Rich Heyn
Senior Member
- Joined
- Jan 17, 2002
- Professional Status
- Certified General Appraiser
- State
- Michigan
For purposes of clarity I'm starting a new thread on this topic, which is growing out of another thread on replacement/reproduction cost.
In the other thread, Greg Boyd stated:
I responded:
Greg replied
Greg;
This dealer invoice thing is a serious issue. It seems that many appraisers are not even aware of it. Every time I teach the MH seminar, I get a lot of startled looks when I get to that part of the supplemental standards and cover the dealer invoice issue. About 40% of the class drops their collective jaw when I inform them that when they execute a 1004C they are signing a supplemental certification (item #10) that states that they received and analyzed the dealer invoice if it’s a new home. This segment, apparently, represents those appraisers who don’t read what they sign.
Another 40% goes bug-eyed when I inform them that the dealer invoice is not the sales contract between the dealer and purchaser (which the appraiser is also supposed to receive and analyze) but rather, the invoice from the manufacturer to the dealer. Yes, folks, what the dealer paid the manufacturer for the house.
In the San Diego seminar there was someone in the audience who mentioned something about different versions of the dealer invoice. I checked with several retailers as well as an individual at my state’s MH trade organization and confirmed that there is only one dealer invoice and that is, in fact, what the dealer pays for the unit. I think the uncertainty stems from the different terms used by Fannie and Freddie in their respective announcements. Fannie calls it a dealer invoice and Freddie calls it a manufacturer’s invoice. Same thing.
In a sense, I don’t blame retailers for not wanting to disclose what they paid for the house. But not all of them feel that way. I’ll illustrate that point with two stories.
When I discussed the issue with a retailer in San Diego, he said he would give the appraiser a copy of the invoice but conditioned it upon a temperature inversion in a very warm place.
I had the same discussion with a retailer here in Michigan and he said “Good.” I told him that was not the reaction I expected. He said that he had recently lost a deal to an unethical dealer. The purchaser couldn’t qualify without paying off a large loan balance on his pick-up. This retailer wouldn’t pay off the loan and hide it in an inflated sale price on the house. Another retailer did.
As you know, that’s what this is all about. Fraud detection. Fannie figures that if appraisers get a “feel” for a typical margin that they will take a harder look at the deals with inflated profits. Of course, the unethical dealers will simply find other ways to “pack” the deal, like inflated prices on subcontracted items, etc. I had a guy in class last week who found a line item for “fill” at $10,000. He drove by the (high and dry) lot and determined that there was no way you could put that much fill material on the site. Crooks are creative.
Greg, I think in your case you need the invoice. Normally, this is a pretty straightforward scope of work issue. Intended use, intended user, value standard, assignment conditions, etc. If the intended use involves selling the loan in the secondary market, then certain assignment conditions (supplemental standards, in this case Fannie or Freddie requirements) apply. And one of those conditions is analyzing the dealer invoice. Now, in your case, the intended use does not involve sale in the secondary market but the client still wants the 1004C. Maybe you could put a countermanding statement in there somewhere and, if you’re not transmitting the report electronically, literally cross out line #10 of the supplemental certification. Personally, I don’t like countermanding statements and the client, if they did decide to sell the paper, could simply cut and paste the signature section of the 1004C to an unaltered top section and copy it.
If this helps you with the retailer, here’s what I tell my classes. Inform the retailer that neither the invoice nor the amount will be published in the report. If it makes then feel better, have the retailer send the invoice to the lender (who is actually the one who is to supply the appraiser with the invoice -- refer the lender to page 11 of 03-06) and have them mark it as “confidential.” Then the appraiser has no choice, per USPAP, but to treat the information in a confidential manner. Let the retailer know that this is not your personal requirement, but something that is required by the secondary market. Further, let them know that you have to sign a 1004C (I think most of them know what that is by now) that states you have received and analyzed the dealer invoice. Something like “I’m sorry, but there simply is no alternative.” Worse case, you may have to resort to diplomatically telling the retailer “no tickee, no laundry.”
I’m going to take this matter up with the Manufactured Housing Institute. They are the national industry advocacy group for manufacturers, retailers and park operators. I worked pretty closely with them when I re-wrote the MH seminar late last year and they’re good people. Perhaps they can inform their membership that it’s in everybody’s interest to cooperate with the system and, like it or not, supply the appraiser with what the appraiser is required to have.
Rich Heyn
In the other thread, Greg Boyd stated:
I responded:
Greg replied
Greg;
This dealer invoice thing is a serious issue. It seems that many appraisers are not even aware of it. Every time I teach the MH seminar, I get a lot of startled looks when I get to that part of the supplemental standards and cover the dealer invoice issue. About 40% of the class drops their collective jaw when I inform them that when they execute a 1004C they are signing a supplemental certification (item #10) that states that they received and analyzed the dealer invoice if it’s a new home. This segment, apparently, represents those appraisers who don’t read what they sign.
Another 40% goes bug-eyed when I inform them that the dealer invoice is not the sales contract between the dealer and purchaser (which the appraiser is also supposed to receive and analyze) but rather, the invoice from the manufacturer to the dealer. Yes, folks, what the dealer paid the manufacturer for the house.
In the San Diego seminar there was someone in the audience who mentioned something about different versions of the dealer invoice. I checked with several retailers as well as an individual at my state’s MH trade organization and confirmed that there is only one dealer invoice and that is, in fact, what the dealer pays for the unit. I think the uncertainty stems from the different terms used by Fannie and Freddie in their respective announcements. Fannie calls it a dealer invoice and Freddie calls it a manufacturer’s invoice. Same thing.
In a sense, I don’t blame retailers for not wanting to disclose what they paid for the house. But not all of them feel that way. I’ll illustrate that point with two stories.
When I discussed the issue with a retailer in San Diego, he said he would give the appraiser a copy of the invoice but conditioned it upon a temperature inversion in a very warm place.
I had the same discussion with a retailer here in Michigan and he said “Good.” I told him that was not the reaction I expected. He said that he had recently lost a deal to an unethical dealer. The purchaser couldn’t qualify without paying off a large loan balance on his pick-up. This retailer wouldn’t pay off the loan and hide it in an inflated sale price on the house. Another retailer did.
As you know, that’s what this is all about. Fraud detection. Fannie figures that if appraisers get a “feel” for a typical margin that they will take a harder look at the deals with inflated profits. Of course, the unethical dealers will simply find other ways to “pack” the deal, like inflated prices on subcontracted items, etc. I had a guy in class last week who found a line item for “fill” at $10,000. He drove by the (high and dry) lot and determined that there was no way you could put that much fill material on the site. Crooks are creative.
Greg, I think in your case you need the invoice. Normally, this is a pretty straightforward scope of work issue. Intended use, intended user, value standard, assignment conditions, etc. If the intended use involves selling the loan in the secondary market, then certain assignment conditions (supplemental standards, in this case Fannie or Freddie requirements) apply. And one of those conditions is analyzing the dealer invoice. Now, in your case, the intended use does not involve sale in the secondary market but the client still wants the 1004C. Maybe you could put a countermanding statement in there somewhere and, if you’re not transmitting the report electronically, literally cross out line #10 of the supplemental certification. Personally, I don’t like countermanding statements and the client, if they did decide to sell the paper, could simply cut and paste the signature section of the 1004C to an unaltered top section and copy it.
If this helps you with the retailer, here’s what I tell my classes. Inform the retailer that neither the invoice nor the amount will be published in the report. If it makes then feel better, have the retailer send the invoice to the lender (who is actually the one who is to supply the appraiser with the invoice -- refer the lender to page 11 of 03-06) and have them mark it as “confidential.” Then the appraiser has no choice, per USPAP, but to treat the information in a confidential manner. Let the retailer know that this is not your personal requirement, but something that is required by the secondary market. Further, let them know that you have to sign a 1004C (I think most of them know what that is by now) that states you have received and analyzed the dealer invoice. Something like “I’m sorry, but there simply is no alternative.” Worse case, you may have to resort to diplomatically telling the retailer “no tickee, no laundry.”
I’m going to take this matter up with the Manufactured Housing Institute. They are the national industry advocacy group for manufacturers, retailers and park operators. I worked pretty closely with them when I re-wrote the MH seminar late last year and they’re good people. Perhaps they can inform their membership that it’s in everybody’s interest to cooperate with the system and, like it or not, supply the appraiser with what the appraiser is required to have.
Rich Heyn
