Reviewing Manufactured On 1004

[Mark Koelsch]

My "two cents":

Jeez, seems obvious! Basic appraisal principal - cost does not equal value. Think of a stick built homes. Just because it cost X to build does NOT mean it's worth X. I've seen custom homes where you have hard costs of $650,000 but you couldn't get more than $400,000 on the open market.
Can't say I've never considered "assembled" sales data. But I've only used it as additional info AFTER I've already cited at least three market sales and only to show a "top end" to the value range.
As far as fees go - I no longer quote a fee for a Field Review until after I've had a chance to look over the report to be reviewed. A quick scan will tell me if the report seems reasonable or if it's worthless. About a third of the time the client will say they can't operate that way and want a quote up front or they won't order the review. Fine by me! I don't want to get burned by basically redoing the entire report AND commenting on all the errors for a minimal fee. And most of my clients understand and will allow me to quote a fee AFTER i've looked through the report to be reviewed.
Sure glad it's a friday!

Marko

 

[Big ole Boy]

:usa: Thanks Jo Ann and all,

Very helpful. I did not get a great fee, but have decided to do it anyways. After this, I am going to spend some more time marketing myself and get away from these cheap AMC's.

Perhaps the forum can teach me some things about marketing. I have a tendency to not reach out, but take what comes along.

This review is a text book example of a rural county where resales just don't support new product price new.

I will site the examples offerred here in the review in fullest detail. This is the kind of appraisal work that is the 'norm' for this industry and it continually feeds on itself.

Thats how these markets get upside down and build in thier own obsolesence based on this kind of practice.

The fact that this garbage exists just makes me so angry with the Institute - this guy is an SRA.
:usa:

 

[Tim Hicks (Texas)]

Originally posted by David R. Stevenson@ SRA,Mar 27 2004, 12:05 AM
This review is a text book example of a rural county where resales just don't support new product price new.



The fact that this garbage exists just makes me so angry with the Institute - this guy is an SRA.
:usa:

It is possible that the actual cost (not the reported) do not support the cost new either. Around here, there is so much funny money built into every phase of the land home package, it is ridiculous. My favorite is the lot cost which is always about double what you can by any manufactured home lot on the open market.



Lets not blame this on AI. Our profession has many organizations and they are made up of a cross section of the American population. Just like any other job, there are good cops and bad cops, good doctors and bad doctors and good appraisers and bad appraisers. It does not matter what organization they are members. One of our biggest offenders here was a chapter president at the time for pete's sake. I don't blame AI, I blame the entire profession for not policing ourselves.

We actually had appraisers giving seminars for lenders from 1999-2001 explaining how they use these comps by knocking on doors, getting information from lenders, etc. They were convinced there was nothing wrong with assemblage sales and were educating lenders and other appraisers on how to use them.

 

[Big ole Boy]

Tim,

I appreciate that perspective.

I will not be too hard on the appraiser - but, offer an alternative point of view. :usa:

 

[Michael Schendel]

I was not aware of the Land/Home package snafu that had obviously come up here before. I want to thank everyone for posting their findings in this forum on this subject, I know I learned quite a bit as I ma sure many other have along the way.

I do have one question though. Going along with this quote,

"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."

So you can not use any land/home package deal that has closed as a comparable sale on any type of property no matter if it is site built, manufactured or other wise?

If that is so, there are many Acre lot subdivisions in and around the Phoenix area that you buy the land and built your own home. These subdivisions are gated and exclusive. With these subdivisions relatively far apart, say at least 5 miles, I can only use resales from at least 5 miles away and no other sales in the subdivision until they resale?

 

[Jo Ann Meyer Stratton]

If a buyer buys a lot, hires a contractor to prepare a lot for construction, install utilities, etc, hires another contractor to build the home (or buy a factory built home and have it installed), an appraiser cannot add all those costs together and report that as a sale and a sale price. That package has not been exposed to the open market as a total package and is not a comparable sale. See the definition of market value that is at the top of Page 1 of 2 of the Statement of Limiting Conditions. (3) a reasonable time is allowed for exposure in the open market;

A builder develops a fifty acre subdivision and the only homes that can be constructed in that subdivision have to be built by the builder and can only be one of the five models offered by that builder with buyers choosing the paint, flooring, etc. The builder advertises his subdivision, has a sales office where potential buyers can view the five models, look at the paint, flooring, finishes that are offered for those five models. Then the buyer makes a choice of model and finish. That situation is exposed to the open market and could be used as a comparable sale. The restriction in that situation would be possibly only one home from that builder. Resales by subject builder or new construction by competing builders in a competing subdivision with a similar setup would be used as other comparables.

If a builder buys a lot, prepares the site and builds a "spec" home on that lot and advertises the total package on the open market with the buyer only have a choice of paint color and flooring, that could be used as a comparable sale because of the open market exposure.

And yes. if the only thing available near the subject are land/home packages (Fannie Mae calls them created sales), then true comparables (either new construction or resales) that have been exposed to the open market from competing areas would have to be used. A created sale could be used as #4 or higher comparable with lots of explanation about its "creation" process. That created sale indicates the cost approach and not the market approach to value. Most weight would be placed on the comparables exposed to the open market because the client is requesting an opinion of value based on the market. A lender needs to know before they lend money that they can get it back either by the borrower making all payments or selling the property for at least the amount of money they loaned. Credit report on the borrower helps the lender make a decision about the borrowers financial capability and the appraisal indicates to the lender the amount of collateral they have if they misjudged the creditability or a calamity happened with the borrower.

 

[Michael Schendel]

Thanks Jo Ann for the response. I am going to have to kick my mentor in the buttocks for this. Again I apprecaite everyones responses.

 

[Big ole Boy]

I found three comps within a mile or two of the subject. Selling for $70,000 to $85,000.

All the rest were recording in the tax roll from $5,000 to $40,000. So I got three resales and 30 other sales which indicate extreme duress. Lil, cashin out by tricksters.

The appraiser I am reviewing thought it would be wiser to go out about 10 t o 20 miles or so and look for comps an then mistate thier superiority.

That was his one resale and the rest were assemblage, two of which were phantoms.

THis appraised value is about 20% above market value on a perfect day which is less than 10% of the time and about 60% time his value is about 250% above liquidation value. But sometimes instead 250% above it can be approaching an infinite number.

Some stuff is selling in the $4000 to $15000 range. Thats 25 times lower than this guys estimated market value.

And nobody seems to care - this is beyond repair.

Somebody give me hope - I need to believe that what we appraisers do - matters.

What am I missing?

 

[Tim Hicks (Texas)]

Some appraisers would sell their soul for a $1.00. Help them get to where they belong! :twisted:

 

[Caterina Platt]

David,

Tim and I have been seeing this scenario a great deal over the past several years.

Nail him/her! Please!