Cost Approach on a 9-year-old MH?

[Alison Swain]

Does Fannie require that the CA be done on a manufactured home that is 9 years old? Or is this optional like with older SFR's?

While we're at it, anyone know of a good MH class coming up in central Florida. I'm seeing an increase in the orders.

 

[Randy Pippin]

I'm not sure if it is required but I include a copy of the NADA generated cost approach in all of my reports.

 

[Jo Ann Meyer Stratton]

FHA does not require a Cost Approach for manufactured homes over one year old. All other lenders require a Cost Approach for all manufactured homes regardless of original year of construction.

 

[Fred]

All other lenders require

I would say lenders request. Law, regulation and USPAP can "require."

 

[Fred]

I don't appraise these, but I found this in the Fannie stuff. Good luck. I find that the paragraph is a bit incoherent, and the second sentence is not gramattical.

XI, 304.01: Manufactured Homes (06/15/07)

B. Appraisal Standards. Fannie Mae requires market-based property valuations for manufactured homes demonstrated by a well-developed sales comparison approach to value. This means that the appraiser must develop and report in a concise format an adequately supported opinion of market value based on the sales comparison approach to value and further supported by the cost approach to value
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[Alison Swain]

I don't appraise these, but I found this in the Fannie stuff. Good luck. I find that the paragraph is a bit incoherent, and the second sentence is not gramattical.

Hey, 06/07 is not so old! Looks like that answers the question pretty precisely.

Thanks!

 

[Fred]

Hey, 06/07 is not so old! Looks like that answers the question pretty precisely.

Thanks!

It's on point, anyway. I think they mean to say they want the CA. "Precise" is out of the question because the last clause has a verb problem.

In my opinion, the passage also creates appraisal theory and standards of independence problems. What if the cost approach doesn't "support" anything because it is meanignless. As much as anything else, that passage sounds like - force the cost approach to match the sales comparison and give it weight of reliance.

 

[Tim Hicks (Texas)]

It's on point, anyway. I think they mean to say they want the CA. "Precise" is out of the question because the last clause has a verb problem.

In my opinion, the passage also creates appraisal theory and standards of independence problems. What if the cost approach doesn't "support" anything because it is meanignless. As much as anything else, that passage sounds like - force the cost approach to match the sales comparison and give it weight of reliance.

I think it is more of a direct response to all the fraudulent manufactured home appraisals based on assemblage sales in the past 10-15 years. The cost approaches were based on the highest lot sales (usually restricted against manufactured homes) and outlandish cost figures (at least in my area). The cost approaches were so poor, it only helped their cases in retrospective reviews. Therefore, they will continue to require supported cost approaches on these type properties.

 

[Fred]

Therefore, they will continue to require supported cost approaches on these type properties.

You make it sound reasonable - that is, if youi like Stalinesque. Create a requirement to force them to do bogus analysis. Then, at the show trial, you have "alot" of bogus analysis to use as "evidence."

Also, you have to love the irony. As a defense against use of assemblage leading to faulty market valuation in one part of the assignment, Fannie tries to make them do the same kind of assemblage in another part of the assignment.

 

[Tim Hicks (Texas)]

You make it sound reasonable - that is, if youi like Stalinesque. Create a requirement to force them to do bogus analysis. Then, at the show trial, you have "alot" of bogus analysis to use as "evidence."

Also, you have to love the irony. As a defense against use of assemblage leading to faulty market valuation in one part of the assignment, Fannie tries to make them do the same kind of assemblage in another part of the assignment.

True, my opinion is slanted by my experience performing hundreds of manufactured home appraisal reviews over the years. However, when all of the comparable sales presented tend to be "created sales" and not actually sales at all, they really expected the reviewer to analyze the cost approaches heavily. It was quite easy, when the lot values were based on lot sales not intended for manufactured homes and the cost figures were higher than the typical brick site built home and in no way matched Marshall & Swift cost figures.

That is how the myth concerning high manufactured home depreciation got so much credibility. Well no, if you bought a manufactured home and put it on your own lot and had no developer and dealer involved in the entire transaction, there was very little (if any) depreciation. If you let the dealer and developer control the entire transaction (including your financing), then you significantly over paid for the home in this area and recognized a dramatic depreciation. Yet, they all had appraisals telling them their homes were worth $40-50,000 than what they were worth on the open market.

I know some areas of the country did not see the effect of this system as much as TX. But around here we continue, even now, to have a manufactured home market dominated by foreclosure sales. Every year, 70-80% of the sales are foreclosure sales. You would think that eventually it would peter out, but the sheer volume of inflated manufactured home sales over the past 15 years is astronomical. I am still reviewing appraisals from the past year, where appraisers have still not gotten the memo and continue to perform bogus cost approaches to support their poor sales comparisons. They got the memo about assemblage sales, but just apply skippy techniques to legitimate sales and then support it with high lot sales and fabricated cost figures.