Seller Carry Back Loans when Buying a Mobile Home

Seller Carry Back Loans when Buying a Mobile Home

The trap is set by seller who is having difficulty finding a buyer for his or her manufactured home. Reasons for this difficulty may be that the parks space rent is too high, or perhaps the location is in blatantly obvious decline. Regardless of the cause, the seller has a choice: they can sit on the home for an undeterminable amount of time, or find a creative way to convince a buyer. An easy-to-qualify, below market interest rate financing for an already affordable manufactured home is, in this case, usually too good to be true.

In these trying economic times, there are few things more enticing to a prospective buyer than seller carry-back financing. This type of financing allows the buyer to avoid the inconvenience of site-built home financing, along with some security against fraud, and will often feature an interest rate that is sub-par and a longer financing term.

However, it is important to realize that seller carry-back financing is a trap often used by sellers of manufactured homes.

In actuality, there is nothing wrong with a below-market interest rate seller note. However, when used as a trap, it is highly unethical.

The manufactured home seller, having lived in the community for a long time, already knows that the mobile home park itself will never hold up to the scrutiny of a funder or the appraiser. In order to prevent the buyer from discovering that the manufactured or manufactured home is overpriced, or located in a low-equity manufactured home park, or suffers one of the traps that prevent financing from being available, the seller offers to carry the financing for the buyer and completely eclipses the note holding institution from the beginning of the transaction.

The second aspect to the sellers sneaky trap is to offer a shorter term on the manufactured home loan, typically ranging from two to five years. Within the term, the below-market interest rate is usually only valid for the first few years. The buyer is almost immediately put into a negative cash-flow scenario, which leads to the buyer flooding every lender with financing applications in a frightened frenzy. Most financing applications are declined, due to the perception of financing fraud. Faced with the impending due date for the remainder of the note and no traditional financing options available, the buyer often is forced to default the manufactured home back to the seller, having lost his or her down payment to the seller. Also lost are the mobile home mortgage payments which were no more than rent payments.

Avoiding this trap is not difficult, especially for buyers with experienced and honest agents or brokers. When considering your manufactured home purchase, you should never consider a mortgage based on any financing outside a reputable manufactured home mortgage broker or lender. Additionally, never buy a manufactured home – do not even enter escrow – prior to obtaining a guaranteed approval from your lending institution or mortgage broker. Maintain a conservative and logical point of view and always contact either a lending institution or mortgage broker to obtain the most trusted financing for mobile homes.