What do you do if you’re trying to value a manufactured home and there aren’t any comps in the market? I’ve been asked this a few times lately, so I wanted to pitch in some thoughts.
PUZZLE APPROACH: There isn’t one easy way to approach this, so when appraising something challenging I tend to look at a property like a puzzle where my goal is to find clues into value by considering a number of factors.
THINGS TO CONSIDER:
1) Older sales: There might not be any recent sales over the past 3-6 months, but what about older sales? There’s nothing wrong with looking at sales over the past few years and then figuring out how much the market has changed since those properties sold. This is exactly what I did when appraising a manufactured home in Carmichael recently. There were no recent sales and the most relevent one I could find was from 2016. I used that sale and simply adjusted for the market increasing in value over time.
2) Competitive markets: If sales are sparse in the neighborhood or city, why not look to competitive markets? When appraising in Carmichael I looked to Fair Oaks, Orangevale, and Citrus Heights. Of course I didn’t blindly choose sales. No, I had to be thoughtful about comp selection by making sure the other areas really were selling at a similar level. After all, there are portions of the other locations that could easily sell for more or less than portions of Carmichael.
Beyond one mile? Remember, it’s okay to use “comps” outside of a one-mile radius, but it’s suspect to cherry-pick higher sales further away when there are better (and lower) ones nearby. Here’s a good saying. It’s not how far you can go for comps, but where you should go.
3) If it was stick built: In my experience manufactured homes usually sell for less than stick-built homes. Duh, thanks Captain Obvious. But for the sake of being objective I’m leery about saying stuff like, “It’s going to sell for less than a stick-built home every time”. Anyway, my point is I can ask what the subject might sell for if it was a stick-built home in the neighborhood. Then at least I have a figure in mind as to what the highest possible price might be for the subject.
4) Subject sale: Has the subject sold in the past? If it was a reasonable sale at the time, it might give clues into value. What other locations were competitive at the time? Did it seem to sell toward the higher or lower end of the competitive market? Did it sell for more or less than other stick built homes?
5) Manufactured vs stick built: What’s the price difference between manufactured and stick built homes? That’s a good question. It’s not easy to answer if we don’t have sales in the market, so this is where we might look to a nearby market with more manufactured homes (not ones found in mobile home parks). When comparing manufactured vs stick-built homes, what sort of percentage price difference do we see? I’m not saying we should just take a percentage like this and apply it to stick-built “comps” in the subject neighborhood, but there could be some data here we might end up using. Remember, this is a piece of the puzzle or clue into value rather than the entire solution to value.
6) Ask for advice on finding sales in MLS: One of the challenges with manufactured homes is knowing how to find them in MLS. I suggest starting a map search as I show below. You might also do a single family home search and type in “manufactured” in the property description to see if anything comes up. Ultimately it might be worth it to ask a few colleagues how they find stuff in MLS.
7) Bottom & Top: Sometimes when dealing with a challenging property we have to ask ourselves where the top and bottom of the price market is in the neighborhood. At the least this gives us some context for where the value of the subject property might fit. In Carmichael I looked to the market and saw the lowest sales were closer to $300,000 and the highest competitive sales were just above $400,000. I realize this is a huge range, but at the least this gives me something to work with. Also, if my value is coming in below the bottom of a reasonable range, that’s a prod for me to keep digging for better comps and data (unless there’s a reason why the value should be lower).
8) Land value: Let’s not forget about land value. It’s worth asking what the site would sell for if it was vacant. This isn’t the main approach to value, but it’s a piece of the puzzle. The problem is if I’m relying heavily on one manufactured home comp in the market, but land value alone is more than that comp sold for, then maybe that one “comp” sold for too little.
CLOSING THOUGHTS: It really is like a puzzle when valuing something without the benefit of recent similar sales. My advice? Try to piece together many details like the ones above to help collectively paint a picture of value.
I hope that was helpful.
Photo credit: Thank you Realtor Sandy Muzinich for letting me use photos.
NEW VIDEO MARKET UPDATE: A couple of days ago I made a video to talk through the latest stats. It’s 10+ minutes and I talk through prices, inventory and sales volume. Enjoy if you wish.
Questions: What point stands out to you the most? Anything else to add? I’d love to hear your take.
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Great points Ryan! I have used all of the things you mentioned in appraising sales with limited comparable sales. I thought you made a great point about looking at what vacant land sales are selling for. That can be a good gauge for determining some value context and perspective.
Thank you Jamie. I appreciate it.
This is a very helpful post. Great point with #6. In our local MLS, manufactured homes can be listed as “manufactured”, “double-wide” or “single-wide”. We have to make sure that we have all three selected when searching for manufactured homes or we might miss some.
Thanks Shannon. It’s funny because we might have the best ideas in the world about how to go about valuing a property, but if we don’t know little tricks for finding manufactured homes in MLS, we’re still lacking.
It is posts like this that remind me how difficult it can be as an appraiser! Was this particular appraisal done for an active market listing or was it non arms length?
Thanks Barb. Yeah, value is not easy. That’s for sure. This was for an estate for a property that would eventually hit the market. Despite being valued for tax purposes I also helped consult with the owner to give pricing tips and some ideas for repairs needed prior to the property hitting the market. In my mind from a value standpoint it’s often easier when something is on the market already because then at least we have more context. In other words, we know if the market rejected a higher list price or if buyers bid up a price. Sometimes (not always) those can be clues into value. The proof of value is of course still found in the comps instead of the number of offers, but having more data and context is often a plus.
All good points Ryan. This outline could be used to help value any unique property or feature. When other appraisers tell me there are no comparable sales, I am skeptical because I’m guessing they are just not expanding the search. There are almost always comparable sales, just often they are not ideal and to make a convincing argument we might need to use sales or techniques from each of the bullet points you listed, not just one.
Thank you Gary. I think you’re right. There are often comparable sales, but we may need to go back further in time to see them (or use a different way of looking at the comps). I think the knee-jerk reaction is often to simply expand boundaries to find comps, but going further away isn’t always the answer.
Another approach is to run comps for the 2016 manufactured home sale for that time period. Then apply similar rational as in your item #5. This will give you the “neighborhood” reaction and another piece to the puzzle.
Yet another data point is to look at expired or withdrawn listings for Manufactured Homes in the subject’s market area. This may give you a good indicator of what the property is *not* worth, bracketing the upper end of the range.
Excellent Mike. You are so right. It’s like we end up appraising the comps so to speak. How did this one manufactured home fit into the market? Great point on withdrawn listings too. Thank you.
Great post Ryan! I appraise many manufactured homes in my market and while some can be easy many have some of the challenges you mention. These are useful tools for anyone looking to establish value!
Thanks so much Brian. Yes, I bet there are MANY in Nevada County. I appreciate your kind words. In a market like Carmichael there are very few manufactured homes. I was actually surprised when the owner reached out and hired me. What? There’s a manufactured home on that site?
Good comments. Another piece of the puzzle is to find out what it cost to make a similar or if possible exact model manufactured home a modular home. I have found difference to be between 21% and 30% in past analyses I have done. This can add to the other limited data to point to an adjustment if you use stick built homes in the analysis. of course going back in time a few years can be quite useful also.
Thanks Bryan. So have you found the difference in the market is often between 20-30% then too? Just curious.
Yes. I have found It is within the range and closer to 30% when comparing new construction MH to new construction site built with similar quality upgrades and the primary difference is built on a frame vs built on a foundation.
Thanks Bryan. I appreciate it.
All great points and great reminders. One piece of advice you mentioned I think is so vital to our job it’s worth highlighting again – learning how to find the appropriate comps using the MLS. Remember, the Board is not entering each listing itself; instead you’ve got thousands upon thousands of individuals (Realtors) that are hand-typing these listings into the MLS system. And when you get that many individuals they are bound to do things differently. Yes, the MLS assists by providing check boxes, but it’s not always that simple. In my location the MLS has options of Manufactured, Modular, or Mobile homes. (wouldn’t it be nice if all Realtors knew the difference between these?) It also has the option of Rambler and many Realtors consider a manufactured home a “Rambler” design because of its long, single story design. At the end of the day appraisers are the valuation experts and as such we must also become experts at research and discovery. I do consider myself an expert at value. But I also pride myself as an expert researcher. Any appraiser that believes they’re going to use a single search to comp their subject property every time has failed. Some assignments may require 2, 3, 4, 5… searches in order to find the ‘right’ comps.
So good Jacob. Thank you very much. You are spot on. I concur about MLS thoughts. I often see the wrong details unfortunately. At times in a more rural area it’s a matter of looking at photos to identify a manufactured home. If the wrong box is checked in MLS, that sale simply won’t come up. That’s the truth.
I appraised something interesting recently (that I may blog about at some point) and just like you said I had to do multiple layers of searching for comps.