Diversify Your Business: Demystifying Manufactured Home Appraisals

By Sherrie Weller

 

Many appraisers choose not to appraise manufactured homes. This may be for myriad reasons such as the perception that manufactured homes are too hard to appraise or that certain appraisers just aren’t familiar with the process. In reality, manufactured homes aren’t a whole lot different than site-built homes. In a changing real estate market, appraisers can add manufactured home valuations to diversify and expand their businesses.

 

Manufactured, mobile, and modular homes can be very similar in appearance. Although many people use the terms interchangeably, manufactured, mobile and modular homes may have different building codes. The code the home is built to can have an effect on placement location, finance options, tax implications, and more.

 

What is a manufactured home?

A manufactured home is any factory-built home in the United States and must comply with  HUD Title 6 construction standards (commonly known as ‘the HUD-code’). The HUD-code took effect June 15, 1976. A manufactured home is built on a permanent chassis to ensure transportability. However, a manufactured home is not typically moved from its initial installed site.

 

What is a modular home?

A modular home is any home factory-built to a local state code. In some cases, a state may have adopted one of the uniform construction codes (i.e. UBC, IRC, etc.). A modular home can be built as an “on-frame” or “off-frame” modular. On-frame modular homes are built on a permanent chassis, whereas the off-frame modular will be built with removal of the chassis frame in mind. An off-frame modular will usually require additional cranes to assist with home placement. Modular homes are, more often than not, attached to private land.

 

What is a mobile home?

A mobile home is a factory-built home that was built before June 15, 1976, and not built to a uniform construction code.

 

Certification Labels

A HUD-coded home will display documentation in the form of a certification label and a data plate. The red certification label, sometimes called the HUD label, will be located on the tail end of each transportable section of the home. The data plate will be located inside the home. Regulations state that the data plate will be affixed inside the home on or near the main electrical breaker box or other readily visible/accessible location. These documents are extremely important and, as per the HUD Title 6 regulation, removal is illegal. Removal of these labels/documents could hinder the buying, selling, financing, or insuring of a manufactured home; they are not replaceable.

 

Modular homes will not have the red certification label but will have a label attached to the home indicating the code it was built to. The appropriate state modular code agency will be able to assist appraisers when trying to locate the modular label.

 

Removing the Guesswork.

Now that we’ve differentiated the difference in the three types of homes, let’s take the guesswork out of the cost approach. Most appraisers first encounter the cost approach for manufactured homes on the 1004C form. Using this form you have several options of published cost approaches to use. You should use one of them, not a combination of them. “If the lender requests more than one cost approach, these should be completed on separate forms or as an addendum,” advises Vince Pulsipher, Consultant and MHV.

 

The N.A.D.A. Manufactured Housing Appraisal Guide or CD-ROM, or another published cost guide, will allow you to give an objective value of the subject home based on the specific manufacturer and model, the length and width, and the date of manufacture. Typically, you will find the label numbers, serial numbers, size, date of manufacture, and zone information on the certification label found inside the home. Because all of this information is important, taking a clear photo of the information will come is a good idea.

 

On occasion, no matter how thorough your investigation of the home, you may not be able to find all of the information about the manufacturer or model. In the event that you are unable to locate the manufacturer or model (or another piece of information), you’ll be able to find a value based on one of four building categories located in the N.A.D.A. Appraisal Guide or CD-ROM. This method is slightly more subjective. However, by matching what you’ve seen of the subject to the building category that best matches its construction, you will have an excellent estimate of value.

 

At this point, you will have determined a base structure value. You should then add additional features that you’ve found. These features may include vinyl siding, shingled roofing, air conditioning, or tape and textured walls. In Florida, homes newer than 1994 may meet Wind Zone 2 or 3 standards. It is interesting to note that Zone 3 homes will resist winds in excess of 101-110 mph.

 

Your 1004C form will ask for many different multipliers. When using the N.A.D.A. products you will only focus on the Condition Modifier and the State Location Modifier. The other modifiers listed on the form pertain to other published cost guides. Keep in mind that you will use only the modifiers for the published cost guide used. Finally, you will add your Market Value of Subject Site to arrive at the Indicated Value by Cost Approach.

 

A Brief Note about Foundation Systems

A requirement for many types of loans is that the home be permanently attached to the foundation. The approved foundation types can be found in the HUD Handbook 4930.0, also known as the “Green Book.” These types of foundation systems should leave a paper trail for the appraiser to be able to ascertain that the subject property’s foundation meets the necessary HUD criteria. Be sure you note all observations of the foundation on your appraisal report.

 

In addition, Mr. Charles Bramlett of the Bramlett School of Real Estate in Monticello, Georgia, cautions, “In every state the appraiser, if appraising the home as real property, must verify that the home is real property” and the title has been surrendered. The terminology and/or procedure may differ from state to state for transition from personal property to real property. Bramlett also suggests, that if the status of “real property” cannot be determined, the appraiser should make note that the appraisal is pending verification of property status.

 

The manufactured home cost approach is not just a “book value” but asks the appraiser to use a reliable cost data and their intuitive knowledge about the market to report the most accurate estimated opinion of value to their client. Darrell K. Hignite of Hignite Training Service in Greenville, North Carolina, reminds appraisers, “In a time when most lenders are dismissing the cost approach including Fannie Mae and VA, it is important to realize that the cost approach is needed for many reasons when a manufactured home is appraised. The cost approach is not only used by appraisers, but insurance agents realize the importance too.”

 

Manufactured homes are an excellent route to new business, and they will keep your skills sharp and help you investigate new avenues.

 

Sherrie Weller is the Editor of the N.A.D.A. Manufactured Housing Appraisal Guide and CD-ROM, as well as the National Appraisal System (NAS). The N.A.D.A. Manufactured Housing Appraisal Guide and CD-ROM are Fannie Mae, Freddie Mac, and HUD Title 1 approved and VA recognized. Ms. Weller can be contacted at (800) 966-6232, ext. 237 or sweller@nadaguides.com.