Hi all,
How does purchasing insurance work for a Lonnie Dealer? Also, what is the average insurance payment that you guys are making prior to selling? Finally, what are your recommendations to buyers on insurance they need?
I am able to go look for my first deal and this is essential before I can purchase one so any help is greatly appreciated.
Thanks so much!!
Hey Joe,
I got your PM regarding this question. I had not responded to the post intially in the hopes that an active Lonnie dealer might jump in. It has been over 10 years since I completed my last Lonnie deal (having focused on small parks and land/home deals).
But to shed some light on how I did things back then (hopefully others will chime in if things have changed), there were two approaches used in regards to insuring the homes.
I am not certain but the SAFE act compliance issues may have changed this process but we either collected the insurance premiums or had the buyer pay them directly. In most cases if the buyer paid them directly, the buyer would lapse on the insurance.
There were companies like Foremost and smaller companies that would broker these type of mobile home insurance policies. You would want to contact insurance agencies directly to see how best to do this in your area.
You may also want to consider a general liability policy for you and your business as well.
Try emailing Karl (OH) or Dr. B as they are the people I would call myself for updates on this issue.
Because it has been so long for me to address this issue I hope you will use this post only as a starting point but go on to make certain you are on the right track.
Tony
Joe and gang,
To some extent this has been a thorn in my side. First, I have carried general liability insurance on my company since day one. I send in updates as to what I have bought , sold, and have in inventory. I have not carried casualty (loss) insurance. I self-insure. Which means I have to pay the loss out of pocket.
Second, once the home is sold, with your company as lien holder, things change. You can have an agent or two in pocket whom you have your buyers get insurance through (with your company as loss payee). They can use their own agent, or just go without insurance. Still… I have them sign a form saying they will adequately insure the home.
Because the buyers rarely have the $$ for a year’s or half-year’s payment up-front, I have ended up taking it out of their down payment or just eating it as cost. Karl (OH) has found an agent who will start insurance with just the first month’s insurance payment.
If, in your state, the SAFE act applies to private mobile home lenders, you have to escrow insurance payments for the buyer IF you charge an interest rate above a certain amount above the prime lending rate. Not to mention all the other rules. I complied with this for a while but here’s the rub:
The money you hold in escrow belongs to the buyer. If they do not send enough $$ in for their payment to cover escrow, it comes up short. Or if you have it set up so late fees and insurance comes out before P & I, then you get shorted in P & I. THEN when their insurance bill comes due and there’s not enough money, they AND you lose coverage unless you choose to pony up the difference (at which point you wonder why you “sold” the home in the first place). WORSE is they leave quietly in the night owing you $$ and YOU OWE THEM their escrow. It is ILLEGAL to apply that escrowed insurance money toward what they owe you for P&I. You have to find them to give it back or send the money to the state unclaimed funds office, ugh.
Now you may see why I have decided to avoid all the regulatory interference by charging a “normal” retail price, and 0% interest which gets you out of the requirement to escrow insurance payments.
The purpose of the SAFE act is to protect the big banks–oops, the consumer from onerous lending practices. So chill, buy low, sell retail, hold the financing at 0%. Isn’t that protecting the pitiful, clueless, downtrodden, entitled masses who refuse to educate themselves on basic money matters.
Steve
Hi guys,
Thank you both so much for the quick and thorough responses. Now that I have a better understanding of how it works, I am going to contact some insurance companies to get more details and quotes.
I appreciate the help and advance and can’t wait to start dealing so I can contribute as much as you guys have!
Joe
I too have a general liability policy covering my LD operations. It is not cheap. But neither is getting sued by stupid people.
I also have a blanket inventory policy on my vacant units. This policy is cheap, ~$300 a year. It is a non-reporting policy, meaning I do not have to tell them each time I buy/sell a home. I’ve had this for probably four years now, and had a home damaged by wind and declared a loss by the insurance co. This home was a 1970 doublewide which was completely destroyed in the first place, and had negative value to me (meaning, I had to figure out what to do with it, before the damage ever occurred).
The insurance company cut me a check for $5,500, AND paid the $2800 to have the home removed from the site and hauled to the dump.
At $300 a year I can pay the premium for a looong time before I use up that $5,500. Totally worth it IMO, and I’m more of a self-insure guy in the first place.
Are there any insurance companies that you guys would recommend? Any that specialize in mobile homes that I should look at first?
Thanks again for the help and advice so far 
I use Auto-Owners Insurance out of MI. Find a local insurance agent who does business ins.
Understanding ins. coverage
Although I know it’s deadly reading I sure recommend all business and property owners read their own policies and make a serious effort to understand their coverage…or ask their lawyers do it for them.
An ins agent is in the business of selling insurance that gives his insureds the legal protection they need but he/ she may not fully understand that’s needed so new, outside eyes might be recommended in all cases.
I’ve had some tough arguments w ins agents over the years as they wanted to think they knew more law than I did…when I spent 7/24 on it!
Best agency
Best agency for any business coverage is a general agency that represents a number of ins companies and allows agents pick and choose among them.
Where Yellow Pages used to be the place to shop of course today its one of the online search engines that’ll display several different ins. co symbols.