Nuts and Bolts of Seller-Financing a MHP?

Multi-Family and Apartment Investing
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Nuts and Bolts of Seller-Financing a MHP?

Thadeous Larkin
Colorado Springs, CO · Member since 2018 · 85 posts · 144 votes

'Sup nerds?

We're negotiating seller-financing for an off-market MHP.  That's cool, right?  Go us!  The only issue is...I have no idea how the nuts and bolts of seller-financing actually works.

I understand the basic concept of seller-financing, so my question isn't like "WHAT IS SELLER FINANCING?"  I mean when it comes to a commercial property, what is the step-by-step of how seller-financing actually works?  Examples of things I don't know include: who do I talk to about payments for the loan - escrow must be involved, right?   Is there any sort of closing - we must need to record something somewhere?  How are the taxes rolled into the sale?  You see how much of a neophyte I am when it comes to this?  Basically, I don't even know what I don't know.

Imagine that I'm talking with the Seller and he says "Ok, great, let's do this 'seller-financing' you're talking about at 10% down and 4% interest.  Now, how do we set this up?"

How do I answer his question?

Anyone with prior experience doing a seller-financing deal (MHP or commercial or really anything), please help!

Thanks!

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Ken Rishel
Specialist · Springfield, IL · Member since 2011 · 700 posts · 479 votes
6y

Seller financing has become considerably more complex since the emergence of the SAFE Act and later followed by the passage of the Dodd-Frank Act. What was once fairly simple and more focused on the process is now very complex and expensive because of all the new laws even the smallest would be seller financier is now subject to.

The issues are even more complex because the financing of manufactured homes has many rules that are different than those that apply to mortgage lenders. As a result there are perhaps five law firms in the entire United States I would consider qualified and experienced to advise a seller financier and none of them are inexpensive.

Unless you are planning on developing an ongoing lending operation that originates a minimum of ten loans a month, seller finance is not a viable solution. There are some other options for smaller operators. If you want further input, feel free to email me.

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  • Brian Gibbons
    Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
    6y

    @Ken Rishel

    Expert on financing Mobile Homes.

    1Reply
  • Greg Dickerson
    Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
    6y
    Originally posted by @Thadeous Larkin:

    'Sup nerds?

    We're negotiating seller-financing for an off-market MHP.  That's cool, right?  Go us!  The only issue is...I have no idea how the nuts and bolts of seller-financing actually works.

    I understand the basic concept of seller-financing, so my question isn't like "WHAT IS SELLER FINANCING?"  I mean when it comes to a commercial property, what is the step-by-step of how seller-financing actually works?  Examples of things I don't know include: who do I talk to about payments for the loan - escrow must be involved, right?   Is there any sort of closing - we must need to record something somewhere?  How are the taxes rolled into the sale?  You see how much of a neophyte I am when it comes to this?  Basically, I don't even know what I don't know.

    Imagine that I'm talking with the Seller and he says "Ok, great, let's do this 'seller-financing' you're talking about at 10% down and 4% interest.  Now, how do we set this up?"

    How do I answer his question?

    Anyone with prior experience doing a seller-financing deal (MHP or commercial or really anything), please help!

    Thanks!

     You should consult with your real estate attorney to make sure you understand the process. The next step is to settle on the price and terms with the owner. Is this simple interest only? Zero interest? amortized loan? Once you determine all the details you take the contract to your attorney to draw up the contract and prepare all of the security instruments and then record the transaction. After closing the payments would sent directly to the seller. This is a brief high level overview but should give you an idea of how the process works.

    1Reply
  • Ken Rishel
    Specialist · Springfield, IL · Member since 2011 · 700 posts · 479 votes
    6y

    Seller financing has become considerably more complex since the emergence of the SAFE Act and later followed by the passage of the Dodd-Frank Act. What was once fairly simple and more focused on the process is now very complex and expensive because of all the new laws even the smallest would be seller financier is now subject to.

    The issues are even more complex because the financing of manufactured homes has many rules that are different than those that apply to mortgage lenders. As a result there are perhaps five law firms in the entire United States I would consider qualified and experienced to advise a seller financier and none of them are inexpensive.

    Unless you are planning on developing an ongoing lending operation that originates a minimum of ten loans a month, seller finance is not a viable solution. There are some other options for smaller operators. If you want further input, feel free to email me.

    2Reply
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