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.
Questions: What point stands out to you the most? Anything else to add? I’d love to hear your take.