B4-1.4-01, Factory-Built Housing: Manufactured Housing (10/04/2023)

Fannie Mae requires market-based property valuations for manufactured homes demonstrated by a well-developed sales comparison approach to value that is further supported by the cost approach to value.

For manufactured housing property eligibility requirements, including special appraisal requirements for MH Advantage properties, see B2-3-02, Special Property Eligibility and Underwriting Considerations: Factory-Built HousingB2-3-02, Special Property Eligibility and Underwriting Considerations: Factory-Built Housing. For manufactured housing mortgage eligibility and underwriting requirements, see B5-2, Manufactured Housing.

The valuation principles for appraising manufactured homes are essentially the same as for other types of residential property. However, not all appraisers are knowledgeable and experienced about the unique construction process, as well as the manufacturers’ and federal, state, and local requirements for both construction and installation.

The lender must ensure that the appraiser is knowledgeable about the local manufactured home market and the unique construction process for manufactured homes, and has access to appropriate data sources in order to render an opinion of value for the manufactured home. Lenders must establish policies and procedures to ensure that qualified individuals are being selected in accordance with Fannie Mae requirements as well as the Appraiser Independence Requirements.

The list below provides requirements and standards for manufactured housing appraisals.

• For purchase money mortgages, the lender must provide the appraiser with

  • a complete copy of the executed contract for sale of the manufactured home and land; or

  • a complete copy of the executed contract for both, if the manufactured home and land are purchased separately; and

  • a copy of the manufacturer’s invoice if the manufactured home is new.

  The appraiser must analyze the contract(s) and the manufacturer’s invoice for new manufactured homes, and provide a summary in the appraisal report.

• The appraiser must report the results of a manufactured home appraisal on the Manufactured Home Appraisal Report (Form 1004C). The use of Form 1004C will help to ensure that the appraiser inspected, considered, and reported the appropriate information including, but not limited to, the:

  • manufacturer’s name,

  • trade or model number,

  • year of manufacture,

  • serial number,

  • Certification number(s) from the HUD Data Plate or HUD Certification Label(s),

  • type of foundation and utility connections,

  • detailed and supported cost approach,

  • opinion of the market value of the site, and

  • property’s conformity to the neighborhood.

Note: For existing construction, the appraiser must also provide a photo(s) of the HUD Data Plate or the HUD Certification Label(s) for each section of the home. (Both are required for new construction.)

• The appraiser must indicate a value conclusion based solely on the real property as completed consisting of the

  • manufactured home,

  • site improvements, and

  • land on which the home is situated.

The value conclusion cannot include any non-realty items including, but not limited to, insurance, warranties, and furniture.

For new manufactured homes not yet attached to the land or not yet constructed, the appraisal may be based on either plans and specifications or an existing model home. If required information is not available at the time the appraiser is completing the appraisal forms, the appraiser must appraise the property subject to the receipt and review of the items and completion of the improvements as a condition of the appraisal. Information that may not be available can include, but is not limited to, the dealer invoice, the HUD Data Plate, and the Certification Label numbers.

A certification of completion must be obtained before the mortgage is sold to Fannie Mae. The certification must

• be completed by the original appraiser if possible, or if not possible, by a substitute appraiser as provided for in B4-1.2-04, Appraisal Age and Use RequirementsB4-1.2-04, Appraisal Age and Use Requirements;

• verify and state that the improvements were completed and all other requirements and conditions of the appraisal have been satisfied;

• include previously unavailable information, and a summary of the appraiser’s analysis of any previously unavailable dealer invoice; and

• include photos of the completed improvements attached to the permanent foundation, and of the HUD Data Plate and HUD Certification Label(s), or acceptable alternatives.

The appraisal site requirements for manufactured housing are as follows:

• The appraiser must base their opinion of value on the characteristics of the subject property, including the site area. The appraisal report must indicate whether or not the site is compatible with the neighborhood, and must comment on the conformity of the manufactured home to other manufactured homes in the neighborhood.

• The property site must be of a size, shape, and topography that is conforming and acceptable in the neighborhood. It must also have competitive utilities, street improvements, adequate vehicular access, and other amenities. Because amenities, easements, and encroachments may either detract from or enhance the marketability of a site, the appraiser must reflect them in their analysis and valuation. The appraiser must comment if the site has adverse conditions or is not typical for the neighborhood.

The comparable selection requirements for manufactured housing appraisals, excluding MH Advantage are as follows:

• The appraiser must use a minimum of two comparable sales that are manufactured homes. If the subject property is a single-width manufactured home, one comparable must be a closed sale of the same single-width configuration, when available. If the appraiser is unable to find a single-width comparable sale, an active listing or “under contract” sale will qualify as a supplemental exhibit to show marketability. The appraiser may use either site-built housing or a different type of factory-built housing as the third comparable sale. The appraiser must explain why site-built housing or a different type of factory-built housing is being used for the third comparable sale, and make and support appropriate adjustments in the appraisal report.

• In markets where condo projects with manufactured homes are more common, at least two comparables should be manufactured homes located in a condominium project. In markets where condo projects with manufactured homes are atypical, the appraiser may select comparables from a mixture of manufactured homes and manufactured home condos provided the appraiser is able to provide adequate written explanation and make appropriate adjustments.

• An appraiser that is unable to locate sales of manufactured homes that are truly comparable to the subject property may decide it is appropriate to use either older sales of similar manufactured homes or sales of similar manufactured homes that are located in a competing neighborhood to establish a baseline for the “sales comparison analysis” and determine sound adjustments to reflect the differences between comparable sales that are available and the subject property.

• The appraiser must not create comparable sales by combining vacant land sales with the contract purchase price of the home. This type of information may be used as additional supporting documentation.

MH Advantage properties are built to meet construction, architectural design, and energy efficiency standards that are more consistent with site-built homes.  Accordingly, for MH Advantage properties, appraisers must use other MH Advantage properties (homes that have an MH Advantage sticker) for the comparable sales. However, if fewer than three MH Advantage sales are available, then the appraiser must supplement those comparable sales with the best and most appropriate sales available. Such sales must include a minimum of two site-built homes in recognition of the design standards for MH Advantage. There is no requirement to include factory-built home sales that are not MH Advantage, but if used, the appraiser must note why it was selected as a comparable sale, based on an assessment of the physical features of the subject property.

Fannie Mae requires a detailed and supported cost approach to value for all manufactured homes which must, at a minimum, contain the information indicated on the Form 1004C. The appraiser may choose to report the results of the cost approach on Form 1004C or by using a report form from a published cost service as an addendum to the appraisal report form. Whatever format the appraiser chooses to report the cost approach, the information must be sufficient to allow the lender to replicate the cost figures and calculations. The sales comparison and cost approach to value are complementary for the valuation of manufactured housing and must support the final value conclusion. A properly developed and detailed cost approach will provide the information necessary for an appraiser to

• recognize differences in manufactured home construction quality,

• understand the difference between the comparable sales and the subject property,

• extract from the market appropriate adjustments for the sales comparison analysis, and

• identify sales of manufactured homes that are similar enough to the subject property to use as comparable sales.

Traditional appraisal data sources do not provide enough quality manufactured home data for the appraiser to develop a supportable and well-documented manufactured home appraisal. While sources such as MLS and public records are important and may contain some data, appraisers must utilize other data sources, such as manufactured home dealers and construction companies/builders experienced in the installation of manufactured homes.

One important source of manufactured housing information is the NADA Manufactured Housing Appraisal Guide. That publication

• lists general manufactured home depreciated replacement values based on original factory construction categories, and

• offers a step-by-step process for arriving at the average retail book value for a manufactured home and can be used to develop a cost approach.

Note: NADA chart values assume the home is in average condition. The publication provides definitions for “excellent,” “good,” “average,” “fair,” and “poor” to appropriately identify the condition of the manufactured home.

Another source of information is Marshall & Swift’s Residential Cost Handbook. Marshall & Swift provides

• information that enables the user to arrive at an estimate of the cost of the manufactured home when new and the replacement cost based on, among other things, the construction quality; as well as

• an explanation of the items that enables the appraiser to support their conclusion of the overall construction quality of the manufactured home.

The appraiser must support their opinion about both the quality and the condition of the manufactured home because they play a very important role in the value and marketability of manufactured homes. The NADA guide or the Marshall & Swift handbook may be used as additional sources to provide support for the appraiser’s conclusions about the quality and value of a manufactured home.