In today’s Mobile Home Investing Lesson Podcast episode #28, I’m proud to welcome active mobile home investor Mohammad to the co-hosting microphone. In today’s 50-minute podcast episode we dive deep into examples both real and hypothetical when it comes dealing with liens and loans on mobile home titles. Learn from our mistakes and successes when it comes to helping sellers and profiting with mobile homes that have current or outstanding liens.
I am super proud of everything Mo has accomplished in such a short period of time. Mo has already been able to help multiple mobile home sellers, buyers, park managers and owners in his local area. Mo has no plans of slowing down.
A Special Thanks to Mo for opening up his business and being so candid on today’s podcast to help other investors he’ll never meet.
Disclaimer: You may have to rewind this podcast a few times to understand everything. During today’s podcast we jump into some real and hypothetical examples seen in the real world. Some of us are visual learners so the fact that we are not able to see anything on the podcast may make it a bit confusing for you to absorb 100% of everything the first time you listen. Don’t hesitate to rewind and make sure you understand things clearly. If you have any follow-up questions never hesitate to comment below or email me directly.
In the podcast episode below, John and Mo cover:- 3:05 Hidden liens with a mobile home on private land story
- 8:13 Mo’s 3 take-away lessons from the Hidden lien story
- 10:00 Mo’s mobile home lien story and how he overcame hurdles to close successfully.
- 17:47 Removing a lien from a closed bank on a Texas Title (SOL)
- 24:52 Liens remaining on Titles without the owner’s knowledge.
- 27:01 Caring for your seller more than the deal.
- 28:42 Discussing a hypothetical situation if the mobile home’s lien was not truly satisfied and moving forward.
- 30:12 Discussing paying off different mobile home lien scenarios.
- 43:30 Discussing a hypothetical situation where getting clear title was not possible.
- 48:48 Discussing some selling strategies and prices for Mo’s properties.
Let’s face it, if you are investing in mobile homes then you will eventually run into a mobile home where the seller still owes money on the mobile home. This may happen to you sooner than later.
✔ A. Understand who holds the loan: Sometimes the seller may be owner financing the home from the previous owner, or directly from the mobile home park, or from a local financing company, or nationwide financing company, or bank, or even a family member or friend. Some of these lenders are more friendly, flexible, organized, and/or forgiving than others.
✔ B. Understand the realistic resale potential: It is important to first know your local market and what buyers are paying for mobile homes both cash and with a down payment and monthly payments. You want to know your realistic exit strategies because it is important to give every seller educated and realistic solutions that help them moving forward. Does the seller owe more money than the home is worth? Are you able to make a purchase offer or offers on this home? Can you give the seller additional information they may be able to use to sell the home themselves if you are not interested?
✔ C. Things you also want to verify, but we are not talking about on this lesson: Repairs, age, ownership, local supply, time vacant, foundation, time of the year, park policies, condition, application criteria, demand, etc.
✔ D. Understand how much the seller has left to pay off: Do the sellers owe over $30,000 on their mobile home? Under $30,000? Under $20,000? Under $10,000?
Yes. I have the cash to pay off the seller’s loan.
In these situations, it is important to…
✔ Call the seller’s lender on a three-way phone conversation or using an Authorization to Release Mortgage Information form to allow you to ask questions about the protocol after you are able to pay off the seller’s lien. Will there be a new title printed and mailed? With the seller’s permission can this title(s) be mailed to your business address? Will there be an electronic notice sent to the state there by allowing the seller to have a new title printed immediately? What will be the turnaround time after the loan payoff be? Additionally, you also want to find out the payoff total and any fees associated with this process. Ask if there is any way to expedite this process.
✔ Now that you understand the seller’s payoff numbers, you also know how much money you will be paying to the seller on top of this loan payoff total, if any. Perhaps you are not paying the seller any extra capital, or perhaps you are paying a few thousand dollars.
✔ It is important to mention that by this time you should be park approved if this home is located inside of a pre-existing mobile home community, and you should also know very clearly what you are buying with regards to the condition of the mobile home you plan on purchasing. It is ideal to know your process and procedures moving forward before holding the home, making any needed repairs, and marketing the home for buyer or renter.
✔ At this point you want strong paperwork/power of attorneys in place or the help of an escrow office or real estate attorney. Now is the time to have the seller sell/sign all transfer paperwork. This can be signed prior to or at the same time as the loan being paid off by you. Paperwork and closing procedures very state-by-state, however, make sure all transfer paperwork is signed (click here for your state’s step-by-step closing procedure) as if you were fully paying off the home that day. Withhold any money you are planning on giving directly to the seller. If utilizing the help of an escrow office or real estate attorney, you as the investor will hand over the money due to the seller to this neutral third party. Additionally, any new titles mailed from the lender should go directly to this neutral third party as well. Once everything is received a switch can be done and everyone walks away happy. If an attorney is not used, make sure to keep in communication with the bank and seller regularly. Additionally, always make sure to have proper paperwork that protects you, your sellers, and buyers.
Disclaimer: Even if you have all the cash to pay off the sellers underlying loan, this does not mean the deal is a good one or will be profitable. It is important to know your realistic numbers and not base any decisions off of emotions.
Whenever borrowing money, it may be ideal to get this debt paid off sooner rather than later. This encourages your lender to continue lending you money and should help keep your interest costs to a minimum.
✔ Follow the same steps 1-4 as listed above.
In this situation, because you don’t have or want to use cash to pay off the underlying debt, you will have to either 1.) Give the seller some helpful advice and walk away, 2.) Aim to wholesale the property to a buyer that does have cash if the deal makes sense, or 3.) Think more creatively about how you may purchase/control this property to help out the seller and create value while selling or renting the home moving forward.
Disclaimer: The following 1-5 bullets below outline one course of action. Depending on the mobile home seller, the payoff, the bank, the local park, the resale value, supply and demand, etc, more things may likely change a bit.
With that said, let’s discuss option #3 (from above) a little more in detail…
The strategy: Control the mobile home. Immediately sell for cash or (more likely) rent the mobile home and slowly pay off the underlying loan. Once the home is paid off you will then transfer the ownership into your name, trust, or company. At this point you may continue renting or selling the home.
Risks: Even with proper paperwork, safety guards, and procedures this strategy allows for your seller, the borrower on the note, to call up the bank prior to you paying off the home, and let the bank know they will be paying off the home immediately and would like the title(s) to be sent to them. At this point they will have the title and could sell the home to someone else. Author’s note: As described in today’s podcast, this is a possibility however has never happened in any situation I have been a part of first-hand or secondhand. With proper paperwork your risks are minimized. It is important to deal with sellers that are ethical and simply want to move on with their lives and are looking for help moving forward.
Personal property or Real property: When purchasing a mobile home located inside a pre-existing mobile home park you will not be able to transfer ownership/title until the underlying lien is paid for (in most cases). However, if you are purchasing a mobile home legally attached/married to private land that you will also be buying, then you may likely purchase the mobile home and land’s deed subject to the underlying loan. In these cases, you still want to get a power of attorney in the event titles are being held by the bank and will be released upon the note’s satisfaction.
✔ It is ideal to add yourself as an authorized user on the account. This may be done verbally by calling the lender with the borrower directly or by emailing/faxing in an Authorization to Release Mortgage Information form. Understand the loan payoff, interest rate, whether this is a fixed or adjustable rate note, if insurance is escrowed monthly, if taxes are escrowed monthly, if the loan is current or past due, etc.
✔ If the mobile home is located inside a pre-existing mobile home park, then it is important to verify the park allows renting or does not need to see proof ownership has transferred from one party to another when you purchase the mobile home. If the mobile home is located on private land, you will also be purchasing than you will not need to confirm with any community manager in most cases.
✔ If inside a park, understand that until you own the home free-and-clear, you should consider only renting the home to a low-risk renter. It is unwise to sell a home when you are not technically the owner just yet.
✔ Understand the paperwork and procedure you will be using moving forward. It may be wise to get all closing and transfer paperwork signed immediately when you take the keys from the seller and hand them any equity they will receive from you directly. Other forms to protect yourself such as an outline of the deal, CYA letters, power of attorneys, purchase and sale agreements, and even audio and videos of closing to show the seller and buyer both understand exactly what is happening and are of sound judgment.
✔ Once you have taken control of the mobile home, you may proceed to immediately sell it for a cash profit and pay off the sellers underlying loan or rent the home long-term and continue making the monthly payments on the underlying note. Tip: Aim to add as much capital to each monthly payment to get the note paid off sooner rather than later. Tip: Renting the home may be wise as you will not be able to transfer title until the loan is paid in full. Additionally, if the borrower does come back to pay off the loan and resell to another buyer to deceive you (as mentioned in the risk section above), you will be able to give your renters a short notice to leave the home. This is better than agreeing to resell the home as the tenant-buyer inside the home making monthly payments who will be very upset when they learn they are no longer able to purchase the home they have been making payments towards.
The title says there is a lien, but the seller promises the home is paid off.
In today’s podcast we cover this exact situation. However, Mo’s example is just one situation. In reality there are many if/then type examples leading to a number of situations, people involved, options, solutions, and paths you may take moving forward.
While these are not all of the steps that you may need (since situations vary from opportunity to opportunity) please see the outline below when a seller tells you their loan has been satisfied, even though an active loan is showing on the Title, or the Title is still held by the lender, or showing a lien through a state website.
Understand the seller situation and listen to the story he/she discusses with you concerning the subject mobile home and the lien(s).Aim to view and take pictures of any payoff statements or payment coupons showing the lien was paid in full or close to being paid off. Aim to call the current bank, loan servicer, or lender to ask them directly whether this lien was paid in full or if money is still owed. If the loan was paid off many years ago and the current lender has gone out of business, track down who bought this lender’s assets and aim to call this company to learn more about the seller’s lien.Also, call your states manufactured housing titling department and mentioned that you are a private buyer who is trying to purchase a mobile home from a private seller inside of a pre-existing mobile home park or attached to private land. Let them know the situation you are facing and tell them that you want to make sure there are no hidden liens, and all taxes are current. Provide the clerk over the phone with the mobile home’s HUD number, serial number, or VIN.If the original mobile home lender has gone out of business and you are unable to track down the bank or lender that purchased the original lender, ask your state’s manufactured housing titling department what the proper and quickest procedure is for the current owner’s lien to be released. In every state there is a process for the state to remove a lien without a title or loan payoff being provided. In some states this is done in front of a judge, or with the bonded title, or providing a letter from the lien holder, or by providing a semi-chain of ownership, or providing other forms that verify the current owner’s interest in the specific mobile home. The more you know about this process the more you will be able to educate sellers and help them moving forward whether you ultimately purchase the home or not.Mini Lesson: HUD Tags
A mobile home’s HUD tag is a small metal plate that is riveted into the exterior rear-lower-side of the home. This plate has a certification label number stamped into it. A mobile home’s HUD plate may also be called a HUD tag, construction code label, certification label, or HUD label.
These HUD labels should be installed on every rear section of every mobile home built since 1976. Contact your states mobile home titling department if yours is missing.
This metal tag has 3 letters and 6 numbers stamped into it. The first 3 letters usually correspond to the origin state, builder, or organization that helped build the home.
Mo’s persistence
In today’s podcast I do not do a good enough job praising Mohammed for his determination and persistence to overcome obstacles. The world is a fairly negative place sometimes. We need to be our own #1 cheerleader. There are so times when Mo could’ve simply given up and decided to do something more fun/comfortable, but he continues to push through to make offers, close deals, and help others.
In conclusion every mobile home opportunity is a unique property. Every mobile home seller and buyer is typically in a unique situation. There are usually no cookie-cutter approaches or purchase offers to make with mobile home sellers. It is best to fully understand exactly what you are making an offer on, buying, who you are working with, and the correct steps needed to safely move forward in any win-win transactions.
POWERED BY BLUBRRY
