Buckle Up:
Rules of the Road for Insuring Mobile Home Transactions
By Ryan Martinez, Esq.
We all know that title insurance offers homeowners protection from claims to ownership or use. But what happens when the home in question is a mobile home? Is it considered a vehicle, personal property or real property? Can buyers of manufactured homes get title insurance on their investment?
Transactions involving mobile homes present many of these questions for title insurance professionals. These questions are becoming more frequent as buyers are considering mobile home purchases as a path to homeownership during the ongoing housing inventory shortage facing our country.
While each state has specific processes for handling mobile home transactions, it is important to understand the framework of what a mobile home is, and what it is not. Questions like how to determine the legal status of a mobile home, and how to convert the mobile home to a fixed improvement on real property while meeting lender requirements, are key to agent success. Here are some FAQs about insuring mobile home transactions, and tips for delivering top-notch service to clients in these scenarios.
What is a mobile home?
Mobile homes are built according to the construction and safety standards set forth by the Department of Housing and Urban Development (HUD). They are completely constructed offsite in a manufacturing plant, and then later transported to the land where they are to be located.
The terms “mobile home” and “manufactured home” are often used interchangeably, but a “modular home” is an entirely different housing unit. Modular homes are partially preconstructed in a facility and completed at the home site. Modular homes pass with title to the land, without conversion or a separate transfer.
Mobile homes are issued vehicle identification numbers (VINs) and have a HUD certification label placed on the exterior of the mobile home. Both the HUD label and VIN are unique to each mobile home.
Most mobile homes are also issued a Certificate of Title (COT) that serves the same as a car title. The COT is usually registered with each state’s department of motor vehicles. However, some mobile homes are never officially titled and only have a Manufacturer’s Certificate of Origin (MCO). The MCO is the “birth certificate” of the mobile home, and it shows the original manufacturer information.
How is a mobile home like real property?
Practically speaking, a mobile home is probably meant to be permanently attached to the land and pass with the real property – like a traditional home. However, intent is usually not enough by itself. Still, it is important to determine if the mobile home has had the axles, wheels, etc., removed. The permanent attachment to the land may physically affix a mobile home to the land, but it may remain as personal property until it is legally converted to real property.
Underwriting requirements for insuring mobile homes
Each state has different requirements for insuring mobile homes as part of real property, so you will need to contact your Doma Title Insurance state underwriting counsel for specific requirements. In general, title insurance policies only insure the land, so a mobile home that has not been converted to real property will not be included in the coverage. Since the mobile home may be more valuable than the vacant plot of land it sits on, most lenders will require conversion. In loan transactions, lenders will also request an ALTA 7 endorsement, or its specific state equivalent, that ensures the mobile home is part of the land insured under their loan policy.
However, if you know that a mobile home has not been converted, an exception for the status of the mobile home as personal property will need to be added to Schedule B of any title commitment or policy. However, the conversion process can be completed as part of the transaction to remove the exception. The exception/requirement on the commitment shall provide:
The improvements located on the Land consists of mobile homes. So long as said mobile homes retain their characteristic as personal property, this commitment does not insure mobile homes located on the property as described in Schedule “A”, but explicitly excludes such personal property from the coverage hereof. In the event, as of the date hereof, said mobile home is so affixed to said lands as to be part of the realty under the terms and provisions of this commitment and under the laws of the state of ___________, this commitment does insure the mobile home as a part of the land and improvements.
Converting a mobile home to real property
Although every state has specific requirements for converting mobile homes to real property, this often includes surrendering the COT (if titled) or MCO (if not titled) to the local division of motor vehicles so it can be cancelled/de-titled. Most states have forms or affidavits to record as evidence of affixation to the land and the owner’s intent to convert it to real property.
The key is that the owner of the mobile home and the land completes this process. Problems arise when the owner of the land and the owner on the COT do not match. This may require additional steps to get a new COT in the owner’s name so they can proceed with the conversion.
If the MCO or COT are not available, and the state does not have a process for conversion without these documents, then a title bond may be needed. A court order establishing ownership and title to the mobile home may also be required to complete the conversion process. Your local Doma underwriting counsel can assist in this unusual situation.
Alternatives to conversion
One alternative is for the seller to transfer the COT to the purchaser separately from the conveyance of the land. The seller signs over the COT to the purchaser, which should be reflected in a bill of sale. Another alternative solution is for the purchaser to convert the mobile home post-closing. These options may work in a cash sale scenario, but if a lender is involved, this may not be acceptable.
These alternatives will require the mobile home to remain an exception, but an endorsement can be issued once the conversion is completed. This may be helpful if time is a concern, but both options will depend on lender requirements.
Final thoughts
Mobile home transactions present additional steps for title professionals, but you now have the basics under your belt. We welcome our valued agents and approved attorneys to contact their local Doma underwriting counsel for state-specific assistance with mobile home transactions. You may do so by emailing [STATE ABBREVIATION][email protected] (for example, [email protected]).
Ryan Martinez is Regional Underwriting Counsel, Southeast Division, for Doma Title Insurance, Inc.