Manufactured Home - Bank Financing - On Owner Financed Lot

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Manufactured Home - Bank Financing - On Owner Financed Lot

Julie Taylor
Real Estate Investor · Topsail Beach, NC · Member since 2010 · 33 posts · 1 vote

Hey, BP Friends,

Advanced apologies for the length of this post.

I'm looking at a subject-to deal on a double wide in NC that has been vacant for YEARS. The current owners have a bank mortgage on the home itself, which is still considered personal property. The home sits on a lot that is owner financed by the person who developed the neighborhood. They have consistently paid both the lender on the home, and the land owner. It does need repairs, but the numbers are good. This is an opportunity to help the owners with a significant pain point in their lives. Because of the area, condition, and current market, I can exit in multiple ways (wholesale, flip, rent) with some cash in hand. 

I know the home will need to be reclassified as real property in order for most buyers to obtain future financing. I just want to make sure that there are no other weird things that I need to watch out for in this deal. I'm hoping that some of the friendly BPers who deal with manufactured homes will offer advice, tips, resources, etc.

I'm also looking for contract guidance (samples, anyone?) as a starting point, which I will put in my toolbox to meet with the RE attorney.

I am appreciative of any helpful nuggets the experienced MH investors in the room have to offer. 

All the best!
Jules

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  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    7y

    Look for the HUD plaque. No plaque = it's a trailer not a manufactured home = no institutional mortgage.

    If it were me as part of my due diligence, I'd pay out of pocket for an appraiser of my choosing, and ask her to do the appraisal to FNMA standards and "subject to" the property becoming real property. (In this context, "subject to" does not mean what it often means on BP, we're NOT talking about taking over someone else's mortgage, we mean "in the hypothetical condition that" the property becomes real property rather than personal property). I can't tell you how many "hey Chris I got this SLAMMING deal on a property that I paid all cash for!" conversations end with "sorry but neither you NOR any potential buyer can get a normal 30yf mortgage on it.... that's WHY you got a slamming deal."

    FYI, no one will be getting a normal 30yf investment property mortgage on a manufactured home. That mostly rules out selling to another investor, and it rules out turning it into a rental and you being able to do a cash out refinance (or any refinance for that matter assuming you want a good 30yf mortgage). Best "exit" plan IMO would be to look for a retail owner occupant buyer and put it on the MLS.

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  • Julie Taylor
    OP
    Real Estate Investor · Topsail Beach, NC · Member since 2010 · 33 posts · 1 vote
    7y

    Hi, Chris,

    Thanks for your response.

    Home is from 1999, and the HUD plaque is in place outside the home, and the data plate is still inside the cabinet.

    I have a couple of cash buyers who regularly flip manufactured homes, so I anticipate that this one will appeal to them as well. I guess I want to make sure that what I think has to occur for reclassification as real property, is really all that has to occur. The home is positioned on block piers, but is underpinned (no brick). My understanding is that if tongue and axles are removed, home is strapped down, intended to be a permanent fixture, and title is surrendered to the state, I can request reclassification. From your lending experience, are there other things that I'm missing?


    As to exits (beyond the aforementioned investors), I could leave the existing financing in place and add it to my rental portfolio. I've also considered selling it to an owner occ with a wrap. My partner is a realtor and has closed two recent transactions with 30 year mortgages on 1994 doublewides on permanent foundations. This should ultimately be comparable.

    Other thoughts?

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