Manufactured Homes In Commercial Real Estate Appraisals: Personal or Real Property?

Commercial real estate appraisers sometimes receive appraisal assignments in which a manufactured or mobile home is included with the property that is being appraised. A mobile or manufactured home is a dwelling which is factory-built and is transported to the site either on its own chassis or on a flat-bed truck. In an appraisal of property which includes a mobile or manufactured dwelling, a critical factor to be determined is whether the manufactured home is to be appraised as personal property or real property. Manufactured homes by nature are personal property, and must be permanently “affixed” to the land in order to be appraised as real estate (or real property). Manufactured dwellings not permanently “affixed” to the land are typically appraised as personal property.

Some mobile homes are only anchored to the ground, with no underlying slab, and could be removed from the site relatively easily. It is debatable among real estate appraisers and users of appraisals as to whether or not the manufactured home becomes real property by simply anchoring it to the ground (and therefore, becoming “affixed” to the property). However, when determining as to whether or not a mobile/manufactured dwelling is real estate or personal property, there is yet another factor to consider. When the manufactured dwelling on the site becomes an integrated component of the property in regards to income generating potential, it is considered reasonable by some appraisers to treat it as real estate. For example, I recently appraised a five-acre tract with a manufactured home that was only anchored to the ground, with no slab. The subject property was leased to a tenant who lived in the manufactured home.

Of course, the underlying land was considered a valid component of the rent being generated; especially since the tenant had free use of the land. However, without the dwelling, it is possible (and probably likely) that the property may have had very limited income generating potential. For this reason, it was my opinion that the mobile home on site should be treated as real estate instead of personal property. Nevertheless, for those users of my appraisal who may argue that the home should be treated as personal property, the contribution of the manufactured home’s value was separated from the total value. That way, it’s left up to the client to determine if the manufactured home should be treated like personal property or real estate.

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Don’t Ignore Real Property Tax Delinquencies

Getting a handle on statistical and physiological aspects affecting foreclosures is a time consuming task. You and I mechanically trod through the document garden picking up a grant deed here and a trust deed here—and maybe an abstract of judgment over there. It takes a while, but with diligence we can amass a statistical version of what happened in most foreclosures.

The grant deeds we commonly see show the enthusiasm prevalent on the date of purchase and the cash flow out of the property to the owners a short time after acquisition of the property. In the heady days of the middle and later last decade, all of us led a charmed life and borrowed heavily on the presumed equity that seemed to flow unaided from our recently acquired property. It is true that some thwarted buyers were more suspicious of the unearned largess we reveled in. But all in all life, flowed grandly and happily through the short months of frivolity and joy. We know now—only looking backward, that a day of reckoning was showing lightly on the horizon. Most of us let the dance go on with nary a blink of the eye.

Why did so many of us miss the reality of the obligations that go with the rights of ownership of residential property? Now we know. What goes up—does not have to continue to do so, but unhappily it all can come down. And it did! How did we miss all the signals?

It is possible to get overly impressed with apparent competency. We knew what we were doing. What worked so well earlier should, by all rights, continue in our current world. It didn’t. Maybe we should have been looking at a more widespread picture of the real estate market. Sometimes there are indicators that show that all is not well with a particular property.

One of those indicators is such an obvious one. Even before “the bubble”, it was possible to ferret out problem properties that could justify a closer look.

As assessed values of properties skyrocketed way beyond “normal”, many wildly enthusiastic residential properties owners were stumbling around—unable to meet even modest real property tax obligations in a regular basis. Such taxes are due twice each calendar year, and such taxes were such a small portion of the property values in the burgeoning residential market. Some owners, even in those heady days, continued to miss paying real property tax obligations to the county on a regular basis. Shouldn’t such owners haves gotten an inkling that the future looked much less bright?

Those of us sniffing around looking for “problem” properties really weren’t so clever after all. Here was a significant indicator that the residential property owner already had lost the capacity to meet minimal obligations of ownership—and we missed it!

As a matter of fact, when we step through all the documentation accompanying residential property ownership, we regularly ignore the painfully obvious fact that these property owners already are in difficulty. Modest payments of real property taxes were missed this year by the owners of our chosen property. If we had had the common sense to look further, we might have found out that the same owners had been in arrears in real property tax payments for some years before that! There are clear indications that financial problems for the owners are lurking in the near future. How could we have missed that?

You already know that unpaid real property taxation is important to lenders. Some lenders will combine such tax obligations with principal and interest payments due monthly to borrowers.

You know the routine. First real property tax payments are due initially on November 1st of the current tax year and delinquent after December 10th. The second payment is due February 1st and delinquent after April 10th of the next year. Ten percent penalties are added on missed current year taxes and jump to eighteen percent per year (one and a half percent per month) after the first unpaid tax year. Real property tax delinquents find that missing payments can result in sale of the property by the county in which the property is located for the total of the unpaid taxes after the fifth year of delinquency. That’s downright scary—since residential property values commonly exceed the total tax amounts due by a healthy margin.

I am bothered by my own myopic view of indicators for residential property owners in trouble. You and I know better than that. Here we were charging ahead while we spent many hours and countless days uncovering critical records involving all kinds of deeds, abstracts, etc., and we missed such obvious indicators of property owners who might have liked to talk to us—those with continuing real property tax problems. What were we thinking?

You will recall that I am a real estate broker, instructor, and mentor to investors specializing in the purchase of foreclosures at the trustees’ sales.

Many people want to buy residential properties in foreclosure at substantial discounts but don’t know how to uncover title or debt to establish equity. I have taught hundreds of people how to make such purchases with minimal risk and cash through my hands-on foreclosure workshop. We were in touch earlier, and I want to keep you

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