Knowing the difference between these types of factory built homes is important because it can affect financing and insurance options; as well as, where your home may be able to be sited. As an example, some counties will allow modular homes but not manufactured homes; some counties will allow manufactured homes but not mobile homes.
There are a number of ways a manufactured home can be valued and the type of value you need to receive is often dependent on why you need a value. Here are a few of the most common:
Financing: A general rule of thumb is that for any purchase of a manufactured home that includes private land, you will need a physical appraisal of some sort. However, if the purchase is for a home only (what is called personal property), there are several ways to go about determining the value for purchase or insurable value. For the purchase of a home, a lender may use the wholesale invoice with a form of mark up to allow for retailer profit, installation, transportation and set up. Other lenders may require what is called a “book value” where the value of the home is determined by using a recognized cost source. It is always good to discuss the valuation process with your lender early in your conversations about the purchase so that you fully understand what methods they use.
Insurance: Each insurance company will have their own standards for underwriting and claims valuation. In many cases, the insurance company will have a trusted source that they refer to at the time they write a policy to ensure they are not over or under insuring the home. Some will require a full inspection, while others may use a trusted cost source (the “book value” mentioned above). When valuing for a claim, similar approaches may be used to determine the cost to repair damage to a home versus declaring the home a total loss. It is important to note that a manufactured home cannot be “reconstructed” to meet the HUD-code. A manufactured home may however, be reconstructed to meet a local code. It would be important to maintain any documentation for future transactions to ensure you have a full paper trail of what has been done to the home.
Assessment: Assessors across the country utilize various methods of valuation for manufactured homes. You will want to consult with your local tax assessment department to determine if a home within their municipal boundaries will pay a property tax assessment.
This will depend on your valuation needs. Your lender or insurance company can advise you on whether or not you will need a physical appraisal where the appraiser comes to the house to do an inspection and write a valuation report. In some cases, a physical appraisal will be required; in other cases, a book value will be just fine.
A book value is a common term for a valuation offered by a company that collects cost and valuation data for things, analyzes the data, and publishes their findings. You’ll find that the way values are determined will differ from company to company so it is important to find the one you are most comfortable with when relying on a book value for a purchase of a manufactured home (or even a car). A common reference for a book value is for the value to be called a “blue book” value. This term is generally accepted to date back to the 15th century by some accounts. A blue book is an almanac of some sort but is often historically attributed to British Parliament where the blue book was used to keep documentation of parliamentary papers. Today, you will find the term used often with a blue book for some sort of value or in the State of Wyoming, the Blue Book refers to the manuals that store the history of the State of Wyoming.
The lender will usually run their own value report. This is done to ensure that valuation is done in accordance to the appropriate guidelines whether they are working within regulatory guidelines or their own underwriting guidelines.
The insurance company will usually run their own value report. This is done to ensure that valuation is done in accordance to the appropriate guidelines whether they are working within regulatory guidelines or their own underwriting guidelines.
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