A mobile home note is a promissory note with a deed of trust or mortgage that secures a mobile home and the land underneath it. The latter part is important, as most mobile home note buyers won’t look at mobile home notes unless the land on which they sit is included in the collateral. The mobile home should be part of the real estate in the legal documents rather than be legally seen as personal property.
Because mobile home notes are considered riskier than notes on other residential properties, they tend to get pricing that is less aggressive. Of course, the value of a mobile home note is based on several factors, as shown below.
Why Do We Buy Mobile Home Notes
Since most banks won’t loan against mobile homes, owner financing is often the only way to sell one. The person who sold the property with the mobile home may not have ever wanted to hold a note, or may decide that they can make more by selling the mobile home note and then investing in other properties.
The mobile home note’s value is determined by factors such as the condition of the mobile and its surroundings, the credit of the payer, the down payment made, the terms of the note (interest rate and number of years), and the number of payments that have been made. Often, the note will carry a higher interest rate than is found with other properties, which helps make the mobile home note buyer be able to price more aggressively.
The mobile home note buyer looks at all of these factors to decide on the riskiness of the note, whether to make an offer on the note, and whether to offer to buy the full note or only some of the payments. If the property has little equity and/or the payer has poor credit, the note buyer will sometimes not make an offer at all or will only pursue buying a certain number of the payments (called a partial note purchase or simply a partial).
To Sell or Keep a Mobile Home Note
The determination on whether or not to keep the note is up to the note holder (the person who sold the property), and their other investment opportunities, financial situation, and stage in life. There are good reasons to hold a note, such as receiving regular, monthly income from the payer. If the note holder is comfortable taking the time to ensure prompt payments, making sure that taxes and insurance are always current, and keeping tabs on the property condition, then keeping the note may make the most sense.
However, there are also risks involved in holding the note, which include:
- Risk of default. Especially with longer-term notes, payers may run into medical situations, divorce, or other life events that could stop them from making payments.
- Risk of delinquent taxes or insurance
- Risk of property damage
- Risk of property values declines in the area
If the note holder is not an expert in real estate or is uncomfortable facing the above risks, it makes sense to contact a mobile home note buyer to determine the value of the note and whether it can be sold. Seascape Capital has been successfully buying mobile home notes since 2002, and is the top company in the U.S. for highest prices and great service.