Manufactured homes are built much better than they used to be. However, there is no getting around the fact that manufactured home sales cater primarily to customers who do not have the credit histories to buy a site-built home. This leads to several unfortunate side effects:
A: Manufactured homes are sold much like cars. There is a substantial mark-up (some books estimate up to 37%) which is in your best interest to negotiate down. The sticker price on the house should be the upper limit.
B: Even the sticker price on the home is only "half a house". Putting aside the question of land to put the house on, there may be any or all of the following extra fees:
- delivery
- set up
- gas
- electricity to the site
- sewer and water to the site
- city/county permitting
- preparation of the land for setting the foundation
- pouring the foundation
- skirting
- steps or porch to get into the front door
- carport or garage
- meeting any neighborhood covenants -- our neighborhood in question required the foundation to be sunken (extra expense) and the house to be stuccoed
- It isn't clear to me whether the purchase of a manufactured home is subject to a NM gross receipts tax
Thus the sticker price on the house plus the cost of the land may be only 2/3 of your total costs. It is worth mentioning that the manufactured home sales use subcontractors to
- deliver the home,
- "button it up" i.e. structurally connect separate pieces,
- and finish the walls and flooring inside,
- connect the utilities (electric, gas, water, sewer).
C: Getting a loan for your manufactured home can be tricky. First, keep in mind that many manufactured home buyers pay in cash (they buy the home outright, rather than take out a loan) or have bad credit and would not qualify for site-built mortgage. If you pay cash for any home (site built or manufactured) you are in the unusual and unfortunate position that you can (but you don't have to!) skip the appraisal and underwriting and pay more for the house than it is worth.
Let's turn to the other group of buyer's -- those with poor credit. The manufactured home dealer (henceforth we shall call him the "MHD") knows much of their business is to people with poor credit. Therefore, they often loan the money for the house themselves. Rather than qualifying a buyer for an interest rate and negotiating a price, they negotiate a "monthly payment", sweeping a lot of details under the rug. Allowing the MHD to be your bank is very bad -- while they gather information to qualify you for a loan, they have access to your tax returns, bank accounts, and credit statement -- a used car salesman would be in seventh heaven if he could know that much about a purchaser. This also means that the holder of the loan is not an independent party -- it may be in the best financial interest of the company to have you pay a high price or high interest for years and default, rather than buy a home within your means at a fair price. (Some MHD sell the home, finance the loan, and issue the home insurance -- a triple whammy of conflict of interest.)
The final sticking point is bank loan timing. If you own land, and hire a contractor to build you a house, you have a construction loan with specific "draws" where money is transferred from the bank to the contractor, if specific goals have been met. It is not unusual for 10% of the total to be withheld until every detail in the contract has been completed and accepted. A manufactured home has to be carefully examined WHEN IT IS DELIVERED. This is the only time you have a chance to check that certain items you paid for were actually included (such as R19 insulation in the walls), and the best time to make sure poor construction or rough handling during transportation didn't produce any issues. However, most manufactured home sellers require the house to be 100% paid for before delivery -- thus you have no financial leverage over the company to fix things that were done wrong.
This 100% payment before delivery policy will disqualify you for most regular bank loans. Remember than when banks are being responsible, they protect their own interests by making sure you have a complete house with no major problems before they release the last of the money. (You are less likely to default on the house if you like it and it will be more valuable in a foreclosure.) You may be forced back into the arms of the manufactured home dealer for your loan, or you may be forced to take out a "bridge loan". Rates on bridge loans can be 12-15% (Wikipedia). A worst case scenario would have a several month delay in the house instilation while you
- pay 15% interest on a house on the bridge loan (you can't refinance until you have a house on the land)
- pay on the land
- pay rent on the place you are living or storing your things
- pay rent to the manufacturer to store your house on their site
I will mention two other snags that we didn't have to face. The first is "trailer parks" where every house is a manufactured home and no one owns the land their house sits on. Unless your park is a co-op with voting rights, the owner can require you deal with a single manufactured home vendor or lender (in some cases the manufactured home dealer OWNS the park). They can change the rent for your land at will and they can impose convents at will. Unfortunately a lovely and safe park with a reasonable landlord can change hands, and rules, overnight.
The second issues is a land-home package, where the dealer owns lots where you want to live, but won't sell them unless you buy their home (and perhaps finance with them and use their home owner's insurance).
Things you can do to make your manufactured home purchase more successful:
- You are entering into a hostile negotiation. Every piece of information you give up can and will be used against you. In particular do not mention if you are paying cash (and therefore have no bank on your side) or if you have a trade-in.
- Pick out a high-quality manufactured home dealer. Read: "The Grissim Ratings Guide to Manufactured Homes: The Essential Buyer's Resource, Listing Every Builder in the U.S., Their Histories, Products, Price Ranges, ... Need-to-Know Information and Much More by John Grissim".
- Once you have picked a dealer and a model, find out how much the home you buy is actually worth. There are two ways to do this. First there is an equivalent of a "Kelley Blue Book" for manufactured homes, the NADA Manufactured Housing Guide. I will point out here that NADA, like the Kelly Blue Book, not only assumes depreciation of your manufactured house, but can predict it. You can purchase the NADA guide or you can find it in the reference area of your local library. The second method is to find a HUD lender and ask how much they would lend on a particular model. You should do both of these.
- Investigate all set-up fees (use the check list in B above). Use Craigslist, the newspaper or go door to door in your new neighborhood to find home owners who have installed manufactured homes in your area recently. Ask them about any surprise costs. If you find an owner with a home by the MHD you are going to use, ask them how they liked the house, if anything they ordered didn't come as specified, or if there were any surprises.
- Make arrangements in advance to get land, home, financing, and insurance from different companies. Shop around for the best rates and terms before you sign the dotted line. If the MHD seems to offer a better deal, read the fine print. Consider whether you want all your eggs in that basket, or if it would give you greater leverage to have an outside source.
- Every manufactured home comes with an installation guide. There is NO excuses for a manufactured home to be installed to lower standards than specified in the installation guide, no matter what the dealer might tell you. You may want to do your own research before you sign the sales contract and pick out higher standards, such as bolting the house to the foundation, "double blocking", or ameliorating bad soil before pouring a foundation -- so that the installation method becomes part of the sales contract. (Remember the installer doesn't work for you, they work for the MHD.) You need to have read this document before delivery and have it in hand on the day of delivery.
- Get the names and numbers of the subcontractors for each part of the installation. Ask if you have any choices. Investigate their reputation (they often do other work in the local area) and if you find any of them unacceptable, arrange to choose and pay for a different subcontractor -- ask for a "credit" on your purchase price. Some people have found it cheaper to hire a subcontractor to install wood floors, rather than upgrade from the factory.
- Negotiate the best possible price. I won't give any advice here -- any source that tells you how to negotiate for cars should be applicable. No verbal agreements will be honored -- everything a salesperson agrees to should become part of the written contract.
- You may get an invitation to tour your house at the factory, and that is certainly worth doing, however poor lighting and the half-completed state of factory inspections make inspection on the day of delivery absolutely necessary. On the day of delivery you should be present with a cell phone and the direct number of the salesperson and their manager, the complete contract, a ladder, the installations guide, a flashlight, yardstick and tape measure and a digital camera and notebook. At minimum you should check
- The depth of the attic insulation
- The condition of all 2x4s you can see while the house is in two (or three) pieces.
- The R value of the insulation in the walls
- Any minor or major interior or exterior damage
The last issue is one of appreciation. We all know that "trailers", "mobile homes", and "singlewides" depreciate, unlike site-built houses which generally appreciate over the course of decades. Many hopeful statements have been made by real estate agents, MHDs, and home sellers that today's modern manufactured houses appreciate exactly like site-built homes. My limited experience suggests this: if your manufactured house LOOKS like a site built home, was installed properly, has an attractive stair/porch entrance and landscaping, and is in a neighborhood where the majority of the homes were site-built, it will probably appreciate along with the neighborhood houses.
If your manufactured home is clearly identifiable as manufactured from the outside, or if a large proportion of the neighborhood is manufactured including older-style singlewide and doublewide mobile homes, the house will depreciate much like a car. Keep in mind that the NADA guide expects depreciation. - The depth of the attic insulation
Books
- 2006 The Grissim Ratings Guide to Manufactured Homes, John Grissim
Has a 60 item rating system on the quality of design (but not customer
service or how well the design is carried out) that results in a score
from 1 to 10 (ten being best). In NM, acording to the book, the
following highly rated homes are available:- Silvercrest Homes 9
- Schult Homes 8
- Golden West Homes 8
- Oak Creek Homes 8
- Palm Harbor Homes 8
- Patriot Homes 8
- Skyline Corp 8
- Karsten 8
- Silvercrest Homes 9
- Buying a Manufactured Home: How to Get the Most Bang for Your Buck in
Today's Housing Market - (3rd Edition, 2008) by Kevin Burnside and
Robert Bentley (Paperback - Aug 30, 2008) - Manufactured Home Buyer's Handbook
- by Wes Johnson (Paperback - Sep 30, 2005)
I also recommend the following website.
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