Creating Salable and Secure Seller Financed Mobile Home Notes
Article
Following are the basics, in outline form, of the most secure, saleable, seller financed mobile home notes. Please note this outline is specific for home only/chattel loans in land leased communities. While I understand some of the possible benefits of lease options, they are not sellable in the secondary market.
First a Mobile Home Sale with seller financing:
- Sell the property to a buyer who will occupy it (called owner occupied). Get an appraisal or blue book value and sell for no more than the maximum appraised value.
- Sell the property to a buyer whose mid credit score is at least 575. The higher the better. It's your federal legal right to know all three of their credit scores. If you need to get connected with the bureau's, please let me know.
- Sell the property to someone that has the income to more than cover the payments. Always get a qualified co-signer when possible such as a parent or grand parent or employer!
- Sell the property to a buyer who you don't know and isn't related to you. (Called an arm's length transaction).
- Use a retail installment sales contract with all of the truth in lending disclosures. Make sure this is state approved.
- Put the title into the buyers name with you or your company listed as the first position lien holder. Some states have processes in place that allow you to maintain control over the actual title. Do this at all cost.
- Take back a Promissory Note in the first position (the most senior lien) for no more than 80% of the sales price.
- Have the buyer(s) get hazard insurance with you or your company listed as loss payee and additional insured for no less than the note balance.
- Significant and detailed late and default payment stipulations.
- Loan terms should be kept as short as possible and no longer than 180 months. The shorter the better.
- You should have an abandonment clause in your contract and Limited Power of Attorney that allows you to sign the buyers name on the title in case of default.
- Interest rates should be no less than 10% and 15 to 17% is better if your state allows.
- Keep detailed records of the note and each payment (preferably a copy of the front and back of the payment check showing the bank cancellation stamp). Preferably a separate checking or savings account for the note.
- Remember this is a common sense and "people" business. You have to work with these types of people so chose buyers you feel comfortable "working" with.
Creative Financial Solutions www.CreativeFundingService.com has placed well over $50 million, in bulk chattel loans, in the secondary market.
Marc Faulkner has over 20 years in retail sales and financing experience and has personally created and sold thousands of notes. We understand the process from being in the trenches on the sales side of the equation as well as the underwriting and investor's side of the story. We have also been involved in a number of seller financed community sales and have placed these notes with our private investors. We work with an elite group of banks, hedge funds, trusts, private equity companies and a select few private individuals, and pride ourselves on staying on top of this complicated secondary market.
We would be happy to discuss your seller financing needs or discuss an "in house" consultation.
Creative Financial can be reached at (269)353-9238 or by e-mailing me personally at marc@creativefundingservice.com
We recommend you consult your states Manufactured Housing Association and a competent attorney. CFS does not provide legal advice.