How to take title to Mobile Homes - Posted by Jason Peason

Real Estate Investing Real Estate Law
1

Posted by Dr. Craig Whisler CA on July 01, 2002 at 14:44:43:

… about you state agencey, the DMV still having a record of the seller as till being on title. In that case juddgments and liens probably could attach to the mobile. Thanks for bringing this to my attention.

I think I omited to say that the title at the DMV’s office should also be put into the Trustees’s name. You will likely casue a sales tax to be paid at that moment in time, but not be taxed again subsequently when the beneficial interest is transfered to your buyer because the mobie will still be in the Trustee’s name. I would add the sales tax to the next buyer’s tab, as it is rightfully his anyway.

Reagrds, doc

2

How to take title to Mobile Homes - Posted by Jason Peason

Posted by Jason Peason on June 30, 2002 at 17:49:36:

I usually buy houses, but I ran accross a mobile home deal! When I buy most houses I buy them “subject to.” and just make payments to the bank on the existing loan until I get it sold. How can I do this with mobile homes. They do not have deeds do they? What kind of title do they have and if it is not a deed can someone still put whatever type of title it is into a Land Trust? I have a seller that just wants to sell the mobile home for what’s owed on it and take over the payments. I don’t want to assume the loan, but just make payments on it until it is sold to my tenant/buyer in the future.
Jason

3

Exit Problems - Posted by Tony-VA

Posted by Tony-VA on June 30, 2002 at 19:27:53:

The glitch in trying to do subject to deals with mobile homes is what you Jason eluded to…ie. there is no deed. Mobile Homes are typically registered via a title just like a car. The lender for the underlying loan is listed as the lienholder and retains the title until it is paid off. This differs from Real Estate because the Seller cannot quitclaim the deed (title) to you because the don’t have it.

This nullifies the privacy value of a Land Trust when used in the usual “Subject to” fashion.

I have no doubt that someone is making money on these upside down mobile home deals but I do not know anyone personally who has done so.

Whenever we take over someone else’s loan, we do so with a directed purpose (exit) in mind. But with and mobile home where the loan balance exceeds the property value, you paint yourself into a corner.

For example the various exit plans:

  1. Sell via a Lease/Option:

Most mobile homes are in parks that will NOT allow NON-OWNER Occupants to be on title. Rental homes in parks devalue the park and as such, are frowned upon by owners.

  1. Rent:

See problems in #1. Additionally because the mobile home loan is so high, there is very little room for a monthly spread. Mobile homes (and their tenants) can be higher maintenance for landlords and as such, you will want reasonable compensation for your time and effort.

  1. Contract for Deed (title):

This is going to be difficult to pull off since you already face a loan payoff value that is at or above what the retail market may bring. Additionally, as mentioned in #1, most park managers will want the resident to be on title.

  1. Buy and Sell (flip):

Again, the loan payoff is too high. Plus the target buyer for this type of property is very likely not to qualify for Lender financing which means you will have to carry the note (wrap) which places us back in the problems addressed in #1 and #3…the parks want the owner on title but the original lender has the title.

I would be happy to be proven wrong so if anyone sees something I have missed, please point it out so we can all benefit from it.

Tony-VA

4

Jason, tell us more about the … - Posted by Dr. Craig Whisler CA

Posted by Dr. Craig Whisler CA on June 30, 2002 at 18:55:45:

…mobile home, such as size year, and amount owed on the loan.

Whenever we see someone willing to just give us a mobile home if we will only take over the payments 99% of the time it is upside down. I mean that there is more owed on the loan that the mobile is worth. That is why they are just willing to give their ‘position’ away free (I can’t really call if equity because there may not be any equity).

Read the seller’s loan documents to see if they contain a due on sale clause. Even if it does the lender will usually not call the loan due if the balance exceeds the mobile’s value. They would be crazy to do so.

Most mobile homes are handled by your department of housing or motor vehicle department, and as you have noted do not come by way of a regular deed as a house does

A trust could take title but not without the lender’s approval if there is due on sale wording in the loan document. I doubt that the lender would be receptive to that idea. If your seller wants to get out from under the loan responsibility the lender will want a credit-worthy person or entity in his stead. You would not have this if you used an otherwise empty trust. I don’t think it will fly for that reason.

Regards, doc

5

What is the difference? - Posted by Helen

Posted by Helen on June 30, 2002 at 19:05:16:

If the trust works in a regular home, why not in a mobile home? If either have a due on sale, you create the trust in the name of the current owner with your entity as beneficiary, seems to me it would work.

Please help me understand why one works and not the other.

6

Helen you may be right but… - Posted by Dr. Craig Whisler CA

Posted by Dr. Craig Whisler CA on June 30, 2002 at 20:34:28:

…you wouldn’t be able to relieve the seller of his primary financial obligation on the loan if you just used a trust to pass title from the seller to you, and then to your buyer. Also when the loan was paid off the lender would send the title to the original party on the loan. Remember the seller stated (I think) that he wanted someone to take over his payments and I assume he did not want to continue to be liable for them in case of a default by the new buyer. If being relieved of financial responsibility was not important then using a trust without notifying the lender would probably work. You are very sharp girl. You could just get a written statement from the seller transfering title to the bearer of the statement and not give it to the lender until the last payment was being made so the title would be sent to the proper party, I suppose.

Regards, doc

7

Protecting your Interest - Posted by Tony-VA

Posted by Tony-VA on July 01, 2002 at 08:39:22:

I fail to see how such a document, kept quietly away from the lending institution that holds the true title, would protect your interest in the home.

The primary motivation in traditional Subject To deals is to “Get the Deed”. The reason this is done is so that you control the property and the Seller cannot rack up additional liens or judgments against the property.

In the case of a mobile home title, held by a lender that is registered in the name of the Seller, affords you no protection. The Seller’s name would be listed on public records as the owner of the home. Liens or judgments could therefore be attached against that property without your knowledge or ability to prevent it. This is not like Real Estate where you can file a Memorandum or Performance Mortgage that notifies the world that you have a protected (at least clouded title) interest in the property. With the mobile home, you have NONE of this protection.

In order to transfer the property in the Trust, you Deed (title) the property in the name of the Trust and the Seller Re-assigns the beneficial interest. Since we do not have Title, how can we Deed (retitle it) into the name of the Trust, thus removing the name of the Seller from public records, and More Importantly, their ability to further encumber the property?

Let’s face it, they managed to buy a home for more than it is worth so don’t think for a second that future financial decisions will not result in judgments or liens.

Tony-VA

8

trust issue - Posted by Helen

Posted by Helen on June 30, 2002 at 21:09:09:

Currently I have three sets of folks who do not care if their name stays on loan,even though I have made sure they understand that if the loan payments are not made they are held responsible. I have buyers who are ready to move in and give me a nice down payment. Therefore, my creative juices are flowing to make it work. I’ll take any wisdom from the pros. Thanks to you all on this board.

9

I disagree with you completely Tony but… - Posted by Dr. Craig Whisler CA

Posted by Dr. Craig Whisler CA on July 01, 2002 at 13:11:05:

… I suppose there is room enough in this world for two opinions.

I disagrree that the purpose of taking title 'subject to is to get the ‘deed’. It’s purpose is to get the ‘title’ without alerting the lender and running the risk of having him call the loan due in full immediately.

I also disagree that the seller’s name would still be listed on the public records. I further disagree that any subsequent liens would attach to the mobile home. Such liens, if recorded at the county recorder’s office would be completely ineffectual, as they would attach to real property not to personal property as is the case with a mobile home that is not on a pemanent foundation.

If you record your transfer to a “Trustee” of a personal property trust by filing the appropriate UCC document with your state’s Secretary Of State or other agency in case your state is behind California, then the new owner of record will be the Trustee, not the seller. Therefore liens and judgments in the seller’s name would not attach to the Trust, because it is in a different name (the Trustee’s name).

UCC stands for Uniform Commerical Code. It was designed to make the various state’s commercial laws more uniform to facilitate interstate commerce. Not all states have adopted it in its entirety so you need to check with a local lawyer to see what your state’s position on this is.

Neither are you correct, in my opinion, when you state that, . When the seller transfered the title to the Trust he also transferd the beneficial interest to the buyer, presumably. That is how this sale would be effectuated. The title is now in the Trustee and noone will know who has the beneficial interest but the Trustee. Actually even the seller can’t know who has the beneficial interest for sure because the buyer could immediately transfer his beneficial interest to someone else and the the seller would have no notice of the transfer. This is why trusts are so popular. The true owner (the beneficialry) is kept secret from the public’s eyes. You have great privacy with trusts. The seller sets up the trust and will transfer the trust res (trust property) to the ‘New’ Trustee directly and the beneficial interest in the trust would belong to the buyer even though no one would have public notice of who the beneficiary really is. T After that the seller has no ownership interest whatsoever in the moile home since it is out of his name as far as title is concerned but not as far as his obligation to pay the loan goes.

The trust title would now be in the name of the Trustee. Titles are transferred (not deeded) in the name of the Trustee (with language to identify which trust is being conveyed).

You then go on to state that . This is incorrect too. Since this is personal property you use of the word “deed” is inaccurate, inappropriate and confusing at best. Only real property is transfered by deed, not personal property like mobile homes. When you buy a mobile from a lender do you get a deed? Of course not. I think you are also misusing the word “title”. Your recorded Trust agreement is your Title, and since the property has been transfered to the ownership of the Trustee, it IS out of the seller’s name and he cannot further encumber it with liens or judgments in his name. Such liens might be recorded with the UCC but they wouldn’t attach to the Trust because the judgments or other liens would be in the name of the seller not the Trustee.

Lets face it if liens or judgments in the name of the seller they would be irrelevant to the Trustee’s title, and ownership interest.

All is well in LaLaLand Mobile home Estates.

Regards, doc

10

Re: I disagree with you completely Tony but… - Posted by Tony-VA

Posted by Tony-VA on July 01, 2002 at 13:38:05:

Craig,

By writing “Deed (title)” I was by no means confused or in error in regards to how mobile homes ownership is transferred. I was simply correlating a Real Estate Subject-To Transaction to that of the given (Mobile Home Subject-To theory).

I was not implying that one receives a deed for a mobile home (personal property), though I thank you for your elaborate assumption of my ignorance.

Your explaination of how a Trust works is unnecessary posturing in this exchange as I never portrayed that the beneficial interest of a trust is recorded. The privacy and the procedure of the Trust technique remains the same on both accounts as it would if this were a Real Estate Transaction. The variation in question was simply the Titling vs. Deeding (Personal Property without Title in hand vs. the Deeding of Real Estate via quit claim or warranty deed into the Trust).
Without the Title, you have an obstacle that is not present when taking Real Estate Subject to.

Your suggestion of filing a UCC form may very well be an answer to pursue and one that I commend you for.

I am not certain that it will be foolproof but not all deals are. Here in VA for example, the DMV records mobile homes on Titles just as if it were a car. If one were to ultilize a UCC form to recored the transfer of the mobile home into the Trust, their may be an argument worth discussing. More importantly it would be worth debating the asset protection value in states like VA that title homes via DMV. For it would appear that despite the UCC filing, the public record most creditors will check for mobile home ownership is the DMV where they will still find the Seller listed as the owner. Thus they could still attach judgments and liens could they not?

Respectfully,

Tony-VA