celebrating the fact that you did not cancel.
They've already mentally moved on. They're thinking, okay, well, I guess it's gonna close. I better start looking for that vacation home or whatever their goal is that they're gonna do with the sales proceeds. And so, the shock is a thousand times worse when you call them right at the end of due diligence. Far, far better off to do it a week or two weeks early or as soon as you see whatever it is that's derailing the deal. At that point, reach out to people and say, wait, I have a problem. I have this thing under contract, but suddenly I've learned this fact and this sours the deal for me. So don't wait until right before the deadline. That's the worst thing you can humanly do. Number two, you've got to be a 100% honest as to what the problems are. It can't just be, Well, I've changed my mind. Well, what does that mean? That's insulting to the broker, insulting to the seller, because it looks like you were never serious to begin with. It was all just kind of whimsical. Like you just suddenly decided, Nah, I don't wanna eat at that restaurant anymore. And then you drive down the highway to go to a new restaurant.
It's just kind of insulting. So instead give people exactly the reasons why you wanna cancel. Don't have to fabricate them, make them up 'cause they're legitimate. They are the reasons that you don't wanna buy it any longer. So why is that? What happened in the interim? Was there a problem on the permit? Is there a problem with the location? Are you having concerns about the floodplain that the zoning has? Whatever it is, just tell them, Hey, here's my problem. When I tied it up under contract, I thought it would be X, Y, Z. And instead of that, I'm coming up with a whole different take on this RV park. And it's got me worried and therefore I want to cancel, but be honest. People appreciate honesty in these situations. You're never gonna get ahead if the whole plan is to just kind of give some broad brush story or even worse, make things up that are not even true. That will definitely burn your bridge with just about everyone 'cause they feel like you did not even give them the worthy respect to actually do due diligence. And now you're still not even being honest with them even after that.
Also, whenever you go to cancel the deal, there has to be a plan B. Tell them, look, I'm thinking I may have to cancel this deal, but here's a solution. So give them a problem solution story. Don't just give them a problem story. Not just say, I'm gonna cancel the deal. No, but I'm gonna cancel the deal unless we can do X. And that's where you need to put your creativity hat on to decide what would X be. In many RV park deals, the solution may be for the seller to carry the financing. When sellers carry financing, magical things happen. It means you can go with a lower amount of down payment. That's always attractive. Or a lower than market interest rate. That's also very attractive. But you've got to tell the seller, Hey, these are the options 'cause that way they make the decision. That's much less painful to them if you say, Well, I'll go ahead and buy the RV park, but here's the deal. You'll have to carry the paper at a 2% interest in year one, and a 3% in year two, and a 4% in year three, and a 5% in year four and on. Because then it's their idea to terminate. They will then say, Well, let me think about that.
Then they'll come back and say, Well, I can't do that. So now the bridge isn't burned because it's as though they are the ones who inserted and lit the dynamite stick on the bridge. So give them a problem solution. Let it be their choice. It's also very important with your seller to be what I call inclusive. And by inclusive, I mean that you invite them into the decision making process that will, again, insulate you from situations where they think, Oh, well, this guy didn't give me a reasonable amount of effort on this deal. No. You go to them and say, Here are my findings. What do you think? Double check my work. Where did I go wrong here? Because then they will have a better understanding of what position you're coming from. And to be honest with you, that may also improve the way you negotiate the deal if you don't cancel. There's nothing that's better to your interest than having that seller who's fully engaged with your deal and understands exactly where you are coming from.
Also, if there's a broker involved in the situation, you need to talk to the broker in advance. Tell them what's going on. Because what's gonna happen is when you then go to cancel, the seller is gonna go to the broker to get his opinion on it all. And that includes your alternative plan. If you say, Well, I could still buy it if you carry the paper and do X, Y, Z, they'll ask the broker for his opinion. You need to keep him in the loop and get him informed. So if you're gonna cancel the deal, the first person you might call will be the broker. Again, well ahead of the expiration and say, hey, broker, here's what I'm finding in due diligence. Here's my plan to turn this thing around. What do you think? Can you sell the seller on this plan? That will help insulate you from having a broker who will no longer show you more deals, because in fact, you kept him well informed and that may help you get that deal forged after all. Also, it's very important in all of these situations that regardless of what you do, whether you go forward or end up canceling the deal, that you debrief everyone on exactly what happened.
Don't just cancel the deal and never talk to the broker again. That's not a good idea. Instead, talk to the broker and tell them exactly what happened. If you ever go to the Bahamas, there's a museum there. It's a museum of pirates, because in the Bahamas, pirates were a big industry for them. So it's not like a wax museum of Blue Bear the Pirate or something with all kinds of a hokey set. No, this is actually a discussion of the piracy industry in the form of a museum devoted to piracy. What I thought was interesting in the museum is that pirates had a very, very sophisticated technique they did after every outing they had at sea. They would go out to sea to try and chase ships and steal the cargo and stuff. But on the way back to port, they did a very large debriefing where all the pirates would go over how it all went, what each person did, and whether or not they still felt it was fair, the amount of the bounty of the piracy that they were to receive. Now, the pirates did it because they wanted to make sure everyone was happy so they didn't end up killing each other in the bar later when they arrived, and also to get a feel, based on how the voyage went, if they should all wanna go out and do it again with those same people.
But even after you canceled, you're going to burn the bridge if you don't talk to the broker and tell him exactly what happened. Do some kind of discussion of exactly why that deal failed. Or conversely, if that deal goes through, how you were able to save it. People like to know where things stand. They like to know the story. They like to know the case study of what transpired. And it's very awkward when you don't call people after you've canceled to follow up. Even a seller that you cancel with is not necessarily terminated that relationship. You could theoretically still end up buying it from them later, perhaps at a reduced price, or maybe if they got their net income up. So stay friendly. Talk to people. Give them the inside scoop of what happened. Don't be afraid to keep talking to them. We've bought many a deal that we canceled in an earlier part in time, and yet we went on later to buy it again. The bottom line to it is that it's a very natural part of the process to cancel deals in due diligence. Everybody does it. But the etiquette, the way you handle it, makes all the difference whether you can successfully go back to those same people again, or whether that bridge is destroyed. This is Frank Rolfe, the RV Park Mastery podcast. Hope you enjoyed this. Talk to you again soon.