Seller Financing and Mobile Homes in Parks

Bummer . . . well, I found out that my nice little seller financing strategies don’t work on mobile homes in parks when there is underlying financing in place (the seller still owes a bank some money). If the seller owns the mobile home free and clear, or if the manufactured home is somehow affixed or attached to the land, then that’s a different story and I can work with that.

I had someone named, well . . . Dawn (the names have not been changed to protect the guilty) contact me about a situation she had in Northern California.

She had purchased the mobile home 3 years ago, expecting to stay single. She put down about $7,000 and had a first mortgage of $69,000. Everything was great, but then it happened . . .

Good news: She fell in love and she and her husband bought a fixer upper house because that makes a whole lot more sense for raising a family

Bad news: If she tried to sell in this market, she would end up being a short sale, and she doesn’t want to ruin her stellar credit

Good news: She had a friend that wanted to move in and take over the existing loan payments and space rent

Bad news: The mobile home park’s rules prohibits anyone but owner occupants . . . no renters allowed

Good news: OK, then, we’ll just leave the underlying financing in place and “wrap” the note (AITD). The friend will pay the seller and the seller will pay the bank.

Bad news: You can do this with regular real estate, but not with mobile homes in parks. They are governed by a different governmental agency, and they will not allow a property transfer unless the underlying loan is completely paid off.

Good news: There’s still the land trust idea

Bad news: It only works when the personal property (mobile home) is affixed to the land. Hmmm . . . there may be some reason it’s called a land trust after all.

More bad news: The bank won’t let the friend assume the loan, and they won’t modify the loan. They’d rather lose a lot of money foreclosing instead (Gee, I wonder why the banks are in such trouble.)

It was a great disappointment not to have a solution for these people. I refunded the consultation fee she had paid, and received this from her:

“Thank you so much for following up on this. This is a big disappointment to me, too, as I think I have exhausted all the options. I talked to the loan servicer again the other day and they said they absolutely cannot do an assumption of the loan. I will have to talk to someone about refinancing the loan and maybe putting my friend on the title as a co-buyer. Thanks again for all your help. I have learned a lot from your site and, though it didn’t help me at the moment, I have no doubt that I will be able to pass this information on to someone whom it can help at some time in the future. I would not hesitate to refer people to you. Thanks.” – Dawn

Wow, thank you.