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Tim Burke: Due diligence required when buying a ‘mobile home’

Manufactured homes are an affordable housing solution for many Nevadans, but there is still a certain stigma and prejudice toward manufactured homes by the public, governing agencies and financial institutions. An estimated 5.6 % of all Americans, or 17.7 million people, live in manufactured homes, commonly referred to as “mobile homes.”

After the adoption of the 1976 U.S. Department of Housing and Urban Development Code, the term mobile home ceased to exist and was replaced by the term “manufactured home.”

Metros located in the South and Southwest have the highest share of households living in mobile homes. According to the Nevada Housing Division, over one-third of all homes in Nye County are manufactured homes, with the statewide average at 5%. Overall, rural counties have a much higher percentage of manufactured home ownership compared to urban areas.

In a booming economy, traditional stick-built homes are in high demand, and that drives housing costs up, putting home ownership out of reach for many Americans. A shortage of skilled labor is also increasing costs and the length of time it takes to get a stick-built home completed.

With a growing gap between the supply and demand of low-cost housing, manufactured homes may be one of the faster and cheaper ways to provide housing for lower-income households.

There are advantages and disadvantages to manufactured home ownership.

One advantage is that since mobile homes usually cost less per square foot than a stick-built home, you can get more space for your money.

An additional advantage that mobile homes offer is that they are usually built in controlled environments. This means they can be consistently built to a high standard. And because they are manufactured in such conditions, construction delays due to weather or difficulty scheduling subcontractors are less likely.

Another advantage to manufactured home ownership is that it’s easier to order a custom manufactured home and have it delivered to a rural area of Nevada than it is to get a construction crew and materials out to a remote area to build a stick-built home. Since the manufactured home was completed prior to delivery, it only needs final assembly on-site with materials supplied by the manufacturer.

There are also disadvantages to manufactured home ownership. For a community, city, town or county, the lower property values on manufactured homes means lower taxes and less money available for needed services.

A diversity of housing choices, including multifamily dwellings, stick-built tract homes, HOA neighborhoods, custom homes and upscale residences add diversity and gives consumers choices.

For homeowners, a disadvantage is that manufactured homes may depreciate in value.

Stick-built homes, on the other hand, normally appreciate in value over time because the stick-built homeowner almost always owns the underlying land.

One reason mobile homes depreciate in value is because they are personal property, not real property. “Real property” is defined as land and anything attached to it permanently. In most instances you can convert your manufactured home from personal property to real property by the installation of a foundation or engineered system and filing the proper paperwork.

Financing of manufactured homes is more difficult than conventional stick-built homes. If your manufactured house is classified as real property, you may be able to finance it with a mortgage. The loans work almost exactly the same as financing for traditional “stick-built” houses. Most likely, you’ll get a Fannie Mae, Freddie Mac or government-backed mortgage. The VA, FHA and USDA all have manufactured home programs, but each has different rules. You may need slightly higher down payments, slightly better credit scores, and/or pay higher fees. But these programs are still the most affordable financing for manufactured houses.

One problem that surprises many would be purchases of a mobile home is the rule that HUD has against financing manufactured homes that have been moved.

The rule states (HUD ML 2009-16), “A. Relocation (of Eligible Manufactured Homes) – To be eligible for FHA Title II insurance, the manufactured unit must not have been previously installed or occupied at any other site or location. Manufactured units may be moved only from the manufacturer’s or dealer’s lot to the site on which the unit will be insured. If a permanent foundation is to be constructed under an existing eligible unit, the unit may be jacked-up or under pinned in order to install a new foundation.”

Although rare, manufactured homes are occasionally moved from one parcel to another. If it has been moved, financing through traditional lenders, even as real property is very difficult. HUD guidelines need to be revised and brought current to today’s housing realities so that loans are more readily available for buyers, but it has to be done at the federal level. If you are in the market for an affordable manufactured home, do your due diligence prior to closing to make sure you don’t get any surprises in the process.

Tim Burke is a businessman, philanthropist, educator and Pahrump resident. Contact him at timstakenv@gmail.com

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