Mobile homes aren’t too mobile and create financial risk

John Oliver’s “Last Week Tonight” may have a comedic bent, but is one of the best news shows around. The latest episode included a detailed look at the mobile home industry. The key takeaway is private investor groups prey upon the mobile (and modular) home buyers through a rigged system.

Between a truly captive audience (more on this later), the fact the significant majority of mobile home buyers rent the land underneath, and the predatory lending and sales practices, the buyers are at the mercy of greedy players in a shady industry. Adding to that, the value of the mobile home will only depreciate (like an auto), so the buyer truly must beware.

We have come to this problem as several conditions have culminated together. We have an increasing number of “have-nots” in America, so mobile or modular homes are the most affordable route. The mobile home park owners have consolidated and were purchased by several private investor groups, but even the larger regional players operate under this rigged system. These folks see a market to squeeze. Finally, if the buyers do not own the land, they are truly held hostage.

Why? Over 80% of mobile homes never move due to the cost of moving. The property owners know this, so they annually jack up the rent increasing by exorbitant amounts. The renters are then inundated by collection agencies who get them to pay. When they cannot, they eventually move, leaving their home behind. Then, the property owner takes possession of the abandoned home and rents it out.

Finally, the sellers of these products often own the financing agency offering a turn-key purchase. The loans are more like predatory car loans than they are mortgages. So, the interest is higher than normal at the same time the rent is getting increased.

Oliver’s show highlights a couple of the players in the industry. One property owner has sites in 25 states and offers seminars on how to gouge your captive tenants. In one instance, this property owner referred to his tenants as “like being chained to a Waffle House table.”

There is a small movement afoot which will allow homeowners to buy the mobile home park land en masse, as a right of first refusal. Nonprofit funders are helping make this happen. What is needed is more states to have right of first refusal laws, so that the property is not sold to a predatory landlord.

The other need is education. If you must buy a mobile or modular home, place it on land you own or in a tenant owned development. Also, seek better financing than what is offered by the seller. But, know going in this home will not go up in value. If you buy a modular home for $50,000, it may be only worth $10,000 in a few years.

The “have-nots” have little recourse in this industry. Education is a must, as you will truly become a hostage in your home.

 

 

9 thoughts on “Mobile homes aren’t too mobile and create financial risk

  1. Added to the great vulnerability from extremes of weather to these homes, it’s not just greed it is callous indifference.

  2. This was forwarded to me in an email from our blogging friend Linda.

    “This is a tragedy, Keith. Matthew Desmond covers this somewhat in his book, Evicted. To make matters worse, I suspect that most of the mobile homes in use today are 30-40 years old. In the 70s I spent a summer working in a mobile home factory on the “final finish” line. This was really the patch it up, cover it up, make it look good line. It is unbelievable what shoddy work the industry rolled out the door. I can’t imagine what the poor residents of homes I worked on must deal with some 40 years later.

    I will keep this email in my queue. After Idaho’s frustrating session ends and my beautiful Team 17 legislators are ready to tackle new ideas, and the next time my community is seeking ideas re: affordable housing, I will repeat your idea of first-of-right refusal.

    Linda”

  3. Dear Keith,

    This is what GOP call capitalism. Any regulations enacted into law to help vulnerable consumers they would call government intervention and socialism. Meanwhile the poor consumer takes it on the shin again.

    I’m all for ending burdensome, unfair regulations but not when the consumer is being fleeced.

    Under President Trump’s administration, fleecing the middle class and the poor is a favorite sport.

    Hugs, Gronda

    • Note to Readers: Here is another email conversation about the above. The person is an experienced mortgage lender.
      ************
      Yes. So many factors that go into why predators take advantage of people with lesser means and education, as well as, the elderly. It is criminal. I just wanted to let you know there are some pre-constructed homes that are very high-end and you’d never know they were not stick built.

      My industry is plagued by crooks, it is very sad because it makes the role of helping and guiding new homebuyers realize their dream of home ownership a real struggle for the true professionals.

      Later, Edie

      ************
      Edie, well laid out. When he referred to modular homes, he was describing pre-constructed homes. No question about charging more for higher risk, but these are beyond that mark-up.

      There is a study called “Class Matters,” meaning people in a lower economic class tend to ask fewer questions on financial matters. As we discussed before, they were not the right folks to get pic-a-pay mortgages.

      Oliver’s report had more specifics than I provided. Keith
      ***********
      Interesting read. I will say that some of these comment are very general and broad. The end result is still the same. For example it is important to distinguish that buyers of mobile homes (single or double wides) financing the purchase are far less likely to be taken to the cleaners, because investors will not finance the mobile home unless the land is already owned or being bought by the buyer.

      Secondly, buyers need to understand that the life of a mobile home begins as a vehicle and is title as such and then converted to real property after the wheels are removed and the mobile home is placed on a permanent slab. This conversion and its requirements vary by state. Generally speaking many lenders will not finance single wide mobile homes. And some will only finance mobiles that have already been titled as real property. The default rate on mobile home loans is greater than other property types. This may be due to the demographics and socio economic make up of its buyers. As for modular homes, I suppose you are referring to tiny houses. Some people refer to manufactured homes as modular homes; however, these could be homes built off-site and put together as LEGO pieces. Some of which are higher-end (mid $500’s) and there is no evidence of greater early payment default.

      My question has always been, should there be a move to ban mobile home parks in areas of the country that are susceptible to tornadoes and other natural destructive forces?

  4. Note to Readers: Below is an email conversation with a friend on the above issue. I have changed her name for privacy reasons:

    Thanks Leslie. It is great to hear from you. I hope you and the family are doing well.

    I am not against modular or mobile homes, per se. My in-laws bought a prefab home after theirs burned down. I am concerned over those who take advantage of the homeowners. In Matthew Desmond’s book “Evicted,” he has a couple chapters on evictions from mobile home parks. One thing he mentioned is the landlord sees when Social Security and pay checks arrive, so he or she will come around to collect.

    I am glad your father and mother-in-law are doing well in theirs. Take care and give everyone my regards. Keith
    *******************
    Hi Keith – Hope you are doing well. Just wanted to give you my two cents on the below. For a number of people mobile homes are the only way they can afford to own a home. It’s a very reasonable and affordable means to put a roof over their heads. As you know, home ownership for a traditional house is never going to happen for people that don’t have a good income. Also with rents as high as they are – it’s a good option for many.

    I agree that there are a lot of groups and individuals out there that try to take advance of people, but there are some very nice parks and well kept up properties. I also agree that putting them on their own land particularly if they can build at a later time in their lives when they are more financially able makes sense.

    My Dad and Mother-in-law both live in mobile home parks and my Dad’s in particular is super nice. I think it’s a good option for seniors.

    Take care,
    Leslie

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