We have had 3-4 mobile home residents who have handed their keys back to their chattel lenders recently. Depending on the bank, the home is repo’d, then auctioned off either as highest first offer wins, or mhp owner (me) gets first right of refusal. The latter one is not the issue, rather it is the former method that causes concern.
We have a regional re-marketing manager who seems to have an agenda, and never awards us the home, despite placing competitive bids. Truthfully, he must be getting a kickback from the other more seasoned repo poachers/bidders.
Ordinarily, I wouldn’t be upset if someone else purchased a home in my mhp (saves me a ton of $$, and restores the home to productive use), however I am starting to feel that the buyers are prepping to pull the homes. How should one address this situation? I am debating giving free rent til the homes are resold (if these people do as they say) provided that I get a right of first refusal, vs. playing hard ball and securing the homes to make sure they don’t escape at night.
This isn’t the first time in this industry it’s happened - I am surprised others haven’t been posting about this issue.
You can’t force the homes to stay. All you can do is to bid on them – if you want – and then try to work with whoever buys them, to try and keep them in the park. If other park owners are buying them, then retention is impossible and they will be moving out. However, you can go to those park operators and steal a home out of their park, and tell them that every time they pull a home out of your park, you will do the same at their park, so the net effect will be zero. Many park owners do not want this kind of situation, as it is bad for business.
We have very few homes pulled out of our parks each year, mainly because we have the other park owners scared, and also because it just doesn’t make sense to buy a home and move it out except when you are another park owner. It costs about $5,000 to move, set, skirt, install stairs, etc, so no investor or home owner is going to do that unless they have to. If you work with them, then it is 100% better for them to leave it in the park. Another factor in this is how many new homes you have. If your park is predominantly older homes – that have no mortgages - then this cannot happen. We tend to buy parks with a mix of homes, but maybe only 10% to 20% that even have mortgages on them, so our risk is reduced.
Recently, we came across a situation in which we were given carte blanche to steal as many homes as we want out of a park that is going into foreclosure - the current owner didn’t care – but despite a myriad of marketing efforts, including direct mail and face-to-face sales, we only got about two homes. The bottom line is that it is a big pain in the neck to move, and most mobile home park tenants don’t want to do it. There is more to the move than just the transport company – you have to box up the contents, get new utility service (which can mean a new deposit), have all your addresses and bills changed, and even change your kid’s school district.
So if you really look at it, the only homes that are subject to moving are ones that are new and have mortgages in default, that are then bought by other park owners – that’s a really low percentage of most park’s home population. That’s probably why there have not been many posts on this topic.
have mortgages in default, that are then bought by
other park owners – that’s a really low
percentage of most park’s home population. That’s
probably why there have not been many posts on
this topic.
Frank,
In my market, and a good chunk of the midwest, there’s a very strong wholesale market for used mobiles, which is where I focus my energies these days. Many of the large REIT-owned parks are aggressively buying homes from dealers like me, who solicit distressed private owners via direct mail and other means. So, I’m out buying up homes on the cheap (just like in my LD days), but the prices I’m selling at are actually higher than direct-to-consumer retail prices on a contract. Hard to believe? Yep.
Example… I can buy a 3 bedroom, 14x70, early to mid 90’s model in good shape for 3-5k or sometimes much less, and that home will sell very quickly on the wholesale market for around $10-12k. We make no repairs, everything is sold as-is,where-is. Just like a repo.
Just last week I bought a 1987 3/2 14x70, in completely awful shape (needed a roof, and complete rehab inside). I paid almost nothing for it, and it sold for $5k. How the park owners are making any money on this deal, I have no idea. They have to move and set the home ($4k), re-roof ($2k), and completely rehab in the interior (at least $5k). Plus the $5k they paid for it, they are into that home for $16k and it’s still a 1987 model! Now, with lot rent near $500 per month it probably makes sense from a numbers standpoint, but certainly not from a home valuation standpoint.
jkmhp - I would be curious which lenders and which states you are in. We buy homes from all sources but mostly Vanderbilt and Greentree and they seem to very fair and I almost never lose a home out of our parks. Greentree has an online bidding system, and vmf sends out their auction schedules and you email back your bid. It seems to me they just want the most they can get out of a home so they go with the highest bidder.
JeffB - I am one of those park owners buying those used homes. You are correct - it only makes sense because it fills another empty lot. Our goal is to break even on the home payment after paying our investors. Using your example (although for $16 k we can usually get something 1990 or newer),
we would set that up at $243/mo over 8 years, so including lot rent we are at $582 and we can sell those all day long. That’s why I haven’t bought any new homes yet (but I’m tempted because it would be a lot easier.- our Lowes bills look like a phone book).
BTW - are you doing any business in mid Ohio (Columbus area)? You can reach me at parkviewmhp@gmail.com. I am always looking for homes.