Working with Realtors

mobile home university
1

Hello,

I’ve recently established one of my firms as a newly licensed manufactured/modular home dealer in western North Carolina. The primary objective of going through the process was our need to sell 50-60 new homes to residents of a new affordable housing MHC called Eagle Park. The first home will be installed in the May/June timeframe for use as an Eagle Park model home and sales office.

We plan to keep it simple and offer new Eagle Park residents a limited portfolio of 2-3 specific home configurations and decors when they reserve their lot. Each home will be a 3/2 double wide in the 1,500 SF range. Delivered and fully-installed end user sales prices will run between $170-190K.

Now that we’re almost ready to publicly announce the project I’m putting together a plan for working with local real estate brokers and Realtors. I found a few helpful posts on this topic here, but I’m interested in hearing updates and/ideas based on the latest market conditions (hot) and industry sales norms.

So far it looks like we have following options for working with Realtors, depending on whether we decide to rent or sell the lots with the homes. Both business models are attractive and both offer comparable investment returns.

If we sell the lot with the home (real estate transactions):

Option 1 - use the typical Realtor listing process, select a preferred Realtor/broker to lead the sales process for all new homes, pay a total sales commission in the normal 6% range, preferred Realtor splits the commission with a buyers agent if a third-party buyers agent is involved. Use a standard real estate purchase contract with home buyers. Closings must be conducted by a NC attorney.

Option 2 - Same as Option 1 but limit the commission amount to 3% if only the preferred Realtor is involved with no separate buyers agent.

Option 3 - Use either Option 1 or 2 but limit preferred Realtor commission to 1.5 - 2% given the commitment to give them 50-60 exclusive listings.

Option 4 - Use an “open listing” process where we pay a standard 3% sales commission to any Realtor who brings us a buyer. No exclusive listings.

If we rent the lots using the common MHC business model (homes sold as personal property):

Option 1 - Pick a preferred Realtor as described above, require 1-2 of their sales team members to get their MH salesperson license (different process than dealer license in NC), designated reps can take orders, pay 3% or 6% as described above depending on 1 or 2 agents involved. Use standard NC mobile home sales contract form. No closing attorney is involved.

Option 2 - Same as Option 1 but no requirement for salesperson training, pay a standard referral fee to one or both agents.

Any comments or other ideas?

Thanks.
Pat

2

You are approaching this from a totally different perspective from most people on this forum. Just moments ago, I answered another question basically saying that real estate agents typically have no interest in our business. You are the exception. However your first set of 4 options are of a different business model than we do as most of us try to rent lots.

I was not sure what sure what your second two options entail, but it seems like it means getting a license or not or having one commission split or another. I think most communities, mine included would hire an in-house sales staff. However, if I had the chance to outsource this to a real estate agent, I would probably approach a few in the area and get their best bids. I would probably also have them develop the leads and refer them to my in house staff with the manufactured home sales license to avoid any legal issues.

3

Thanks for the feedback mPark - understand and agree. Apparently it’s uncommon to develop new parks from scratch and allow only new homes in the park. In our case the stars have aligned to create a unique and attractive opportunity to do so.

I didn’t mention that we plan to have an in-house sales team, agree there as well, and to be honest I wouldn’t be surprised if they end up selling most/all the homes without Realtors given the huge affordable housing demand in the area.

That said, many local Realtors have anxious and frustrated buyers already looking in that price range and there is almost nothing to choose from unless it’s junk. I’m thinking why not grab them while we have a favorable demand curve.

I like your idea of letting the local Realtors compete on both creativity and compensation structure. Will throw that one into the mix and consider further - most appreciated. Definitely will require the actual orders to be placed with a licensed salesperson regardless of which collaboration strategy we adopt.

FYI for others - we are in the final stages of capitalizing the project. So far we have verbal commitments for the required equity from a small group and are in conversations with commercial lenders and brokers for the debt package. Regardless, we all know things can change and not everyone executes on their commitments. If anyone would like to consider potential participation options in the event of changes feel free to email patrick@aeropartners.com.

4

Good luck with the new development. One additional consideration is that if you are selling the homes with the land then the place will not be a mobile home park in the future. Alternatively, if you only sell the homes, the buyers may have trouble getting financing. Some of the chattel financing programs incorporate home cost, set up cost and profit margin, but that may not include enough funds to pay a real estate agent.

5

Thanks again.

Aware of both those points. The limited options for end user financing of personal property is one reason why are considering the lot sale approach. Lots of real estate lenders out there, even for MH buyers.

If we end up going with MHC business model we plan to sell the whole park anyway as soon as it’s stabilized. If anyone would like to consider a forward acquisition deal feel free to get in touch. Eagle Park will be an unusually beautiful place to live as each new home will be tastefully tucked into the trees and rolling hills of the NC mountains in harmony with the land.