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entrepreneurial incentive

Doug Wegener

Thread Starter
Senior Member
Joined
Apr 14, 2005
Professional Status
Certified Residential Appraiser
State
Oregon
In your opinion, when doing a Marshall and Swift cost approach on a manufactured home is it appropriate to include entrepreneurial incentive? Reasons?
 

glenn walker

Elite Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
It's a tough one because Entrepreneurial Profit is often confused with what a builder or contractor will need to complete a project and also make money. But Yes, if the builder is the only person involved. M&S's costs include "contractors' overhead and profit. The contractor cost does not include EP; it is limited to what a contractor makes as profit as hired by the developer (or, homeowner in a owner-managed project) Personally I have no opinion to which is correct, having built homes and remodeled and flipped homes we learned an-Entrepreneurial-Profit is only a goal and not a fixed cost. We have made big profits and also had ones where we got out breaking even or even at a loss. So any number an-appraiser would have used in a Cost Approach would have been a good guess at best. Anyway I try to separate Builder Costs and Entrepreneurial profit, they really are not one and the same. A Builders cost and typical costs can be estimated by taking surveys from numerous contractors in different areas but EP Profits are not measurable, and like asking a guy in Las Vegas how his poker game is going, he always has an-ace in his back pocket even if he is two cards away from folding

It's no big deal if you want use the M & S because at least if someone challenges it -you can just cite M & S as your source and be done. :)
 

Doug Wegener

Thread Starter
Senior Member
Joined
Apr 14, 2005
Professional Status
Certified Residential Appraiser
State
Oregon
I appreciate the response Glenn
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
I find that the cost to erect a manufactured home and the proper foundation is a quite high price. So don't underestimate those. As for a new MH, the dealer is extracting the market price with his "incentive" built in. Likewise, if you use the NADA properly, in place, I'd be loath to add anything to the price since it should include that. However, if you do then you need to extract the RCN to add to the EP and with NADA you rarely have direct access to the same model and configuration on the manufacturer's website and are working fairly blind using other units as a proxy. Therefore, I think you risk over-estimating the total cost of the MH and under-estimating the cost to move, set, and erect the unit on site with a proper foundation. Therefore, if I have a manufacturer's cost or the original cost (from the owner) I can adjust the RCN based on the Historical multiplier of NBC or M & S. In my opinion, M & S and NBC tend to over-estimate the RCN of manufactured housing compared to real costs. So I pay the freight with the NADA book for manf. housing and do not rely upon M & S or NBC because, as I stated, I don't trust their numbers. They are too high.
 

BRCJR

Senior Member
Gold Supporting Member
Joined
Sep 20, 2005
Professional Status
Licensed Appraiser
State
Virginia
Would it matter if the dwelling was to be a "spec" or owner occupied?
 

Doug Wegener

Thread Starter
Senior Member
Joined
Apr 14, 2005
Professional Status
Certified Residential Appraiser
State
Oregon
I find that the cost to erect a manufactured home and the proper foundation is a quite high price. So don't underestimate those. As for a new MH, the dealer is extracting the market price with his "incentive" built in. Likewise, if you use the NADA properly, in place, I'd be loath to add anything to the price since it should include that. However, if you do then you need to extract the RCN to add to the EP and with NADA you rarely have direct access to the same model and configuration on the manufacturer's website and are working fairly blind using other units as a proxy. Therefore, I think you risk over-estimating the total cost of the MH and under-estimating the cost to move, set, and erect the unit on site with a proper foundation. Therefore, if I have a manufacturer's cost or the original cost (from the owner) I can adjust the RCN based on the Historical multiplier of NBC or M & S. In my opinion, M & S and NBC tend to over-estimate the RCN of manufactured housing compared to real costs. So I pay the freight with the NADA book for manf. housing and do not rely upon M & S or NBC because, as I stated, I don't trust their numbers. They are too high.
Thanks to you as well Terrel
 
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