Steve,
My Contract is pretty detailed listing not paying rent, not obeying park rules etc as reasons for default as well as payment terms. I keep the title in my name until they pay me off. That way I can take the titles into my bank and drop them on my loan officer’s desk as collateral to borrow money (much cheaper than selling a note or partial). One reservation that has been expressed in the past is the possiblity of some level of liability because the title is in my name. My attorney isn’t concerned about it and it hasn’t been a problem to this point. Just to make it clear that it’s a SALE and I’m not a landlord, I include a “Document of Understanding” that we sign at closing that unequivocally states that “This is a purchase” yadda, yadda just to have something signed in the file that I can wave in their face if necessary.
All the best, Lyal
I am thinking of selling my home on contract. My question comes on how I do it. I only pay like $450 in rent and mortgage for a 99 16x80 3bdr 2ba commadore home because I have a heck of a deal on interest rates (6%).
So, I will sell on contract (because I cant find anyone to buy the place with bank financing) and charge like $550-650 for the total monthly payment, thus making a small profit that I can tuck away just in case (course, Im asking for money down also, maybe 1-2k). So my question is, do I have to structure the sale like a home loan, where there is the buying price, an interest rate set by myself (maybe 8-10%?) and figure out what the monthly payments are? Or, is it more structured like rent, where they just pay me one lump sum and I take that and pay the rent and mortgage.
I owe like 24k on my home, so its not paid off, so I will be taking whatever I get from the new ‘owner’ of the house to pay my bills.
Finally, on a tax return, what kind of income am I making. Its not really a rental property with rental income and expenses…is it like a capital gain?
Any help in clarifying these issues would be appreciated. Also, please feel free to comment on any smart tips to do before accepting a “contract” deal with someone.
(I havent done anything yet, dont even have a contract written up)
April,
I sell almost all my homes on a “Contract for Delivery of Title to a Manufactured Home” (whew…). The actual document was created by a local attorney in my area.
I take the position that I’m the bank. I get a down payment or 10% or so and structure the Contract based on a payment that "leaves them grocery money at the end of the month (usually corresponds to what a similar apartment would cost monthly) and it’s ALWAYS more than I’m paying if the home is financed (my underlying finacing is none of their business by the way), and yes I do charge interest at 12.9%, justified by the fact that I’m a “small operation taking a risk”.
I let the park manager screen the applicant and if they’re good enough for the park they’re good enough for me. I also require an insurance policy binder, paid for the first year with me listed as lien holder at closing.
All the best, Lyal
Far be it from me to suggest anything unsavory, but you do realise that the only people who know for sure you are taking payments on that piece of personal property (the home), are the person doing the paying (your buyer) and the person doing the cashing of the check (you, the seller)? You may want to rethink letting the government into your check book unless you absolutely have to. Just my opinion, not a solicitation to commit tax fraud.
Also, will the park allow you to basically sell your place on a kind of personal property “wrap”? Most parks will notify the lien holder that a change in ownership has occurred and the note may have to be cashed out. With a buyer without financing, that will be impossible and the sale will fall through. Better ask your park manager about selling your place on contract. They have all kinds of rules about contract sales.
If you figure out how to get out from under a home that you owe $24,000 on and actually get to transfer ownership without satisfying the note in cash, PLEASE let the other 750,000 people who now find themselves upside down in their homes know how you did it. All this due, in part, to some terrible shananigans pulled by the lenders the last few years. (Soap box, another day!).
Phil:
I think the shanaigans were pulled by the MH Dealers!
I recently purchased a repo home in my park. While I was at the County Tax Office asking what the back taxes were, I saw the original purchase price of 47,900 for a 1998 16x80 sold in 1999. The lender got 6500 for a note with over 30k due. The only person who made any money was the original dealer.
Steve,
I cleaned out my file and mistakenly deleted the copy of your contract you had sent me. I wanted to include some of the verbiage in my next deal (closing today). Can you shoot me another copy please to keninvestinc@yahoo.com
Thanks Much, Lyal