Insurance Academy

Valuation of Manufactured Homes

By | January 15, 2020

Building valuation can be confusing at best.

If you go to a real estate website like Zillow, it’ll give you an estimated market value for a building. It’s doubtful that anyone really knows how they come up with their estimates and I don’t trust them at all.

If you go to your county’s property appraiser website, you’ll get a tax value for the property. Here’s another valuation that’s totally mysterious.

A realtor can give you an estimated market value based on comparable buildings.

A property appraiser can inspect and come up with an appraised value.

When it comes to insurance, any number of the app-first agencies and companies will give you a valuation based on the data that they have. Your insurance company of choice will give you a valuation based on the information that they have.

Who’s right? All of them? None of them? Who cares?

Valuation of a piece of property is important for a variety of reasons, but for our purposes, let’s focus on the insurance valuation of a piece of property.

One particular sort of building that can be problematic is the manufactured home. You know manufactured homes? They’re the mobile homes that don’t generally go anywhere once they are installed on a piece of property.

They are different in part because of the way that they are brought on site and installed. A manufactured home is not built on premises (neither is a modular home, but that’s another topic). It is built on a steel trailer frame that has a tongue at one end for connecting to a truck for transportation and wheels underneath for rolling down the road. If you were to remove the skirting that encloses the underside of a properly installed manufactured home, you would likely see those wheels underneath.

Once brought on site, the home needs to be set on pilings (usually stacks of blocks), sometimes set on a foundation, and other times, not, the home sections need to be connected to one another (double, triple, and quadruple-wide homes), the home needs to be attached to the ground, and the utilities need to be connected.

One major way that a manufactured home is different from a site-built home is the way that it is attached to the ground. A site-built home can be attached to the ground in many ways. Wood frame homes may have long lag bolts embedded into the foundation and then the walls bolted to them.

A manufactured home is secured to the ground using a series of anchors and tie down straps. Yes. It’s tied to the ground. The anchors are driven into the ground, cemented in place, and then attached to the underside of the manufactured home’s frame by a metal strap. The number of required anchors depends on the size of the home.

In some high-wind prone areas, Florida in particular, manufactured homes also have tie down straps. These straps run from one side over the roof to the other side and from front to back, also over the roof. You can’t see the straps because they are run under the exterior of the home. Again, the number of required straps changes based on the size of the home and what wind zone it is in.

What does all of this have to do with valuation?

Because of the nature of the manufacture and installation of a manufactured home, it’s not considered a permanent dwelling. We all know that once a manufactured home is installed, it’s almost never removed, but it could be. In many ways, it’s treated like a vehicle. The Automobile Association of America (AAA) has a great website that details how each state deals with a manufactured home. Some states will always treat it like a vehicle, while other states can make it real property if the owner applies for it.

Because it is generally considered a vehicle, a manufactured home often does not appreciate in value, like real estate will. It depreciates, like vehicles will. So while you might be able to buy a fully installed and well maintained manufactured home and get a loan that acts a lot like a traditional mortgage, you need to look very carefully at that home’s value on your insurance policy.

There may be a limit on the policy.

If the manufactured home’s homeowners’ policy has a value on it, and you’re in a valued policy state, the insurance company will pay up to the limit listed on the policy if the home is deemed a total loss.

Watch the policy though because there is quite possibly a provision to pay any building loss that is less than a total loss on an actual cash value basis. Is that a big deal? I don’t know. Do you want to replace what’s damaged, or just get the depreciated value of that property and self-insure the rest?

Some manufactured home policies will have a provision that allows for homes less than a certain age (10 years for example) to be valued at replacement cost. This has been done in part because some companies recognize that construction methods have changed over the years and that the home is newer. It’s kind of like getting new car replacement on your auto policy, but only for late models.

In the end, the people who buy manufactured homes use them the same way that other homes are used. They live in them, raise their children in them, leave them in place, and often sell it later to move up in home, or move to a different city or neighborhood.

It’s time to revisit this matter of valuation of manufactured homes. Many of the newer models are as well built and cared for as any site built home. Yes. There are many older manufactured homes still being used (and some of them are in great shape or have had additional rooms added to them so that you can’t easily find the original manufactured home’s footprint). Some of the newest models can’t be distinguished from a site built home, except that when you look under it, you can see the mobile home. Why not take a look and reconsider this dated actual cash value valuation?

About Patrick Wraight

Patrick Wraight, CIC, CRM, AU, is director of Insurance Journal's Academy of Insurance. He can be reached at pwraight@ijacademy.com.

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