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The Braustin Homes
| Braustin Homes Blog
In the mobile home industry, as in traditional real estate, foreclosure can be an unfortunate outcome for some home buyers. When a mobile home has been financed without land in the loan, however, only the home can be part of the foreclosure. The home is removed from the borrower’s property and taken to the lender’s storage area to be resold as a used home—otherwise known as a “repo”.
Repos are a very tempting option for many people first looking at options for purchasing a mobile home. It’s a repo, so it must be a good deal! Right? Well, it depends.
There are a few things to understand about the world of repos before rushing in to buy one and we’ll examine some of those in this blog.
Take a scroll through some repo listings on a bank site and compare them to new mobile home prices and you might be left scratching your head when you notice the prices are almost the same.
I can help solve this mystery, though.
Lenders who have provided a mobile home loan and later foreclosed know exactly the money they have invested into the home, including the repaid portion of the loan, transportation, repairs, and administration. Because of this, they have more wiggle room in the loan terms they can offer on the used home versus the more risky unknowns of a new mobile home loan.
With that in mind, rather than offering repos at a discounted price to that of a new home, lenders instead will target used homes to home buyers who don’t qualify for new homes.
This means that where a bank might have offered financing for 35% down payment and 12% interest on a new mobile home to someone with poor credit history or high debt, they may offer 10% down payment and 8% interest on a used home loan.
Again, this is because the bank knows what’s needed on that home to at least recoup their investment if not still have a chance to turn a profit.
Now that we’ve talked about why repos may not be great deals right out the gate, let’s look at other considerations to make when opting for a repo rather than a new home.
New mobile homes typically come with 45-90 day cosmetic warranties, 1 year structural warranties, and 1 year appliance warranties from the manufacturer. Most new air conditioning units have affordable 10 year parts and labor warranties as well.
With a used or repo mobile home, there is a 60-day habitability warranty which covers only the structure and aspects of the home considered to make the home habitable (gaping hole in roof, missing toilet, etc). This warranty begins from the day of delivery and means that a homeowner must get their electric and water hooked up within the timeframe, test it, and make any other claims before the 60 days is up.
As far as the air conditioner is concerned, many repos come with the original air conditioner from the home’s first owner which will be reconnected at the time of the home’s installation. Always ask if there is an AC included, assumptions are not usually helpful in the used home world.
Many used homes come with appliances and many do not. Again, if appliances are included, they will be the ones original to the home and may or may not be in the best operating condition.
While many homeowners wanting to purchase a repo may not care much for the future resale value of the home and would rather focus on having an affordable home quickly, it’s still worthwhile to note that repo homes have some limitations when it comes to resale.
Government backed loan programs, such as FHA and VA, will not finance a mobile home that has been installed on more than one property. This situation lowers the resale price of the home dramatically because a major portion of the home buying market does not have access to the limited financing options.
Although your repo may be in excellent condition and fair market value should have it priced equally with other manufactured homes in the area, the limitations on financing typically lead to more time on the market and less return on investment, or equity, than accumulated with a new mobile home.
In the end, purchasing a repo might make sense for one home buyer and be the wrong choice for someone else. Whatever you decide, having all the facts means being able to weigh your options and choose what’s right for your situation.
Just remember, the term repo does not always mean inexpensive. Instead, it might be identically priced to a new home but have better loan terms from the lender because it is a foreclosure.
If you have questions about the pros and cons of buying a repo, our team members would be glad to hear from you. Give us a call today at 210-510-0500.
Drop us a message and we'll get back to you with some answers!