Who has any input on the following:
Puchasing a coastal lot ($450,000) in N. Cali Half Moon Bay and placing a 4000 sq ft 4-5 bedroom manufactored home ($200,000) on the lot. What price differential would the property have if you had a contractor build a home from scratch. How much would the property’s value be affected by the manufactored home versus an onsite build? I see may people bringing these manf homes onsite in pieces, put them together and sell the property…it can’t sell for the same price as an onsite build…can it???
Your idea sounds good. Your head is in the right place for sure!! The problem is buyers…
The first thing i would do is, check out other homes in the area. Are there any other Manufactured around… Half Moon Bay is kinda ritzy so i kinda doubt it. As picky as buyers are in this area, being the ONLY house in the area manufactured may be a problem for a Realtor to sell. The last time i checked, was last year about a renovation on our house. For a addition (NOT NEW construction) in the city close to everything (no materials being trucked out to no where) the estimate was roughly $225 dollars a squre foot in Salinas, California.
Another thing is financing for the buyer… Now it’s not impossible but there could be some problems getting financing on a manufactured/mobile home.
Since it is just a lot, I would think about water and septic. Since it is so close to the ocean, is there any special things needed to make water drinkable… How deep the well will be (that cost can get up there). As for septic, you would have to have the ground tested for the leech tanks i believe, and the bigger the house, the bigger the septic, so the more cost.
I’m in not trying to chase you away from it, but, just give you some ideas.
And as always, to all the other board members more experienced please feel FREE to correct me if i’m wrong or mistaken, this board is for all of us to learn from!
- Jason
Thanks for the input, do you have any suggestions for seller financing?
I’m now considering buying the land, going through the process to make the land buidable, and finally constructing a home. The seller will consider “seller financing”. What are the steps to complete this transaction and what are fair terms for a $150,00-$200,000 offer price?
If you choose the land contract deal, here’s a few things worth noting. You probably already know this but I’ll put it on the table as you decide what to do. In a Land contract (contract for deed) type deal, the seller would hold title until the terms are met and loan is paid in full. This means you would hold equitable title on the property. The land contract should be recorded to protect your interest from third parties. This also puts a lien on the seller’s title.
The land contract is advantageous to the seller where taxes are concerned. While the seller retains legal title, he/she would be taxed on a portion of the installment payments received within the same tax year instead of on a lump sum.
If you default, there could be a forfeiture of all your money and payments as remedy to the seller. The seller could also create liens on the property for his/her personal benefit in the meantime, so require in your contract a General Warranty Deed and lien waiver (just to be safe) at the end of your term, when you pay the loan in full. And of course, you probably wouldn’t be able to use the property as collateral for personal interim financing needs.
Thanks for the advice, the land contract is defintely a great alternative route.
What do you think about proposing a simple purchase agreement with an offer price of 200,000, $10,000 down at 10 years for 6%-7%. The seller is 70, so the term should be short, and have a payoff in 10 tens, where I can refinance or borrow from a bank and pay her in full in ten years. She just wants some liquid, and wants to get rid of the land.
The seller is concerned with capital gains? Wouldn’t the above proposal diminish amount owed for capital gains?
BTW, the land was inherited, so what role does capital gains play into this. It wasn’t bought and sold for a gain or capital loss. ???
Your question has two parts, your interest as potential buyer of the property and their interest as seller of inherited property and capital gains taxes. I would advise the seller to seek a tax attorney regarding the estate taxation of of the inherited property. Something worth noting is the owner is 70. If you do a purchase money what complications might arise if the owner passes and other siblings inherit the property? That could open up a major can of worms.
The only advantage I see with owner financing aside from a traditional loan to purchase is a lower interest rate (the interest rate is typically higher with a purchase), 5%-10 downpayment, minimal closing costs, and a faster closing period. This works well with folks who have bad credit and have few options of owning. I think with a purchase contract there would be two deeds (recorded) involved and exchanged at closing. I believe the owner would still have the option of selling the property to a lender, primarily in the secondary market should they need money in the future, of course based on their equity in the home. There’s also a possibly of subordinating the loan in this case. A purchase money agreement could get very complex I think. There’s no standard when comes to documentation of the agreements…dicy.
You might want to consider obtaining a construction loan (possibly LTV of 80%), whereas you pay interest only payments for a short period of time (during the construction phase), it’s a revolving line of credit. Once the project is completed, you’re payments will be termed out to include principal and interest payments. Of course, there’s a steady stream of paperwork as the construction project progresses. In the interim, when the house is completed sell the property then pay the bank off. Or, make it your primary residence for 24 months and take advantage of the benefits for homeowners where capital gain taxes are concerned.
Not sure if this helps. I’m not sure why the sellers would consider owner financing before first selling the property on the open market if they just want out of of it? Maybe they just aren’t aware of their options, or possibly they know something about the property and are not disclosing a potential major problem with the property? I see some possible red flags. Cevate emptor “Buyer beware”.