Is Buying a Used Mobile Home in My Best Interest?

Buying secondhand or previously used typically comes with the connotation of having a significantly reduced price.

There are so many “used but like new” buying opportunities that are hard to pass up at a variety of places like thrift stores, Facebook Marketplace, Amazon Warehouse, and even vehicle dealerships like Carvana and CarMax.

Returned, gently used, or previously owned products could be a great savings option if the quality is still in good operating condition.

When I moved a couple years back, I bought and sold furniture items on Facebook Marketplace and saved so much money in the process. What was once someone’s trash, quickly became my treasure!

However, does this also remain true if the “product” is a mobile home?

I mean, it is USED, so it should be cheaper than a new mobile home… right?

While this thinking works with things like used vehicles, furniture, clothes, etc., buying a used mobile home has a bit more complexity that could change the “obvious” answer.

After reading through the discussion in this article, you’ll come to realize how pricing/availability of used homes isn’t quite what it used to be.

How Does a Mobile Home Become “Used”?

Realistically speaking, life happens.

There are multiple reasons (some not-so-great included) as to why a mobile home might be going back on the market:

• Repossession
• Trade-ins
• Direct Sale from Owner

Let’s break down what each of these mean:

Repossession: Unfortunately, most used mobile homes are the result of a repossession by the bank due to a homeowner’s default in mortgage.

When this happens, the home is then removed from the homeowner’s property and sent to storage located either in manufactured home model centers or storage belonging to the financing bank.

Trade-In’s: Used homes can also be sold at model centers from “trade-ins”, where a home buyer trades in their manufactured home to negotiate a portion of the purchase price down on a new mobile home.

Owner Sold: The owner can also try to sell their manufactured home with the land on their own to a potential buyer. This can happen via online auctions, a real estate broker, or completely on their own.

Used Mobile Homes are Not Necessarily Cheaper

As previously mentioned, used mobile homes are more complex than items such as a used car, especially if it is a repossessed home and the bank is involved.

When it comes to a mobile home repossession, you have to first think of a bank’s need to recoup their investment as well as time and other costs that have been associated with it.

This means the new sale price increases to cover:

• Remainder of Loan
• Transportation Costs
• Time and Personnel Paid

Now you’re most likely wondering at this point,

“What alternative options do I have?”

“What if I don’t buy a repossessed home?”

“What if it’s a trade-in or I’m buying from a real estate broker?”

In these cases, we must consider the “limitation of consumer choice,” which means sometimes you can only buy a used home based on your credit situation, or it could also mean that there is only one used mobile home available for the real estate broker to sell.

One scenario to look at is when home buyers submit their credit applications with low credit scores and a small down payment only to find that the chosen lender declined their application. The lender will then counteroffer with better terms on the financing of a used home rather than a new home. This usually eliminates all other choices but that of a used home.

Because the lender owns this home and knows exactly what is needed to recover their investment, they can be more lenient in their lending options.

Surprisingly for most home buyers, they can actually find themselves paying more for a used home with better loan terms than a brand-new home with less favorable terms.

As an example, let’s create a scenario:

Home Buyer A – has submitted a credit application on a new mobile home at $35,000 with a 5% down payment but they have a low credit score and high debt-to-income ratio.

Lender – may counter this by saying Home Buyer A can instead have the $35,000 loan with a 35% down payment OR purchase a used mobile home in the same price range for a 10% down payment.

Home Buyer A – might need to accept these terms because they cannot afford $12,000 up front but can produce the $3,500. So, Home Buyer A has no choice other than to go with the used home in that moment.

This scenario goes a long way to explain why used homes are no longer a less expensive option, but, because a bank can decide on what they need to turn a profit on their used homes, better loan terms may be used to incentivize the sale of a used home.

In addition, delivery and set-up costs are still added on to the listed home price and will be calculated by distance in the same way a new home purchase would be.

Supply and Demand as Factors in Used Mobile Homes

Another factor into the cost of used mobile homes can be attributed to supply and demand.

The truth is, used mobile homes are not an endless stream and their availability can change with the economic climate.

Additionally, a big player in used mobile home pricing, at least in Texas, is the oil field.

When oil field work is booming and labor is in high demand, housing is in high demand, too. Oil field companies will purchase a ton of used mobile home inventory for their work force because it is ready and available to transport and install at the drop of a hat.

As previously mentioned, used mobile homes are not widely common, so having many purchased all at once creates a dip in supply. This means lenders can charge more because there will be many people who want or need a used mobile home and unfortunately – only the highest bidder can afford it.

Warranties and A/C

There are a few more aspects of used mobile homes that should be considered before purchasing.

It’s no secret that new purchases typically have much better warranties. As a matter of fact, this is true in mobile homes as well.

A new mobile home comes with a 90-day Cosmetic Warranty and a 1-Year Structural Warranty from the factory. Not to mention the 1-Year Manufacturer’s Warranty on all appliances.

However, a used mobile home is only given a 60-day Habitability Warranty, which means from the day the used home is set on your property, you have 60 days to get all water and electric connected and tested thoroughly to have any necessary repairs covered by the seller.

Used homes do not necessarily come with all appliances or A/C.

You will need to look very carefully into the details of listings and ask questions up front to avoid any surprises on a used mobile home. A/C units are not always included, but they are often in the purchase of a used mobile home. However, the unit will likely be the same age of the home and does not come with a warranty. (The home’s A/C ducts are included under the 60-day warranty.)

Resale Value of a Used Mobile Home

One issue potential buyers may not consider when looking into the purchase of a used mobile home is the resale value.

While used mobile homes that remain on the same property and are moved only for the original sale retain their value very well, and can often appreciate, homes that have been moved more than once are immediately disqualified from sale with a government loan (FHA and VA).

While this does not disqualify the actual resale of a reinstalled used home, it does make selling at fair market value much more difficult as many buyers in a mobile home price point typically use government loans to afford the down payment and interest rate.

In other words, reselling a twice-moved mobile home may result in having to sell for much less than the home’s true value.

Is a Used Mobile Home Right for You?

To put it simply, no solution is one size fits all.

In our experience, buying a used home and reinstalling it on your property is not the ideal long-term investment many families need if they are hoping to accumulate wealth with their home purchase.

Used mobile homes are an option, sure, but there is a time and place for them.

With a limited warranty, limited resale opportunity, and comparable (and even higher) prices than that of a new home, ultimately, the benefits do not often outweigh the risks.

And there you have it. That is the breakdown of all things used homes. If we missed any questions you have on this topic, don’t be afraid to drop us a note on Facebook and we’ll be glad to help you.