Manufactured/Modular

[Jo Ann Meyer Stratton]

Fannie Mae's Announcement 02-02 prohibits the use of land/home packages. They call them created comparables and will refer appraisal reports that contain "created comparables" to the applicable state appraisal board. The last sentence under their new guidelines for factory built housing is "The appraiser must not create comparable sales by combining vacant land sales with the contract purchase price of a factory built home (although this type of information may be included as additional supporting documentation).

Fannie Mae 02-02 "Improper selection (or creation) of comparable sales"

See the messages on the General Discusstion group on Friday, download the announcement, print it out and send it to everyone you can think of!

 

[Mountain Man]

Jo Ann, your right. Need more coffee. I don't know where in the world that addendum came from. The lender claims that it is a Fannie form, but I don't see their usual mice type at the bottom. I just tell them to get an inspection if needed.

I get calls from dealers, they just point blank ask if I will use their sales. No...then I hear the dead phone tone. Still see appraisal done that way.

 

[Stephen J. Vertin MAI]

This has baffled me for years and all seems like semantics. Is there any value difference between the two and is it relevant? In other words who cares what they are called. What are the value effecting issues? If there are none than it appears the argument is more academic than practical. I have asked similar questions on this topic in the past; yet, no one has answered. It seems the two facilities have more in common than difference. What is the real deal with this and as an appraiser should I be concerned with this issue?

Steve Vertin

 

[airphoto]

My two pennies,

Always referred to mobile homes as "came in with a hitch, on its own wheels." Other factory-built homes "came in on a flat-bed trailer."

Either can be put on a permanent foundation, but the first, typically, has panelled walls and plastic casements (although I've seen some upgrades.) Second usually has drywall and some form of ranch or wood casements ..

 

[Jo Ann Meyer Stratton]

Bill:

Not always true! It is the building code that identifies the home, not the way it arrived on the site. Modular homes can also have steel undercarriages with wheels, axles and hitches. Sometimes manufactured homes can be hauled to a site. So back to the original building code followed while under construction in the factory.

Steven:

The building code affects the type of financing the home can receive, that is why it is so important. Each lender has some very specific requirements for the home, depending on the building code.

And just like any other appraisal assignment, comparables are what determine the value. So if your subject was built to HUD code, then other HUD code built homes are the appropriate comparables. If factory built to a site built code like UBC, CABO, BOAC, etc, then other factory built to site built codes are the appropriate comparables.

The appearance, construction quality, materials used in construction, the interior finish, etc, etc, is also very important. There is just as large of variance between factory built homes, whether they are HUD code or site built code, as there are with built on site homes. They can range from cheap aluminum finish to stucco, wood siding, brick or masonry veneer after arriving on site, composition roofing, tile, wood shake, etc. Interior can range from cheap paneling to very expensive textured drywall, expensive sold wood paneling, printed wallboard to expensive on site applied wallpaper, low grade sheet vinyl to ceramic tile, saltillo tile, hardwood, very expensive carpeted floors, mass produced kitchen cabinets out of heavy cardboard to in place custom solid wood cabinets, with formica to solid surface, granite, tile counter tops. Etc, etc, etc, etc. Factory built homes can be one or two story homes, with as many angles, varied footprint as a built on site home. As I state in my article on the naifa.com web site, factory built homes are not your grandfathers trailer or your fathers mobile home anymore.

So the first thing is to determine the building code, once that is identified and similar code homes for comparables are identified, then it is standard appraisal procedures and techniques from then on.

 

[Tim Hicks (Texas)]

Steve,

There is a difference. They are not interchangeable. Modular homes generally have better constuction quality and definitely are considered superior to manufactured homes. That is why many Realtors and other parties try to call manufactured homes "modular". That is why they have different building codes and different set up systems. You should always compare manufactured to manufactured and modular to modular. I realize in some areas that manufactured homes have many upgrades and can be confused, but they are still manufactured homes. I have heard appraisers in Colorado say the modular homes in that are are comparable to stick built homes. I am sure every part of the country has a different variety of manufactured and modular homes.

 

[Stephen J. Vertin MAI]

Jo Ann:

Thank you for your insight it was most enlightening. I would assume, as with many issues, there are gray areas. In other words, situations when it is difficult to determine which is which. Furthermore, I would assume most code issues are not readily visible to the eye. Meaning many are related to pluming, electrical, heating, support, etc. Are buyers and sellers well versed in these issues? When examining comparable are there any sure tell signs differentiating between the two groups?

Steve Vertin

 

[Stephen J. Vertin MAI]

Tim:

Thank you for your input. I read Jo Ann's post first and replied. I did not read yours before writing. You answered many of the questions I asked Jo Ann. Thank you.

Steve Vertin

 

[wade3333]

Steven, ask your loan officer if there is a difference, my underwriters would tell you in a new york second yes, there is a difference. Wade

 

[Jo Ann Meyer Stratton]

Steven:

I did want to re-emphasize sometimes it is impossible from observing the property which original construction code was followed in the factory. Then the appraiser has to become a private detective. Searching out ownership records, building and zoning department permits, etc. until you find a serial number or manufacturer's name and maybe model number. Once you find some kind of documentaton somewhere in either private or public doccuments, then you have to follow the paper trail until you can verify the building code. Not only do you have to do that with your subject, you might have to be a private detective with your comparables. But typically, somewhere down the line with the comparables, the detective work was done before it closed escrow and they might be easier to identify. Then you have to research the market of the subject to see what the reactions are to various types of properties. Is there a distinction in the subject's market between manufactured homes with FHA installation versus conventional installation for example. What type of market reaction is there between single wide versus double wide. What would prospective owners of the subject consider as subsitutes for the subject, etc, etc, etc. Would a site built buyer even consider the subject factory built home? And now Fannie Mae requires at least two comparables that are the same width and building code as the subject, so the detective work becomes even more important regarding the comparables.