Risky Financing Harms Manufactured Home Buyer’s Financial and Housing Stability

About 7 million U.S. homebuyers currently use alternative home financing—in which buyers make payments directly to sellers, using instruments such as land contracts, seller-financed mortgages, lease-purchase agreements, and personal property loans. Although these arrangements may work for some homebuyers, they’re typically riskier and costlier than mortgages. In some instances, sellers do not give buyers the deed or title to the home until the final payment is made. This means that buyers can be treated like renters instead of homeowners and may have difficulty demonstrating legal ownership of the property. Additionally, these arrangements can muddy important issues such as whether the buyer or seller is responsible for home maintenance and repairs.

This first in a series of interviews with alternative financing borrowers is with Martha, who along with her brother and son bought a manufactured home in Gun Barrel City, Texas, using a seller-financing arrangement. She has asked that her last name not be used.

The interview has been edited for length and clarity.

Q: How did you meet the seller and enter into a seller-financing arrangement?

A: In 2018, I was living in Dallas and visiting my sister and her church on the weekends in Gun Barrel City, about an hour away. I became really involved in the church, so I decided to move to Gun Barrel City and make that our home church. I needed to find a place that would offer seller financing because my credit was terrible. And I wanted to have a place to leave to my son, because after I pass away, he’s not going to have a place to go.

I found the home in a newspaper, advertised with “homeowner financing.” The home was on the seller’s land and he said he was going to sell the land with the home. The lot was huge, with a fence, in a really nice neighborhood, and the idea was that eventually we would own the land. I called the seller and he sounded like he wanted to help me since I was a widow. I thought, “I like this guy.” Before I knew it, my son and I were moving in.

Q: What were the terms of the arrangement?

A: I honestly don’t know how we decided on the price. The seller was selling it for $60,000, but then he changed the price to $68,000. Since I didn’t get any paperwork from him, I never knew what the price was until later, when I called and asked him for the sales price.

The payment came to $800 total a month including the insurance and property taxes, which the seller paid. The interest rate was two point something. And he requested that we pay him by taking cash to the bank and putting it into his account.

Q: How was the house after you moved in?

A: The seller didn’t think an inspection was needed. I didn’t ask questions because I had never bought a home before and nobody was there to help me; I figured, “I guess he knows since he’s the seller.” I could only hope that I was doing the right thing. I was rushed into everything, and it was a big mistake.

Six months after we moved in, the floor started caving in. The seller blamed it on us and said, “It’s because your brother is riding the wheelchair in there.” But my brother wasn’t.

Then the roof over my bedroom started leaking and rain started dripping through the ceiling fan. I couldn’t get anyone to come fix it, so my son got up there and took the fan down. He found out that the insulation was moldy, which had to have taken years. Later, I started having a lot of skin issues and coughing really, really bad. I think they just glued the cabinets on the wall and they started falling off after about a year. Everything else started falling apart in the next three to six months.

Q: Who did the repairs?

A: The seller kept blaming us even though we found out he bought the cheapest particleboard that he could buy for the home. Since he was keeping the deed until we completed our payments, I thought he was still under obligation to fix it, so I asked him to do that. Then his property manager visited us and said, “It’s the homeowner’s place to fix all the problems.” That made me feel really small.

Q: What ended up happening?

A: At first, the seller tried to buy it back from us. We had paid almost $30,000 by then, but he only offered us $8,000. I turned him down. I was thinking, “No way. I’m not spending a whole lot just to get very little.” I told him I had some good offers. That’s when he offered me $10,000, but I still held out. I wanted to sell the home for more, and I thought I might have another deal in place. But, unfortunately, that deal did not work out.

Then in September 2021, the seller just sold the house from under us to one of those “buy-as-is” companies and gave the new buyer the home even without us signing any papers. We got only $13,000 out of the deal, but the new buyer said the seller had received a lot more money. In the end, we got totally ripped off and harassed.

Q: How are things going today?

A: We’re renting now. It’s a mistake but yet a savior because after our house was sold, we were living in motels and didn’t know where we would live next or how to eat; we were going out to restaurants and going broke. Then my sister found this place, and I rented it just to get us a roof over our heads. Of course, I bit off more than I could chew. We pay $700 a month; my brother and I are splitting it. It’s a big chunk of our monthly income after car payments and all of the insurance and lights and everything. I’d really rather buy; that way I can fix things up myself. And I don’t like the area where we’re living.

Q: Looking back on your home financing situation, how would you describe it to others?

A: Once burned, never again. It’s a scam. I didn’t find out until just recently that if we wanted to, we could have dragged out the selling process. We could have waited until we actually found a place but instead my son and I were homeless for three months after we moved out of the home in September. We didn’t have to leave on the day the seller sold the house, but I didn’t know we could do that.