Quality adjustments on manufactured homes

[Mr Rex]

Doug, the way they are doing it, it's simply putting the GLA, quality etc into a one line adjustment. If doing it that way, I would scan the stacking form into my report, to avoid the cal backs. As I said, I tried it here, and the market data didn't bear out their methodology.

I really wonder about the size of their samples of re-sales (since they say its based on real sales). How do they get the data etc?

 

[Vegan702]

It makes sense to use the book values for a quality adjustment if you cant acutally extract a difference from the market in my opinion. .

So you are saying that even if you don't find a difference in the market still make the adjustment?

 

[Doug Wegener]

No, Im saying the NADA book comes from the market, at least they say so.

Very hard to fine tune adjustments like that with limited data. How you going to do with sales if there is limited data in your area? How would you adjust for quality with a fleetwood waverlycrest vs. a redmond if there are no sales of either in your market area?

Isnt NADA better than ignoring quality issues altogether which is what most appraisers seem to do.

 

[CANative]

You can't use the NADA book to make market derived quality adjustments (or any other types of adjustments.) Same with M&S or any other cost service. It's cost data not market data. NADA is an amalgam of numerous data sources. It's based on MSRP, sales to dealers, retailer sales statistics, sales from rental parks, consignment sales, insurance companies, market data research, etc., etc., etc. It's a system developed over many years for valuing not just manufactured hosues, but vehicles, RV's, commercial buildings, boats, motorcycles, buses, etc., etc.

But obviously the market will react to quality. They will pay more for high quality and less for low quality. High quality costs more and low quality costs less.

The difficulty, IMO, is that there are always far fewer sales of MH's than of site built homes and other value influencing characteristics usually eclipse the the single factor of quality. General market noise is usually enough to erase a really supportable adjustment for quality differences. The general ignorance and laziness of listing agents is another big factor because they seldom include enough information in their listings.

But if your market has enough regular sales of manufactured homes and you regularly appraise manufactured housing over a long period of time, have made it a priority and commitment to learn all there is to learn about manufacttured housing, and routinely stick to honest, detailed and well documented cost approaches every single time you appraise this property type, you will easily spot trends related to market reaction to quality differences.

You must not pull a number from NADA and stick it into the adjustment line, but you can use the data to help corroborate and support an opinion. Even though I've never been asked to explain an appraisal or an adjustment, most of the time if I need to make an age or quality adjustment and I know or have a good idea of the model or quality (and can find a similar model in NADA) I will run a quickie cost sheet from the CD version of NADA for that comps and stick the printout in my work file.

This is where I'm at now. Maybe as I learn more over the years I'll come up with something different.

 

[Doug Wegener]

Where did you get that?

You can't use the NADA book to make market derived quality adjustments (or any other types of adjustments.) Same with M&S or any other cost service. It's cost data not market data. NADA is an amalgam of numerous data sources. It's based on MSRP, sales to dealers, retailer sales statistics, sales from rental parks, consignment sales, insurance companies, market data research, etc., etc., etc. It's a system developed over many years for valuing not just manufactured hosues, but vehicles, RV's, commercial buildings, boats, motorcycles, buses, etc., etc.

But obviously the market will react to quality. They will pay more for high quality and less for low quality. High quality costs more and low quality costs less.

The difficulty, IMO, is that there are always far fewer sales of MH's than of site built homes and other value influencing characteristics usually eclipse the the single factor of quality. General market noise is usually enough to erase a really supportable adjustment for quality differences. The general ignorance and laziness of listing agents is another big factor because they seldom include enough information in their listings.

But if your market has enough regular sales of manufactured homes and you regularly appraise manufactured housing over a long period of time, have made it a priority and commitment to learn all there is to learn about manufacttured housing, and routinely stick to honest, detailed and well documented cost approaches every single time you appraise this property type, you will easily spot trends related to market reaction to quality differences.

You must not pull a number from NADA and stick it into the adjustment line, but you can use the data to help corroborate and support an opinion. Even though I've never been asked to explain an appraisal or an adjustment, most of the time if I need to make an age or quality adjustment and I know or have a good idea of the model or quality (and can find a similar model in NADA) I will run a quickie cost sheet from the CD version of NADA for that comps and stick the printout in my work file.

This is where I'm at now. Maybe as I learn more over the years I'll come up with something different.

." It's based on MSRP, sales to dealers, retailer sales statistics, sales from rental parks, consignment sales, insurance companies, market data research, etc., etc., etc"

Ok, I confess. I dont know what MSRP is. The NADA guide doesnt say anything about including sales to dealers or sales from rental parks. It says from sales on the open market place.

However, even if it does included sales from homeowners to dealers. If you can see there is a difference in these sales due to quality isnt this confirmation that a quality adjustment is warranted?

If you have limited market data in your area, isnt using NADA as a basis of the quality adjustment better than just ignoring the quality issue, which is what most appraisers do?

 

[CANative]

It says from sales on the open market place.

It goes on to say This data is obtained nationally in each of the 9 NADA regions from a VARIETY of INDICATORS and SOURCES. This and other PROPRIETARY DATA is used in the program that includes traditional assumptions that were DEVELOPED as a result of our continuous RESEARCH OF THE MANUFACTURED HOUSING INDUSTRY since 1973.

But I agree with you. In some cases not making an adjustment for quality would be skippy-like. Use the book as a tool not a source to transfer a adjustment amount to a sales grid.

 

[Vegan702]

Now I am even more confused. It was stated earlier in the thread that after a few years the market doesn't see a difference in quality. So if the people selling and buying don't see a difference in the quality of the homes why would an appraiser make an adjustment for quality if they can't get any meaningful data from the market?

I see these quality adjustments in high end homes also and have rarely ever been able to do see any market differences for say a high cost class vs. very good cost class. It does cost more to construct these houses, but after they are constructed and placed on the market and sold I think that difference is erased as most buyers are ignorant of what it actually costs to build these homes. Take a rock fascia on the front of a home. The price could vary $30sf easily from one type to another, but the typical buyer doesn't know that. The same for granite. Granite can vary from $30sf installed to $100sf installed depending on the type of granite. But once it is installed and the house has sold once or twice that difference is erased as the buyers couldn't tell you the difference in price as all they know it is granite and it costs more then most other counter tops. So for me to come in and put in a value that can't be derived from the market seems wrong even if I know that a particular house cost more to construct then another that I may be using as a comp. Am I wrong in my thinking?

 

[Doug Wegener]

Of Cadillacs and Yugos

Now I am even more confused. It was stated earlier in the thread that after a few years the market doesn't see a difference in quality. So if the people selling and buying don't see a difference in the quality of the homes why would an appraiser make an adjustment for quality if they can't get any meaningful data from the market?

I see these quality adjustments in high end homes also and have rarely ever been able to do see any market differences for say a high cost class vs. very good cost class. It does cost more to construct these houses, but after they are constructed and placed on the market and sold I think that difference is erased as most buyers are ignorant of what it actually costs to build these homes. Take a rock fascia on the front of a home. The price could vary $30sf easily from one type to another, but the typical buyer doesn't know that. The same for granite. Granite can vary from $30sf installed to $100sf installed depending on the type of granite. But once it is installed and the house has sold once or twice that difference is erased as the buyers couldn't tell you the difference in price as all they know it is granite and it costs more then most other counter tops. So for me to come in and put in a value that can't be derived from the market seems wrong even if I know that a particular house cost more to construct then another that I may be using as a comp. Am I wrong in my thinking?

Yes, you are wrong in your thinking.

"It was stated after a few years that the market doesnt see a difference"-
Yes, that was stated but it doesnt necesarily make it true. People can state all kinds of thing.

Im not going to pay the same amount for a low quality Redmond vs. a deluxe quality Fleetwood Waverly crest even if 10 years has passed. Common sense should tell everyone that is true. Buyers arent stupid. They can tell the difference between drywall interior vs. cheap stuff and photo oak (wallpaper plastered on cabinets to make it look like oak) cabinets and real oak cabinets. They know the difference between tile and formica.

Does anyone seriously believe a cheap Redmond home will bring the same amount as a Silvercrest? I would suggest that anyone that does believe that doesnt know manufactured homes very well.

While it may be true that you see very little difference in market reaction to
high cost class vs. very good cost it is not true when you have more signifcant differences. Do you see a market reaction between high cost class and average cost? What if you dont have market evidence in your area due to insufficient sales?

Comparing a deluxe class manufactured home vs economy category is like comparing a Cadillacs to a Yugo.

 

[Doug Wegener]

Of Cadillacs and Yugos

Now I am even more confused. It was stated earlier in the thread that after a few years the market doesn't see a difference in quality. So if the people selling and buying don't see a difference in the quality of the homes why would an appraiser make an adjustment for quality if they can't get any meaningful data from the market?

I see these quality adjustments in high end homes also and have rarely ever been able to do see any market differences for say a high cost class vs. very good cost class. It does cost more to construct these houses, but after they are constructed and placed on the market and sold I think that difference is erased as most buyers are ignorant of what it actually costs to build these homes. Take a rock fascia on the front of a home. The price could vary $30sf easily from one type to another, but the typical buyer doesn't know that. The same for granite. Granite can vary from $30sf installed to $100sf installed depending on the type of granite. But once it is installed and the house has sold once or twice that difference is erased as the buyers couldn't tell you the difference in price as all they know it is granite and it costs more then most other counter tops. So for me to come in and put in a value that can't be derived from the market seems wrong even if I know that a particular house cost more to construct then another that I may be using as a comp. Am I wrong in my thinking?

Yes, you are wrong in your thinking.

"It was stated after a few years that the market doesnt see a difference"-
Yes, that was stated but it doesnt necesarily make it true. People can state all kinds of thing.

Im not going to pay the same amount for a low quality Redmond vs. a deluxe quality Fleetwood Waverly crest even if 10 years has passed. Common sense should tell everyone that is true. Buyers arent stupid. They can tell the difference between drywall interior vs. cheap stuff and photo oak (wallpaper plastered on cabinets to make it look like oak) cabinets and real oak cabinets. They know the difference between tile and formica.

Does anyone seriously believe a cheap Redmond home will bring the same amount as a Silvercrest? I would suggest that anyone that does believe that doesnt know manufactured homes very well.

While it may be true that you see very little difference in market reaction to
high cost class vs. very good cost it is not true when you have more signifcant differences. Do you see a market reaction between high cost class and average cost? What if you dont have market evidence in your area due to insufficient sales?

Comparing a deluxe class manufactured home vs economy category is like comparing a Cadillacs to a Yugo.

 

[Vegan702]

Yes, you are wrong in your thinking.

"It was stated after a few years that the market doesnt see a difference"-
Yes, that was stated but it doesnt necesarily make it true. People can state all kinds of thing.

Im not going to pay the same amount for a low quality Redmond vs. a deluxe quality Fleetwood Waverly crest even if 10 years has passed. Common sense should tell everyone that is true. Buyers arent stupid. They can tell the difference between drywall interior vs. cheap stuff and photo oak (wallpaper plastered on cabinets to make it look like oak) cabinets and real oak cabinets. They know the difference between tile and formica.

Does anyone seriously believe a cheap Redmond home will bring the same amount as a Silvercrest? I would suggest that anyone that does believe that doesnt know manufactured homes very well.

While it may be true that you see very little difference in market reaction to
high cost class vs. very good cost it is not true when you have more signifcant differences. Do you see a market reaction between high cost class and average cost? What if you dont have market evidence in your area due to insufficient sales?

Comparing a deluxe class manufactured home vs economy category is like comparing a Cadillacs to a Yugo.

I can see a difference in high vs. average. I can't see a difference between 2 classes that are very similar, say fair vs. avg., avg. vs. good, etc. Once the classes used for comparsion jump a few classes then you can see a difference if using 1 comp from avg and 1 comp from high.

I was taught the only adjustments that get put into the grid for sales comparison are those coming from the market. If I can't get enough info from the market don't make the adjustment and just talk about it in the addendum.

I don't know manufactured homes very well. However I have moved to an area that has a lot more manufactured homes then where I previosuly was. So I am interested in this discussion as I am sure I will get an order for one soon.