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What You Need to Know About Selling Manufactured Homes
This blog was part of an ongoing series of educational classes and attempts to summarize a class on manufactured homes. Nothing in this blog should be used in place of actual legal advice. Please contact an attorney if you need help with your manufactured homes.
Click to watch the video for this class
HISTORY
Back in the period between 1913 and 1929, cars were really starting to take off and RVs and trailers hit the market. The very first qualified recreational vehicle, the Pierce Arrow Touring Landau, was made in 1910 and is now in a museum. Before the 1910s, trailers were mostly just hitched onto the backs of cars, and then in 1922 the New York Times predicted that 1 out of every 2 automobiles would be used for camping. When the Great Depression began, vehicles typically used only for recreation gained a new purpose as actual housing for those who needed affordable or temporary housing. In the 1930s the traditional model appeared for the manufactured home and gained that “bread loaf” appearance that is still seen today. Shortly after the 1930s when the housing market was booming and as the Second World War began, mobile homes were brought in to house factory workers who had to move into the area. At the time, it was predicted that 7% of the population was using mobile homes and that number has continued to grow. In the 1950s people started calling them 'mobile homes,' and the Golden Age of mobile homes started in 1976 when the federal government finally got involved and started regulating them. This industry has set a record for how fast it went from non-existent to an everyday thing here in America.
DEFINITIONS
Mobile homes and manufactured homes are the same thing, but there is a slight difference in their definition.
- Mobile Home: Those constructed before June 15, 1976.
- Manufactured Home: Built to the Manufactured Home Construction and Safety Standards of 1976 (HUD Code) and displays a red certification label on the exterior of each transportable section. Manufactured homes are built in a plant and are transported in one or more sections on a permanent chassis.
They are still colloquially known as mobile homes, though, even if they’re constructed after 1976.
Manufactured homes are a type of home known as a Systems-Built Home. This is a method of building in which prefabricated components are used to speed up the construction of buildings. Some other systems-built homes examples are:
- Modular homes
- Panelized wall systems
- Log homes
- Structural insulated panels
- Insulating concrete forms
REGISTRATION
Manufactured homes have to be registered by law. Every state has their own laws on top of the federal regulations for safety standards and guidelines; even though the Feds are involved in the creation of manufactured homes, the actual process of governing and administering those homes falls to the state. You can be fined if your manufactured home isn’t registered properly, and whether this happens or not is really dependent on how aggressive your local county office is about licensing. Some people may have owned their manufactured home for 20 years without ever paying tax on it – this doesn’t mean they shouldn’t have paid tax, it just means they were never aggressively pursued by the taxing authorities.
When we talk about taxing mobile homes, we’re referring to two different parties that have authority over this: the licensing department at the DMV and the tax assessor’s office, which deals with ad valorem taxes, or real property taxes. Either one of these entities can tax a manufactured home depending on how it qualifies; if you are being taxed by the DMV, you do not have a fixture to real property – what you have is a personal property vehicle. Once it becomes affixed to land, there is a process to have that personal property title removed so you can make it part of a fixture to the land. The tax assessor picks that up and sends you a tax statement every year to show what the land is worth and what the trailer is worth.
You can find information on registering your manufactured home in Madison County HERE.
HOW DOES THIS AFFECT TITLE IN A CLOSING?
The way the manufactured home is registered is very important when it comes to the closing attorney’s side – it is not just a tax issue. First we have to make sure all liens are paid off on your title, so if the manufacturer still has a lien (just like an auto manufacturer may have a lien when they sell you the car) we have to make sure that’s been released. Most importantly, if you’re trying to get a mortgage on it, it needs to be a fixture. You can technically get a mortgage on it as personal property, but finding a lender who understands this process and is willing to do it is very difficult. The status of a manufactured home is very important in terms of whether or not a buyer will be able to borrow money in order to purchase it.
By default, every manufactured home in Alabama starts as personal property. You cannot simply have it put on your land and consider it a fixture. You need to make sure you take the property steps to make it a fixture so that it will be insurable as real property in the future.
SO WHAT TITLE DO I HAVE?
Alabama has slowly been progressing on the issue of how we handle manufactured homes. As we discussed, the federal government got involved in 1976, but Alabama didn’t really get involved until 1990. Pre-1990, there really wasn’t a requirement on titling manufactured homes, or at least not that I’ve found. In 1989, the Alabama Legislature amended the automobile title provisions to say that all manufactured homes will be titled as a vehicle (personal property) and each one will be required to have a title beginning in 1990. Because this process didn’t exist prior to 1990, knowing how old your manufactured home is can be very important in knowing what to even look for when considering selling – if the structure was built prior to 1990, you may not have a title at all and we may need to get a title so we can then surrender it in order to make the manufactured home a fixed piece of property.
In 2003 the Legislature updated the provisions again to include language about the home being permanently affixed to the land. This update would apply to model years 2004 and all subsequent years.
WHO DECIDES THIS?
There are certain criteria that have to be met in order for your manufactured home to qualify as a fixture:
- The home has to have the wheels removed and be on a slab
- It has to be hooked up to public utilities via an attachment to the dwelling, not to a pole next to the dwelling
- The owner of the land must be the same as the owner of the manufactured home
- The owner must be using the manufactured home as a family residence – it cannot be rented or be situated on rented land
WHAT’S THE LAW?
- Your manufactured home must be titled with the DMV.
- If it is not titled then you’re required to fill out an application for title
- Each unit must be titled – a double-wide counts as two units
- Title can be canceled if the home is permanently affixed to Real Property
- If the ownership of a manufactured home and real property is identical and the owner uses it as a personal residence for family
- It cannot be rented or placed on rented land – if it is rented even after the family has lived in it for years, the tax assessor will very likely remove the Fixture label on the next tax assessment even if everything else has been done to have it qualify as a fixture
- How to cancel:
- Certificate of Origin or Certificate of Title – this comes from the DMV
- Lien release if there is one on title from the manufacturer – If I know a manufactured home is involved in closing, I’m going to do an additional UCC (Uniform Commercial Code) search on top of the title search just to make sure we look for everything we need to and to see if the asset has been used as collateral on any loan
- Affidavit of Affixation from the owner saying that it meets all requirements of being affixed to the land and is being used properly
- Can be detached after being affixed
- If you do go through all these steps to have title canceled and have the home affixed to the land, that doesn’t mean you have that title forever. It can still be detached after being affixed, and if this happens then according to the statute you are still responsible for dealing with it and ensuring proper title.
- State keeps records of canceled title
- If you aren’t sure if a previous owner canceled title, we can try to look at the records to see if it has already been documented or if you need to go through the process.
If you are trying to sell a manufactured home that is no longer considered a fixture, you can absolutely do that using a bill of sale. The major issues you’d have there are that it won’t be part of title insurance and you’ll have a difficult time obtaining a loan to purchase it so you may have to purchase it in cash.
The biggest thing to take from this is that manufactured homes are time-consuming – there is no quick close on a manufactured home. Even though the home itself will likely be less expensive than purchasing a “stick-built” home, it’ll be a longer process and will be a more expensive closing because of all the steps the attorney needs to take to verify the home’s status. It’s very important to communicate this to your clients so they have accurate expectations for the closing process.
