An Overview of a Mobile Home Purchase Agreement
What is a Mobile Home Purchase Agreement?
It’s pretty easy to consider a "Mobile Home Purchase Agreement" simply as a contract that is used when you buy or sell a mobile home, but that wouldn’t be entirely correct. A mobile home purchase agreement is more than just an agreement between a buyer and a seller of a mobile home; it also serves as a sales contract for the land on which the mobile home sits and establishes the relationship between a mobile home buyer and a mobile home seller.
A mobile home purchase agreement is often the first place an inexperienced buyer will see a reflection of many of the laws that govern the mobile home sales process . The buyer can, by reading a mobile home purchase agreement, learn about their rights under the law and should have a basis from which to ask the seller questions about the purchase process. It is entirely possible for an inexperienced buyer to learn a lot simply by reading a mobile home purchase agreement.
One of the more important aspects of a mobile home purchase agreement is that it is a legal document that should be carefully reviewed for accuracy and completeness. That means that a buyer shouldn’t just rush into a closing wearing blinders that only allow them to see the total price. Any mobile home purchase agreement should benefit both the buyer and the seller; just like any other real estate purchase agreement.
The Major Parts of a Purchase Agreement
A mobile home purchase agreement generally constitutes a binding contract for the sale and purchase of a mobile home. Like all types of residential purchase agreements, it typically includes basic informative provisions such as the names of the buyer and seller, the nature of the property being sold, and the anticipated amount of the purchase price. The seller is generally required to provide the buyer with a written disclosure of defects that affect the home.
For applicable manufactured homes, the Mobile Home Seller Disclosure Act requires specific disclosures concerning, for example, certain defects in the electrical, plumbing, heating, and sewage systems. It also requires the seller to disclose whether any material damages to the home have been repaired and whether there have been any additions or modifications made to the home not governed by a building permit.
In standard form, the mobile home purchase agreement will contain sections requiring each party to take possession of the property at closing. A fee schedule as to the contents of the home may also be included. The parties will be asked to signify their mutual acceptance of the terms of the purchase agreement with their respective signatures.
Legal Implications and Laws
"Undertaking sufficient due diligence before signing any contract is critical. The agreement you sign does not encompass your entire understanding of the contract so care should be taken to not get involved with a purchase agreement where you do not vet out any contained deficiencies."
"Local laws and regulations also play a significant part in the buy/sell contract. For example, if you are buying from a seller who does not own the land and you believe he does or the unit has major code deficiencies, you will have an uphill battle to climb to enforce certain provisions that may appear in the contract. However, if the seller owns the land and the unit you will be in a stronger position to negotiate. Further, mobile home park laws that regulate such things as evictions, rental increases, install-deinstall regulations, park rules, etc., can be enforced against you once you take title to the unit depending upon the language in the local ordinances."
Financing Terms and Clauses
Financing is one of the most complex parts of purchasing a mobile home. Certain financing options may be available based on your credit. Your credit score can affect the interest rate, terms, and type of loan offered.
Options: Credit Score: The clauses listed in a sample mobile home purchase agreement may include terms for financing. Financing is essentially the means of obtaining funds for a purchase, such as a mortgage for real estate. If you are financing the mobile home, borrowors of all credit ratings may be able to obtain a federal housing administration (FHA) loan. Many banks offer loans but require the borrower to have good or excellent credit. The purchase agreement may state that the property is being purchased without any seller financing or seller carry. If the buyer finances the mobile home through a lender, the maximum amount allowed would be determined by the lending institution.
Clauses: A mobile home purchase agreement or mobile home sale agreement may include clauses that detail the method by which the buyer plans to finance the purchase of the mobile home. The purchaser may be applying for financing through an FHA loan. The agreement should include how much of the purchase price is to be paid as a down payment and the interest rate. It should also state the amount of time the buyer has to secure financing. The closing date for the sale, wherein the property will become fully transferred to the buyer, may be contingent on the buyer obtaining financing or the seller obtaining financing approval.
Clauses Regarding Inspection and Condition
Inspection clauses, both for the home and the community, are key. Without these clauses, you’re essentially saying that you’ll take the home and lot "as is" even if there are big problems – and this could lead to hundreds – if not thousands – of dollars wasted for a new investor. An easy example could be a soft spot in the floor of a vacant mobile home in a park. The park owner or manager knows this problem, and it could only cost $50 to fix, but once again says nothing. You buy the home, believing you got a good deal at $2,500, then pay $1,000 in moving costs, $2,500 in repairs – and at the end of the day, the home has $500 in equity and $6,000 in expenses . And in the meantime that you are fixing the place up to rent or flip, your phone is ringing off the hooks for someone wanting to rent this puppy – as outhouse – which, for some reason, is the finest compliment a landlord can receive.
The solution is to add an inspection contingency to both the Home Purchase Agreement and any Community Lot Lease Assignment documents. This clause needs to give you enough time to bring in the home and have a licensed inspector go through the place. If you do find something major that would not be obvious to a seller, notify the seller in writing of the problem to your satisfaction, and it’s best to specify the exact remediation steps needed to resolve those issues. Then allow the seller to either fix the problems listed, or reduce the purchase price accordingly.
Contingency Clauses and Closing Provisions
A contingency is a provision that either must be satisfied or waived prior to closing, or a provision that will make the purchase agreement null and void if not met and/or waived. Among the most common contingencies in a purchase agreement with respect to a manufactured home are appraisals and financing contingencies. An appraisal contingency protects the purchaser in that the seller must agree to have the home appraised or provide a current appraisal prior to closing. Waiver of the appraisal contingency may result when the purchaser agrees to waive the appraisal or obtain an appraisal himself. However, the waiver of an appraisal contingency may have an adverse effect upon the purchaser if the property has been appraised for less than the purchase price. Therefore, the purchaser should consider a financing contingency as an alternative to an appraisal contingency. A financing contingency generally states the purchaser must be able to obtain financing from a lender at a predetermined interest rate. If the purchaser is unable to obtain financing by the date specified in the purchase agreement, a financing contingency may be waived by the purchaser or the purchase agreement may be deemed null and void.
Other common and typical closing terms are: (i) a request for homeowners’ insurance, requirement for the purchaser to purchase title insurance for the home and/or (ii) requirement for the purchaser to execute a note and security agreement for the purchase money loan.
Common Errors to Avoid
An anecdotal but not uncommon scenario exists in which both a buyer and seller of a mobile home have agreed to a deal between them, but neither has been fully familiarized with the purchase agreement language as they "trust" the other party to be honest and fair. All too often, however, it is the buyer or seller of the mobile home that ends up having their best interest compromised when not fully informed of the purchase agreement itself. Consider the case where an agreement offers a discount to the buyer if the home is picked up or removed from the property within 30 days. This is a reasonable deal so long as it is placed in writing, but all too often the buyer makes the mistake of telling the seller the trailer is coming out on day 30. Even though a signed purchase agreement exists, the buyer did not get the pick-up details in writing. Due to some unforeseen circumstances or weather delays, the buyer calls on day 31 and requests another day to take the trailer out, and the seller agrees. However, on day 32, a storm blows through and rips off part of the home’s roof. The buyer then wants the seller to pay for the roof repair, but the seller refuses, stating that the damage occurred after the trailer was supposed to be the buyer’s. The obvious lesson to be learned here is to make sure that all aspects of a deal are documented in writing, and when closing, that the time frame for the move-out has been agreed upon in advance and is clearly reflected in the purchase agreement.
A Sample Mobile Home Purchase Agreement
A sample mobile home purchase agreement can be a useful guide when drafting or reviewing an agreement. The sample is intended to provide a general idea of what a mobile home purchase or sale agreement might contain and the organization of its specific sections. Any reference to a party will be generic, "Seller," "Buyer," "Purchaser," "As Is" etc., to avoid identifying a specific seller, purchaser, buyer or land owner.
A typical mobile home purchase or sale agreement will contain the following sections:
- Date
- Purchaser’s name
- Seller’s name
- Mobile Home Description
- Land Description (if applicable)
- Purchase Price
- Closing Date and Possession Date
- Title and Ownership
- Taxes
- Financing
- Default
- Miscellaneous Provisions
Many other provisions could be included in a mobile home purchase and sale agreement depending upon the needs of the parties. Considerations include inspection rights for the purchaser or an exchange of rights to move the mobile home. This is particularly important where a private individual is selling the mobile home to another private individual , or where a private individual is selling the mobile home to a dealer. A dealer may want to inspect the premises to evaluate moving costs, whereas a purchaser may want to inspect the home for mold contamination, etc. It is also important to evaluate any requirements that may be included in personal property security agreements.
Many retail dealers often have a form mobile home purchase and sale agreement but may include non-negotiated boilerplate language that can be language traps for unwary purchasers or sellers.