What To Do When There Are No Comps

[Scott R Marshall]

Okay here is the scenario. Subject is located within a rural area. Subject is a new (2010) "L" shaped manufactured home totaling approximately 2650 square feet. I performed on appraisal on this bad boy as proposed construction back in April of this year. At that time it was conventional. At that time I utilized 6 comps, 1 which had sold in February of 2010, located on the same street as the subject, about 500 square feet smaller in GLA but overall a good comp. The next most recent sale sold in February of 2009 in a different area, the next 2 most recent comparable sales sold in 2006, one in the same community and 1 in a differing community. Utilized a pending sale (which never sold and is now active again) and an active listing (which is now expired).

There are a total of 7 sales of manufactured homes of any type within the "market" area within the last 12 months, which includes 3 sales not in the market (at this point I've gone out 20+ miles and am now hitting urban areas). Of the remaining 4 sales the most "comparable" I have is a 2300 square foot 1987 bank owned needing quite a bit of work (looks like it sold for land value only). The next largest one I've got is just a hair under 1500 square feet in a differing community. I've gone as far out as I can go before I'm in differing markets. We're in a non-disclosure state so sales are pretty much limited to MLS. I can attempt to utilize site built homes but at that point I'm comparing apples to hippopatami. I can attempt to go to various local manufacturers and see what they've got but I'm inclined to punt that option back to the client.

Handbook 4150.2 states that comparables more than 1 year old can only be included as comps #4+, so the route I took the first time around seems to be a HUD no-no. I have left a message with my local HOC to see if exceptions can be made for the 1 year issue or if I use older comps it will be rejected.

I know that in theory I could compare Bill Gates' home to my own so long as I applied the correct market derived adjustments, but it is not something I'll do as "comparable" means something different to me. Outside of HUD-1's from the dealers or comparing it to things which are not "comparable", is this thing dead for FHA/HUD purposes due to lack of sales?

 

[Metamorphic]

All you can do is all that you can do.

Give them the most recent - no matter how comparable.
Give them the most similar - no matter how old.
Given them something very recent and very similar, no matter how far.
Give them something new, no matter how old or far or different.
Give them more and less acreage, more and less size, superior and inferior location.

You are correct about the Bill Gate's house comment. But as a practical matter, the only way you can demonstrate that the adjustments are consistent with the market is to show how the adjustments will reasonably explain the difference in observed prices, by reducing the range of adjusted variables either when applied in a upward or downward fashion. That is the essence of bracketing.

 

[CANative]

Just do the best you can and report what there is to report. I understand you're problem and have had to deal with it numerous times.

The main thing is to put the most recent sales in the first three comps slots.

 

[DWiley]

The HUD requirements exist for a reason. Not all homes will qualify for FHA financing.

I had a deal last year - a home in an established inner-city neighborhood burned down. The home was replaced with a manufactured home. Of course, I was asked to appraise that home for an FHA loan. After looking at the home and doing the reserach, I notified the lender that there was not data available that would allow me to appraise the home in compliance with FHA requirements. I sent them a bill. They paid it. End of story.

 

[Don Clark]

Scott,

Do you have any non MH's that would otherwise be comparable? I have very, very few MH's in my market in Virginia. Lot's of them in the market I cover in North Carolina, but not in Virginia. I have used, and would still use a stick built home that is otherwise the best comparable to compare to a MH. I believe that you will find that is acceptable to FHA as well as Fannie Mae if you explain the situation as you have done in your post.

 

[DWiley]

I have used, and would still use a stick built home that is otherwise the best comparable to compare to a MH. I believe that you will find that is acceptable to FHA as well as Fannie Mae if you explain the situation as you have done in your post.

I have done that as well on a few occassions. But the 4150 says that you have to have at least two comps that are manufactured homes, and those must have sold in the past year. Sometimes, the data just isn't there.

 

[Scott R Marshall]

Scott,

Do you have any non MH's that would otherwise be comparable? I have very, very few MH's in my market in Virginia. Lot's of them in the market I cover in North Carolina, but not in Virginia. I have used, and would still use a stick built home that is otherwise the best comparable to compare to a MH. I believe that you will find that is acceptable to FHA as well as Fannie Mae if you explain the situation as you have done in your post.

Don,


One sale total of a site built SFR within the subjects town within the last 12 months and its not comparable. Again, while I understand the theory of being able to equate any type of residence to my subject, I'm a bit reticent to do so in this case due to the unique nature of my subject. I do appreciate the advice and it was something I considered the first time around (April) and I decided against it. Nothing has sold since then that would necessarily make me change my mind.

 

[Jo Ann Meyer Stratton]

Do not use dealer sales! Those are land/home packages AKA as created sales. The total package has not been exposed to the open market. Created sales are indications of the Cost Approach to value and are NOT a Sales Comparison Approach.

Since I have similar situations on a weekly basis, use the most logical open market sales you can find with the most logical adjustments and then explain everything several times in your report. Call your client before finishing the report, explain to them there is limited market data, older sales, long distances, large adjustments will be neccessary, etc and see if they want to continue. If they say go forward, then the previous sentences apply.

Hopefully your order is directly from the lender, not an AMC. The AMC will not read the explanations and demand recent, near, no adjustments comparables which do not exist. But many, many, many explanations any way, some day somebody will read the entire report, then make a lending decision.

 

[CANative]

I have done that as well on a few occassions. But the 4150 says that you have to have at leats two comps that are manufactured homes, and those must have sold in the past year. Sometimes, the data just isn't there.

Are you sure Danny? We know that at least 3 sales must be less than 12 months old. And we know that two of the comparable sales must be MH's. But I don't see in the 4150.2 or Appendix D that links the two requirements together (2 MHs in less than 12 months). Also add in the rural location and HUDs acknowledgment that rural properties need special handling.

I think (and I'm pretty sure) that HUD/FHA wants a well developed appraisal first and comp selection/grid placement second. It's up to the lender and the DEU to decide what should be done.

 

[Scott R Marshall]

Here is my real concern. HUD says one thing which by my best estimation says that only properties which have sold within the last 12 months can be utilized as comps #1 through #3 and then everything else can be comps #4+ (still haven't heard back from the HOC, will probably be trying again soon). If that amount of data doesn't exist I am forced to either A) comply by including properties which are not comparable, potentially putting my license in jeopardy, B) including dated sales as comps #2 and #3, possibly putting my approval with HUD in jeopardy or C) declining the whole thing 1 week into the assignment and possibly lose a client due to what appears to be an unacceptable assignment condition on the part of HUD. At this point option C appears the most reasonable unless I can get confirmation from HUD that older comps will be accepted.

This is not an issue with completing the assignment, as I've already done it 5 months ago. I'm just trying to figure out how to adequately address client concerns and my own, produce a credible report and not get black-listed because of some reporting requirement which cannot be met in this instance.