38 sales, 30 are REO

[Tim Hicks (Texas)]

I just completed a loss mitigaion appraisal for Wells Fargo. It is a double wide (1,457 SF) on 1 acre near Alvarado, TX. The Realtor has it listed at $109,998. There is no garage, no fence, no barns,etc. Just a home, drive, septic and an acre. I have no idea how the real estate agent came up with her listing price. (oh yes I do, they have their purchase appraisal for $102,000 in 2001). I have 38 manufactured home sales in the Alvarado area in the last year. 30 are REO properties. 25 are in the $40-60,000 range. 90% are larger homes. I scraped up two sales that were not REO and two that were, but sold higher than most of the others. There are no sales over $100,000. My eight "clean" sales had only one on less than four acres. Active listings show 48 competing listings. About 10 are similar to the subject and are listed over $100,000. Over 20 are REO property listings and the rest are priced along the lines of the higher REO sales. My argument in this case is that the REO is the market for this area at the present time. The agent will have little hope selling this over priced home with 20 larger REO properties for half the price. Needless to say, my value is much, much lower than the list price. The sad part is that I counted no less than five signs for land home developers in the area inviting new prey. At what point, will lenders realize that maybe these homes are overpriced, over appraised and high loan risks?

Oh, the NADA blue book for the home suggested an current $32,000 value fo the home. What do you bet they paid over double that for the home? That was last year. Depreciation is created in these type loans.

How many other areas in the country have this same scenario? There are three other areas just like it in this county alone.

 

[Anonymous]

While I am not generally seeing that kind of depreciation of MH in this market (after all Arkansas is supposed to be MH Capital of world with James Carville calling Paula Jones trailer park scum, despite the fact she never lived in one AND while the govs mansion was being remodelled Hon. Gov. Huckabee lived in a triple wide) but in general I see lots of MHs sell for less than 1st sale by 5-10% while owners often expect appreciation of 10-20%. My sub is working on one right now. Owner sez $80,000. NADA says $28,000 and he bought 3 yr ago for $32,000. Where is the other 50 thou? Certainly not in a 10 acre tract with a 100' well and septic in the boonies of E. Oklahoma. Generously giving 2,000 an acre for the land still leaves way too much for site improvements to make up the difference.

A few have managed to maintain value by keeping above average condition, nice decks well maintained as well as good landscaping. It makes using the NADA a little tough, though I believe the wildcard is that overall appearance a.k.a.- site improvements. If you can determine site value as if vacant, NADA value, then whatever is left over is that Site and appearance factor.
ter

 

[Mountain Man]

"My argument in this case is that the REO is the market for this area at the present time."

Yep, I agree. See the same thing in GA too. The highest Security Deed I remember seeing recorded for a wobbly box was for over $130,000. 8O

 

[wyecoyote]

Tim,

I agree with you from the information that you provided. I did one of these types a couple of years ago. The REO was the market and took several paragraphs of explanation.

Ryan

 

[Ted Martin]

In 1985 I was working for the RTC / FDIC closing banks. There were some markets at that time where REO's sales set the market. I had the same problem with MFG's for quite a while. The buyers tend to stay in them if they can make the payments, there are very few valid sales. It is very hard to sort through the available sales data to find the few sales which aren't tained by seller motivation.

 

[Caterina Platt]

Tim,

Dealing with the same monster in several areas. My favorite comment of recent, 'Current sales prices of similar bank/investor owned properties appear to be more afftected by seller motivation than condition and amenities.' Have turned up with some uncomfortably large ranges on adjusted comparables that appear to be relatively equal to the subject in 'repaired' condition (confirming the condition and repairs with the Realtors). In the areas I'm speaking of, rarely does the lender/owner repair the units simply for marketing purposes. The return on the dollar is nil. Some have been left in average condition on HUD foundations and sold FHA. The sales prices are wildly different with no plausible explaination except 'That's the offer the seller took just to get out from under it.'

Reconciliation becomes, well, interesting at that point. Don't ask about the dart board! :? No, honestly you end up choosing the most similar comparable and heavily wieghting the value on that one adjusted sale, while tap dancing around your ugly range of the other two sales. Then you hope like all heck you end up accurate when the sale finally takes place.

Interesting times to say the least.

 

[Restrain]

Tim: Have seen the same thing up here in Denton County. Until the REO's work out, they are setting the market. However, I have a group that is purchasing the REO's, cleaning them up and selling them under a program that they rebate costs back to the buyer. The bottom line is a 105% loan, but the value is much more reasonable than what they want for a new one on 1 acre.