FHA SF purchase with Mobile home on site

[sputnam]

So what do you then call it when you take a photo of it and it's inside. No good mf housing. What is the current functional utility of the structure.

Your perception may be different that another appraisers perception. My feeling is that this manuf house sitting there is like the junk cars sitting on the front lawn. Pretty much scrap metal.

You call it what it is. The English language has something like 600,000 words.. not including technical terms.

 

[Digger88]

As new AI models get released weekly I like running forum questions by them to see what they say. Prompting them to act in the role of an appraiser Google's newest model Gemini 2.5 Experimental says this:

Okay, let's put on the appraiser hat and address this frustrating situation professionally and according to standard practices. Your annoyance is understandable, but the report needs to be objective and clear.

Here’s a breakdown of how to handle the mobile home situation:

1. Confirm Client and Intended Use: First, double-check the appraisal order. Is it explicitly for FHA financing? Conventional? VA? Portfolio loan? A cash buyer needing an appraisal? The type of loan (or lack thereof) dictates the specific guidelines you must follow.
   
   • If FHA/VA/USDA: This mobile home is a non-starter as contributing real property value. It doesn't meet the June 15, 1976 rule, lacks HUD certification, etc. It cannot be included as part of the real estate security for the loan.
   • If Conventional (Fannie Mae/Freddie Mac): Still highly problematic. They also have requirements for manufactured homes regarding age, foundation, data plates, and classification as real property. A 1970 unit with no data plate is extremely unlikely to meet current conventional guidelines.
   • If Portfolio Loan/Cash Buyer: Lender requirements might be less stringent or non-existent. However, standard appraisal practice still involves identifying real vs. personal property and assessing marketability and compliance issues.
2. Identify the Mobile Home's Status:
   
   • Real vs. Personal Property: Given its age, lack of HUD tag/data sheet, and the fact it's a mobile home (implying it could potentially be moved, even if difficult), it is most likely legally classified as personal property, not real property. Appraisals are typically for real property. Verify how it's treated in local jurisdiction records if possible, but pre-HUD units not on permanent foundations are almost always personal property.
   • Compliance & Legality: Does local zoning even permit two dwellings on this lot? Was the mobile home placement ever permitted? Its age predates many current zoning rules, but its continued presence might be a non-conforming use violation or require specific permits, especially with shared utilities. This needs investigation.
3. Address Highest and Best Use (H&BU):
   
   • Analyze the H&BU of the site as improved. Does the presence of an old, non-compliant, likely personal property mobile home contribute positively, negatively, or neutrally to the value of the real estate (the land and the cottage)?
   • Given its age, condition (likely), lack of compliance for financing, and potential zoning issues, it almost certainly has zero or negative contributory value. The cost to remove it might exceed any nominal value it has. Its presence likely detracts from the marketability of the primary dwelling (the cottage).
4. Valuation Approach:
   
   • Value the Real Property: Your primary focus is the value of the land and the SF cottage.
   • Mobile Home Treatment:
     
     • Clearly state in the report that the mobile home is considered personal property and is not included in the appraised value of the real estate.
     • Assign zero contributory value to the mobile home.
     • Note its age, lack of HUD compliance, and inability to meet standard financing guidelines.
     • Cost to Cure/Remove: Consider if the presence of the mobile home represents a cost to cure. If its removal is necessary for legal compliance, marketability, or to meet H&BU, you should estimate the cost of removal and site restoration. This cost could be treated as a deduction from the overall value or factored into the site value/adjustments.
5. Reporting and Conditions: This is where you address the "subject to" question.
   
   • Option A: "As Is" with Clear Statements (Often Preferred unless removal is certain):
     
     • Appraise the property "as is," BUT clearly state:
       
       • The mobile home is personal property with no contributory value included in the opinion of value.
       • It does not meet FHA/Conventional lending guidelines.
       • Its presence may affect marketability and/or violate zoning (recommend further investigation by the client/lender).
       • Mention the shared septic and well situation (see point 6 below).
     • This approach informs the lender/client of the issues without mandating removal, leaving that decision to them based on their risk tolerance and loan program requirements. The lender will almost certainly require removal for FHA/VA/Conventional loans anyway.
   • Option B: "Subject To" Removal (Use if required by lender type or clearly necessary for H&BU/Legality):
     
     • Make the appraisal "Subject to the removal of the mobile home and restoration of its site."
     • Clearly state the reasons (e.g., "necessary to comply with lender requirements for manufactured housing," "necessary to cure zoning non-compliance," "necessary to achieve Highest and Best Use," "mobile home is personal property with no contributory value and negatively impacts marketability").
     • The value conclusion would be based on the hypothetical condition of the property after the mobile home is gone.
     • This is a direct approach but presumes removal is the only viable path forward for the client's intended use (like FHA financing).
   • Which Option? If it's for FHA/VA/Conventional, "Subject To" removal is often the cleanest path as it directly addresses the unavoidable lending issue. If it's portfolio/cash, "As Is" with strong warnings might be sufficient, letting the client/lender decide. Given your annoyance and the likely financing scenario, leaning towards "Subject To" might save everyone time, but "As Is" with clear documentation of the issues is also defensible.
6. Address the Utilities (CRITICAL):
   
   • Shared Septic: This is a HUGE red flag for any lender, regardless of the mobile home. Does the septic system have a permit? Is it rated for two dwellings? Has it been inspected? Shared systems often violate health codes or lender guidelines. This likely requires investigation and potentially significant repair/replacement. Make the appraisal "Subject to inspection and verification of permit compliance and adequate function of the shared septic system by the local health authority or qualified professional." This condition might be more critical than the mobile home itself.
   • Two Wells: Less inherently problematic than shared septic, but still needs verification. Make the appraisal "Subject to water quality and quantity testing for both wells, ensuring adequate supply for intended use(s)."

Summary Recommendation:

1. Verify Client/Use: Confirm the loan type.
2. Document Everything: Describe the cottage and mobile home accurately. State the mobile home's age, lack of tags, and likely personal property status.
3. Address Utilities: This is non-negotiable. Make the report subject to septic system verification/compliance and well testing.
4. Handle Mobile Home:
   
   • State it's personal property with no contributory value.
   • If FHA/VA/Conventional loan: Making the report "Subject to removal of the mobile home" is likely necessary and most direct.
   • If Portfolio/Cash: Appraise "As Is," clearly detailing the mobile home's issues (personal property, no value, non-compliant for typical loans, potential zoning/marketability impact), and let the lender/client decide. Still strongly recommend removal in the comments.
5. Communicate: Briefly and professionally communicate these core issues (especially the mobile home's ineligibility for typical financing and the septic concerns) to the client (lender/AMC) as soon as possible. This manages expectations and avoids wasted effort.

Don't let the agent's poor choice derail your process. Stick to the facts, USPAP, and lender guidelines. The utility issues, especially the shared septic, might be just as big, if not bigger, hurdles than the old mobile home.

 

[Zoe]

Many good points. FHA would be the one to answer their end, but the many other points your article mentions are very relative. If FHA is involved and won't provide insurance on the manufactured home improvements loan, then there is no need to include the value of it. In fact you would have to ask FHA if they want you to deduct the estimated cost to remove the improvements.

But many other good points in your post.

We have many manufactured homes in Tennessee. Not in Shelby county anymore unless they are in a manufactured home park. However, Shelby County won't provide a permit for new manufactured homes on a vacant site. It doesn't matter whether it meets all the other FHA requirements. Can't get a permit to do it. If the manufactured home was the only residential unit on the site, the owner might have to go back stick built if a tornado hit it. I am not sure. That would be question for code.

Again, homeowner's insurance is involved here also. Is this unit insured for the owner and the client (bank/FHA)?

 

[Zoe]

I'll make one more point.

The bank can get a lien on the property even if it is classified as personal property and the owner would still have to provide the lender with proof of insurance on the manufactured home. Let's assume FHA says No, we don't want it.

On conventional loan, the lender can still get a lien on the manufactured home all other things passing the tests. We appraise real property rights. It would be wise for lender to provide the appraiser with a value estimate from a qualified source of the manufactured home if they want to lend on it. Similar to a car or other personal property that banks take liens on. FF&E.

Take a commercial property loan. The bank wants a lien on everything in loan including non-real property rights. Think of like a hotel or motel or restaurant, etc. etc.

Manufactured home is considered real property if they meet FHA standards. Same way on conventional loan.

Same way on car loan. It is personal property. The bank still requires insurance on it if you owe money to the bank on it.

Think of like a stove, or chair or whatever if it is considered personal property instead of real property. The bank wants a lien on it all if they are loaning money on all of it.

They want insurance on it. I specialize in real property rights.

FHA does waivers sometimes based on their requirements. Remember who your client is. Don't let people make their problems your problems.

 

[Zoe]

One more thought. This property seems like it would pass as being real property. I could be totally wrong.

I am totally outside looking in.

That complicates things with your client(s).

What do we have here? Utilities, septic or public sewer, permanent foundation, local code agreement. Etc.Etc.Etc.

Entender?

Would H&B use be to demolish or keep?

Market value requires H&B use analysis. No ifs ands or buts. Market value appraisal requires H&B use analysis. Many value definitions do not require H&B use analysis.

 

[Sadie]

This is out in the boonies, and since the mobile home is clearly listed in the tax record as an improvement, its legal. The problem is that this is an FHA loan, there are no HUD tags on the mobile home, nor is there a data sheet and tax records say it was built in 1970, which is well prior to Huds cut off date of 1976. If that mobile home was removed from the property, the property would meet HUD standards. Same driveway, the only "utilities" are the electric. There is a meter on the mobile home and there is an oil tank behind the mobile home. The main house has its oil tank in the basement and its own electric meter.

Don't just assume its legal because its on the tax record. Sometimes when you call they say yeah its not legal be we are taxing it anyway. They do use more official language, but that is the gist.