Misconceptions about Mobile Home Dealer Licensing - Posted by Tony-VA

Posted by Lisa in Oz on April 01, 2000 at 15:17:54:

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Misconceptions about Mobile Home Dealer Licensing - Posted by Tony-VA

Posted by Tony-VA on April 01, 2000 at 11:04:59:

After reading books like Lonnie’s “Deals on Wheels”, many new investors think “this looks too easy, there must be a catch”. Then when they read about the license issue, they believe they have found the catch and an excuse not to pursue mobile home investing. I would hazard a guess that this is the leading stated reason for not investing in mobile homes.

The issue of obtaining a Dealer License or Broker’s License needs to be addressed by each investor with their local and/or state agencies. This issue is not one that should cause anyone to throw in the towel.

Perhaps an example will help calm these fears.

For instance, here in VA you may sell two homes without a license. The third home you sell in 12 months, requires a dealer or broker’s license. The defn. of each of these will be determined by the licensing agency.

Some misconceptions about licensing.

Even though you are buying and selling mobile homes that you have titled in your own name, these agencies may consider you a dealer or broker. Yes, traditional brokers just market and sell mobile homes for the owners without ever taking title and simply receive a commission. Although our investing activities are different, we still fall under these licensing requirements in many states. Again, it is important to check with the licensing agency in your state. Start with DMV. They may refer you to a place with a title similar to “Dept. of Housing and Community Developement.”

Most states appear to require a bond of about $25,000. Now don’t panic. This does not mean that you have to put up $25,000. I suppose it simply means that the agency wants you to have some 3rd party collateral to protect your buyers. Here in VA they simply collect a one time fee of $500 that goes into a pool to fund claims that may be brought against licensed dealers or brokers. I have been told that the $25,000 bond required in other states will cost about $500 as well.

There are fees and costs to having this license but most any business will incur licensing costs. It is simply part of doing business and is a routine business expense. Off the top of my head, I think including the $500 mentioned above, it cost $850 total the first year to get my broker’s license and sales license. The recurring annual cost will only be about $300.

Because I am a licensed broker, I can assign DMV titles without paying sales tax. I can honestly say that if you buy even a few homes per year, the sales tax savings alone should pay for the recurring license cost and saves a great deal of time and frustration. Now we only have to go to DMV once, not twice. We only need to go to title the home in the name of our buyer and place our name on the title as the lienholder of record. We retain this title until the home is paid off.

Remember this is a business. It has extremely good benefits but it is still a business and must be treated as such. Being a dealer or broker does give some clout to your business with people like Park Managers. They are used to dealing with dealers and brokers. This may help get you permission to work in their park because they are less likely to fear you as some fly by night investor.

Please don’t fear the dealer issue. It is simply an exercise in paper work and yes, it costs some money. The rewards far outway the costs if you apply yourself.

One last misconception:

Being a dealer is not the same as “Dealer Status” when it comes to tax issues. “Dealer Status” is a Federal tax issue, not a state issue. Understand that you may very well be subject to “Dealer Status” for tax purposes without being a licensed dealer. This is an issue that I recommend you bring up with your tax advisor.

Hope this helps take the sting off the dealer licensing issues.

Tony-VA