Lender Requires Full Replacement Cost on 1980 Manufactured Home in Florida
Hello everyone, I could really use some advice. I’m in the process of purchasing a 5-acre property that includes a 1,100 sq. ft. manufactured home from 1980. It’s clear to me that the value lies primarily in the land. When I made the offer, I never anticipated that the manufactured home would be such a challenge. My intention was to buy the land and build a traditional house within the next couple of years.
However, now I’m facing high interest rates and a larger down payment due to the manufactured home. While I was okay with this, the lender has now requested Full Replacement Cost insurance for the home. Unfortunately, they rejected the coverage I found with Citizens, which is the best option available. Citizens provided an RCE report indicating that the full cost of reconstructing the home would be $147,000; however, considering depreciation and allowing an additional 25%, they proposed coverage of $78,000, with a premium of around $2,300.
The lender is insisting on the $147,000 coverage amount, and despite my efforts, I can’t find any other insurers willing to cover the mobile home. I recently completed a 4-point inspection, which the home passed without any problems, and a full roof replacement was just finished last week. In my opinion, the manufactured home is worth only $30,000 to $40,000 at most, so the insurance company’s assessment seems reasonable.
I’m buying the property as-is for $330,000 with a 25% down payment, borrowing $249,000. The land alone is valued at over $300,000. I don’t understand why the lender won’t accept the $78,000 insurance coverage, especially since I can’t insure the land either. I’ve urged the lender/broker to find an insurance company that can meet their requirements, but even if they do, I can’t imagine what the premium would look like—perhaps $5,000? Who would want to insure a $40,000 mobile home for that price?
What should I do in this situation? Any insights would be incredibly helpful!
It sounds like you’re in a frustrating position with your lender’s insurance requirements related to the manufactured home, especially given that the primary value of the property lies in the land. Here are some potential steps and considerations that might help you navigate this situation:
Communicate with Your Lender: Make sure to have an open dialogue with your lender about your concerns. Explain your perspective on the value of the manufactured home compared to the land. Sometimes, lenders might have flexibility or can offer alternatives once they understand your viewpoint better.
Explore Additional Insurers: While you’ve had trouble so far, it may be worth reaching out to a few more insurance agents or brokers who specialize in manufactured or mobile home insurance. They may have access to markets that are not readily available to you. Ask them if they can obtain “actual cash value” coverage or find a way to meet the lender’s requirement.
Negotiate with the Current Insurer: If Citizens won’t budge on their policy, see if they can provide you with a modified policy or if there are other options they can offer that might meet your lender’s requirements without skyrocketing the premium.
Look for Specialty Insurers: Some insurers specialize in higher-risk properties or unique situations like yours. They might have different underwriting criteria that could be more favorable.
Appraisal or Inspection: If you believe the lender is misvaluing the property, you might consider hiring an independent appraiser to assess the manufactured home and provide a written report to support your claim. This could help in negotiations with your lender.
Consider a Short-term Loan: If your situation doesn’t resolve quickly, consider discussing short-term loan options that do not have the same stringent insurance requirements, allowing you to buy the property now and refinance later once you’ve built your new home.
Consult Real Estate Professionals: You might want to consult with a real estate attorney or a financial advisor who can offer insights into your rights and any potential loopholes in the requirements.
Contingency Plan: If all else fails, think about whether you can proceed with your original plan to build a house sooner than planned, which might eliminate the mortgage on the mobile home.
Remember, while the lender has specific requirements, they should eventually want to close the loan and complete the deal. Keep advocating for yourself, and don’t hesitate to seek professional advice if needed. Good luck!