This is stuff I have written in the past... just posting it up...
OK. We have gone through buying and selling a home, but that is just the beginning. Now lets fill in the blanks on how a note is serviced, how to repo a home, and what do we do if our buyer wants to move out. We can also cover collections and late payments.
Lets start with my most common event- someone wants to move out. This is good and fresh as I got a call this morning from a buyer who wants to move out of a home.
First- the home- This is an older 2/2 single wide I bought for $1000 cash. I had it a week and it sold for $4000 on payments of $175 per month. The payoff on the home is $2,632. I have received $1,450 in payments over the last 9 months she has owned the home. My buyer called and said she was moving out and into a townhouse in town. I gave her this option for breaking the contract.
1) we put a sign in the window, she pays the space rent until it sells. She pays me $1,500 to break the security agreement and moves out. I will finance the $1,500 on payments of $100 per month @ 15% as a second on her new town home.
Total return- $2,950 in 9 months and I sell the home again.
I have notified the park the home is coming back and for them to begin marketing it to potential buyers. The new price on the home is $7,500 @ 15% with payments of $250 per month. Because I have almost no inventory in the park at this time it should sell in 15-30 days. This is tax time so there is a good chance it will sell for cash, I will discount the home to $4,500 for a cash buyer.
Late payments- Most every month I have people that pay late. Sometimes I get a call, a buyer saying their check will be late a couple of days because of a pay-period problem, or slow week. If I get a call like that and the person is not late on a regular basis, I tend to wave the late fees for a couple of days so the buyer can get the check to me. Then there are the folks that are late every month. I have a single gal in a home that has never paid on time. I know at first it might seem like a problem... but follow how it is dealt with and tell me what you think.
First off- my payment policy. The home payments are due on the 15th and late after 5pm on the 19th. Late fees are $10 per day. So on the business day of the 20th, it is another $50. So if your late 10 days, its $100. I fax my late notices (which are templates on my computer for each note) to the park office and they post it for me. It lets them know I have not received their payment and then spells out how much they owe on any given day. Payments are posted on the day received so they must allow at least a day for the mail to get to me.
So lets look at this note- It is on a double-wide, payments of $465/month. The note has a escrow deduction of $30/month so the net is $435. If my buyer pays me late fees every month of about $100 my yield goes up another 20-25%. Yes... it might take some collection time, and people that always pay late will probably not last... but that is business. By the way, she called me on Friday and said I would get my check for this month on Tuesday... That is $160 in late fees.
My notice reads as follows...
NOTICE TO PAY
Date: Monday, December 19, 2005
TO:
Notice to you and all others in possession of the below premises, that you have hereby violated the conditions or covenants by which you hold possession of the property below:
You are to comply on or within (3) THREE days (excluding date of service and legal holidays) of receipt of this notice, pursuant to the applicable law of Colorado.
This notice is provided due to non-payment and or other violations of the agreement by which you entered in as follows:
Past due Payments in the amount of $ 325.00
Late Fees in the amount of $ 50.00
Damage Deposit in the amount of $
Past Due Lot Rent $
Lot Rent Late Fees Due in the amount of $
Other Charges $
TOTAL AMOUNT DUE $ 375.00 as of Tuesday, December 20, 2005.This amount is increasing by the amount of $10 per day until payment is received by PAR Real Estate, Inc.
**Failure to cure said violations within the prescribed time period will result in additional late and legal fees.
Other Violations of your agreement are as follows: n/a
PAYMENT MUST BE MADE WITH CASH, CASHIER’S CHECK, OR CERTFIED FUNDS.
This is not an election to terminate your obligations to pay for the balance of the amount owed under your agreement.
In the event you fail to pay the above amount and cure above violations within (3) THREE days of this notice, we shall immediately take legal action to recover monies for the unlawful detention of said premises together with such future amounts as may be due us for breach of your agreement.
Most of the people that are buying these houses live very month to month. Some believe if they have checks in they hand... there must be cash in the account to cover the check. I receive my payments with money orders, certified checks or cash. No personal checks.
So why is there a gap between when a payment is due and when the late fees start. I would question if there is a gap. I could re-write the clause to read- all payments are due on the 19th before 5pm. All late payments will be assessed a $50 late charge and $10 for each additional day. It really all says the same thing. But in court... I say... Judge, I make my payments due the 15th and give everyone 4 additional days to pay without penalty. This buyer pays 10 days late every month! See, I build in a 'good guy' time for the payments... it evenly applies the late fees and looks good to the buyer, and makes me look better in court.
So what does one do if the home is the subject of a midnight move-out?
So your buyer has been late a few times and you have posted their door. Now you head over and find the place empty with the keys on the counter. My security agreement has the following line in it I rely on in this very situation
'If the premises are left unoccupied for FIVE (5) days or more while payment or lot rent is due and unpaid, property will be considered abandoned and at the option of the Agreement Holder and or its assigns, is hereby authorized to take immediate possession of abandoned property as partial damages, disposing of mobile home and owners personal property as he may wish, without recourse.'
So... I head inside, put a sign in the window and call my handyman for cleanup, carpet cleaning and the locks to be changed. I put a lock-box on the door and my guy comes over that day and starts getting it ready to be turned. I head to the park office and let them know the old owner seems to be missing, or was living without furniture, and I will be repossessing the home. At this time the old owner is still on the hook for the space rent. Most of the time the park will leave the old owner in the space rent until they can verify they have moved out. They will have some sort of process handed down from the owners of the park as to how to do this.
Once the home is sold- I take the old title and a repo slip to the county and sell the home to the new owners using the old title. The repo slip removes the old lien and signs off on the title as a official of the finance company. There is one more step in Colorado where taxes have to be paid on the home, that might set you back another $100 or so. After this is done, I round up the paperwork on the old owner and head to court for my judgment. Break fees, space rent, cleanup fees, interest and court costs. Once I have the judgment I can go after the old owners for what is owed.
Let me add this. In Colorado signatures do not need to be notarized... I do not know why. This said- follow the law because signing a home over to someone when you do not have the authority to sign is the first step to 3 square meals a day in your brick cell. Keep honest and stay out of trouble. Every state has laws concerning this process- it might take some extra steps but you will sleep better at night knowing you have been honest throughout the process.
This is the best part of owning the note on a mobile home. In a property where your promissory note is secured by a deed, the process of getting back a non performing note is through foreclosure. A lot is said on this and other boards on how this process works and its ins and outs. our process here is much like the one used if you do not make the payments on a car you have a loan on. In that instance the bank calls a tow truck and hauls your car away, or more like their car now. So the process of a repo is much the same. If a home is vacated there will be a legal process dictated by your state to get the home back. This will probably involve posting the home and certified mail. It might involve a date in court though not always. You take the old title and a repo slip provided by your state, sign off on the title and boom your done. Sell the home again. In Colorado there is no court requirement just a few lines on a paper to fill out. This is the final step after a home has been vacated before you can resell the property.
The timing is important- most of the parks look at the date of this document as a watermark as to when you, the lien holder become responsible for the monetary issues surrounding the home. So with that said, depending on your relationship with the park you might want to do this right away, or hold off on this final step- leaving the old homeowner on the hook for what is owed on the home. This will depend on how that park goes after old space rent and legal fees. If they require you to pay them, then they give you their judgement, you might as well get this step out of the way now. If they are happy to recover past space rent from the old owner and write off the debt in your favor... well, you might not go out of your way to get this done. Relationships with parks are the key so keep them solid!
