Independent ‘street’ MHRetailers & in – Landlease Community Home Sales
Independent Street MHRetailers & In – Landlease Community Home Sales
“Do YOU view them as ‘oil & water siblings, separated at birth – never the twain to meet’? Or as ‘one in the same, cut from the same cloth’, but NOW maybe ripe for sharing knowledge that sells homes, while eschewing nefarious ‘tricks of the trailer trade’? And finally, are they willing to embrace contemporary housing marketing and sales techniques, including the establishment of a functioning and accountable secondary manufactured housing resale market?” Edited introduction to last weeks blog posting.
The above subtitle questions were last week’s BEBA (Blast Email Blog Alert) reader provocateur. And did we ever get responses! Here’s an outline based on the observations and commentary YOU sent us; then fleshed out in paragraphs to follow:
Independent street MHRetailers, ‘pro & con’ and recent (not past) trend(s)
In – landlease communities, are new and resale home sales & self – finance necessary evils to fill vacant rental homesites, and or a practical means of ‘adding value’, while complicating one’s disposition strategy and property’s refinance potential?
Consequences of increased federal and state financial regulatory control and supervision of MHRetailers & landlease community owners/operators engaged in self – finance of new and resale home sales transactions.
Still awaiting on a secondary market for resale homes!
Where to go from here, relative to manufactured housing marketing and sales training, communication, resources, and more?
Independent street MHRetailers, ‘pro & con’ and recent (not past) trend(s)
While not a documentable fact, many MHIndustry aficionados estimate we’ve lost 9/10ths of the independent street MHRetailers in business during manufactured housing’s most recent, albeit brief heyday, culminating in 1998 with 372,843 new HUD Code home shipments in the U.S. Why? Take your pick of reasons: chasing market share (Think ‘land & home packages’) head to head with stick builders; loss of independent third party chattel (personal property) financing for our homes; and, wholesale acquisition of independent salescenters by cash flush (at the time) HUD Code manufacturers (i.e. Converted to ‘company stores’) During the same period of time, per Danny Ghorbani of the MHARR, we’ve also seen 300 of 400 housing factories close.
PRO. Independent street MHRetailers “…are on the front line of battling business problems every day. They create all the jobs in this industry – for the manufacturers, lenders, suppliers and associations – not the other way around. (Some) have survived these last three years of financial turmoil, with most having been through several downturns over the last 40 years or more.” CC
CON. “Many, if not most, retailers (street dealers) are out of business because they ‘killed the goose that was laying the golden egg’ with their selfish, short – sighted financing shenanigans (i.e. down payment games, fraudulent credit applications and income – reporting antics) or because they couldn’t operate unless they locked the customer in their office to pressure them and keep them from buying elsewhere. What are LLCommunity owners to learn from people like that?” And “Even when lenders caught them, they really just got a slap on the wrist and a warning. Everyone was so concerned about volume and profit, no one thought about the long term consequences, which we are now suffering.” Latter quote (edited) per Jim Carmichael.
TREND. Most landlease community owners/operators, particularly portfolio ones, are convinced MHRetailers have forgotten how to market and sell new manufactured homes into their properties. As a result, the majority of larger LLCommunities, particularly property portfolio owners/operators, now routinely sell and often self – finance new and resale homes on – site. In the meantime, this question begs answer: Will independent street MHRetailers ever return in significant number? Most pundits say ‘Not until independent third party chattel finance returns in volume.’ Others just say ‘No.’ How ‘bout you?
In – landlease communities, are new and resale home sales & self – finance methodologies necessary evils to fill vacant rental homesites, and or a practical means of ‘adding value’, while complicating one’s disposition strategy, and a property’s refinance potential?
PRO. Real estate broker Jim Carmichael penned the following lines a few years ago. Landlease community owners/operators “…must become dealers if they want to increase and control their occupancy levels. Just like a street retailer with a couple park models, sales people and service operations. The (business) model is that of a residential developer when they are building a new subdivision. The good news is you control tenant and housing quality. The bad news is the asset totally changes.”
CON. Hmm. “How does this change the asset class? Once you have a successful dealership in the community and vacancy is back to less than 5%, you decide to sell (the property). Instead of ‘many investors’ driving prices (up), there will only be a few players who can take on the complicated operations now part of the asset. The community (ground leases) will have a value, and the home sales (and finance) business(es), as well as ‘rental units’, all have different values. They are also totally interdependent on each other. So, potentially, a limited pool of buyers will dictate the market, thereby (maybe) driving prices down.”
TRENDS. For the majority of landlease communities (85% of the national inventory containing fewer than 100 rental homesites apiece) it’s ‘business as usual’, with the typical Mom & Pop owner/operator selling an occasional home, maybe carrying a personal note for the buyer, even renting a few units (apartments) from time to time. However, property portfolio owners/operators were quick to realize their very profitability, even their future, depended on their ability to effectively sell, and often self – finance new and resale mobile and manufactured homes, park model RVs, even modular homes on – site to fill rental homesites vacated by more than 250,000+/- repossessed homes circa year 2000. And by coincidence, it’s this same quarter million figure that’s estimated to be the number of vacant rental homesites in landlease communities in the U.S. today! So there’s a great deal of work to be done.
Result of all this? Today, according to past two years of ALLEN REPORTS, 500+/- known portfolio owners/operators landlease communities were carrying $3 ½ billion in chattel ‘paper’ by the end of 2009, and $5.2 billion by the end of 2010. What’s the total for this 2011? Read the 23rd annual ALLEN REPORT in January 2012, when it’s published as a Signature Series Resource Document enclosed with the Allen Letter professional journal. To ensure you receive a copy of that dynamic duo, phone the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.
In the midst of the above – described, on – site sales and self – finance reality, landlease community owners/operators took control of their future, by convening National State of the Asset Class (‘NSAC’) caucuses in 2008 in Tampa, FL. (Where they agreed on Five Action Areas to guide future business efforts), and 2009 in Elkhart, IN., where they met, for the first time in manufactured housing history, with their home fabrication counterparts. There they agreed to new home design features, which led to the branding of Community Series Homes (in contrast with the Developer Series Homes of the late 1990s), marketed and sold by Business Development Managers (‘BDM’), a new job title for the manufacturing segment of the industry. For a description of the typical CSH product, contact Don Westphal @ (248) 651-5518.
Consequences of increased federal and state financial regulatory control and supervision of MHRetailers and landlease community owners/operators engaged in self – finance of new and resale home sales transactions
In the first instance, since there are far fewer independent street MHRetailers today than a decade ago; those surviving, some even thriving, have learned to adjust to increased financial regulatory overview – or, consider themselves ‘far enough below the radar’ of state and federal review to worry much about it.
Portfolio owners/operators of landlease communities however, are another story altogether. They have far more to lose, monetarily, if caught in violation of S.A.F.E. Act provisions in their state, or regulations pursuant to the Dodd – Frank bill. It’s been interesting to watch those actively engaged in self – finance on – site, segue from one methodology to another, during the past several years. Many started out using the classic ‘buy here – pay here’ approach, then shifted some of their mortgage servicing responsibility to others via ‘captive finance’. In the meantime, others ‘seeing the handwriting on the wall’ opted to ‘return to the 1970s business model’ and lease manufactured homes, as apartment units, on – site; and yet others have become firm believers in carefully worded and executed lease – options.
Is there a clear roadmap out there, for navigating this constantly changing financial regulatory scene? No. For example, read this rambling but illustrative passage from a veteran LLCommunity owner: “…the S.A.F.E. Act has put a great deal on us to do things right. Just because someone is doing ‘something’, doesn’t mean they’re doing it right, or others should copy what they’re doing. I’ve heard community owners say they continue to use Retail Installment Contracts or Promissory Notes to seller – finance manufactured homes, despite what the S.A.F.E. Act says, and assume they either won’t get caught or will only get their hand slapped if they do. I’ve heard others say they use lease – option contracts which provide for the tenant (buyer) to buy the manufactured home for $1.00 at the end of the lease – despite IRS ruling that the sales price must be approximately equal to the Fair Market Value of the asset at that time.” SR Go figure…
Still awaiting a secondary market for resale homes!
If memory serves me right, the Manufactured Housing Institute (‘MHI’), under the leadership of Barry McCabe, before he retired, took a good hard look at this matter, at their annual meeting in New Orleans, Louisiana, maybe five or more years ago. Well, we’re still waiting for a secondary market for resale homes to materialize, to take shape. Because, until that happens, we have no efficient, effective, intrastate and interstate home value preservation means of freeing up homeowner equity for them to buy their next new manufactured home from us!
What comprises a secondary market for resale homes? Well, part of the national marketing piece is already in place via MHVillage. Most landlease community owners/operators, as well as homeowner/site lessees, already are either somewhat familiar with the system, or use it regularly. Visit www.mhvillage.com or (800) 397-2158. But that’s but only the visible present day tip of a figurative iceberg that needs to materialize and float our way.
Multilist service. Though discriminatory denial of access to Realtor® mulitlist services has softened since a recent U.S. Supreme Court ruling, National Association of Realtors (‘NAR’) affiliated state and local realty boards have not ‘flung open their doors’, welcoming manufactured housing listings, including those in landlease communities.
Valuation. As long as federal government GSEs (government – sponsored enterprises), independent third party chattel lenders, and lending institutions continue to opt for ‘book (replacement) values’, in preference to estimating home values ascertained via market ‘comparable sales’, our unique, affordable, manufactured housing product, in and outside landlease communities, will continue to trend toward value depreciation, rather than appreciation or increase. Believe it.
Escrow closings. The sooner we treat our homebuyers/borrowers like folk buying/mortgaging site – built new and resale homes, the sooner HUD Code manufactured housing will be treated, across the board, like HOUSING per se.
Licensure. In most manufactured housing sales environments, this is a touchy subject. But it relates to the previous point. There’s little harm, rather a lot of positives, to educating ‘street’ and on – site sales staffs in the basics of real estate, along with state regulations. If YOU were a would – be manufactured housing purchaser, wouldn’t you feel a whole lot more confident meeting with and buying from a trained and licensed professional, rather than someone with less invested in your home buying experience?
Where to go from here, relative to manufactured housing marketing and sales training, communication, resources and more?
First; an attempt to answer the primary question posed in the subtitle of this week’s blog posting. Can we indeed bring independent street MHRetailers & in – landlease community home sales, as disparate but akin manufactured housing marketing and sales environments as they are, together to work as the much needed new team to effectively and fairly sell new and resale homes? I think so, if both sides are willing to learn ‘the good lessons’ from one another, even tips from housing ‘brethren’ outside factory – built housing circles. A couple cases, resources, and upcoming opportunities in point.
More than a decade ago, Hometown America recruited a top housing marketer from outside the HUD Code manufactured housing industry. He continues with the firm today, and is widely recognized as bringing conventional housing marketing and sales techniques to that firm, realizing unparalleled success along the way; methods now copied by other property portfolio owners/operators.
Note. If you’re a property portfolio owner/operator reading this blog posting, and wonder why I’m not citing your firm as an example here, it’s because I need to sit in on some of your sales training sessions, then Mystery Shop your landlease communities, to ensure you’re not only ‘talking the (sales) talk’, but ‘walking the (sales) talk’ as well. GFA @ (317) 346-7156. Professional Mystery Shopping of LLCommunities = $500.00 each.
Chris Nicely, longtime marketing executive with Clayton Homes, now an independent consultant, has released the first How To book in decades, describing means to effectively market and sell HUD Code manufactured homes in ‘street’ retail salescenters and on – site in landlease communities! It’s an e-book, titled Pillars of Promotion. In it Nicely describes “six proven tactics that will drive more qualified traffic and increase sales opportunities.” Price is $49.95, actually $10.00 less, if you’re a dues – paying member of any state or national manufactured housing trade association. To order, phone (865) 385-9675 or firstname.lastname@example.org
Another relatively new, but now widely used, tool for individuals marketing and selling new and resale homes of any type, is the ‘Ah Ha! & Uh Oh!’ Formulae. This single page worksheet is used by MHRetailers and LLCommunity owners/operators, to estimate maximum recommended ‘affordable’ & ‘risky’ purchase prices – as well as max mortgage amounts – for new and resale, privately – owned homes of any type, whether sited on realty owned fee simple with said home, or on a leased rental homesite within a landlease community! Seriously. Such a practical computational tool was not available to home manufacturers, MHRetailers, and landlease community salescenters before 2008. The procedure begins with either a prospective homebuyer or household’s Annual Gross Income (‘AGI’), or local housing market’s Area Median Income (‘AMI’) – latter ascertained by inputting one’s local housing market’s postal zip code at zipskinny.com For a FREE sample of this revolutionary form, phone the above – referenced MHIndustry HOTLINE today. Why is this form revolutionary? Using it, one never again has to rely on the advice of a manufactured housing factory marketing representative to suggest what home price points will sell in one’s present or intended local housing market; and, no more will salespersons accidentally ‘sell more house than their customer can afford’, based on their Annual Gross Income, or the local housing market’s Area Median Income.
Finally; for those reading this, who’re truly excited about the possibility of ushering in a new era of independent street MHRetailer & in – landlease community home sales cooperation, objectivity and professionalism, there’s a helpful and timely ‘bright light on the horizon’! A National Summit is being planned for 13 – 15 November, in Chicago, where top – notch, successful independent street MHRetailers and in – landlease community home sales pros, will be sharing their ‘insider secrets’ to sustaining home sales and maintaining profits during the past decade. The only way you’re going to get off ‘dead center’, to rejuvenate your MHRetail sales business model, whether street – oriented or in – community, is to network with, and learn from, marketing and sales pros and peers willing to share and discuss ‘what works’! Want more information on this first – ever national summit meeting opportunity? Contact Bill or Chad Carr of Rainmaker Consulting at (800) 336-0339. I plan to be present, how ‘bout you?
George Allen, CPM®Emeritus, MHM® Master. Box # 47024, Indpls, IN. 46247