second note for insurance? - Posted by Philip

Posted by Philip on September 16, 2003 at 16:43:40:

Thanks Steve,
I always wondered why she needed to visit with the people. First I will talk to her in person, which I have not done. I will tell her that I am on my 5th deal and she might get several premiums if she will help me out.
If not,I will change agents.
I have always made this proof part of the deal. I just didn’t have it worded where I could buy it for them…my recourse was repo only, and that isn’t always the best answer.
Thanks,
Philip

second note for insurance? - Posted by Philip

Posted by Philip on September 14, 2003 at 09:37:42:

I have one payor who has let his insurance lapse. Several of you said to buy it and ad it onto the end of the loan.

This will take the person 30 months instead of 24 month to complete the loan. They cant afford the extra $35.00 per month to make it part of their existing payment. Plus I want to add a few dollars to pay myself for doing there homeowner work, and for the added risk.

Do I just make a new purchase agreement?
Do I make a secondary promissory note with security agreement attached?

Philip

Re: second note for insurance? - Posted by Anne_ND

Posted by Anne_ND on September 16, 2003 at 07:15:42:

Hi Philip,

I second Doc’s thanks for posting your situation for all of us to learn from.

What I have been doing is requiring the buyer to come to closing with an insurance binder in hand showing my company as loss payee. Twice I made an exception to this. Both times the buyers had excellent (720s) or good (630s) credit scores.

In the first case, I had to nag the buyers incessantly for two months to get the policy (and they couldn’t remember the name of my company so they just randomly picked a bank in town and had them listed as loss payee- fortunately the insurer knew me and called me). Two weeks after getting the policy these buyers were evicted from the park for setting off fireworks (we’ve had less than an inch of rain in the last 6 weeks). I’m paying them to leave me the mh in good condition tomorrow. We’ll see what happens (how can such dummies have such good credit?).

In the second case the guy paid his lot rent this month ($250) but not me ($103). I assume he’s going to stay, but he’s avoiding answering his phone and he doesn’t have an answering machine or voice mail. He also never came up with the insurance.

My contract does require buyers to have insurance at all times with my company as loss payee, but I’ve just added language to cover the situation where I buy insurance because theirs lapses (no more letting someone with good credit slip by at closing).

thanks!

Anne

You will get the mine and they will get the shaft. - Posted by Dr. Craig Whisler CA NV

Posted by Dr. Craig Whisler CA NV on September 14, 2003 at 11:45:39:

You can do neither. Unless your contract specifically states that buyers are to maintain insurance and what you can do if they let it lapse, all you can due is grin and bear it. In a bilateral contract you have only the rights specified therein, unless both parties consent to modifications. You cannot buy insurance and add it to the end of the contract without the buyer’s permission. You cannot force them to sign a new note with tougher terms, though they may voluntarily do so.

Ask them to do so and as an added inducement tell them that if you have to insure it you will only insure for the remaining amount of the note and you will make YOURSELF the loss payee, not them. If there is a fire, you will get the mine and they will get the shaft. Just say that only by agreeing to an new insurance policy, at their expense, can they protect themselves and the equity that they are building in their new home. Say it is as much for their benefit as it is for yours. Tell them that you are offering to do them a FAVOR, by paying for it yourself now so they will be covered and letting them pay you back later, at the end of the contract. Stress that their monthly payment will not increase.

When you phrase it properly you may be able to get yourself out of this jam. If they agree, just write it up as a short addendem to your original agreement, and have both parties sign it. No need to disturb your original documents. This is the only way that you can add it to the end of your contract.

You have just attended $300 seminar, sponsored by the school of hard knocks. Been there, done that.

A wise man learns from others mistakes, a fool scarcely by his own.

Thanks Philip, for sharing your experiences with us. By doing so you have probably helped many others avoid the same seminar.

Sharing information, to help others, is what this board is all about.

Regards, doc

Re: second note for insurance? - Posted by Chuck

Posted by Chuck on September 14, 2003 at 10:24:43:

The easy way to avoid this problem (in the first place) is to put a policy on the home for the term of the sale when you sell it (i.e - 36 month note = 36 months of insurance), and roll the cost of it into the note.

CYA… cover your assets.

You would of course make them aware of this so they can get their own policy when the note terminates. It also makes the note abit more marketable if you should ever decide to sell it or a partial of it.

Re: second note for insurance? - Posted by Philip

Posted by Philip on September 16, 2003 at 12:14:19:

Yeah, I lived and learned about the wording of the contracts!
Philip

I never have had that problem - Posted by Steve-WA

Posted by Steve-WA on September 16, 2003 at 10:40:05:

I do it for them - and it’s as easy as a phone call. The buyers don’t have a chance to screw it up.

I would not close without insurance being in place; as we are seeing, it is too hard to chase after them to get it after the fact.

I want a refund… - Posted by Chuck

Posted by Chuck on September 15, 2003 at 10:17:30:

…there are a couple of things that your $300 seminar didn’t cover.

a) The buyers haven’t yet occupied the home (Phil told me this via e-mail). He thus has the opportunity to correct the problem (on this deal and all that follow) before it becomes one and to be compensated for doing so in each instance (re: item d below).

b) An “insurance addendum” to a existing contract adds no value to the contract, but rather lessens it from a resale viewpoint (as in selling the note or a partial of it). Having been both a note buyer and a note broker I know this to be fact.

c) By purchasing “replacement cost” (equal to the note’s face value) insurance for the term of the loan himself, Phil is buying “piece of mind” and “covering his assets” as any astute investor should. While his current contract requires that the buyer insure the home, it didn’t have the wording that would allow Phil to buy the insurance himself and add it on. An oversight he’ll no doubt be rethinking.

d) I had Phil run the numbers based on a guesstimate of $300/year for the policy and rolling the cost into the note, his yield jumped from 133% without the insurance, to 149% with it. It’s worth noting that doing it in this manner will also allow Phil to earn interest on the dollars he invested in the policy, for the FULL term of the note.

You can meet me at Sizzler, I’m in the mood for their “all-you-can-eat” Steak and Shrimp platter. I figure I’ve got around 15 due me.

:wink:

You will get the mine and they will get the shaft. - Posted by Philip

Posted by Philip on September 14, 2003 at 13:10:29:

I think they will agree to the extra months. Probably take it as a favor seeing as it is more money loaned on the same amount of collateral. They are stuck in a raw deal right now and they really want out.
Yes, I have learned and am going to adjust the notes that I use in the future.
Thank you very much.
Philip

Re: second note for insurance? - Posted by Philip

Posted by Philip on September 14, 2003 at 10:36:36:

I will do this different from now on.
What do I do with the one I have?
Make a new note with longer terms since they can only afford the monthly payment I already have set up?
Philip

Re: I never have had that problem - Posted by Philip

Posted by Philip on September 16, 2003 at 12:17:56:

Steve,
My insurance agent wont write a policy without interviewing the people that are going to live in the mh. Was your agent ever like that?
She says the person living there changes the amount of risk according to what they are like???
How do you arrange it again? Or point me towards an old post in the archives because I know you have posted the details of how your insurance agent handles it.
I know all my future contracts are going to be worded different!
Philip

Re: second note for insurance? - Posted by Chuck

Posted by Chuck on September 14, 2003 at 10:48:40:

“Make a new note with longer terms since they can only afford the monthly payment I already have set up?”

That’s what I would do… and you’ll have to modify your contract to reflect this change, for the “future investors” benefit.

Re: I never have had that problem - Posted by Steve-WA

Posted by Steve-WA on September 16, 2003 at 14:03:25:

get another insurance agent.

Call around to find an agent who will work with you. Interview them this way: What you want is somebody who will be able to get you a MH homeowners quote with a phone call, and put the policy in force with another. Especially for older MHs. You should be able to give buyers SSN, DOB, occupation, and a description of the home. Cover for 15-20K replacement, same for contents, plus standard liability - you want your business to be listed as additional beneficiary. This status will get you copies of their bills and statements.

I also would try to get a guy who will take a small amount toward the premium up front, and the company will bill your buyers for the rest. My guy wants 25%, and the rest is billed over the remaining three quarters of the year. I always collect $100 from the buyer at closing to pay this. When first talking to the buyer about this, offer them the opportunity to get their own insurance, but you can get it done with competitive coverage very easily for them. Do not close without this money (or proof of them getting their own insurance), in addition to the parks deposit and first month (or proof of payment thereof) and your downpayment.

If your agent won’t take your buyers’ money, I’m betting there are many others who will.

Consult DOW; the prom note in the back shows the wording for the insurance coverage default point.

Re: second note for insurance? - Posted by Philip

Posted by Philip on September 14, 2003 at 10:55:01:

Believe me I will! Learned through experience!
I am also going to put a provision in related to lapsing insurance that allows me to buy it for them and charge them a nice hefty sum for my trouble.
Philip