FOR IMMEDIATE RELEASE
January 27, 2005
CONTACT: Suzanne Henry
(512) 477-4431, ext. 121
Study finds significant fluctuations in costs of identical mobile homes
Adoption of sticker prices, independent financing and appraisals listed among solutions
AUSTIN, TX — Just as airline travelers often pay widely fluctuating ticket prices even as they sit next to each other, a high degree of variation also exists in the prices paid by purchasers of manufactured homes for identical models, according to a report released today by Consumers Union.
The report says the highest prices are paid by consumers who shop at three or fewer dealers, for those who finance their homes through the dealer and for first-time buyers. For example, a purchaser in Dallas County, Texas paid $42,000 for a newly constructed “Alamo by Clayton” 16 x 76 single-wide home, where as in Franklin County – just two hours east – the exact same home sold for $33,800.
The traditional manufactured home dealer sales process is based on secrecy and uncertainty surrounding the value of each home. “That’s not good for consumers,” says Suzanne Henry, a policy associate with CU’s Manufactured Housing Project. “If you overpay for your house or its financing, often you’ll be left owing more on the loan than the home is worth. This raises the likelihood of the foreclosure and repossession of your home.”
In the end, both consumers and the industry lose. Hundreds of thousands of families have seen their manufactured homes repossessed in the last decade alone, contributing to a widespread downturn in the industry, the report said. Only a handful of major lenders active in the manufactured housing boom of the late 90’s remain active today.
Consumers, according to the report, can save money in their purchases by:
• Shopping around at more than 3 dealerships (average savings of 9.1% in our survey).
• Financing their homes independently, rather than through a dealer (average savings of 10.9% in our survey).
• Being experienced in the process (average savings of 8.2% compared to first-time buyers in our survey).
The survey polled consumers who bought manufactured homes in the past two years and compared the prices they paid with others who bought the exact same new home. While the traditional purchase includes a down payment of 5%, the survey found that 24% of respondents paid a price that was more than 5% higher than the average pricing, washing out the equity provided by this 5% buffer. This is also known as starting out with negative equity.
“The good news is that the industry can take steps to improve both its image and its long-term financial viability by adapting the use of sticker prices from the auto industry and the use of independent appraisals from the conventional real estate market,” Henry said.
• Sticker prices — Sticker prices would add much needed transparency and simplicity to the process, according to the report. All homes should be required to have a posted price that includes the invoice price as well as the recommended dealer markup and any specifications and options included.
• Appraisals – Many manufactured home transactions are still classified as personal property purchases, a direct result of its evolution from travel trailer roots. Like auto dealers, manufactured housing dealers retain close ties to specific lenders, so few manufactured home purchases undergo independent appraisals. Appraisals, tied to independent financing, are a fundamental solution to stabilizing the industry.
• Independent financing – Increasingly, dealers, manufacturers and lenders are one and the same company. Therefore, Consumers Union believes only independent lenders have the incentive to make sure the transaction occurs at a fair price and recommends that consumers shop for their loan separate from their home.
Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.