Lest We Forget: ‘Upside Down in a Mobilehome Park’
Lest We Forget!
14 years ago, I penned ‘UPSIDE DOWN in a Mobilehome Park’ for the now defunct Manufactured Home Merchandiser magazine. The feature bluntly described sorry homeownership situations the manufactured housing industry, and its’ home buying/site lessee customers, frequently got themselves into, circa year 2000.
Few at the time appreciated my ‘airing our industry’s dirty laundry in public’; but as annual new home shipment volume continued the precipitous slide begun in 1999, ending in 2009, the expose’ proved warranted and instructional! It returns here today, as a timely and authoritative ‘WARNING to the MHIndustry’, to eschew any revival of interest in, or efforts to obtain, ‘too easy to access chattel capital’ for manufactured homes.
The ‘numbers’?: 1999 = 348,843; 2000 = 250,550; 2009 = 49,789; & 2013 = 60,228
‘UPSIDE DOWN in a Mobilehome Park’
By George Allen, CPM®Emeritus, MHM®Master
The title ‘Upside Down…’ caught my eye as I browsed among art film titles in a local video store. Rented the film, took it home, and here’s what was viewed..
The movie’s setting is unclear. Could easily have been in New England, the Southeast, or the Pacific Northwest, though I’ve seen similar manufactured home communities in the rural Midwest. No question however, this was an upscale land lease MHCommunity installing new multisection manufactured homes on-site.
Central characters were a young couple, George & Carolyn, buying their first home. Both employed, no children or pets, and two older cars. And there was H. ‘Itch’ Balle, the retail sales center salesman/manager. Film begins with George reading this classified ad: ‘L(.)(.)K, New Homes for sale at Sherwood Forest Estates’. What catches his eye, besides the nearby location, is the $4,000.00 move-in incentive offer! George phones, he and Carolyn visit, really like what they see, and buy. Their new home, already sited, but not yet landscaped, is an $80,000.00 multisection HUD-Code manufactured home.
Everything seemed to be going their way! Originally expecting to have to come up with $4,500.00 down payment, they only paid $500.00! How so? The $4,000.00 ‘move-in incentive’ was graciously applied, by the retailer/developer, to improve their homesite with shrubs, porch and carport. Then that amount was added to the balance they’d be financing.
Even financing arrangements were a steal! Mr. Balle arranged for them to avoid paying ‘10% over 30 years’ terms (that’d have meant $733.13/month payments *1), and got them a variable rate loan of only ‘9% over 30 years’ with maximum possible increase of 2% (or two points) after one year. Their first year rate was only $672.18/month *2 on their new home mortgage!
And the Good News didn’t stop there! At the point in the movie when George & Carolyn suggest they might ‘shop around’ before committing to buy at Sherwood Forest, ‘Itch’ announced the entire first year’s rent of $285.00/month would be waived if they signed the sales contract that very day!
Now, that was a ‘no brainer’ decision if ever there was one. They’d already ‘saved’ $4,000.00 on the housing down payment (Somehow they thought they’d be paying off less than $83,500 though….); were saving $60.95/month on the loan payment, or $731.40 per year; and now, a ‘signing bonus’ (Just like a pro athlete!), they were saving yet another $3,420.00 in rent during the first year of being a resident at Sherwood Forest Estates. This was all too good to be true! No question; they signed.
Then the video fast-forwarded a year and a month into the future. The euphoric sales center scene of 13 months ago is now a distant bittersweet memory. During the past year, Carolyn had become pregnant and was no longer working. And with the extra money from the ‘house deal’ – more than $4,000.00 in down payment and mortgage savings, waived rent, and no security deposit (Forgot to mention that little gem earlier), they’d bought an expensive new SUV on payments.
It was bill-paying day and George & Carolyn were out of money. Their variable rate mortgage payment had just jumped from $672.18/month to almost $800.00/month *3 – not including property tax and homeowner insurance commitments. And a previously unknown notice had just arrived, a monthly site rent bill of not $285.00/month, but $300.00/month, incorporating an annual rent increase. Where in the world were they going to come up with at least an extra $400.00 every month, on just one salary, to pay rent, mortgage, payments on the new car, and with a baby on the way?
As the movie ended, this couple was, in effect, completely upside down in their financial commitments and responsibilities – with no easy way out, but to walk away from their new dream home. The epilogue, through a voice-over by a moderator, listed the winners and losers in this housing transaction….
Winners. Commissioned salespersons selling new homes. Lenders providing high interest chattel mortgages. Developers intent on filling new MHCommunities within a year, and then flipping/selling to the highest bidder. Homeowner/site lessees during only the first year of their tenancy.
Losers. The HUD-Code manufactured housing industry’s image and reputation! Lenders risking repossession and losing money, but able to resell and originate new loans. Salespersons setting homebuyers up for a ‘fall’ will likely suffer consequences somewhere, somehow, along the line. And developers earn a reputation for profiteering.
As I contemplated an appropriate moral, lesson learned, or summary for ‘Upside Down in a Mobilehome Park’, several came to mind: a little Latin, a slang expression, a Biblical admonition, and a quote from Gub Mix’s popular column, ‘From My Soapbox’:
• Caveat emptor…’Let the buyer beware!’
• ‘A sucker is born every minute.’
• The Golden Rule…’Do Unto Others as You Would Have Them Do Unto You!’ Matthew 7:12, and NOT the God Rule: ‘He who Has the Gold Rules!’
• “…manufactured housing industry devotes an extraordinary amount of its’ resources to sell homes to people who really aren’t qualified home buyers. Why? Because they allow us to sell the old mobile home way…it’s easier than attempting to sell to qualified buyers who require a lot more effort. Manufactured housing may be the only industry in America who ignores the customer’s desires in their marketing practices. Unfortunately for us, potential buyers are much more savvy these days and appear to be abandoning us in droves.” June 2000. Gub Mix has since retired.
1. $80,000 (-) $500 DP (+) $4,000 add back = $83,500.00 (or 83.5) X 8.78 loan factor = $733.13/month
2. $83,500 ( or 83.5) X 8.05 loan factor = $672.18/month
3. $83,500 ( or 83.5) X 9.52 loan factor = $794.92/month.
If interested in learning more about the Community Owners Business Alliance, or COBA7, simply phone the Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.
Affiliates include land-lease-lifestyle community owners/operators, HUD-Code home manufacturers, product/service providers, and state MHAssociations in the U.S. & CN.
George Allen, CPM®Emeritus, MHM®Master
Box # 47024, Indianapolis, IN. 46247