FHA and "on-frame" modular home

[PropertyEconomics]

JoAnn .. I very much appreciate your weighing in on this issue. One of the things I am concerned most with is that on-frame modular homes can be compared with conventionally constructed site built homes becuase of the building code, however, from the exterior appearance of the one I am reviewing it looks like a manufactured home (the interior appearance does as well given it comes in two sections).
I believe the market would dictate how it is treated in the event of resale, however, strong opposition is offered by both the lender and the appraiser because they "can" compare it with site built construction. Becuase they "can" does not equate to they "should" in my opinion.

I do not have any market evidence to support a postion one way or the other but rather am relying on logic to guide me based on exterior and interior appearance.

Your further thoughts are certainly welcomed.

 

[Rich Heyn]

I have an assignment for an FHA appraisal of an "on-frame" modular home. I know Fannie Mae will not buy loans of "on-frame" modular homes. However, I have read conflicting information on the Appraisers Forum regarding the FHA insuring such properties. Can anyone provide a definitive answer as to whether or not an "on-frame" modular home qualifies for an FHA insured loan and cite the source of your answer?

And, if FHA does insure loans for "on-frame" modular homes, which form should the report be written on? It seems using a Fannie Mae Form 1004 designed for reporting appraisals of one-unit (single-family) homes may be misleading since Fannie Mae itself does not consider "on-frame" modular homes to be such. Help!!! Thanks.

Unless there have been policy changes of which I am unaware, FHA does not distinguish between "on-chassis" modular homes and "off-chassis" modular homes.

The following quote is from Mortgagee Letter 2009-16:

"Modular construction is also a factory-built home, but is treated the same as stick-built housing."

Perhaps there is something more current, but FHA's position historically has been to have appraisers report their assignment results for both on and off chassis modular homes using the same format.

This does not mean that the market will view on and off chassis modular homes the same and it also does not mean that appraisers should ignore that in their valuation.

There is also nothing that I know of that prevents and appraiser from using HUD-code manufactured homes as comparables when appraising an on-chassis modular.

 

[Noreen]

Unless there have been policy changes of which I am unaware, FHA does not distinguish between "on-chassis" modular homes and "off-chassis" modular homes.

The following quote is from Mortgagee Letter 2009-16:

"Modular construction is also a factory-built home, but is treated the same as stick-built housing."

Perhaps there is something more current, but FHA's position historically has been to have appraisers report their assignment results for both on and off chassis modular homes using the same format.

This does not mean that the market will view on and off chassis modular homes the same and it also does not mean that appraisers should ignore that in their valuation.

There is also nothing that I know of that prevents and appraiser from using HUD-code manufactured homes as comparables when appraising an on-chassis modular.

Rich, any plans to come to New England to teach a class? Would love to take it.

 

[Jo Ann Meyer Stratton]

The market value of an on frame modular or off frame modular or manufactured home or mobile home or any other type of factory built home depends on the market that is applicable to the subject. Depending on many things comparable properties could be modular, on frame or off frame, manufactured homes, mobile homes, kit/paneled homes or site built homes. All types of homes come in many varieties of construction quality, construction materials, amenities, interior options, etc, etc, etc. Compliance with a building code, whether is a local code for site built homes or a national code (HUD) for manufactured homes does NOT determine the quality or inclusion of any of the above items. A home, regardless of code, materials, amenities, can be the "Yugo" of a home or a "Rolls Royce" home. It can be a dune/sand buggy (mobile home), pick up (manufactured home) or a convertible (on frame modular) or a sedan (off frame modular). All of those are motor vehicles. Factory builts for residential use are homes.

And just like any other appraisal assignment the knowledgable, ethical, professional appraiser researches the market to determine what properties would be considered a substitute a buyer or owner might choose instead of the subject. Those are the comparables that should be utilized in the report. All the comparables could be site built, modular or manufactured or they could be a mixture of all types. And just as there are Skippys for appraisals of site built homes, there are Skippys for factory built homes. So hopefully an appraiser selected for an assignment is not a Skippy, their appraisal report will have the appropriate comparables and an appropriate opinion of market value.

 

[mbroussard]

Thanks to everyone for your informative and succint answers to my question. I appreciate it very much. Per the representative I spoke with at the manufacturer (Clayton Homes), this model has more "bells and whistles" compared to their manufactured homes. So as far as quality goes, the subject probably is superior than other manufactured homes in the marketand and inferior to site-built homes. According to the rep, they have not sold any other modular homes of any type (on-frame or off-frame) in the local market in the past one year, so I have no comp sales for similar type construction. So my strategy will be use site-built homes as comps and make downward adjustments for superior quality...and explain my reasoning in detail.

Thanks again

 

[Jo Ann Meyer Stratton]

Wait until you have seen the subject property before you make a decision of what type of comparables you will be using. It might look like a cheap manufactured home or a high quality site built home (or the other way around). Clayton Homes builds the good quality line under the name of Schult here in Arizona; manufactured homes, on frame modulars and off frame modulars are all constructed to the same floor plans, same materials, same options and upgrades but different building codes. Some have very steeply pitched roofs, tile or wood shake roofs, ceramic tile and hardwood flooring, 9' and high ceiling heights, granite counter tops, etc. The pitched roofs are on hinges when they leave the factory so that they will go under freeway passes. Their average line is constructed under the Clayton Homes or CMH label here. All the various corporations belong to Warren Buffet from Omaha, NE.

 

[CANative]

to the rep, they have not sold any other modular homes of any type (on-frame or off-frame) in the local market in the past one year, so I have no comp sales for similar type construction.

What about resales of their homes?

 

[PropertyEconomics]

Wait until you have seen the subject property before you make a decision of what type of comparables you will be using. It might look like a cheap manufactured home or a high quality site built home (or the other way around). Clayton Homes builds the good quality line under the name of Schult here in Arizona; manufactured homes, on frame modulars and off frame modulars are all constructed to the same floor plans, same materials, same options and upgrades but different building codes. Some have very steeply pitched roofs, tile or wood shake roofs, ceramic tile and hardwood flooring, 9' and high ceiling heights, granite counter tops, etc. The pitched roofs are on hinges when they leave the factory so that they will go under freeway passes. Their average line is constructed under the Clayton Homes or CMH label here. All the various corporations belong to Warren Buffet from Omaha, NE.

The report I am looking at is from plans and specs ... yet neither plans nor specs were provided and the floor plan looks exactly like manufactured ... I think I will seek additional information.

Is there anything to look for in an invoice or contract JoAnn?

 

[Bob Ipock]

Building codes are a set "minimum". If there are fifty homes, some may be modular, some may be small entry level homes and some huge mansions. ALL of these must meet the same minimum requirements. Very few people would want a home that meets only the minimum standards.

Dealers of modular homes used to advertise that their homes meet the same code as custom built, site built homes.......and they meet the same minimum. It is what goes beyond the minimum that counts.

All appraisers meet the same minimum requirements........same deal.

 

[Jo Ann Meyer Stratton]

The best thing an appraiser of factory built housing needs to do is to tour a manufacturing plant. I think there is at least one in NM. Another good resource is making the rounds of every manufactured home dealers you can find and gather up all their brochures which show floor plans, specifications, options, etc. Some of the manufacturer's have websites with videos that show the construction process from step one to after installation. Those can be very informative also.

But the best thing is looking at the subject property--just like any other appraisal assignment. Spend a long time, looking into every nook and cranny of the home (again like any other assignment).

Take the time and use due diligence!