Lender Requires Full Replacement Cost for 1980 Manufactured Home in Florida
Hi everyone, I could really use some advice. I’m currently in the process of purchasing a 5-acre property that includes a 1980 manufactured home with 1,100 square feet. It’s clear the real value lies in the land itself. When I made my offer, I didn’t anticipate that the manufactured home would become such an obstacle. My plan is to buy the land and build a traditional house within the next couple of years.
However, because of the manufactured home, I’m facing a high interest rate and an increased down payment, which I initially accepted. Now, the lender is requiring me to obtain Full Replacement Cost coverage for the manufactured home. Unfortunately, they won’t accept the best dwelling coverage I could find through Citizens. Although Citizens provided an RCE report estimating that a full reconstruction would cost $147k, they stated that the value would be reduced by depreciation, alongside a 25% increase—amounting to $78k in total. The premium for this coverage is around $2,300, and Citizens won’t increase it.
The lender insists on $147k in coverage. I’ve looked for other insurance options but haven’t found any willing to insure the mobile home, despite having just completed a 4-point inspection that passed without any issues. A full roof replacement was also done just a week ago. To me, the value of the mobile home is only around $30-40k, so I understand why insurance companies wouldn’t insure it for more.
I’m buying the property as-is for $330k, with a 25% down payment, which means I’m only borrowing $249k. I estimate the land is worth over $300k by itself. I’m baffled as to why the lender wouldn’t accept my $78k insurance when they can’t insure the land either. I’ve asked the lender/broker to find an insurance company that can meet their requirements, but I can’t imagine what premium they’d face—maybe $5,000? Who would pay insurance on a $40k mobile home?
What are my options moving forward? Any suggestions would be greatly appreciated!
It sounds like you’re in a challenging situation, but there are a few steps you can take to navigate it. Here are some suggestions:
Communicate with Your Lender: Keep an open line of communication with your lender about your concerns. Explain the situation regarding the insurance coverage and the valuation of the mobile home. Sometimes, they may have recommendations or alternative solutions based on their experience.
Explore Alternative Insurers: While you mentioned that Citizens isn’t providing the coverage you need, it may be worthwhile to reach out to additional insurance companies that specialize in mobile home insurance. Each insurer has different underwriting criteria and coverage options, so you might find one that aligns more closely with your lender’s requirements.
Consider a Different Type of Insurance: Look into whether any specialized policies, such as those for older manufactured homes, could meet the lender’s full replacement cost requirement. Some companies may offer “actual cash value” policies that could potentially satisfy your lender while also being more affordable.
Get an Independent Appraisal: If you believe the value of the mobile home is significantly lower than what the lender is asking for insurance coverage, consider getting an independent appraisal. This may give you leverage in discussions with your lender, especially if the appraisal aligns more closely with your estimates.
Negotiate with Your Lender: If you can provide evidence of the home’s actual value and the challenges you are facing with insurance, your lender may be willing to reconsider their requirements. The land is a significant asset, and they may take that into account.
Consult with a Real Estate Attorney or Financial Advisor: If the situation doesn’t improve, it could be beneficial to consult with a professional who can provide tailored advice based on your specific circumstances. They might offer insights into how to handle your lender or even alternative financing options.
Evaluate Your Options: If the insurance issue becomes a roadblock to closing the deal, reassess whether this property is the right investment at this time. There might be other opportunities that align better with your needs and financial situation.
In complex situations like this, persistence and thorough research can often pay off. Good luck with your property purchase!