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Appraising Manufactured Housing

By Ric Wilson

Recently the Board received a number of telephone calls from lenders and from appraisers asking about a new Georgia law prohibiting appraisals on manufactured housing. THERE IS NO SUCH LAW!

Apparently someone started the rumor in the wake of disciplinary action that the Board has taken against appraisers who produced appraisals of manufactured housing without following accepted appraisal practices or USPAP.

The Board has received some reports that the mistake made by those appraisers has been made by other appraisers who have attempted to appraise manufactured housing. The mistake was to attempt to perform the sales comparison approach with "manufactured comparables."

Specifically, the appraisers attempted to pass off as comparable sales, dealer-financed purchases of new manufactured homes and lot combinations. There are severe problems with attempting to use these transactions as comparables.

A major problem was that the "comparables" did not constitute open market sales transactions of real estate. Instead of market sales prices, the appraisers used the total of a) the dealer-financed price for a manufactured home based upon plans and specifications, b) the sales tax, and c) an agreed upon price for the lot. The appraisers' sources of information were HUD-1 closing statements of the purchase of the unattached manufactured homes.

An additional problem was that many of the transactions were not actual real estate transactions. Since the dealers sold the land under land contracts, no title to the land passed at the time of the "sale." Moreover, if the dealers also continued to hold title to the manufactured homes, they were titled as personal property. The Georgia Supreme Court has held that the mere placing of a manufactured home on land and hooking it up to utilities does not make the home real estate. It is not the physical attachment of the manufactured home, but the legal attachment that makes it real estate. Therefore, there was no real estate sale to serve as a comparable. In short since true comparables only arise out of open market, arms length sales of real estate, these "manufactured comparables" do not qualify.

Nevertheless, appraisals of manufactured homes can be done and are being done in accord with standard appraisal principles and practices and in compliance with USPAP. If you have an assignment to develop an appraisal of a manufactured home and your client requires you to do the sales comparison analysis, do the work necessary to find real comparables.

Despite some opinions to the contrary they do exist. One of the appraisers facing disciplinary action complained that he could not find real comparables. Yet another appraiser reviewing one of his appraisals found five comparables for the subject property in that appraisal.