Suppose you bought a mobile home with a $500 monthly payment, then added a matching carport, screened patio, storage unit, and air conditioning that increased your payments by $300 per month. Next, you put it in an upscale planned mobile home community, paying an additional $500 per month for your lot. Your combined payments would have soared to $1300 per month and your costs would approach those of owning a conventional home. To your chagrin, you would discover that nobody wants to buy your mobile home and to absorb these costs, so you give up and move out. This triggers a cascading series of repercussions creates a lot of opportunity.
When people simply abandon a mobile home, that creates two potentially distressed parties, the financer of the home and the owner of the land beneath it. A lender who repossesses the home must continue to pay lot rent to the owner, but when it chooses not to repossess the home, the lot owner is left with an “occupied, but un-rented, space. This situation generates a lot of motivated parties with whom to deal. Let’s examine the position of each of them to see why:
A mortgage lender is often far removed from the collateral. It’s easy to repossess a mobile home under the Uniform Commercial Code, but the repossessing lender has the Hobson’s choice of either continuing to pay rent, or to pay for moving a repossessed unit to a central storage area only to see it deteriorate into unusable and unmarketable condition. During this period, the lender/owner will now bear all the risk of liability associated with it while annual taxes and insurance continue to drain resources. When we’ve point out these delicious alternatives, lenders have been eager to sell their loans at pennies on the dollar.
Buying the loan leaves us confronting the lender’s dilemma, but with a major difference; we’re on site near where the mobile home is located. We’re willing, able, and ready to re-cycle the unit back into the market. But first, we need to deal with the plight of the borrower. As the new holder of the defaulted loan, we can work out a deal with the non-paying borrower that can solve two major problems for them; where to live, and how to preserve their credit rating.
When a family loses its housing, it must find other living quarters and move its possessions. We can help with this. In return for their signing over the title to us, we can allow them to remain in the unit rent-free until they can find new quarters. And we can agree to wipe out their debt without any negative credit reporting if they’ll leave the unit and the premise clean and ready for occupancy. Once we have the title and the mortgage, all we need is a place to put the mobile home. This brings us to the third player in our little drama; the lot owner.
A rental unit may be situated on an individual lot or in a park or mobile home community. In either situation, payments have not been received as scheduled. Both of these parties have the problem of legally evicting occupants and physically removing a large, cumbersome Mobile Home before the space can be re-rented or re-sold. Many States have special laws that protect mobile home owners from what they deem to be capricious eviction, so getting a mobile home removed legally can be an onerous chore that owners and managers are eager to avoid. This motivates them to sell or to rent their spaces to us at discounts to the market. We’ll leave the unit in place until we can buy a lot to place it on, or we’ll buy both the home and lot from the respective owners. The key is to be able to control both home and lot.
Once a mobile home and its lot come under the ownership of one person or entity, the next step is to reset it on an approved foundation and take steps to convert the mobile home from personal property to real estate. Then the lot/home package can be cashed out at full retail appraised value by an owner-occupant using either conventional or FHA financing. Washington Mutual has recently inaugurated a conventional loan program aimed directly at this market. The profit on a single home/lot transaction is amazing; depending primarily upon the cost of the lot, it can easily range from $30,00 – $50,000. With a lot less time and effort, that’s more than either the lot developer or mobile home manufacturer realizes.
