A Look at a Recent Area Conversion

FACTS - A RECENT, LOCAL & SUCCESSFUL MOBILE HOME PARK CONVERSION

By Ann Silver, Mesa Dunes Resident

On September 26, 2013, I visited Knollwood Village Mobile Home Park, 4012 S. Bradley Road, Santa Maria, CA 93455 to meet Jackie Scolari, with the rental management company managing the leased lots, and Richard Whippo, the broker who sells the converted lots.  The Towbes Group (a trust company for the park owner) manages lots after they are sold.  Knollwood became a condominium style subdivision for resident owners in May, 2012.  To date 77 of the 195 lots (39%) have closed.  There are no vacant lots.

A tenant survey taken before specifics were known had 130 responses.  They were:  60  Yes  -  64 No  -  6 No Response.   When prices and terms became known, there were no objections.

Knollwood is restricted to residents older than 55 years.  It is a quiet, attractive park with a clubhouse, trees, billiards, ping pong, library, card area, pool, jacuzzi, putting green, BBQ pit & shuffleboard.  Each home was built in 1981 or later and has a two-car garage.   There are no single wide homes.  All are double or triple wide.  All homes are at ground level.  Each has pier and post foundations below ground level with under-the-home accessibility space for repairs.

Knollwood is outside the Santa Maria City limits, in Santa Barbara County.  The sewer is Laguna County Sanitation District.  The well water is Golden State Water Supply.  Residents pay their own utilities.

There are no low-income leases.  Leases run between the high $600’s and the low $700’s monthly.  The market rate was and is determined solely by the Los Angeles Consumer Price Index (CPI.)  If a resident chose to not buy their lot they could sign a new long term lease, expiring in 2021.  If that resident then sold the mobile home, under the terms of the lease the new owner can assume the lease, or buy the lot.  If a resident sells their mobile home without having a long term lease, the new buyer must also buy the lot.

OWNER INCENTIVES FOR BUYERS WERE:

During the first six months, the appraised lot price reduced $10,000.  Plus, an additional 10% reduction on the remaining lot price balance.

During the second six months, 5% off the lot price.

All lots were appraised between $120K and $140K.  I found four homes presently for sale.  The first three were $54,000, $68,950 and $79,500.  The fourth was $225,000 including the lot.

To obtain a mortgage, the mobile home must be attached to the lot by a certified engineer who installs an approved foundation system.  The California Department of Housing and Community Development (HCD) issues a titling document on Form 433A aka “Installation of a Manufactured Home on a Foundation System” per California Code of Regulations, Title 25, Division1, Chapter 2, Section 18551.  The company who installs all foundation systems in Knollwood charges between $2700 and $3400.  Knollwood pays 90% of the cost.  No mortgages have been issued without Form 433A.

Two banks presently issue mortgages in Knollwood.  They are California Bank & Trust and Land Home Financial Services.  MPROP has not approved an application because 51% of the lots have not sold.  After 51% are sold, MPROP may provide mortgage assistance to lower income buyers.

Estimated escrow fees (in addition to mortgage fees) are approximately $1500.  Each buyer owns 1/195^th of Knollwood Village Common Areas and cannot own more than one lot.

The HOA Board of Directors has five members.  Monthly dues are presently $149.89, including common area maintenance.  When 100% of the lots are sold, the HOA Board will consist of resident owners only.

There is no street parking.  Two cars are allowed per home.  Resident’s cars may be parked in the driveway during daylight hours, if the driveway is long enough.  All cars must be in the garage, with the garage door closed, at night.

Two pets are allowed.  Dogs must be leashed, stay off anyone’s lawn and be cleaned up after.

The “Final Buyer Package for Knollwood Village Homeowners Association, Inc.” has 17 chapters.

1.   Articles of Incorporation

2.   Declaration of Establishment of Covenants, Conditions and Restrictions (CC&R’s)

3.   Bylaws

4.   Rules and Regulations

5.   Policies and Procedures

6.   Policies for Older Persons Housing Designation

7.   Architectural and Landscaping Rules

8.   Election Policy

9.   Delinquent Assessment Collection Policy

10. Condominium Plan

11. Association Budget

12. Reserve Study

13. Purchase and Sale Agreement and Joint Escrow Instructions

14. Natural Hazard Disclosure Report

15. Lot Appraisal

16. Sample Proforma Title Report

17. Sample Grant Deed 

Permanent Foundations and 433a Certificates

Beach Rocks

I was asked recently if "permanent foundation" means that a concrete foundation would need to be poured under our units.  Turns out it's a simple question with a non-simple answer ... but, basically, "no."

There are two related questions:  What is a 433a certificate? And what is a "permanent foundation?"

The 433a certificate transforms a manufactured home into real property which then qualifies for regular home mortgages.  The Zillow article below gives details on the process of getting a 433a certificate.  But what does "permanent foundation" … or as it's termed in some places … "appropriate foundation" mean?

The simplest description I found comes from Ridley Home Service … "In its most simplistic definition, a permanent foundation will generally consist of a skirting to keep out vermin and water, footings and piers to support the home from gravity loads (such as snow and live loads), anchorage to resist lateral loads such as high winds or an earthquake, and other considerations." 

In other words, it does not necessarily mean a concrete foundation but it does mean that a professional engineer needs to certify that the coach is adequately affixed to a permanent foundation and obtain the 433a certificate.

More info comes from Zillow:

California 433a and Manufactured Home Engineering Foundation Certifications and HCD Form 513C

• Ed Harrison, "FoundationCerts"
• •  
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1. What is a California 433a?

In California, to convert the manufactured home to real property, Form 433a must be recorded. Generally speaking, the recorded 433A is required by the mortgage lender and/or the Title Company. Form 433A is a California Department of Housing and Community Development (HCD) Form.

The California Department of Housing and Community Development requires manufactured housing owners who affix their units to foundation systems to record a form known as Form 433A with HCD. The form is to be completed at the time a building permit is issued. After installation has been approved and on the same day the certificate of occupancy has been issued, HCD shall record Form 433A with the county recorder's office. Thus, a preliminary title report should reveal whether a Form 433A was recorded.

2. What does a recorded 433a document in California accomplish?

When completed by the governing building division and recorded by the City/County Recorder, the form certifies that the manufactured home was installed on a California-approved permanent foundation or foundation system and acts as an investment instrument (security) to the mortgage lender, the Title Company and even the homeowner.

Once recorded it ensures that:

• the manufactured home has been placed on an appropriate foundation.
• a professional engineer, licensed in the State of California, has certified that the foundation has been installed according to the appropriate standards.

3. What is the process for filing and recording a 433a in California?

In general terms, it means: 1) applying for a permit, 2) installing an engineered retrofit, 3) obtaining an engineer's certificate of compliance, 4) inspection by the governing building department, and finally 5) recording the 433a document.

*********

Ann Silver who shared her fact-finding mission to Knollwood Village Mobile Home Park reports:

The certified engineering company that does all of Knollwood's mobile home attachments to their lots, obtains 433A certifications and works with escrow and title companies is:

     www.onthelevelcontractors.com

It is the only company Knollwood uses when selling their own lots.  

Invitation to the HOA Board

A Mesa Dunes Moment of Beauty

It's a common refrain:  Actions speak louder than words.

The HOA Board has repeatedly said they are not against conversion.  And yet their actions seem bent on stopping or slowing down the conversion.  Here are just a few of their actions that make me wonder why … 

• Oppositional Petition - Just days after the first information meetings, Jeff McAlister knocked on my door wanting me to sign a petition in favor of SB 510.  (At the time, I had no idea what that was so I declined.)

• Activist Lawyer Hired - Shortly thereafter, the HOA Board hired William Constantine, an attorney who is a known anti-conversion activist.  Constantine did not ask for clarification of the conversion process or make suggestions that would have improved the incentives for potential buyers or protections for those who want to continue renting. Instead, he immediately attacked the details of the survey process as well as the integrity of Gilchrist & Rutter ... a standard activist ploy.

• Hostility at Meetings - At the first HOA Board-initiated meeting, which was billed as being "open to all," the board responded with hostility when they found out I had invited Susy Forbath. I invited her because I thought it was important to have as much information in the room as possible. One person in the room even called me a liar for saying I had invited her.  He claimed, quite loudly, that the owner had sent her.

• Misinformation about Appraisal Method - After being repeatedly told that the appraisal method would NOT be the "residual method," in the latest HOA Board-initiated meeting, Jeff McAlister explained in great detail the pitfalls of the residual method of appraisal and how it might reduce the value of residents' homes, never mentioning that it wasn't the method that would be used.

• Alternative Surveys - In the second HOA Board initiated meeting, Jeff listed all the problems with the survey that was done to determine interest in the conversion and then proceeded to ask people to sign alternative letters so they could deliver them as a protest to the county during the public meetings that will be held. 

• Fear & Misinformation - In that same meeting, Jeff read a letter from attorney David E. Loop (who is Vice-President ROP of GSMOL - Golden State Manufactured-Home Owners League).  The letter details a conversion in Long Beach, calling it an "unmitigated economic disaster."  This letter even scared me.  However, after calls to the assistant park manager of the park mentioned in the letter, the primary realtor active in the park, and the non-profit association that took over ownership of the park, a completely different picture emerged.  (See What Scares Me Most)

• "Our Own Conversion" - In one of the small group meetings conducted by Susy Forbath, I suggested to Jeff that we put our energies into creating a better package of incentives and protections instead of this continuous debate about how the survey was done.  He replied that he wanted to stop this conversion "so we can do our own."  I was so shocked, I verified with several other people that I had heard this correctly.

• Personal Attacks - After the first small group meeting which was attended by some of the HOA Board and others who seem to share their opinions, I was called "a plant of the owner" and told that I did not write this blog.  When I responded that I did, the person said that I might TYPE the words but Susy was writing them for me.  I was startled by his rudeness, however I spent many years in business so this stuff just rolls off my back.  The attackers now seem to be going after Susy Forbath.

Which brings me to my question of "why?"  Why is the Board saying they are not against conversion when their actions clearly show that they are? And, why are they mounting a campaign of fear, anxiety and mis-information? Why are they are working so hard ... going to Sacramento, carrying petitions around the park.

What are they trying to accomplish?

This forum is open to all.  I have repeatedly invited the HOA Board to share their ideas and opinions but was told that they had decided not to. That makes me wonder why they are afraid to share their thinking.  I believe in diversity … it's only by sharing information openly that we have all the information we need to make informed decisions.

The invitation is still open … HOWEVER … I have spent an enormous amount of time tracking down sources of information to offset the misinformation the Board is putting out.  I fact check everything that goes into this forum and will continue to do so.  I am always open to someone telling me that I have something wrong … I welcome information that shows me a different perspective or where I missed a beat.  So, if the Board submits solid information, I will print it ... however, I will not perpetrate mis-information.

The Board has not pointed out any errors or shared their objectives.  What I see so far is an attempt to block an option that many of us view as a way to protect our properties, share in potential real estate appreciation and live in a resident-owned park where we have more control over our futures.

I still don't understand why 

but it sure seems as if the HOA Board is trying to stop the conversion.

I want the option to purchase my lot ...  IF

 IF it's in a price range I can afford ... 

IF I can get financing ... 

IF protections are in place for the

residents who want to keep renting.

INVITATION TO THE BOARD ...

Please stop trying to block the conversion and

JOIN US

in working to make this conversion

a win-win for all involved.

Residents for a Collaborative Conversion

Until we ask all the right questions,
we'll never find all the right answers.

A new group has been launched.  This group recognizes that there are potential benefits to being able to purchase our lots … and, that there are also a lot of concerns and fears that come with this type of change in something that is so important to all of us … our homes and our financial well-being.

Our commitment is … 

working together for the good of all.

In order to do that we need information … information about the process of conversion, information about how the conversion would affect the values of our homes, information about what happens when we, the residents, eventually own the park.

• We need information we can trust, information that helps each of us look at our own situations and make a decision that could make a huge difference for our future.

• We need to work together as a community in order to understand how this change will affect each of us.

• We do not need fear tactics, misinformation or half-truths.

This group is for ALL of us … people who want to purchase their lots, people who just want to continue renting. People who need help understanding the numbers and what all this means.  People who have been through a conversion in the past and know what to expect.

We are currently in conversation with the park owner's representatives including his legal representatives.  I am hopeful about these conversations.  So far, the owner seems to be very willing to listen and work toward making this conversion a win-win. 

In order to know which direction to go with these discussions, we need to identify all the concerns people have.

We need to hear from you.  Please call or send an email to let us know what you think.  Since the recent open meetings have been rather antagonistic and hostile, we are going to depend on individual, neighbor-to-neighbor conversations to gather your thoughts and concerns.

Please join us … we need to hear from everyone, regardless of your position on conversion.  Together, we can make a difference.  We can come together as a community and make Mesa Dunes an even better place to live.

Joyce Wycoff

jwycoff@me.com

870-656-4141

What Scares Me Most

View from the top.
This is NOT Long Beach.

When I was a child, I fell in love with Paul Harvey … that voice … those stories of human triumph … that reminder that there's always a deeper truth. As I grew up, I realized that Paul and I saw the world through different eyes, however I was forever touched by that desire to find "the rest of the story."

At the September 10, 2013, HOA meeting, Jeff McCallister read a letter from attorney David E. Loop.  It was a very disturbing letter that painted a picture of a conversion gone wrong … a park where lot prices were too high for most residents, where resale values plummeted, where rents were escalating and almost a third of the park was "abandoned," empty, or for sale, where the conversion "has been an unmitigated economic disaster."

It scared me and probably everyone else sitting there that night.  The research I've done had been leading me to think that conversion will be a very good thing for a lot of people and will actually protect the park investment in the long run while leaving residents who want to rent basically unaffected (with the exception of about 20 non-lower-income residents currently on rent control and paying around $300 per month … their rents will escalate to market rent (current about $800 a month) over the next five years.)

I was happy with the details of what I was finding, however, Loop's letter created doubt and fear.  So, I set out on a journey to find the "rest of the story."

What now scares me more than anything is the willingness of people to spread misinformation, distort the truth, lie by omission and, sometimes, just plain lie.  Mark Twain probably said it best when he said there are lies, damned lies and statistics. 

My Pledge to you:  I will tell you what I think but I will always provide the sources and research that got me there so that you can check out the rest of the story for yourself.   RIP Paul Harvey.

The rest of the Windward Village story: 

Current listing of a 1977 Home in Windward Village MHP, Long Beach

Windward Village Mobile Home Park in Long Beach is a 303-unit, gated, 24-hour guarded park similar in amenities to ours.  The park conversion began in 2008 and many of its residents were caught in the financial crisis of that time, losing jobs as well as investments in the stock market and retirement plans. While the residents supported the conversion, sales were slow because of the financial crisis and the general age of the units (pre-1977 models could not qualify for financing.)

There are now 53 residents who have purchased their lots and the assistant manager states that they have sold 19 this month.  This park has a high percentage of older homes and it is gradually being upgraded. Today's current listings on the website shown below shows 10 units for sale, most in the $230-240K range with a year built of 1977-1978 for all but one of them. Lot prices run about $152K … so the value for these older units is still holding in the range of $70-80K.  HOA fee is $188 per month.

Loop's letter implies that, because of conversion, residents are now forced to pay high space rents and that Long Beach has "lost the park as an affordable housing resource." The assistant manager stated that before conversion, rents were averaging "$880 - $980" a month. 

Steve Iverson, a realtor who is actively marketing properties within Windward Village, states that one of the issues with after-conversion sales is that agents, appraisers and lenders often do not understand how to market the property as a "single family home within a planned development."  His take is that it takes a team approach to make a conversion successful.  He has also offered to come up and talk with us.  As soon as the temperature within the park cools down here, we will take him up on this generous offer.

Sources:  Kathy Jones, Assistant Park Manager, Windward Village

Steve Iverson, Realtor, Keller-Williams

Gerald R. Gibbs, President, The Associates Group  for Affordable Housing, Inc.

a California Nonprofit Public Benefit Corporation*

Windward Village website: http://windwardvillage.com/current-listings/

Details: 

Interview with Kathy Jones: "Conversion is awesome!" "Come see my park." "We have 19 closings this month."  "Space rent PRIOR to conversion was $880-980 per month on average."

Email from Gerald R. Gibbs …

Dear Ms. Wycoff:

Your message to  our assistant park manager has once again proven the persistence of incorrect information.  I am enclosing a copy of our response to the original request to purchase the park, please note this is an e file and does not have the formal letter head upon which it was printed.  Since that letter was written the park total sales have increased to 53 and we have 7 more in escrow and I just received a demand to close three more of those escrows.

Unfortunately this conversion was completed at a time when our nation was going through a financial crisis not seen since the great depression. We are now able to sell lots to both the present residents as well as outside buyers and people are installing new homes. The number of empty homes was primarily due to the total loss of income in this working persons park.  The Associates group has in fact a number of those homes which have been saved and converted to lower income rentals pending those persons being able to purchase and stop paying rent.  Unfortunately a number of the homes that banks foreclosed upon are in such poor shape that they are a total loss.  We have continued to maintain those exteriors and lots to ensure that the park is an excellent place to live and not downgraded by the economic pressures that led to the former home owners downfall.

If someone is attempting to use this as leverage to defeat future conversions the action is misplaced.  The residents of this park fully supported the conversion, but in spite of the support lots were very slow in selling initially due to the poor economy.  Our non-profit has continued to maintain the park and it Is  now moving forward after a tremendously bad  economy which fell at the start of the sales activity.  Thank you for listening

Gerald R. Gibbs, President

The Associates Group  for Affordable Housing, Inc.

a California Nonprofit Public Benefit Corporation*

110 E Avenida Palizada, Suite 201A

San Clemente, California 92672-3956

(949) 492-3825 | (949) 492-3697 fax

mail@associatesgroup.org

www.associatesgroup.org

The Associates Group for Affordable Housing, Inc. is the supported public benefit nonprofit corporation for the following entities. Email sent from this account may be sent on behalf of the following entities:

The Associates Group-Windward Village

The Associates Group-Cedar Hill

Homes for sale in Windward Village as of 9/19/2013: http://windwardvillage.com/current-listings/ Each of these units were built in 1977 or 1978 except #291 which was built in 1999.

3595 Santa Fe Avenue #194	Long Beach	$199,000	3	2	1,440	Active (New)
Listing Courtesy Of: Keller Williams Coastal Prop.
3595 Santa Fe Avenue #184	Long Beach	$223,900	2	3	1,524	Active
Listing Courtesy Of: R & B Communities
3595 Santa Fe Avenue #140	Long Beach	$229,000	2	2	1,300	Active
Listing Courtesy Of: CENTURY 21 Action !
3595 Santa Fe Avenue #119	Long Beach	$229,900	3	2	1,600	Active
Listing Courtesy Of: CENTURY 21 Action !
3595 Santa Fe Avenue #17	Long Beach	$232,500	2	2	1,800	Active
Listing Courtesy Of: Keller Williams Coastal Prop.
3595 Santa Fe Avenue #144	Long Beach	$237,000	2	2	1,440	Active
Listing Courtesy Of: CENTURY 21 Action !
3595 Santa Fe Avenue #291	Long Beach	$239,000	2	2	1,200	Active
Listing Courtesy Of: Keller Williams Coastal Prop.
3595 Santa Fe Avenue #203	Long Beach	$239,900	3	2	1,325	Backup Offer
Listing Courtesy Of: R & B Communities
3595 Santa Fe Avenue #76	Long Beach	$239,900	3	2	1,440	Active
Listing Courtesy Of: Century 21 Allstars
3595 Santa Fe Avenue #157	Long Beach	$249,900	3	2	1,600	Active
Listing Courtesy Of: CENTURY 21 Action !

Tax on Our Lots

One of our research-oriented residents just sent me this note ... 

I just confirmed with the Assessor's Office that any lot will be taxed at the same rate as the mobile home (providing the purchase price was at fair market value.)

We live in Tax Code Area 052-013 if anyone wants to look it up.  To keep the math simple, if one presently pays tax on a home assessed at $100,000, and buys a $200,000 lot, the amount of tax they presently pay would triple.

Where We All Agree

Sticker on a car in SLO seen this morning.

My momma always told me that you would catch more flies with honey than vinegar.  I was never sure why we wanted to catch flies … but you get the idea.

Last night the HOA Board held a meeting about the conversion.  Each board member repeatedly said he or she was not against the conversion, however, their actions seemed pretty vinegary.

It seems like we're all in agreement that the conversion MIGHT be a good thing … IF …

     IF … the lot prices are right. 

     IF … there is financing available. (See News Flash!!! for update on financing. - Right Column-)

     IF … rents for those who don't buy are protected.

The HOA Board seems to be taking the position that they want to "slow things down" … or stop the conversion until the owner can guarantee answers to the above. 

Rent Protections:  Susy Forbath has repeatedly explained the rent protections that will cover all but about 20 residents in the rent-controlled section of the park who do not qualify as lower income.  These residents are currently paying about $300 a month in space rent and could see their rents increase to market rate (about $800 a month) over five years.  The rest of us are on space leases that will continue as before the conversion.  If you're in doubt about whether or not you're on a lease, contact Joanne Mancarella in the office.

This is hissing!
Baby possum on my deck a few nights ago

Financing:  Murphy Bank has said they will offer "normal" mortgages … 20 year, current interest rate (currently about 5%), 80% of total value including your lot and your unit, no mortgage insurance.  Existing equity in your unit will count as your down payment.  The question came up at the meeting as to whether or not Murphy Bank is big enough to handle this conversion so I have an email into Richard Laxton asking him to respond to that question.  Remember though, not everyone will want to buy their lots and not everyone who wants to buy will do so on day one.

Murphy Bank has said they will be happy to come out and talk to all of us about the financing process.  For more about financing see the post Financing Highlights.

(UPDATE:  When asked if they could handle 50 sales in the first three months, Richard Laxton at Murphy Bank said: "50 lots is fine." After that, Community West Bank and others will probably be comfortable with lending in this park.)

Lot Prices: In spite of the fact that Susy Forbath spent two days in small group meetings explaining that the "residual" method of appraisal will NOT be used, Jeff McAlister still continued to regale us with the horrors of this method last night.  The official appraisal will not be available for months … slowing the process down or stopping it will not make this appraisal available any sooner.

Two Approaches:  Obstruction and Negotiation

We all seem to want the same thing … reliable information and enough understanding to make a smart decision based on our own specific situations.

There are two ways to get there … doing whatever possible to obstruct the process … demanding information that doesn't currently exist, claiming a lack of information when we each have a growing stack of questions, answers, legal citations and what ifs, describing information as misleading or deceitful, gearing up for a strong oppositional showing at public meetings through letters, petitions and so on.

Or … negotiation.  The owner has offered incentives over and above the legal requirements. If we get smart enough to thoroughly understand the process and how to get what we need … lot prices that are fair and affordable … rent protection for all non-buyers … financing for those who want and need it … then maybe we can negotiate a deal that works for everyone.

However, the more vinegar we pour on the owner, the less he's likely to be willing to negotiate.  I'd like to start a new conversation focused on negotiation. How could we structure this conversion to be a win-win for everyone?

I've had some people say that the lawyers … or the owner … or someone would "never do that."  But, until we ask, we'll never know.  

IF you think you'd like to buy your lot if all those above "ifs" can fall into the right places, and if you'd like to be part of the process of negotiating a win-win, please email me at jwycoff@me.com