Is it ethical to post a “fake” unit on Craigslist?

15 Replies

If you’ve ever listened to Jefferson Lilly, one of his recommendations during the due diligence period of purchasing a MHP is to post an ad on Craigslist. He suggests getting a response rate of two per week (if I remember correctly). Am I misunderstanding what is happening. It seems to get people to bite you would have to present it as though you had a lot/mobile home available. It seems to me that you would be getting people’s hopes up. I know there is no guarantee that they would qualify, and your not taking money from them, but it’s still dishonest isn’t it? Am I alone in this thought? Am I misunderstanding how investors place “test” ads?

Interesting perspective...I've never thought about it that way. 

I have also never placed a test ad but still wouldn't hesitate to do it. I'd be inclined to simply not respond to inquiries and remove the ad as soon as it had accomplished whatever I had wanted to test.

I have definitely had the same thought. Is there a way around this? One thing I have thought to justify this—- is that if you do end up buying the park that you could reach out to those who expressed interest first. It’s difficult because I think testing the market is important but I have considered the integrity issue as well. 

Interested to hear the other feedback you receive. 

Jenny

@John West from my understanding of how Jefferson Lilly explains the test ad is that he advertises for a vacancy ( whether it be POH for rent, MH for Sale, or lot for rent) that already exists in the park. The LOI explains that as part of DD he will run the ads so he had the owners consent. If he doesn't buy the park he passes on the leads to the owner. If he does buy the park he can start infilling with those leads.

Also, I don't think the ads say, "Lot for rent in Sunny Acres Mobile Home Park 250/mo utilities included" but something along the lines of " Mobile Home lot for rent 20 min from Everytown USA, easy access to Highway XX, call for details" 

Its more to test the market rather than that specific park. Also, we investors can easily forget that the extent of some Park Owner's advertising is a sign out front and an ad in the classifieds. At least this way no matter if the park is sold or not, someone at least has the lead. 

John ethics is strictly personal my ethics don't equal yours and vice versa. When hunting I will only take a shot if it is completely perfect, or I pass. Ethics is how  you act when no one is looking. ;<)

Doesn't seem useful to me, but not hurtful either.

you aren't trying to do actual business on there, and craigslist isn't known for 'serious' buyers. Perfect fit! You'll be wasting as much of their time as they would of you.

as for ethics, I RARELY say ethics aren't important, but craigslist is kind of the place where the unethical are welcome.

@John West I do agree with @Alexander Felice . My experience with the craigslist platform is the same: few serious buyers/renters far and in between. The best prospects are people actually living very close to the park (or have friends and family members living in the park) who are ready to move. Good luck with your research! 

It does violate the Craigslist terms of service.  It is unethical.  In some states it probably violates the licensing law and anti hacking laws.

I have made ads for apartments in buildings while under contract to test the market.

It worked.

@John West I am not certain if the following will ease your mind on this practice or not but here it is.  First, when you market mobile homes you normally get 50 calls for every actual viable lead.  I have done this and I let the callers know immediately that we will have vacancy soon but nothing currently.  If they say they need housing immediately we pass the lead on to the sellers management team. If we do not close all of the leads go to the seller.   In my opinion it is neither unethical nor dishonest since the purpose is to gauge the interest in the market and to sell the housing at some point.  When I close on a park those numbers are the first I call to try to place those people.  Interestingly enough I have never sold a home to a person I found on a test ad.  If you word the ad honestly and treat the people honestly this is a great tool and there is nothing wrong with it.

Paul Stout, Broker

I have walked away from deals because of poor test ads.  And the logic I use is simple: better to know the market and walk away when needed than to buy a property with lots I can't (reasonably) fill.  

Do I feel bad someone spent 10 seconds texting a burner number saying they are interested?  Not really.  They will get the chance to apply for one of my future homes after I close the deal.

It's my recommendation nobody put a large investment at risk without this information.

Thanks all for the input. I like the idea of marketing with permission of the seller and passing leads on. Sounds logical - it helps the seller, buyer and even the applying tenants.  

The park I'm doing due diligence on is a small park (20 spaces) that is about half empty. I believe it has just been mismanaged. A few years ago it was 75% full. When you run test ads, are you advertising for people to bring in their own homes, or are you bringing in a mobile home and advertising rent to own? 

@John West ...you can run it both ways, you can name the park if you have permission maybe...or just name the city with some general pictures of homes that look similar to what is in the park or what you'll be bringing in.

It depends on the market and the park, you want the ad to be accurate as possible to what you are going to bringing in and truest representation of the homes in the park...unless a senior only park, or 1 bedroom trailers....a family is going to look for the best school district for their kids..so be sure to name that as well..unless a truely bad school district.

Mobile home park residents still look for everything that a single family renter looks for as well in a market for their kids.

It is important for investors to cover all their bases when doing due diligence on any property. There is after all money on the line and you should do what ever is necessary to insure your money is being invested properly.

When it comes to money (or anything else) ethics is subjective. It is a personal standard for the most part up to the point of intensionally breaking the law.

He was vague on the ad. I don’t think his intention was to be unethical.
Like someone else said 10 seconds wasted of someone’s time to see if a deal will fly will still get you a possible tenant if not at that location.
Rachel is right about friend and family being the best.

Bethany Rankin, Real Estate Agent

@John West

I have done this many times to check the demand on all kinds of things. It works great and no one is harmed. “Sorry, sold it” is the response.

If anyone has a better, cheaper, faster way to preform market research, I’m all ears.

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