Resolving a Dichotomy

by Eddie Hicks

It is my considered opinion that for the manufactured home land lease community industry to make serious gains, we are going to have to resolve a dichotomy. Who are we going to market and appeal to with our high value manufactured homes?

With the notable exception of seniors, most of our industries traditional home sales have been to buyer/residents using chattel mortgage financing with minimal down payments and fair to poor credit. That hasn't worked well in recent years largely because of the inherent high rate of loan defaults. And with past abuses, we have largely been abandoned by many investor sources. With the exception of the FHA Title I program, there is not much of a secondary market for our lender's notes. Unless we improve the financial and credit status of our home buyers, were are going to be stuck in this pattern, forever.

To survive, we must therefore find a way to greatly improve our image with the general public, and appeal to buyers with better credit profiles, using current viable underwriting terms by responsible lenders, and quit "belly-aching" about not being able to get loan approvals for the many "bottom of the barrel, site built housing rejects" and seriously "credit challenged" buyers.

The few dozen HUD Code home manufacturers left are building excellent value housing. There are some pretty innovative floor plans and home designs within the limits of transportation limitations, at excellent prices.

Although not well understood yet by many retailers, chattel mortgage financing for homes have greatly improved with the implementation of the HERA revisions to the FHA Title I program, and other viable programs which are available by responsible lenders.

Amortization periods and interest rates, lower credit scores are still not low enough for use to compete with site built home loans. Income and credit standards are more strict than in the past and are now virtually the same as for site built homes, which means we must structure homes and pricing to appeal to a different buyer base. The availability of secondary financing through GNMA and hopefully some day with FNMA and Freddie Mac would increase liquidity for lenders, who by the way should be doing their own originations, and not let them be done by (all too often in the past) unscrupulous retailers.

The undeserved, poor state of our image with the general public, which spills over to local politicians who control zoning and land use for new communities is a serious problem.

It is apparent to me that there is little that we who are a part of the industry can do about this without a massive infusion of capital for institutional advertising. Or in the alternative - as I have so often suggested in the past - we should consider initiating a "product placement" strategy which would involve support from writers, producers and directors of TV and Internet production.

When the public fully understands the truth about myths such as:

home depreciation,
lowering neighborhood home values,
types and quality of residents,
construction quality,
fire safety and
windstorm safety, etc.,

the general public is going to continue to "shun" our quality, affordable homes, especially in quality managed land lease communities.

Get Better Credit Buyers, Stagnate or Die

We must accept the fact that we must appeal to financially stable home buyers with good credit histories, and not rely on credit challenged buyers. Instead of hiding them on the back of the sales center we need to be building interest in one of the best home values in America: the single section home, and smaller doubles, both of which are truly affordable. As nice are they look, except in rural areas, and in seniors communities it is useless to build and try to sell sell expensive, unnecessarily "gimmicked up" multi-section homes, which try to emulate site built homes, but are far from affordable. They make good "getters" for boulevard retail sales locations, but with the exception of a few markets, don't represent a significant number of home sales.

Boulevard retailers who essentially abandoned land lease community home sales in the past 15 years, need to revisit their sales programs, and learn how to sell the many advantages of living in a manufactured home in a land lease community, when compared to living in high density cheap apartments with all their disadvantages.

It's hard to believe that once the facts are known, manufactured homes show up as a much better housing alternative. Non-credit challenged - would be or current - apartment residents should be a our major target types of buyer/residents.

In the case of the revised FHA Title I home financing program, 5% down payments are often not much more than first, last, and security deposits required by many apartments. The additional income tax deductions for interest paid, and the potential for a return of equity upon the sale of their home, places MHLiving at a premium over apartment living.

Real positive improvements in our image with the general public which can pull us out of the doldrums, won't come from within our industry by merely improving retail sales techniques. They will come from without when the general public has a clear picture of the positive realities of manufactured home community living, and begin to consider of our unique type of housing seriously when evaluating their housing needs.

If we are effective, we will drive a much larger percentage of prospective home buyers with better credit credentials to our sales centers, on the boulevard and within communities, than in the past

In short, we have to create more serious interest by more affluent home buyers, and be willing to "walk away" from many of the prospective buyers which have become our traditional market base.

For those of you out there who think we can raise the large amount of capital required from within our industry members for a massive, effective, institutional advertising program, think again. It ain't gonna happen. There aren't enough "deep pockets" in the industry which can fund such an effort.

Perhaps by using a smaller effort in a different direction by thinking smarter could work. IMHO, by using more subtle methods with the entertainment side of mass media, plus the new social marketing techniques we can and must with minimal capital, find ways to accomplish meaningful positive changes with the general public.##

(Editor's Note: Eddie Hicks is a member of the MHSpeakerTrainer.org. Comments and replies to this article are encouraged.)

(Editor's Note: Eddie Hicks is a member of MHSpeakerTrainer.org)