RV Park Mastery: Episode 65

How To Get An Extension

Buying an RV park typically includes a due diligence period and financing contingency. But what do you do when you can’t meet the timetable spelled out in the contract? In this RV Park Mastery podcast we’re going to review constructive steps to successfully obtaining an extension from the seller if that is necessary. In a perfect world everything would fall into place on the promised dates, but the world is not perfect.

Episode 65: How To Get An Extension Transcript

In a perfect world, everything goes smoothly. We meet all of our deadlines, everything is running just as planned, but the world isn't that perfect. This is Frank Rolfe, the RV Park Mastery Podcast.

We're gonna be talking about the simple fact that every time you enter into a contract, you have to be prepared to get an extension on either of your due diligence or your financing contingency. Now, all good RV Park contracts should have both in the document, so you need to have a due diligence provision, that allows you to check everything out about the RV Park, make sure that everything you were told is true, the things that you've never even discussed are in place, and then you need a financing contingency to make sure you can get a loan to close on the transaction.

But here's a problem, it doesn't always work out as you thought it would. Just imagine you're doing everything properly and suddenly there's a roadblock in due diligence, there's a third party report you can't be getting in time, you're on the financing side, you're trying to get the loan and the banker goes out of town, the bank's attorney has an illness. There's a million things that can happen to derail any deal for making its timetable that's set forth in the contract. So then what do you do? Well, here are some thoughts of how to get extensions on RV Park due diligence or financing contingency period. Number one, don't be ashamed to ask for more time. It is very reasonable and normal in any deal when you don't control all the pieces, which you don't. There's something will pop up and derail it from hitting the scheduled date. This is nothing to make you feel like you failed, or you're an amateur, or you're just no good at buying an RV Park. Typically, who's at fall is some third party, might be a survey, surveys are a frequent culprit when this happens, or your banker who just can't get his act together in time. But don't feel like asking for more time is a shameful thing. Asking for more time is just a part of business. It's just a part of buying an RV Park. Everybody does it. The largest owners of RV parks have done it all the way down to someone just buying their first one, so don't be ashamed to ask.

Number two, give the seller the entire truth on why you need the extension. Don't lie. Tell them absolutely what the problem is. If the problem is the surveyor said he would have the survey on this date and now he tells you he can't make that date, tell the seller exactly that and explain to them that's why you need the extension.

However, it better not be that the reason you need the extension is that you drag your feet or that you have fear of pulling the trigger. At the very end, you just can't make a decision. If that is what occurred, if what's happened is not the part of a third party and it's something that you fully control and you just put off to tomorrow what you could do today, or you didn't really feel strongly enough about the property to ever buy the thing to begin with, that's not going to go over well. So tell the seller the truth as to what has occurred, but don't make it one of those issues, because you won't be able to get an extension if it's one of those issues. The seller is going to tell you if you cannot give him a legitimate reason why, no, and if you're gonna tell him, "Well, I need more time just to ponder it," once again, no, because the seller has other options, at least they hope they do, and if they don't think you're a legitimate buyer, if they think that you're just a tire kicker, they're gonna move on to the next person. But if you have real reasons, things beyond your control, then tell them exactly what those are, 'cause they'll deal with that.

Now, if it's a third party delay, a good way to broach that with the seller is to get something from the third party acknowledging they need more time. It's not that hard to do. Let's assume the problem is the appraisal. They promised they'd have the appraisal on a certain date, they're not gonna get it on that certain date, and you need more time, what better tool than have the appraiser write you or email you something stating they're backed up right now and they were unable to get it done, but they should have it done by this new date? That's the kind of information that makes the seller feel very strongly that everything is fine, that you're right on track with what you were doing, that they shouldn't hold you at fault because it's entirely somebody else's problem, and now you have every possible reason why the seller will say, "Okay, I understand that the same thing could happen to me."

And if it's a lender issue, even better. If you can get your lender to call the seller and say, "Hey, Mr, seller, this is the bank. We're doing the loan on the property. There's nothing wrong with the loan, but we've just got behind in all the things we have to do," you're gonna get that extension, because once again, the seller will be fully accommodating 'cause you've proven to him that you've done everything that you were supposed to do, and it's outside of your control and in the hands of somebody else, and I can't imagine any seller based on that, say, "No, no, I'm not gonna give you that extension."

Also, make sure that you always set expectations correctly. Everything you do with the seller should always be done with the intent of being factual and on time. Don't set for yourself false deadlines that you know you can't make and just think, "Well, it's just okay. Let me get my foot in the door, and I'll correct it later." Sellers like people who seem conservative in their estimates that are gonna be able to meet their timetable. There's nothing that annoys a seller more than when someone says, "Oh yeah, I can buy that property in 14 days," and then 14 days in, they're only halfway through their due diligence, no financing, and it's never going to happen. That's just not going to work. So give people reasonable periods of time.

Also, think of it from the seller's perspective. So let's just change positions here. If you're the seller of the RV Park and you've already got it under contract and you've told them you're gonna do your best to try and get it worked out in due diligence and in financing, they have no guarantee that the next buyer is going to find anything or do anything any better than you are. So as a result, it would just make complete sense that they would wanna go ahead and stick with you, the incumbent, because you've already put in the time and you've already moved it forward to a certain degree. And if there's certain things that you need additional, well, they'd rather be better off giving you that extra time than just canceling your deal, wasting more time trying to find a new buyer, and then moving forward with them.

Also, remember that the seller, once you enter into the contract, they always have a vested interest in closing, 'cause they kind of start mentally spending the money. It's just human nature. So if I'm gonna sell my RV Park to someone, if I'm gonna make a certain large amount of money, I've probably gone out and already started looking at things I wanna buy. Maybe it's a different house, maybe you're gonna go retire on a boat, whatever the case may be, I've already mentally made a commitment to myself, "Hey, this is happening." I've even included in my spouse and other people into this decision, into this lifestyle change. And that was very troubling to suddenly tell everyone, "Oh, oh, well, I had to cancel the deal because they couldn't get to close on that certain day, so as a result, we're gonna have to scrap all those plans." You know how unpleasant that would be. And additionally, during due diligence, you probably have talked to the RV Park manager, people have seen survey stakes go in other items, and it's again, tough if you're the seller now to undo that, because there is some degree of damage. The manager knows it's selling, so the trust and the bond will never be the same between the seller and the manager, because the manager knows that their relationship together is gonna be in relatively soon.

So sellers have lots of skin in the game too. It isn't just the buyer, so as a result, when you go to the seller and say, "Hey, I need extra time. I need to do my due diligence, I need to do my financing, I need a little bit of extension," they have much skin in the game, and they are typically gonna go ahead and give you that extra time.

But one word of caution, don't do something in which you go ahead and shorten and drop some of your diligence or financing to meet that schedule. That is the mark of a really bad buyer. I would further ask for the extension and fail to get it and move on to the next deal than to scrimp on something that I need to be doing to be a good buyer. For example, if the surveyor says, "I can't get the survey in time," I wouldn't buy the property without a survey. That wouldn't make any sense. If I was trying to get the certificate of zoning from the city and the city can't get it done in time, I'm not gonna skip that step. You've gotta hold true to your mandate to be a smart buyer. You need to make sure you're doing exemplary due diligence. And you gotta make sure you don't ever give up and slack off on that just to meet some arbitrary deadline date.

In 25 years of buying and operating RV Parks, I've never had a deal that fell out of place because of an extension. And we've asked for extensions many, many times. If you follow these tips, you will have no problem in getting a seller who will agree to those extensions, which will then give you the time to complete the deal successfully and move on. This is Frank Rolfe, the RV Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.