Manufactured Home - Unfinanceable Adjustment?

Question

Hi Guys,

For those of you who "don't shy away from manufactured homes on owned land (vs park owned land) you know that certain attributes like age and structural alterations can cause a manu to no longer be financeable.

I'm curious how much of an adjustment do you make for that, knowing your exit strategy has to be to keep it as a rental or sell it to a cash buyer or carry the contract yourself?

TIA!

Julian Sibley · Answer

@Frank Matanane My wife and I do not currently invest in manufactured homes, so I can't speak to the adjustments part, but if your exit strategy is to sell the home to someone who will be owner-occupying you should make sure the property is easily financed using traditional financing. It will give you the largest pool of potential buyers that are able to consider purchasing your property.

If this is the case you generally need the manufactured home to be title-eliminated and on a permanent foundation (Tied down & axle/tongue removed). The reason why most lenders won't touch anything that's built before 1976 is because that is the year that the HUD code went into effect, establishing construction and safety standards for manufactured homes.

The issue you are facing with "physically attaching" structures to the mobile home will depend on the lender. Many believe that your structure can NOT pierce the "skin" of the mobile home. Really what is important is that the new structure is free-standing. Meaning if you put a deck on it, it should not matter if it pierces the skin of the manufactured home, the most important part is that the deck should be designed that if you removed the boards where they attach to the manufactured home, it should freely stand on its own. This will depend on your lender (A lot of guidelines/loan programs are up to interpretation, and you will receive different answers from different underwriters).

One other thing you will need to watch out for is whether or not the manufactured home has been moved. The only financing we have been able to secure for a manufactured home that has been moved multiple times was using a VA loan. According to FannieMae they don't want to touch it if it has been moved because they are concerned it will compromise the structure of the home. Basically they want the home to be purchased, delivered to the lot, title-eliminated and put on a permanent foundation and to stay there. If a home has been moved only once, you can sometimes get away with traditional financing.

If you can avoid those things your potential buyers should not have any issues securing a loan through FHA, VA, Fannie, Freddie, etc. If they want to use a USDA loan it needs to be in an eligible area in WA state and built after Jan 1 2006.

Sharon Rosendahl · Answer

@Julie Marquez I hope that helps. I have no idea whether any of these banks still do investment real estate. At the time I was looking around it was to develop a relationship with a regional bank who would fund my investments (I was thinking of selling my Oregon investment). I chose wrong since the bank I opened accounts with and started building things with ended up getting out of real estate all together and won't even finance owner occupied. Ugh, I need to go back through the investigations again but am actually thinking of taking my money off the west coast altogether since the market is so expensive and much of what I'm finding won't cash flow well even with a decent down.

Sharon Rosendahl · Answer

I have found that for more standard financing the mobile has to been joined to the property. That being said, it can still be difficult to finance, especially if it is older. I know that the house down the street, they sold it as an improved lot with house of no value. With the appreciation they still did fine. Newer mobiles seem to do better.

Ours is a rarer situation and I have only found one bank so far that will do some kind of conventional mortgage on it. We moved a used trailer to our lot. Skagit Bank requires that the house be there for 1 year before they will consider a mortgage. The title must be surrendered and added to the property. We are getting close to a point that we will seriously pursue this. I'm expecting the rates to be higher than a stick built but the loan officer told me it wouldn't be by much.

Perhaps checking with local banks will get you what you need.

Julie Marquez · Answer

@Sharon Rosendahl Thanks, good to know! I like Washington Federal, we use them on our personal construction projects, they have a good construction loan that allows owner-builders.

Julie Marquez · Answer

@Sharon Rosendahl Is Skagit Bank is a portfolio lender?

John Dirgo Deweese · Answer

Are you including those manufactured homes that have been 'de-titled' in that?  I've not run into any financing issues on those regardless of age

Sharon Rosendahl · Answer

@Julie Marquez This is my personal home, I talked to a loan officer about it about 6 months ago. It seems to me I asked them a couple years ago if they did investment real estate and they said yes. At the same time I also talked to Peoples bank and they said they did too. I have heard that Washington Federal also will do business loans but they are very conservative so a little more difficult to deal with. Opus Bank has business lending but I'm not sure if they also do investment real estate.

I was looking for a lender for SFR and duplex so if you have larger units it may be different.

Sharon Rosendahl · Answer

I have found that for more standard financing the mobile has to been joined to the property. That being said, it can still be difficult to finance, especially if it is older. I know that the house down the street, they sold it as an improved lot with house of no value. With the appreciation they still did fine. Newer mobiles seem to do better.

Ours is a rarer situation and I have only found one bank so far that will do some kind of conventional mortgage on it. We moved a used trailer to our lot. Skagit Bank requires that the house be there for 1 year before they will consider a mortgage. The title must be surrendered and added to the property. We are getting close to a point that we will seriously pursue this. I'm expecting the rates to be higher than a stick built but the loan officer told me it wouldn't be by much.

Perhaps checking with local banks will get you what you need.

Frank Matanane · Answer

Hmm. That's a twist @John.

In short yes.

I've been informed by many other investors that even if a mobile/manu's title is surrendered and now classed as real property, it still falls under the rules.

Dbls/Triples before 1976 wont finance. Singles I believe it is before 199x and it wont finance

Same goes once someone 'Physically attaches' a structure (thus altering) it wont finance. (You can but porch and awning right up to it but dont fix it physically to the structure)

My guys out here have tried finding a lender for those and cant.

Hence the reason for asking what adjustment should/would you make?

Thanks

Manufactured Home - Unfinanceable Adjustment?

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