I recently was contacted by a real estate appraisal company from Michigan that was in a heated dispute with a property owner regarding their factory-built home. Was it a modular home or a manufactured home? The homeowner claimed is was a modular, while the appraiser disagreed.
This appraisal company had over 30 years experience, yet had never received any training specifically on manufactured housing. Most training courses will include a few slides that basically say that if a home has steel chassis (or frame) attached to the floor joist, it must be a manufactured home. As you know, that is not always the case.
Now, don’t think I am criticizing real estate appraisers. I have seen tax assessors make the same mistake. In fact, not just appraisers and assessors, but code officials, zoning officers, banks and home inspectors as well. This leads me to ask, why are so many housing professionals misinformed regarding manufactured housing?
I visited several web sites to see what they say regarding the differences between manufactured and modular housing, and found most of the information on the web is more focused on marketing as opposed to structural features and building code differences. To make things worse, too many industry professionals do not have a clear understanding of the differences, and play fast and loose with the terms manufactured, mobile, modular, etc., causing further confusion.
Now, to muddy the water even more, we are dealing with “tiny houses” which are a completely different product! Why do they use the word “house”? Calling them “Tiny Campers” would be more accurate. But, as it stands they also add to the confusion.
So, what is so different about a manufactured home compared to other housing? And who should be responsible to assure that manufactured homes are not confused with other housing types? And does it even matter?
Simply put, modular homes are generally built to a state specific building code and are not intended to be moved after the initial installation. They are considered real estate and must be placed on a permanent foundation on privately owned land. And like it or not, some producers design and construct modular homes that leave a chassis in place, even after it is placed upon the foundation. But the intent is that the modular home will never be moved after placement.
As you know, manufactured homes are built to a national building code. However each state has their own set of requirements (or lack of requirements) regarding assesment, classification, zoning, lending, sales, etc. Many states consider manufactured homes to be vehicles, registered or titled through the state Department of Motor Vechicles (DMV). Therefore, like a “vehicle”, manufactured homes are considered “personal property”. Which means instead of a low interest rate mortgage, purchasers must either pay cash or take out a high interest rate “chattel” loan.
So why are manufactured homes considered vehicles? Because by definition, a manufactured home must be permanently transportable. It doesn’t matter if the home is placed on a full basement, masonry crawl space, piers or slabs. A manufactured home must retain the ability to be moved from one location to the next. It may not always be practical, but the on-going ability to lift the home from the foundation, re-attach tires and axles, hitch and lights for transport is required.
For a manufactured home installed in a leased land community (park), a chattel loan makes sense. But today, many manufactured homes are placed on private land with permanent foundations. For these situations, a chattel loan is not the best option. The owner of the manufactured home would have to work with their state DMV to retire the registration or title and establish the home as “real” property, and therefore qualify for a mortgage.
I hope this helps you better understand the mortgage/chattel loan issue. Banks are reluctant to lend money to a structure that could potentially be towed from the building site.
So, can you blame an appraiser who looks in the crawl space and sees a steel chassis and assumes it is a manufactured home?
I don’t presume to have all of the answers to this decades old problem, but I do think that understanding the requirement of transportability is important. I also believe that there are some simple steps that all of us can take to help educate those in the housing industry as well as the home buying public:
- Use the correct terminology. If it is a Manufactured Home, call it a Manufactured Home!
- Earn the confidence of other housing professionals. Start sharing how this program is regulated, and that there is oversight to protect the consumer and the public.
- Consider sponsoring a training session in your area for code officials, assessors, appraisers, or other housing professionals.
- Teach the consumer that at some point the home’s label and data plate will be important and should be preserved.
- Invite housing officials to your trade show, retail center, or to visit an installation site.
- Become your area’s manufactured housing expert.
The Manufactured Housing Program is likely the best kept secret in the housing industry. To encourage the industry to grow, we need to get the rest of the housing industry to better understand what makes our product different.