In 2018, Fannie Mae launched its MH Advantage® program to help ease the nation’s affordable housing shortage by providing financing on modern, high-quality manufactured homes. This loan program combines features, like a low down payment, with the lower price and customizable finishes of modern manufactured homes. For example, a borrower can obtain a MH Advantage loan on a qualifying manufactured home with a down payment as low as 3%.
According to Fannie Mae, in a December 2018 Appraisal Buzz article, “MH Advantage® is an innovative new homeownership option that pairs affordable financing with specially designated manufactured housing designed with characteristics typical of site-built homes, including: distinctive roof treatments, lower profile foundations, garage, carports, porches, or dormers, and upgraded interior/exterior features and materials. The intention is for MH Advantage to have style, design, and appeal similar to site-built housing.”
When it comes to appraising MH Advantage properties, here are some important points to keep in mind.
As an appraiser, you are not required to verify the central features in order to determine if the dwelling is an MH Advantage home. For example, you’re not required to measure the roof pitch or verify that the interior walls are drywall. The presence of the MH Advantage sticker is sufficient.
For MH Advantage appraisals, you are required to provide photos of:
- The data plate
- HUD labels
- MH Advantage sticker
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To be qualified to complete this type of appraisal assignment, you must possess the knowledge and experience to fully understand the unique construction process of manufactured homes, as well as the manufacturer’s and federal, state, and local requirements for both construction and installation.
You also must have access to appropriate data sources to render an opinion of value for the manufactured home. Resources may include manufactured home dealers and construction companies and/or builders experienced in the installation of manufactured homes, as well as MLS, public records, real estate professionals, and book value/cost approach services.
MH Advantage appraisal requirements
The requirements for this type of appraisal are significantly similar to the requirements for a standard manufactured home.
For example, the appraisal must include an interior and exterior inspection of the subject manufactured home (or be based on plans and specifications) and must be reported on the Manufactured Home Appraisal Report form (Form 1004C). The appraisal must include both the sales comparison and cost approaches.
One difference, though, involves the requirements for comparable sale selection.
According to Fannie Mae, “MH Advantage is a hybrid between manufactured and site-built homes, so appraisers will need flexibility with comparable sale selection.”
As such, you are permitted to use site-built homes as comparables, if they are the best available. You are not required to use a minimum number of sales of manufactured homes in an appraisal of an MH Advantage home.
Comparable sale selection
The best comparable sale for an MH Advantage home is (obviously) another MH Advantage home. However, it is unlikely that you will be able to locate a sufficient number of sales of these homes, particularly during the early years of the program.
The Fannie Mae Selling Guide states, “If fewer than three MH Advantage sales are available, then the appraiser must supplement with the best and most appropriate sales available, which may include site-built homes.”
If no MH Advantage sales are available, you may use either site-built sales or traditional manufactured homes as comparables, or a combination of both housing types.
Regardless of the scarcity of comparable sales, appraisers are not permitted to create comparable sales by combining a vacant land sale with the contract purchase price of a home. With manufactured homes, this is particularly tempting because it can be easy to find land sales and obtain the sale price of the home from the buyer or retailer. Nevertheless, Fannie Mae considers this an unacceptable appraisal practice.
The Selling Guide states that these transactions may be included in an appraisal report as additional information and support for an appraised value, but may not be used as a closed comparable sale.
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