If you are looking to fill vacant lots in your mobile home park with used homes, one option that is rarely mentioned is “tax sales” stemming from unpaid property tax. In this Mobile Home Park Mastery podcast we’re going to explore how this process works in the real world and things to watch out for.
Episode 402: A Primer On Buying Mobile Homes At Tax Sales Transcript
When you own a mobile home park and you're trying to fill a vacant lot, you have one initial choice. You're either going to bring in a new home to fill that vacant lot, or you're going to bring in a used home. And in many mobile home parks throughout America, new homes just don't work. By the time you bring in the new home, set it up, get it ready to go, the cost is just more than your customers can afford. They don't have the down payment, they don't have the incomes to qualify. So a better choice for many mobile home parks is to bring in used mobile homes. And we all know the regular sources to find such used mobile homes. You have repo lists from the lenders like 21st Mortgage and Vanderbilt. And then of course you've got home wholesalers. Most markets in America have people who buy and sell used mobile homes for profit. And then of course you could go out and hard scrabble search Facebook Marketplace and Craigslist and find old mobile homes to bring in and renovate. But another option out there that's always been out there that very few people ever think of or talk about, and that's buying mobile homes at unpaid tax sales.
This is Frank Rolfe, the Mobile Home Park Mastery podcast. We're going to explore the world of buying mobile homes at said tax sales. Situations where people have not paid their personal property tax and now the mobile home is being sold to the highest bidder. Now, the first thing you have to know about these tax sales before you even begin the process is you need to know the laws in your state regarding these tax sales. In some states, they give the property owner a redemption option after the sale. So in those states, if you were to buy the old mobile home at the unpaid personal property tax sale, you couldn't do anything with it for some specified period of time set forth in their code regarding the right of redemption. So that's going to flavor that concept enormously. If, for example, the state requires you have a one-year redemption, that means if you bought the mobile home, you really wouldn't want to put any money in it or do anything with it, nor could you really sell it until that redemption period of a year is over. Other states do not have a redemption period at all.
And then some states, I assume maybe California, might have a multi-year right of redemption. So before you even think about buying mobile homes at tax sales, you need to know specifically what the rules of engagement are. And in your state, it may just not be attractive to do, period. But let's assume that it is, that this is a state in which the redemption period doesn't exist or is relatively short. Then how do these tax sales work? Well, the first thing you'll find in buying mobile homes at unpaid tax sales is they go for not a lot of money. In fact, they typically go for the minimum reserve price, which might be $500, might be $1,000, whatever it is in your state. That's going to be probably the price because no one shows up at the auctions. If you're there to bid on a used mobile home for unpaid personal property tax, you probably are going to win it because more than likely you are the only one present to make that bid. And another thing you have to know about buying mobile homes at unpaid property tax auctions is you typically have to bring the money in cash because there's no financing plan.
It's not like buying a used home and financing that through PEP or 21st or something. Nope, you're going to have to pay for it in cash. So bring the required cash that you're going to bid. Bring that with you. And here's a big one. You have to do all your due diligence in advance because they don't do any for you. So if you want to see what that home looks like, you're going to have to go out there and take a look at it or have your manager go over and take a look at it. And you're not going to probably be able to see the inside, just the outside. Might be able to take a picture through a window or something. But since you cannot do thorough due diligence, not like when you're buying from a home wholesaler or a repo list, that puts you at a distinct disadvantage because you don't really know the true condition of what you're really getting into, which once again is why probably very few people go to bid on them is because people don't like buying the unknown. They would much rather buy from a repo list where there are many photos of the inside and the outside, a description of the condition. They can go out and look at it.
Here instead, we're buying a pig and a poke. We don't really know exactly what we're getting into until after we buy it if we are the ultimate seller or buyer and take a look inside. Also, you have to understand that the people who run these auctions are typically complete idiots, and they know nothing about the property that you're buying. So asking them questions at the auction is absolutely hopeless. They have no clue. And one thing they never have any idea of, nor do they even realize the importance, is does the thing even have a HUD seal? As we all know, HUD took over the mobile home manufacturing industry in 1976, and they declared all the homes that were built prior to the enactment were grandfathered wherever they sat, but you can't ever move them again because if you move them to a city or county that requires a HUD seal, which is just about all of them, you can't get a permit to turn on your utilities or live in that structure. But yet a lot of the homes that are sold at these tax auctions are in fact pre-HUD.
They do not have the all-important HUD seal. And that means if you buy that home, I don't know what you're going to do with it. You're probably going to have to demolish it. You'll be out whenever you pay for the home, plus probably another $2,000 or $3,000 to demolish it. It would be a terrible, terrible thing to do. So if you're going to bid at these tax auctions, it's definitely buyer beware. You have to know in advance exactly what you're getting, and you need to make sure that it has that HUD seal so it can be transported. And on top of that, let's talk about transportation for a minute. These homes are typically located inside of mobile homes, sometimes out on raw land. But we don't really know what's going to happen when you jack it up in the air and try and put the old wheels and axles on it and move it down the highway.
As a result, you better steer clear of the really, really old home stock. Sometimes those auctions can yield homes that are leased from the later '80s or early '90s. But I would be very, very nervous buying a 1978 home, even if it has the HUD seal, because I don't know if it is truly roadworthy. And that would be another problem you would have. A lot of home wholesalers, they sell the homes already up in the air, moved out of the park, stacked in the yard somewhere. But here we're buying a home that has not ever seen light underneath that old trailer in literally decades. And that can be a bit of a problem. Also, getting the title to these homes can be very, very difficult. Despite what the taxing folks will tell you, they'll make all kinds of wild promises to you about the ability to get the title within a certain frame of time, but they never meet any of those obligations. Like all government officials, they're completely out to lunch when it comes to the real world. So they'll promise you, they'll say, yeah, you'll get your new mobile home title within 90 days.
It's never going to happen. If they tell you 90 days, it's probably more likely a year than it is just for three months. But the bottom line is you can get a really good deal at those sales if you are a smart shopper. Because most people know nothing about mobile homes. Those who do not own parks and are outside the industry, they don't have a clue how mobile home works or what's good from what's bad. And that scares most amateurs away. And a lot of those tax auctions are filled with people trying to make a quick buck, but they're all novices. They're complete amateurs. They read books on buying things at tax sales and then trying to flip them. They don't really know the product. They don't know the history. They don't know the complications. And that scares most of the tire kickers away. So if you really dig deep into the listings of what they have as far as inventory in the tax auction, and you do your diligence on the front end and you know exactly what you are buying, and you feel good about the ability to get it transported, and you know the laws of your state and the redemption periods and everything else, then buying a mobile home at an unpaid tax sale might be an option for you when you are trying to fill those vacant lots.
But again, the reason these things sell for such a low price during those events is because of all the issues that we don't know about. The condition, the transportation. So you have to buy them cheap, but sometimes amidst all of those offerings, there is a good deal. This is Frank Rolfe from the Mobile Home Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.