Manufactured/Modular

[Stephen J. Vertin MAI]

Jo Ann:

It sounds like a lot of work. It must take at least 8 hours per appraisal, if not more. It seems like you could only charge the same as a SF. How does anyone make a living doing it? Than again, I do not see how anyone makes a living doing SF. I did one yesterday that took me 10 hours. At a fee of $350, it breaks down to $35.00 per hour. Last year I did a complete cost analysis and determined I need to make $65.00 per hour to make a living wage. If I could do two SF's in a day, I would quite the commercial business, but I am just to slow. Oh well.

Steve Vertin

 

[Mike Garrett RAA]

UBC, CABO, and HUD homes....all are considered modular. Sure seems to me that there is a bias against this type of construction on this forum. We deal with it all the time in my market. Thousands of them dot the landscape on sites from 1 to 40 acres.

Many are sold as a package by developers. You buy the site and the home for $XXXXXX. To say these are not comps is wrong. They are exposed to the open market, they are sold every day. Both HUD and VA will allow the use of these as comparables.

 

[Tim Hicks (Texas)]

MIchael, Michael,

Once again, you confuse the Colorado market with the other 49 states. There is no bias on this forum. Well, maybe by some, but most of us have our experiences with manufactured/modular appraisals. Contrary to your narrow market, Modular and Manufactured homes are not the same. Here in North Texas, modular homes are put together on site and manufactured homes are attached on site. Here, modular homes usually have better foudations, attic space and generally better construction materials. Here, modular homes generally sell for more than manufactured homes. Here, modular homes are more similar to site built, frame homes than manufactured homes are.

I am sure the land/home packages are legit in your state because you say so. Land/home packages here in North Texas are quite inflated/over priced/not exposed to the open market. Hopefully, your developers are buying the homes, setting them up on their land and then offering them for sale on the open market. Or, hopefully, they have model homes on lots with sales prices prominantly displayed for them to have one built the same. That is not the case here. The ASB has a statement regarding proper sales for land/manufactured home sales and proper exposure to the open market. The state of Texas has the same statement prominantly displayed on the TALCB web site. The reason is quite clear. Overpriced homes, shaky borrowers, shady developers, shady manufactured home dealers and corrupt appraisers. I am not speaking about a subject that I am not familiar. I have appraised many MLS manufactured home resales, land/home packages for borrowers with their own financing, land/manufactured home foreclosures and about 20 field reviews on land/manufactured home appraisals. I appraise more manufactured home re-sales than any appraiser I know.

Here in Texas, we have appraisers valuing 1,500 SF manufactured homes on an acre with a septic, gravel drive, water hook-up and nothing else for more than a 1,500 SF brick home on slab, 3/2/2 (thats with a full attached garage) with the same lot size and improvements. Trust me, they are not equal in construction quality. They use nothing but dealer sales, never consider closer re-sales and don't verify the financing. Many times thay use sales verbally given to them across a salesman's desk and never verify anything. The trouble is after years of doing this there are still no market sales (MLS) to support these high values ($100,000+). However, the foreclosure rate is astronomical. Why? Because, the dealers tell the borrowers that they can roll in everything, put very little down and they have a new home on an acre. People are so happy they don't realize they can't afford the $800+ payment. Who should be at fault here? The dealer? The developer? The mortgage company? or the appraiser? It is simple, none of this would have happened if the appraiser would not have "made the deal work". If he had done the proper job, they all would have appraised for about $40,000 less and there would be no deal. No rich dealer. No rich developer. No rich mortgage company. No appraiser about to lose his license. But thats not all, we also have a poor, manipulated borrower who has no home and ruined credit for the trouble.

So, Mike, hopefully your sales are properly exposed to the market. Hopefully, you have settlement statements to verify your sales. Hopefully, by now, you have re-sales to support your market estimate that don't have outlandish age adjustments for that "drive-off" depreciation that really is just inflated original pricing. Hopefully, you know the difference between modular and manufactured homes. Hopefully, they are interchangeable in your area. Hopefully, you realize there is very little bias on this forum. Hopefully, the foreclosure rate on the homes you appraise is not too high for the VA or HUD to take notice.

One more thing, they are not "all considered modular". If you want to continue calling them all "modular" that is your business. However, since I know you are the good, straightforward, upstanding appraiser that you are, you might want to make sure you label them properly in your reports. Anybody who labels them improperly is misinformed, uneducated and easily sanctioned for delivering a "misleading" appraisal report. Just because they call them all "modular" doesn't make it so. Underwriters also know the difference (well, some of them) and some mortgage companies have different criteria for each.

MIke, I only responded in this way, because of the cavlier way you dismissed the ramblings about market sales and calling everything modular. If you haven't read the ASB ruling on market sales for manufactured homes, please do.

 

[Jo Ann Meyer Stratton]

Also read Fannie Mae's Announcement 02-02! I understand Fannie Mae has already started turning in reports to the state appraisal boards. I think there are going to be some very unhappy appraisers in the near future! So DO NOT use created sales or land/home packages that were
not exposed to the market (dealer sale plus land sale is not market exposure) as comparables for either site built or factory built homes. They may be provided for additional information but total properties exposed to the open market is to be the basis for the opinion of value.

Or you might soon be receivng a registered letter from your state board.

Also back to my often repeated comments--it is immaterial what your state, local governments, dealers, homeowners, realtors, appraisers, loan officers, etc, etc call the home. Factory built, factory assembled, industrialized homes, modular homes, mobile homes, manufactured homes are all used interchangably in laws, zoning regulations, taxation, casual conversation, etc, etc.

But when it comes to financing the home there are some very, very explicit meanings of the terms.

Again:

Nationwide, HUD code home equals manufactured home FOR FINANCING.

Nationwide, non-HUD code factory built home similar to site built code equals modular home FOR FINANCING.

Nationwide, a home constructed prior to June 15, 1976, a factory built home not built to HUD code, not built similar to a code for site built home, may have been or may not have been built to an industry code is a mobile home FOR FINANCING.

Tim: I am sure you mean a resale or a spec home exposed to the market, available to any one when you say MLS sales don't you? I know you are in a non-disclosure state. Also where on the Texas web site might I find your boards opinion about "created" comparables? I have decided I like that term--much more descriptive of the real situation than land/home package! Land/home packages can be assembled in several ways--some even legitimate.

 

[Roger]

While I don't feel a great deal of bias toward factory built homes, I am starting to become very cautious (also conservative) in appraising them.

I have started turning down orders for them, unless from good, regular customers.

In the past week I appraised a manufactured home that sold off the dealer's lot for about $64,000, in late 1999. The home was repo'ed and sold a month ago for $15,000, or less than 25% of its original value, in just over two years. This was home only, as it was sold off the lot with no land, and then towed back to the lot for resale. Quite a depreciation curve.

Foreclosures seem to be way up on these homes. It appears to me, that when these homes are purchased off the lot, the dealer finances them through a company that specializes in manufactured homes. These deals are often at high interest rates, with several points added to the loan, mostly for the dealer's part in the financing. The buyers simply ask about the monthly payment.

When the buyers wake up and realize that they are paying 10-12% interest, and the going rate is 7%, they attempt to refinance. But, at this point, they have little/no equity. They then have a choice, either keep paying the high rates, or walk away. Many are choosing to walk away, and the sales of the repos continues to depress the market, making the refinancing of the others even more difficult. It's a crazy circle.

That seems to be what is happening in this market.

 

[Mike Garrett RAA]

Last month our local appraisers group, CAREA, brought in three "experts" from the state who gave us a two hour presentation on Modular/Manufactured housing. Here in Colorado, the terms are interchangable. We are not talking mobile homes, we are discussing factory manufactured housing put on a permanent foundation.

The session was both informative and educational. I would recommend it for other states since there is so much mis-information being bantered around. Appraisers need to know the differences between HUD Manufactured, UBC and CABO manufactured...not that there is substantial construction differences but how they are identified and how they are treated by various lending methods.

This type of housing will continue to expand in nearly all markets, it will be offered both as new and and as resale. We owe it to ourselves to fully understand it and not allow our personal bias to be reflected in our appraisal. Since the bulk of my work is for VA financing, their juristictional exceptions apply. They have given us specific instructions on how to handle "Mobile/Modular" new construction....I follow those guidelines.

The quality of construction is not the same as stick built (in most cases), the properties have a different life expectancy and depreciation rate. Comparison should be kept to like units which includes new vs resale. My county has the 2nd highest number of modular or manufactured homes in the state of Colorado ....some 30,000 units in place. Comparables are plentiful. I have done at least 500 appraisals on these in the past 10 years.

 

[Caterina Platt]

We have exactly the same situation as Tim describes in our market with the manufactured repos in several areas around metro Albuquerque. The neighborhoods affected have always been in lower demand, even in good market times. Now the external depreciation is off the charts, land and home sell for less than the value of the land 2-3 years ago, and folks that should not have qualified for a mortgage to begin with are homeless and even more credit 'challenged' than they were when they walked into the dealership.

Who's to blame you ask? All the parties, but the appraiser should have been the 'conscience' that put a stop to the deal before it happened. There is a vengful side of me that gets some pleasure out of seeing these 'trouse' lenders take a blood bath. They are the same crooks who charged horrendous 'interest rate buy downs' and increased these already top heavy deals by another 10-12%. They financed in these credit card pay offs, car loans, etc. knowingly, although they will state otherwise. They made huge profits for a number of years off those who rarely understood what was taking place, and could scarcely afford the payments.

The manufactured housing industry in my state is a heavy handed and wealthy lobby, the entire industry operated in the grey area as far as ethics and lawfulness for years. The appraisers may do some jail time-deservedly. Unfortunately the appraiser's equally as guilty compadres at the dealerships and lenders won't see the same grey walled Hilton time. While I'm saddened to see these homeowner's in a worse situation, at least these crooks are taking it in the pocketbook.

There is also another bad facet to this scenario, FNMA has taken back quite a few of these homes from mortgages purchased on the secondary market. The tax payer bail out begins. When I consider this, I can almost understand why they may not place any weight on an appraisal.

 

[Anonymous]

You all have made this a great thread. Let me shed some more light. As far as the quality issues go, there are several levels of modulars as there are stick built.

In NC, there was a law suit a few years back. A broker listed a modular for sale and called it a modular in MLS. This was a very upper end modular in an upper end NH. The home didnt sell. The owner sued. He stated in his suit that the broker had harmed him by saying it was modular, when in fact it was built to the same codes as the home next door. He won. Now, we can rarely find the term "modular" in our MLS systems. The court stated that you could not discriminate between modular and stick built.

So the manufactured home builders got an idea. What if they took a double wide, upped the building process a little and were able to get it inspected as a modular. So now we have frame on modulars. The look like doublewides but are actually built to modular standards.

When these animals first came out. many of use were unsre of how to handle them. Cant discriminate, they are modulars. However, after a few resales, I have found that if it looks like a doublewide, that is how the typical buyer will treat it, regardless of the "sticker".

 

[Jo Ann Meyer Stratton]

In Arizona, we have modulars built to UBC code on steel under carriages towed to the site. They are built in the same plant by a manufacturer of HUD code homes and costs $5,000 to $10,000 more to construct than a HUD code home. But the reason for that product is zoning, some areas of the state prohibit the installation of any "mobile home built to HUD code". So a home built to UBC code that is the same floor plan, materials, design, amenities, appearance, etc as the HUD code home can be installed on one of those sites with that zoning restriction. The two largest counties in the state stopped that prohibition about 6-7 years ago, so now there are only isolated sites with that zoning quirk. And because of the higher costs, few of the UBC on frame homes were constructed. So resales are very limited statewide, but I am sure they are in the same market segment as a manufactured home due to their appearance. Just in the past year, Redman Homes has started construction of their Genesis Homes, which are built off frame on wood floor joists and hauled to the site. They look exactly like all of the million of stucco frame homes built in subdivisions in Arizona over the past 20 years. Will have superior finish, upgrades and amenities in their lower cost models than the lower cost model site built homes. They will only be identifiable by having a crawl space. Site built homes in Arizona are constructed on concrete slabs. Modular homes on crawl spaces that were constructed in Arizona over 20 years ago have always been considered site built homes by the market, assessment offices, building and zoning departments, etc and usually can not be identified as a modular home today because of appearance and lack of documentation.

State and local governments have many different terms for a home constructed in a factory--government terms, as well as colloquially terms get very confusing. The state Department of Manufactured Housing had the title of Department of Mobile Homes until very recent years. They are responsible for inspecting and approving all factory constructed structures in the state. Their term for all homes built to HUD code or UBC code is FBB. Zoning terms in most cities and counties use the term mobile home for all structures constructeed in a factory, even schools and office buildings. Some zoning and building departments still have the word trailer in their requirements--requiring a trailer to be built to HUD code in certain locations.

But when it comes to financing, terms become simplified. For financing, HUD code homes have specific requirements and qualify for specific type loans. The term manufactured home for financing indicates compliance with the HUD code, regardless of the colloquial term for the subject's location. For financing UBC/CABO/BOAC code homes are considered the same as site built homes and are eligible for the same types of loan packages as a home constructed on site. The term modular home indicates compliance with whatever building code is required for that special location's site built homes.

And just like an appraisal for on site built homes, the appraiser has to identify the market for that specific type home. If you have an on site built home constructed of brick, other brick homes would be the first choice of comparables. If you have an off site built home of frame construction, then first choice would be other off site built frame homes, unless in that specific location, the market does not recognize the difference between on site frame homes and off site frame homes. Although some other off site built homes would be required as comparables to indicate the marketability of off site built homes in that specific location.

 

[Tim Hicks (Texas)]

JoAnne, here is the link to the Texas State Licensing Board info on manufaurctured homes- www.talcb.state.tx.us/pdf/assemblage-1201.pdf.