Parents in a pickle. What are their options?

Question

Good morning,My parents are currently renting out their 70's era manufactured home. The tenant accidentally flooded nearly the entire house. When my parents went to go make an insurance claim, the inspector found evidence of previous water damage and mold and decided they would not cover the damages. They are now saying they will not continue their coverage until the water damage and mold is taken care of. The house is a very rural area of very northern California. House prices are not very high, with the median for the area being around $100k. They still owe $67k, and the house is only a few more accidents away from falling in on itself, especially after it being flooded. The tenant is terminal and may not be renting the house for much longer. I doubt investors would be interested in this area, and the house isn't able to be put on the market without significant repairs. They do not have enough equity in their current home to put towards the other as they moved under a year ago. Finding a contractor to even come out to the area is a challenge in and of itself. Given this situation, what the HECK do they do?! Thanks for any information and suggestions you may have.

Jay Hinrichs · Answer

be rare to the extreme in way rural N CA to have a true modular home.. west coast just has a fraction of that type of housing compared to the east coast.. I would be dollars to donuts this is a Mobile home.. the question would be do they own the land is this title as a MH or as fixed to the ground.. the ground could still have value as a buildable lot.

Jay Hinrichs · Answer

let it go back to the bank.. short sale it walk away.. although even rural CA usually has buyers at the right price.is this north of Shasta ? by the coast or more inland off of I 5 or eastern area off of 395 north of Susanville ?

Karen Margrave · Answer

It's understandable that the insurance company doesn't want to continue coverage unless the damage is addressed and repaired. It is possible for someone to go in and completely rehab a manufactured home. However; it has to make financial sense, and they would expect to get it for a rock bottom price, basically what's owed on it. It requires permitting, inspections, etc. and would need to meet current codes. It's quite possible a new septic would be required, which would make it extremely expensive. If were me, price as low as possible, and dump it.

Jay Hinrichs · Answer

that's a nice recreational area there.. your on the Redding side of Alturas there are world renowned trout fishing streams and rivers there.. I would think you would want to dive into it a little more.

Jay Hinrichs · Answer

yes it will hurt there credit.. unless they have the money to pay this off or make up the delta between what it can actually sell for their credit is going to be hurt either way.. as they would have to ask for a short sale.. Yup Alturas area is RURAL

Brett Goldsmith · Answer

Look into a short sale or a deed in lieu. Depending on condition and other factors a deed in lieu may not be an option. Do your parents own other assets with equity? I ask this as if they are solvent t hey may have tax liabilities associated with the potential settlement of the debt. Sounds like a potential tough transaction due to the location and issues. Do you think someone would want to buy it, fix it, and live in it? I'd likely list it as a short sale.

Charlie MacPherson · Answer

@Tashina Taylor The first thing I'd do is to contact a public insurance adjuster. Have him fight the claim with the insurance company.If that fails, put it on the market as a rehab property.You might clarify whether you mean a mobile home or a modular home. People tend to use these terms interchangeably, but they're very different types of properties.Modular homes are mostly built in a factory. The big pieces are shipped to the site and put together there. I saw one report out of Florida that said modular homes fared better in one of the recent hurricanes than conventional stick-built homes did.Mobile homes on the other hand are not as sturdy. Instead of appreciating in value like other homes, they actually depreciate. When I was researching them, I came across a statement saying that they have an expected useful life of 30-35 years. If you folks' home is a mobile home, it's 50-ish years old and well past its useful life. Not that you can't keep it in shape and keep renting it out, but you can expect a lot of repairs going forward.Good luck!

Tashina Taylor · Answer

They own the lot next to it, which has a well and electricity access. It needs septic I believe. The home did not have a foundation originally, and has some kind of foundation put in that was just enough to get it refinanced some years ago.

Tashina Taylor · Answer

Will this hurt their credit? They are located an hour west of Alturas, outside of Lookout.