Reviewing Manufactured On 1004

[Big ole Boy]

Lucky me,

I have two appraisals to review.

Both are located in rural areas and the appraiser who is widely known in the area has selected comparables that are not resales.

All of them are assembled home and land packages. The date of the appraisal is 9/2003 - Is this a violation? to use these type of sales - the whole apprasial hangs on these sales which can not be confirmed through public record.

How should I proceed?

What fee would you charge to review these? :usa:

 

[Mountain Man]

Georgia sent out a letter several years ago saying those are "created sales" and are NOT acceptable. Any appraiser using them as their only support is likely to face disciplinary action. The appraiser must use market sales, that have been exposed to the market. Being listed in MLS, or marketed by the builder, like a spec home is a good test.

In GA, I send a copy to the state.... they would be interested in seeing it.

Oh, BTW... on the fee:

Both are located in rural areas and the appraiser who is widely known in the area has selected comparables that are not resales.

Personally, I'd consider doing a special package price. I know, I wouldn't make much (if any). But I'd have the glowing satisfaction that I finally got me hands on some "Skippy" evidence.

 

[Big ole Boy]

Thanks,

But is this a violation in Florida? What do I site?

Why do I have to be the good samaritan and get paid peanuts to drive 100's of miles to review this? -its hard to make a living and be honest around here - where has my country gone?

Our system makes me sick to my stumach. This guys gets to ride around and be the all of end alls - no checks and balances.

No accountability - these are very rural areas where resales will never support new product - what to do? help - need more reponse. :usa:

 

[Caterina Platt]

Ok, I've not actually pulled the Fannie regs as I'm typing, but I do believe the Fannie Mae guidelines were changed as of Jan 2001 to disallow the use of 'assembledge' comparables in manufactured housing appraisals. I could be wrong on the actual date, but I'd bet a weeks' pay it was loooooooong after 9/2003.

January 2004 I believe is when the 1004-C became mandatory, so that's not applicable in this case.

 

[Carnivore]

David,

This is a USPAP question and it supercedes any state rules. In my state these are not allowable sales. I cant imagine they are allowable in your state either.

Charge what you want, you will be developing your own opinion so go from there.

Congratulations on catching a Skippy!

 

[Tim Hicks (Texas)]

Read this from the Texas Appraiser Licensing and Certification Board:

ASSEMBLAGE
As Applied to Manufactured Housing

In order to arrive at a market value opinion for a property under analysis, sales data used for the analysis
must also meet the definition of market value. This means a sale comparable is a property (a single
property) that has been exposed to competitive and open market conditions requisite to a fair sale:
(1) buyer and seller are typically motivated;
(2) both parties are well informed;
(3) a reasonable time is allowed for exposure in the open market;
(4) payment is in terms of U.S. dollars; and
(5) the price represents the normal consideration for the property sold unaffected by special or
creative financing or sales concessions granted by anyone associated with the sale.
USPAP SR 1-4(e) states: “An appraiser must analyze the effect on value, if any, of the assemblage of the
various estates or component parts of a property and refrain from valuing the whole solely by adding
together the individual values of the various estates of component parts.”
Market Value Definition as applied to comparable sales for the analysis and appraisal of new manufactured
homes:
• If a person were to buy a site, put a new manufactured home on a permanent foundation on the site,
connect all the utilities, provide adequate access (driveway, walks, etc.), expose it to the open market,
and negotiate a sale of the property; this sale could be used as a sales comparable for a new
manufactured home.
• If, however, a site was purchased from one party, and a manufactured home from another, and site
development, permanent foundation, etc. from another, this could not be used. Costs gathered were
from different units of production, and may or may not represent the value of the whole and must not
be used as a comparable sale. This is an example of an assemblage, not the sale of a single property
offered as one unit on the open market.
We found an excellent article on the subject of assemblage written by Jo Ann Meyer Stratton, IFA, SRA.
A portion of the article is reprinted below with permission of the National Association of Independent Fee
Appraisers.
“Typically, arms length transactions of properties exposed to the market of manufactured homes
of similar quality to your subject manufactured home are the most representative of comparables.
Manufactured homes of very good or excellent quality with similar "site built" installation, exterior
and interior amenities might compete equally with a site built home, depending on the neighborhood.
An appraiser would be required to determine from market research for the subject area if
there would be a negative "trailer" reaction to the above average quality and appeal of the
manufactured home. Knowledge of the subject market, availability and appeal of all types of
homes in that market is extremely important.
“When the situation occurs of a buyer purchasing a lot from an individual, purchases a manufactured
or modular home from a dealer, hires contractors to prepare the site, install utilities, and install
the home, that is known as a land/home package. This is the same process as a site built home for
an individual on their lot or a lot they purchase. The total package has not been exposed to the
market as a single entity. Later, an appraisal is ordered for another land/home package and the
appraiser is asked to develop an opinion of market value, with the intended use of the results to
identify collateral risk for a mortgage. The sum total of another land/home package would not be
a market sale that could be used as a comparable for any type of residence, whether it is a site built
home, manufactured home, modular home, panelized home, etc. That land/home package could
be an indication of the cost approach to value but would not be consistent with the market
approach because the costs of the improvements are not based on their actual contribution to the
site.”

Welcome, you have just entered the manufactured home appraisal review domain that is the thorn in Roger Strahan's and my side. These reviews take considerable work proving that the comps are assemblage sales, addressing why you can not consider them acceptable and why you have presented sales that "were exposed to the open market" to support your much lower review value. Remember comment only the appraisal, not the appraiser, stick to the facts and let the cards fall where they should have fallen in the first place. I hope you are getting a good fee. I charge the same as a URAR and it should be more since it is twice the work.

Let me guess, the home is now foreclosed....the value is a minimum $40,000 high...it has re-sold on the foreclosure market at 1/3 the original appraisal value.

I pretty much put that entire quote in every manufactured home field review I perform.

 

[Tim Hicks (Texas)]

Here is a list of USPAP violations from one disciplinary action regarding a manufactured home appraisal with assemblage sales.

4. USPAP, SR1-4(B)(i) & 2-2(B)(ix). There was no support for the concluded land value.
5. USPAP, SR1-4(B)(ii) & 2-2(B)(ix). The estimated cost per square foot of the subject manufactured
house was not consistent with Marshall and Swift indicated values for a similar property.
6. USPAP, SR1-4(a) & 2-2(B)(ix). Two of the comparable sales were assemblage sales. Sale
No. 1 was not appropriately adjusted.
7. USPAP, SR1-1(a) & 1-4(a). Because two of the comparable sales were not true sales, correct
methods and techniques were not used and the report was deemed not credible.
8. USPAP, SR1-1(a). Because assemblage sales were utilized, recognized methods and techniques
were not utilized; the report was deemed not credible.
9. USPAP, SR2-1(a). The report is deemed misleading and unreliable due to the lack of properly
analyzing the sales data.

Hey, this guy had to reports reviewed by the state. One had 9 violations. The other had 12 violations. They hit the appraiser hard with $1,500 fine and a required USPAP class.

 

[Big ole Boy]

Much thanks,

I am still trying to get a reasonable fee.

Obvious to me is the ristance to 'pay' for professional review work

- they just shop it out to lowest common denominator.

Bozo's run these institutions

 

[Ken-NC]

Y'know, you don't have to accept "their" fee! I charge $300 on Field Reviews and I feel more and more like bumping that up another $50 or so!

As to the question of asemblage "sales", these are NOT sales! Rather, land-home packages. This was not offered on the market as a whole, not arms-length, etc.

 

[Jo Ann Meyer Stratton]

USPAP Violations:

Ethics Rule: An appraiser must perform assignments ethically and competently, in accordance with USPAP and any supplemental standards agreed to by the appraiser in accepting the assignment.
An appraiser must not communicate assignment results in a misleading or fraudulent manner. An Appraiser must not use or communicate a misleading or fraudulent report or knowingly permit an employee or other person to communicate a misleading or fraudulent report

Competency Rule: Prior to accepting an assignment or entering into an agreement to perform any assignment, an appraiser must properly identify the problem to be addressed and have the knowledge and experience to complete assignment competently; or----

Standards Rule 1: In developing a real property appraisal, an appraiser must identify the problem to be solved and the scope of work necessary to solve the problem, and correctly complete research and analysis necessary to produce a credible appraisal.
Standards Rule 1-1 In developing a real property appraisal, an appraiser must: (a) BE AWARE OF, UNDERSTAND, AND CORRECTLY EMPLOY THOSE RECOGNIZED METHODS AND TECHNIQUES THAT ARE NECESSARY TO PRODUCE A CREDIBLE APPRAISAL: (B) NOT COMMIT A SUBSTANTIAL ERROR OF OMISSION OR COMMISSION THAT SIGNIFICANTLY AFFECTS AN APPRAISAL:

Standards Rule1-3 When the value opinion to be developed is market value, and given the scope of work identified in accordance with Standards Rule 1-2(f), an appraiser must: (B) develop an opinion of the highest and best use of the real estate. Comment: ---The appraiser must recognize that land is appraised as though vacant and available for development to its highest and best use, and that the APPRAISAL OF IMPROVEMENTS IS BASED ON THEIR ACTUAL CONTRIBUTION TO THE SITE.

Standards Rule 1-4
(a) When a sales comparison approach is applicable, an appraiser must analyze such comparable sales data as are available to indicate a value conclusion.
(e) An appraiser must analyze the effect on value, if any, of the assemblage of the various estates or component parts of a property and REFRAIN from valuing the whole solely by adding together the individual values of the various estates or component parts.
Comment: Although the value of the whole may be equal to the sum of the separate estates or parts, it also may be greater than or less than the sum of such estates or parts. Therefore, the value of the whole must be tested by reference to appropriate data and supported by an appropriate analysis of such data.

Above quotes were based on a letter issued by Jim Park, Director of Research & Technical Issues for the Appraisal Standards Board in January, 2000. His response was based on the entire subject property being real property. The letter was in response to an inquiry by a lender asking whether a summation of land plus improvement's cost can be called a Comparable Sale. His response was on behalf of the Appraisal Standards Board. His response was based on the premise that the purpose of the assignment was to develop an opinion of market value, with the intended use of the assignment results being to identify collateral risk in a loan transaction, and the subject property being a site with site improvements and a manufactured home, as a whole property.

Supplemental Standards: requirements issued by government agencies, GOVERNMENT SPONSORED ENTERPRISES, or other entities that establish public policy which add to the purpose, intent and content of the requirements in USPAP, that have a material effect on the development and reporting of assignment results.

Fannie Mae's Selling Guide issued 04/12/2003; effective 06/30/2003:
Section 102.02--Unacceptable Appraisal Practices
The following are examples of appraisal practices that we consider unacceptable:
Creation of comparable sales by combining vacant land sales with the contract purchase price of a home that has been built or will be built on the land:
Section 304--Factory Built Housing
The appraiser must not "create" comparable sales by combining vacant land sales with the contract purchase price of the home (although he or she may use this type of information as additional supporting documentation). If the appraiser is unable to develop a reliable appraisal based on at least two comparable sales of similar manufactured homes, the mortgage is not eligible for delivery to us.

Fannie Mae's Announcement 03-06 and 03-07 provides additional information regarding factory built homes. Above statements are also repeated in Fannie Mae's Handbook for Appraisers on pages 45-49.

Fannie Mae's Announcement 03-06 was issued June 3, 2003 and effect August 24, 2003.