Home sellers who want to sell property that includes a mobile or manufactured home may or may not know exactly what it is they are selling.
As a real estate agent, one of your primary goals is to help your clients understand the nuances of these types of property transfers so as a seller, they maximize their ability to find a buyer. This could include converting the home from chattel (personal property) to real property.
Property or chattel
The first thing to establish with the homeowner is whether their mobile or manufactured home is real property or chattel. Most mobile and manufactured homes start out as chattel or personal property because they are not permanently affixed to land and can be moved from one piece of land to another.
In most states, a document similar to a deed of conveyance in the form of a Certificate of Title is required for a manufactured home. At the time of the original purchase if the owners intend to permanently affix the home to the land, the certificate of title must still be applied for, but then will need to be cancelled to convert the home to the real property classification.
However, if the owner did not permanently affix the property to land, they can do this at a later date by reclassifying the home as real estate through a legal conversion process. This process is handled differently from state to state and may need to be managed by an attorney to ensure the paperwork is completed and filed correctly.
Advantages of converting to real property
The most important advantage of converting a manufactured or mobile home to real property status is the ability to finance a mortgage.
When a mobile or manufactured home is not affixed to the property, the process for transferring the property to a buyer involves two separate transactions, the sale of the land – the real property – and the sale of the structure – the personal property. Generally speaking, loan terms for a manufactured home classified as real property are going to be more favorable than those classified as personal property, although conversion is not an automatic guarantee that all lenders will provide conventional financing.
A second advantage of converting to real property is the ability to get title insurance. In the sale of a property where the home is not affixed to the property, title insurance would be available for the land itself, but would not cover the unaffixed home.
Once the structure is converted to real property, title insurance may be available to cover the entire sale of the property, but this should be carefully vetted with the title insurance agent handling the sale to ensure all the necessary documentation is in place so that the underwriter can insure the property accordingly.
Other advantages of converting to real property include availability of homestead exemptions in some states, stronger protection of the property for future heirs, and a much greater ability to resell the property in the future
At FAN, we have a full range of services to support real estate agents, consumers and other title agencies who are handling the unique requirements of mobile and manufactured home transactions. Contact us today to learn how we can help you with your next transaction.
