The nationwide need for affordable housing is a boon to our wider industry. Many factories across the US are operating at capacity, or even adding shifts. In recent years, customers could expect their homes delivered within three or four weeks after ordering; due to current production demands, it’s now common to wait six or eight weeks, or even longer.
Financing for buyers of manufactured homes in parks is STILL very difficult and expensive.
The collapse of the manufactured home consumer lending market in the late 1990s and early 2000s resulted in far fewer lenders, and more stringent underwriting standards. As a result, qualifying for a manufactured home loan is a real challenge to the consumers who most need affordable housing.
I just sold a new home in my park and saw firsthand how difficult it is for a buyer. The buyer was a parent who would be the sole borrower, but needed his daughter on title to comply with my park’s requirements. This is known as a ‘Buy-for’ and has for decades been a common scenario for the major lenders who fund home sales in parks; but this particular bank had recently changed its underwriting guidelines and the Buy-for became an issue at the 11th hour, resulting in a two-week delay.
Then, the bank realized it had somehow transposed the borrower’s social security number with another application throughout the process, and upon discovering my buyer’s credit score was lower than they thought, demanded 35% down payment instead of the 20% they were prequalified on. Another two-week delay. At that point, the buyer bypassed the mortgage broker and started calling the bank directly, pleading and on the verge of a nervous breakdown because he’d passed on other housing options for his daughter on the bank’s assurances that this loan was teed up and closing imminently.
The end results:
- A ten-week process from buyer’s initial loan application to funding of loan (from one of the largest providers of such loans).
- An appraisal that valued the brand-new Energy Star, option-loaded home at less than 70% of what I paid the factory for it.
- The buyer paid 35% down payment ($17,500) on a $50,000 purchase.
- Closing fees, points and broker’s commission were added into the loan balance and amortized.
- The buyer was subjected to stressful false starts and apparently unanchored underwriting standards…
- …and he’s paying 13.5% APR for the privilege of getting the loan!
These types of lending barriers -- combined with the restrictions and liability risk foisted on park owners under the Dodd-Frank act – illustrate the pressures of the market that are suppressing manufactured housing sales, compared to past markets where credit was more accessible.
Though the process was sometimes excruciating for the buyer, he and his daughter (my new resident) are thrilled with the outcome: They own a brand new, warrantied, Energy-Star rated 2 bed/1 bath home with covered front porch, gabled entry, lap siding, 12” eaves, stainless appliances, gas furnace/water heater/range, skylights, upgraded cabinets and carpet, set up in the middle of the hottest real estate market in the nation…and purchased at $72/square foot. See photo at top of page.
Federal Section 8 Vouchers can now be used to purchase manufactured homes
President Obama signed the Housing Opportunity through Modernization Act of 2016 (H.R. 3700) into law on July 29th, 2016. Among other actions, this law authorizes Section 8 housing vouchers to be used toward the full annual cost of purchasing a manufactured home.
As there are more than two million households in the US receiving federal housing assistance through Section 8, this could be a significant boost to the industry, and to low-income residents who desire to be homeowners.
Perhaps this is an early indicator of evolving social attitudes towards manufactured housing, and the benefit we provide to our residents as community owners..?
Sell your park to residents and pay no state capital gains tax
Did you know that Oregon law provides a full state capital gains tax exemption to park owners who sell their communities to a tenant’s association, or similar entity? Depending on your individual tax situation, this exemption could save you many thousands of dollars in tax liability upon sale!
ORS 316.792 amended Oregon tax law to authorize the exemption. It reads in part: ‘To qualify, the park must have been sold to a tenant’s association nonprofit organization, community development corporation, or a housing authority.’
As a mobile home park real estate broker, I often work with CASA (Community Assistance and Shelter Association), a nonprofit organization that assists park residents in creating tenant’s associations to purchase their communities. If you are considering selling your park, there are several advantages to considering a resident purchase through CASA. Call me at 503-653-3887 if you have any questions.
Multifamily and Mobile Home Park Investing
3215 SE Raymond St.
Portland, OR 97202