There’s been a couple of homes featured here on MHL that was bought as a foreclosure. These were nice manufactured homes purchased at very attractive prices. Naturally, I wanted to learn more about the whole process.
It’s depressing to think about a family losing their manufactured home to foreclosure and I certainly don’t want to ignore that in this article. These families were trying to be responsible by buying a more affordable home and living within their means but for whatever reason it didn’t work out. Lots of bad things happen to good people.
I prefer to think that anyone that has lost a home to foreclosure ended up in less stressful situation in the end. Job loss, illness, divorce, and any number of things can put a family in a tough financial spot and cutting their losses and moving on is sometimes the best decision to make. These people should not be judged and their loss should not be considered another’s gain. With that said, here’s what I learned about buying a foreclosed manufactured home:
What Does Foreclosure Mean?
HomeGuides explains a foreclosure as any house, condo or manufactured home whose original owner defaulted on his mortgage, resulting in his lender repossessing the home. The lender then reserves the right to sell the foreclosed home to another buyer. Savvy home buyers can sometimes purchase foreclosed homes from the bank at a discount.
A foreclosed homes cannot be listed for sale until the entire foreclosure process is complete. This process is very long and tedious in order to protect homeowners as much as possible.
3 Stages of Foreclosure
There are 3 stages involved in a foreclosure: pre-foreclosure, auction, and post-foreclosure.
If the homeowner gets behind on their mortgage payments by 60-90 days or more the bank files a notice of default and the foreclosure process will have officially began. Basically, the bank is required to notify, or provide a public notice to the homeowner that they are in default of the loan. The bank must also file a notice through their local County Recorder’s Office.
Once the notice has been filed and delivered the home is officially in pre-foreclosure. At this stage the owner will still have up to 120 days to catch up on payments or refinance the home. There’s also a third option for homeowners in the pre-foreclosure period – they can try to sell the home and this is what is called a short sell.
Zillow.com describes a short sell as the sale of a property for an amount less than the unpaid mortgage. This happens when a borrower cannot afford to keep making mortgage payments and cannot pay the difference between the sale price and the unpaid mortgage. The borrower gets the bank to agree to sell the property for less than what is owed – and the bank is “shorted.”
The second stage in a home foreclosure is the auction. If the owner cannot make the payments, get the home refinanced, or sell it via a short sell the bank will schedule an auction.
Homes bought at auctions are sold as-is and goes to the highest bidder. However, the bids must be above a certain amount and the full amount is due immediately in cash. Not many people can pay cash for a home, even if it is at a reduced rate due to foreclosure. If no one buys the home at auction then the foreclosure goes into the third stage.
The last stage of a home foreclosure happens if the home does not sell at auction. The bank will have either received a payoff from the mortgage insurance or taken a loss on the home. By this time the owners will have left the property and the bank will be free to list it with a real estate agent or sell it at a liquidation auction. Homes owned by a bank and listed for sale are known as REOs, or real estate owned properties.
How to Find Foreclosed Manufactured Homes for Sale
It’s fairly easy to find foreclosed manufactured homes. You can go through an agent, a real estate listing site, the newspaper, or your local area bank websites to find foreclosed homes. There’s also government agencies and private companies that can help you.
Bigger Pockets published a list of National and regional REO Banks in both the private and government sectors. Below are the national sites:
- HomePath.com – FannieMae’s REO Search
- 21st Mortgage Corporation – REO Search (mobile homes)
- Bank of America – REO Search
- Bank of the West – REO Search
- BBVA Compass – REO Search
- Branch Banking & Trust (BB&T) – REO Properties Search
- Chase Bank – REO Search
- CitiMortgage – REO Search
- City National Bank – REO Search
- Fifth Third Bank – REO Search
- First Citizens Bank -REO Search
- Flagstar Bank – REO Search
- HSBC – REO Search
- IndyMac Bank -REO Search
- Key Bank – REO Search
- M&T Bank – REO Search
- Mercantil Commercebank (MCB) – REO Search
- OCWEN – REO Search; See also Hubzu for REO Searches and Auctions
- People’s United Bank – REO Search
- PNC Financial Services – REO Search
- Regions Financial Corporation – REO Search
- Republic Bank – REO Search
- Suntrust Mortgage – National REO Search
- TCF Bank – REO Search
- Trustmark Banking -REO Search
- Union Bank – REO Search
- United Community Bank – REO Search
- U.S. Bank Home Mortgage – REO Search
- Washington Federal – REO Search
- Wells Fargo – REO Search
- BayView REO – REO Search
Pros and Cons of Buying a Foreclosed Manufactured Home
There are more disadvantages of buying a foreclosed manufactured home than there are advantages but if you understand what you are getting into it can be worthwhile.
Price is the biggest advantage for buying a foreclosed home.
The median sales price of a non-foreclosed home was $195,100. The median sales price of a foreclosure home was $125,000, or 36% lower than non-distressed home sales (RealtyTrac).
Disadvantages can include high competition, property damages, complicated loan requirements, lien burdens attached to the home, and expensive repairs. There is typically no inspections involved when buying a foreclosed home either.
Simply put, you must do your homework and research the property and all its financial history before buying it.
Foreclosed Manufactured Homes vs Repossessed Manufactured Homes
Technically, you can only purchase a foreclosed manufactured home that is permanently installed, meaning the land is included in the sell.
If you just want to purchase a manufactured home with no land you will be buying a repossessed home. Foreclosed and repossessed both describe property that the previous owners lost due to non-payment. Foreclosed homes include the land, repossessed homes do not.
Of course, each state is different and things can get really complicated depending on how the home is classified. Manufactured homes can be classified 2 ways, as real property or personal property. Real property will be foreclosed, personal property will be repossessed.
You will first need to decide whether you want just a home or both the home and land together. If you want a home with land you will be searching regular real estate listing sites, bank sites, etc. If you just want a manufactured home you will be going through dealers and finance companies.
Online Sources for Repossessed and Foreclosed Manufactured Homes
One of the largest nationwide manufactured home financing companies, 21st Mortgage Corporation, lists all of their available foreclosed and repossessed homes for sale on their website. All you have to do is click which state you’re in.
Another large manufactured home finance company, Vanderbilt Mortgage and Finance, also has a website with listings of pre-owned homes (there’s no mention of foreclosure or repossession).
Financing a Foreclosed Manufactured Home Purchase
You can finance a foreclosed home just like any other home. Factors that will play a role include your credit score, credit history, and the properties condition.
Manufactured homes are more difficult to find financing though it’s not impossible.
Local banks, private lending companies, and credit unions will be your best bet for finding financing especially if the home is classified as real property. The Veterans United Website had this to say about finding manufactured home financing:
“….it’s pretty tough right now to find a VA lender willing to loan on manufactured housing. There’s more risk with these properties, from the likelihood of long-term depreciation to issues with delinquency and foreclosure. After the housing market collapse and subsequent foreclosure crisis, lenders are still skittish and unwilling to take on what they may see as unnecessary risk.”
Government Programs That Can Help You Finance a Home
Government programs such as HUD, VA, and FHA can help you buy a manufactured home whether it’s new, used, repossessed, or foreclosed. These programs do not lend money themselves but they insure loans for qualified applicants which makes lenders more comfortable with lending because they have much less to lose.
The Federal Housing Administration has been helping Americans buy a home for over 75 years. They have a long list of loans available. They accept manufactured homes though there are a few requirements.
203K Loan is a popular loan program that can be used to buy a home that needs repairs. Here’s how they explain it on their website:
HUD has developed a new FHA insured mortgage program called the Streamline 203k Limited Repair Program that permits home buyers to finance up to an additional $35,000 for repairs into their mortgage to purchase and improve or upgrade the home before move-in or to refinance an existing mortgage and add up to $35,000 for repairs or improvements. With this new product, home buyers can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser. Unlike the standard 203(k) program, any FHA approved lender may originate a Streamlined 203k mortgage. The following repairs can be financed with this program:
- structural alterations and reconstruction
- modernization and improvements to the home’s function
- elimination of health and safety hazards
- changes that improve appearance and eliminate obsolescence
- reconditioning or replacing plumbing; installing a well and/or septic system
- adding or replacing roofing, gutters, and downspouts
- adding or replacing floors and/or floor treatments
- major landscape work and site improvements
- enhancing accessibility for a disabled person
- making energy conservation improvements
This program can also be used with the purchase of a HUD home. Find out more about the Streamline 203k program by visiting HUD’s 203(k) Rehabilitation Mortgage Insurance web page here. To find a HUD approved lender in your area click here.
HUD has its own programs to help people buy homes, including foreclosed homes. They are also directly over the safety regulations of manufactured homes. (click on the header to be taken to the program’s main website}.
Here’s how HUD explains the Title 1 loan in regards to manufactured homes:
A Title I loan may be used for the purchase or refinancing of a manufactured home, a developed lot on which to place a manufactured home, or a manufactured home and lot in combination. The home must be used as the principal residence of the borrower.
This should get you started! I spent quite a long time looking through foreclosed search sites and found many great manufactured homes for sale at awesome prices. I’m sure you can, too!
Thank you for reading Mobile and Manufactured Home Living!