Realtors: How to sell a Manufactured home w/Land
Tuesday Mar 21st, 2023
How to sell a Manufactured home with land
Manufactured homes, often inaccurately called "Mobile Homes", are here to stay. Some sources say 19% of all homes in South Carolina are Manufactured.
So why do most Realtors avoid them? Commission and Difficulty.
It's no secret that most Real Estate Agents shy away from Manufactured home sales. There are several reasons for this.
Lets get #1 out the way, because people are often too chicken to mention it in fear of sounding "Too good".
The average Manufactured home sells for significantly lower price than a site built home of similar size. So the Commission is
relative to the sale price and pays less in the end. This would not be such an issue if it were not for #2 and the entire reason for this blog today.
Manufactured homes are much more difficult to transact than a typical site built home. So when you consider they take more effort and pay much less, there is no need to look elsewhere for a reason to avoid them. BUT...BUT....If you do not see Manufactured homes as inferior and do not mind a little bit more work, they can be a niche market worthy of your time. Especially if you love and appreciate the types of people who buy them. Which are typically discount shoppers who want more bang for buck. Like me.
What makes Manufactured homes harder to sell?
I thought you would never ask.
Lenders. Yep, its the lenders. Well...and the Insurance companies. Both see Manufactured homes as a higher risk. For these reasons, lenders have a few more requirements to lend on them. Especially if going FHA or VA. And these are the loans I plan to discuss.
If buying a Manufactured home, your FHA and/or VA loan lender will require the following:
- Data Plates with Serial Numbers, date of manufacture, Wind Zone and HUD numbers
- Both HUD Labels on the exterior of the home matching Data plate
- CL-100 wood rot and Termite inspection
- A water test if the Septic and drain field is under 100 foot from the well.
- A rendering (Drawing) by a Licensed contractor of the distance between drain field and well if over 100'
- Engineer Certificate-stating the home is on a Permanent foundation meeting current HUD Foundation standards
- -If it does not pass the engineer standard for today, a modern foundation alternative must be installed
- De-title- Retirement of the DMV title
Data Plates: These 8.5x11" stickers have all the manufacturer information on them and are often located in a kitchen cabinet, Master bathroom cabinet, Master bedroom closet wall, Utility room wall, Inside the Electrical panel door. Take a picture of this data plate as soon as you can and hold it for later dates. You will need it. If this plate (sticker) has been removed, you can order one through the IBTS institute. But, you will have to locate the S/N somewhere. Look back in the deed/title record for this number, a prior appraisal, Insurance policy, etc. If you are late retrieving this information, the IBTS will be very willing to charge you a crazy amount of money to rush deliver. But, if you are early enough (Knowing what you need) the charge is minimal to you and your client.
HUD Labels: These Aluminum 2x3.5" tags are located on the long sides of the homes at the corners. There will be two on opposite corners most often attached by rivets to the siding about 6 inches from the edge and bottom. If the siding has been replaced or damaged and the HUD Labels are missing, no worry. The IBTS can give you a letter stating the home meets HUD standards and was issued the labels at one time. You can order this letter for a fee. You will need the Data Plate information and S/N.
What is all this HUD Label stuff any ways?
These labels certify that your home meets the HUD standard at the time of manufacture. These little labels are why we no longer call them "Mobile homes". In 1976, HUD set a minimum standard for homes built with permanent residence in mind. These labels are given a number that can be traced back to the HUD label on record confirming the home was made to the HUD code of the time of manufacture. These numbers allow the Insurance company or IBTS to look up which safety and quality standard code the home was made to. Insurance will need this number to know what they are getting themselves into.
CL-100: This is a debatable inspection including both wood rot and termites. I call it debatable because many of us do not agree both should be on the same inspection report. There is almost always going to be wood rot somewhere on a door frame or small corner of an older home. So why place this on a letter that also has the house destroying insects? You got me. I don't make the rules. These letters are written by a licensed pest control technician. They specify if issues were found and if they are "Active" or "Inactive". If something is found to be "Active", then it is considered to be a Dirty CL-100 and must be "Cleared" by a licensed contractor. Meaning the contractor must evaluate, repair, and certify that the issue(s) mentioned have been taken care of. Contractors take these letters seriously, as everything comes back to them if the problem returns.
Water Test: FHA and VA wants to make sure the water is safe to drink. If a drain field is too close to the well and pump, it could cause an issue with drinking water. Of course what is being poured into the ground will be filtered by the ground. But, depending on soil types and various other things, sometimes the water is not filtered good enough and is not far enough away from the well that dirty things pop up in a test. Regulations state that if a well is less than 100 feet from the drain field, A test is required. These tests cost money. And the later you act to obtain this test, the more the testing company charges for rush orders. Starting to get the picture? Knowing how to close these deals timely saves you and your client money.
Distance and rendering: If you step off the well to the drain field and feel you're over 100 foot, you might save some money on a well test by getting a drawing of the distance by a contractor. This is cheaper than a test in many cases. But, you have to have somebody with a license. They will not trust your good word. Sorry.
Engineer Certificate: This is a certificate stating the home has been affixed to a permanent foundation using a method that meets or exceeds the current required standard. Most homes installed after 2000 are using the modern foundation attachment methods. But, still must be inspected to confirm. These engineers are not cheap. They charge to come out and inspect. They have to crawl underneath. And they are not so happy about that. I often see prices between 500-750 for this inspection. If the home fails the inspection, you must install a modern alternative and can expect the engineer to charge a second time to come back out to certify.
Alternative foundation systems: IF your home does not meet the engineer's standard for a permanent foundation, you have a few options. But, all will cost money. In many cases what is required are more hurricane straps closer together and/or cross strapping/bracing. Which is difficult in many applications since the home often has a system already installed and or/skirting that prevents adding more straps to the exterior walls. So the most common, safe, fast and cost efficient option is an alternative foundation system like the Oliver system. Which works along with what is already in place and attaches to the corners. See my last blog for more info on these types of systems. Once the system is in place and the engineer feels it is adequate to meet his/her safety standard, the certificate will be issued. The insurance company and lender will need that.
Retire the title: There is much ignorance on this phrase. But, it is not to be feared. I find that 90% of the homes I have sold, do not have retired titles. Why would they? There is no real benefit unless the lender needs it. Berkeley County allows you to combine the 2 TMS numbers to pay one tax bill even with a title still on the home. So, why do lenders want this done now? Well, first let me explain why there is a title in the first place.
No, it is not a car. Sorry Mr Ramsey. It's Nothing like a car. A flatbed Trailer and an RV have Titles. In part, because it is taxable personal property. But, the main reason is because the steel transportation trailer under them was once used for transport on a county or federal Highway. That Title says it was not just put together by Jimbo and Joe Bob on beer night. The title was given after the DMV confirmed it met safety and quality standards to be trusted on public highways. A title makes it legal to be transported on its own. Once the home has been delivered to it's final location (Home Sweet Home) there is no more need for a title. By retiring the title, the lender is making the home illegal to transport. They do not want their collateral WALKING off.
Are you getting the picture here? The lender will lend on a Manufactured home. But, they want it to be "Permanent" and have a "Retired Title". Why? Because they want to insure it STAYS with the Land. And the insurance company also wants the home to remain attached so their insured home does not float away. That would suck. Or blow. Whichever works.
NOW, the average inexperienced lender will freak out at the last minute because their underwriter will tell them the home must be De-Titled Prior to closing. And at this point, it is normally too late to make that happen in time. Attorneys, who have experience doing this, will sometimes write a promise letter to the bank stating they will handle the retiring of the title Post-Close. It's actually much easier to do AFTER it transfers with the new owner's name on the title. Rather than attempting to do it all with the current owner and then switching it over. Normally the lender's underwriter will allow this. (For me) I have seen this succeed 100% of the time. However, I use specific Manufactured home experienced lenders who simply get it. Each county and state will be different on retiring titles. So this option is best.
Now, the VA is going to also require a Septic inspection. Just to make sure there are no back ups. And I don't mean delays in the loan process either. I mean the stinky ones.
These items listed above will be expected every single time. Stay on top of these and you will not be blindsided. Now, you still must consider all the smaller common issues that Manufactured homes sometimes face due to the type of construction, locations they often set, methods of getting water and septic rurally, Types of plumbing used in earlier models, and quality of the builds. You must remember that Manufactured homes are built in a factory for speed and cost efficiency. You can buy a blinged out LS version with granite counter tops, Architectural shingles and 2x6 exterior walls. Or you can order a budget minded SE model with OSB flooring, 2x4 exterior walls, and 3 tab shingles. The budget models may actually have the infamous 1x3 and 2x3 interior wall studs they are famous for. But, this is only because someone skimped on the initial investment. Not because all Manufactured houses are built this way.
So, if the home was a budget model, the owners will have to maintain that home more often and upgrade it quicker. For example: the roofing on a budget model will not last as long. Or the cabinets will be made out of pressed wood instead of solid wood, which will wear faster. Deferred Maintenance and lack of upgrading are most often the cause of inspection problems in these types of homes. You can expect to see more issues pop up on an inspection when buying one of these budget models. Knowing what to expect will be very helpful for you as a buyer or an agent when buying/selling a manufactured home.
To top all this off, you can expect higher insurance premiums and higher Interest rates on manufactured homes because insurance companies go by nationwide statistics rather than local. You are paying for Kansas and Oklahoma homes torn up by wind storms. Lenders charge more because these homes are riskier. Studies show they fall into deferred maintenance more often. -Not because of their quality alone. I believe it is due to the situations often surrounding purchase of a budget model. If someone needed to purchase a budget model new, it's possible they may not have the money to maintain the property properly. (This is my opinion)
There are agents and home buyers that simply cannot deal with the ups and downs of Manufactured housing transactions. And remember that these transactions pay agents less money while promising even more stress. Why on Earth would you do it, Ryan?
Because, it's not all terrible. You can buy a larger home on a larger lot for less money when purchasing a manufactured home. If maintained and upgraded, owners often see their home's value multiply. If you want more bang for your buck...More space for less money...These are great homes to have. Just inform your clients to maintain their homes, upgrade when they can. Keep water out. If they do these things, they can expect a good return on their budget friendly investment for years to come. I will tell you how to do just that in an upcoming blog.
The Real Estate Firm