Need Advice on Insurance Challenge for 1980 Manufactured Home in Florida
Hello everyone, I would greatly appreciate your insights on a situation I’m facing. I’m in the process of purchasing a 5-acre property that features a permanently attached manufactured home from 1980, which is around 1100 sqft. It’s clear to me that the main value lies in the land itself, and I initially planned to build a traditional home on the property within the next couple of years. However, I’ve encountered unexpected obstacles due to the manufactured home.
Currently, I’m dealing with a higher interest rate and larger down payment, which I accepted. But now, my lender is insisting on having Full Replacement Cost coverage for the manufactured home. Unfortunately, they won’t accept the maximum dwelling coverage I found with Citizens Insurance.
Citizens provided a Reconstruction Cost Estimate (RCE) report indicating that full reconstruction would cost around $147k, but they factor in depreciation, allowing for a total of only $78k in coverage ($62k plus 25%). The premium for this policy is approximately $2300, and Citizens has stated they cannot increase it further. However, my lender is adamant about requiring $147k in coverage.
I’ve reached out to several other insurance providers, but none are willing to insure the manufactured home at all. I recently had a 4-point inspection completed, and the home passed without any issues. A full roof replacement was also just completed last week. Personally, I believe the manufactured home’s value is between $30k-$40k, so I can understand why the insurance company isn’t inclined to insure it for more.
I’m purchasing the property as-is for $330k, putting down 25%, which means I’m borrowing $249k. The land itself is valued at over $300k. I’m puzzled as to why the lender won’t accept the $78k insurance policy when I can’t insure the land either. I’ve asked my lender and broker to find another insurance provider that meets their requirements, but I can’t imagine what the premium might be—possibly around $5000?! Who would pay for insurance on a $40k manufactured home?
What steps should I take from here? Any advice would be greatly appreciated!
It sounds like you’re in a frustrating situation, especially since the value of the property is primarily in the land rather than the manufactured home itself. Here are a few steps you can take to address the lender’s requirements and hopefully move forward with your purchase:
Communicate with the Lender: Clearly explain your position to the lender. Let them know the actual market value of the mobile home and the challenges you’re facing in obtaining the required insurance coverage. They may have some flexibility or suggestions for accommodating your situation.
Shop Around for Insurance: While it seems you’ve already done some research, consider contacting more specialized insurance companies that focus on manufactured homes. They might have different criteria or options that could meet the lender’s requirements.
Consult with a Real Estate Agent: An experienced real estate agent, especially one familiar with manufactured homes, may have insights into local lenders and insurance options. They can also help negotiate with the lender on your behalf.
Look into Additional Coverage Options: If the lender is set on the full replacement cost, you might ask if they would accept a policy that offers a gradation of coverage—such as a policy that covers the value of the home at 100%, with a specific deductible or other terms.
Consider Alternative Financing: If this property is just not feasible under current financing terms, it may be worth exploring other financing options. Some local credit unions or community banks might have different requirements that can work with you better than a traditional lender.
Request a Re-evaluation: If there is any consideration for the improvement made to the home (like the new roof), you might be able to request a re-evaluation of your current insurance to reflect the upgrades, potentially leading to a reconsideration by the lender.
Understand the Loan Terms: Review the terms and conditions of your loan to see if there’s any clause that might provide an alternative solution or permissible coverage amounts.
Ultimately, focusing on clear communication with all parties involved and seeking professional assistance can help you breakthrough this hurdle. Good luck!