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Using Cost Info From Dealer For Cost Approach?

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Joshua Fookes

Junior Member
Joined
Jan 15, 2003
Professional Status
Certified General Appraiser
State
California
Hi all,

I was hoping you could shed some light on this. I have been looking at the different manufactured home dealer's lots in the area to get an idea of costs and design and yada, yada. Just out info hunting. My question is this...

I just inspected a home that came from one of the local dealer's lots. I have the catalog on it, and the cost info from the dealer. It seems that this information would be the most representative of the local cost to put in a new manufactured home. It figures the cost of the snow load, the insulation, the built-ins, I even got a quote on the style of foundation, plus delivery and set-up. I know what it would cost to replace that home. Should I use that for the cost approach?

It has to me more acurate than M&S. Right? Then why do I get this paranoid feeling about not using M&S for the cost of the home (I am using it for the cost of the other outbuildings, decks, etc. because they did not come from the manufacturer)?

Thanks for any info.

PS this thing is out in the sticks, private well, septic, solar&generator setup, not on the power grid, but remarkably this thing is pretty nice. All of that will be noted but if you can think of major things I need to comment on, I'd love to hear it.

Thanks again

Josh
 

Rich Heyn

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Michigan
Josh,

I'd be leery of cost information from a dealer, especially if it's specific to the subject deal.

If the information is deal specific, you don't know how much is packed into the sale price in the way of credit card payoffs, negative equity on the trade-in, etc.

If the information is general in nature, you may still have a hard time determining the "street price" of the home. That is, catalog price, sticker price, invoice price, etc. are all non or pre-negotiated prices. What you want to know is the price at which it REALLY sells. If you can get that price, you're in business.

BTW, FannieMae will soon be requiring a replicable cost approach (and a bunch of other stuff) on all loans secured by manufactured housing. This means Marshall and Swift, NADA or another published cost service. I'm operating under the assumption that Freddie will soon follow.

Don't get me wrong. What you're doing (gathering more information) is good, it's just that you have to consider the source.

Rich Heyn
 

Joshua Fookes

Junior Member
Joined
Jan 15, 2003
Professional Status
Certified General Appraiser
State
California
Rich,

Thanks for the reply, I understand the concern about the source becaue of those other fees, but, would those other fees be considered costs if you were going to truely try to replace the home?

Or is the issue, those fees are paid when you buy a home from the dealer off the lot, but are not paid when the home is sold on the open market after the fact. I have heard that the MfdHm's "depreciate" when they roll off the lot, is it becaue of these fees not being passed on (so to speak) when the person sells their home?

The info I got was not associated with the subject at all only that I was asking the price of the subject's model. What I did was called the dealer and said, what does it cost for this model +/- these options. That is the price I got. If we're talking cost approach, that is what the house would cost right. They quote me $XX,zzz for the house, $Y,YYY for the foundation, and $Z,ZZZ for the install and other misc. items. If I use the $XX,zzz for the house price, is that not what the house costs? I'm confused. How could M&S know better than the dealer who deals specifically with that house.

If the information is general in nature, you may still have a hard time determining the "street price" of the home. That is, catalog price, sticker price, invoice price, etc. are all non or pre-negotiated prices. What you want to know is the price at which it REALLY sells. If you can get that price, you're in business.

Wouldn't that be the price I am getting from the sales comparison method? And are you saying that M&S are using sales prices to get the prices they use in there guides. I thought they would use actual costs involved in the construction of the homes.

When dealing with site built homes and the cost approach, we use things like regional mulitplyers, and local multiplyers because in certain areas, the contractors cost more than in other areas, or the materials cost more.

When I'm doing the cost approach for the site built or the manufactured home I am trying to answer, "what would it cost to replace this structure?". If there are comissions or profits or whatever figured in, that is still the cost right? I mean, stick building contractors have their own fees included into the work they do to right?

Oooooorrrrrr, are we talking house selling costs (the dealer's) vs. house building costs (the manufacturer's)? If that's the case, if I got a cost quote from the manufacturer (which might be impossible) would that be acceptable? I know that when the new forms are required that the answer is probably no, but what about it, would that be accruate?

Tell what I'm missing?

Josh :mrgreen:
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
Joshua,

If you want to send me the info on the subject, I'll work up the NADA cost for you and fax or email it to you so you can include it in your appraisal.

I'll email or PM you my phone # & fax #.
 

Wally Jones

Senior Member
Joined
Jan 23, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Joshua,

If you could get a "real" cost to manufacture a specific model from the maker, it might be relevant. You would at least have a "baseline" from which you could then add on options as needed for a particular subject property. Of course, you'd have to develop this for all the various models and for all the different manufacturers........... I think we're beginning to see why M & S are in business! Anytime you get "cost" figures, file them and continuously compare them to figures you get from other sources (NADA, M & S, other appraisers, dealers, factory reps, internet, etc.). At some point, you may be able to correlate all that data and develop multipliers for your specific market. Once again, most of us are too lazy to dedicate that much time and effort and instead reach for a nationally recognized source. M & S may not be completely accurate for all applications, but at least it's a source recognized in the industry and gives many of us a "warm fuzzy" that we're performing a cost approach.

Try thinking of a new manufactured home like a new car. Most folks look at the window sticker on a car at the dealership, but wouldn't pay that price. Why? Because they know it sure didn't "cost" the manufacturer that much to make the thing. So they negotiate. But try finding out how much it actually costs to build that car. Pure cost is not that easy to find. So when researching for car "costs", many turn to the NADA guide to try and figure out what they ought to be paying for their new wheels. Of course, whatever they end up paying, it's way over the "cost" to build it. Ahhh, but now comes the best part. They sign for the new buggy and drive it home. In six months, they realize they hate it or it smells bad or it's no longer cool or reality sets in and that $500 monthly payment won't let them eat out more than four times a week. How much can they sell it for? It's only six months old and in perfect condition. Wanta bet they can't get anywhere near what they paid for it? Depreciation. But it's new! Not anymore. (Sound like any manufactured homeowners you've met?)

As Rich pointed out, be careful with any figures from the dealer. That new car (as well as man. home) has a bunch of hidden "costs" that are mighty hard to pin down and account for.

You might stick with M & S for developing your cost approach for awhile and compare your results with what you find during your research. Perhaps you'll be surprised and the bottom lines won't be that far apart.
 

Joshua Fookes

Junior Member
Joined
Jan 15, 2003
Professional Status
Certified General Appraiser
State
California
Ahhhh, I'm beginging to see the light :idea:

Thank you sensay, little grasshoppa no use deal'r cost. (he says in a white dude's version of an asian accent) :)

Well besides, after a little talk with Pamela, NADA just might be the way to go ;)

Boy I'm glad we have this forum!
 
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