Financial Information

How are Modular Homes Appraised and Valued

In the past, most homes were constructed piece-by-piece on a given parcel of land. Homebuyers could wait months or even years to see their home finally completed. Currently, homebuyers have many more property choices that are of high quality. An alternative to a traditional home is the modular property. It's important to understand the key differences and similarities between these homes, so that any appraisals are streamlined for a rapid escrow process.

Understanding a Modular Home Versus Site-Built Models

When homebuyers first hear the term "modular," they usually equate this word to a trailer home. In fact, modular homes are more similar to site-built models because they're permanent structures. Modular manufacturers build these homes in sectional pieces. For example, a living room with all of its electrical outlets and other accessories are built within a factory setting. Each part of the modular home is mostly completed at the factory, and then it's hauled out to the final property site. Contractors simply need to install these room sections on a permanent foundation to complete the modular construction. From the outside, the home looks just like a site-built type but without the long construction time period.

The Main Goal

An appraisal is an estimation of a property's value if sold at that very moment. Homebuyers need an appraisal because they must match the property's value to their possible investment. If a modular home is worth $200,000, for instance, then the homebuyers must finance some or all of this amount. In most cases, homebuyers cannot borrow more than 80 percent of a property's value. Borrowers must have 20 percent of the appraised value to pay their down payment while borrowing the remaining 80 percent from lenders over 20 or 30 years. Generally, a modular home appraisal operates in the same fashion as a site-built home's valuation process.

Local Neighborhood Factors

Regardless of the home's physical value, appraisers must also look at the neighborhood as a cost factor too. If the neighborhood has an award-winning school system, home values will often rise in response. Other factors, such as community pools and parks, are also incorporated into the home's overall value. Even crime rates affect an appraisal because safe neighborhoods typically come at a higher cost to homeowners. Appraisers also look at neighboring homes and their current selling prices to make a fair determination about a modular home's value. All of the neighborhood's pricing must be relatively close in value when it comes to accurate real estate appraisals.

The Physical Structure

Appraisers must also consider the physical modular home as a major factor during valuation processes. In fact, the home doesn't even have to be built on the site yet to be properly appraised. Professionals can look at the home's schematics as an alternative in these cases. A home's value is based on its size, condition and available features. Generally, a larger home has more value than a smaller property. The overall condition, however, can change these values dramatically. A modular home built 20 years ago with neglectful owners won't have the same value as a newer property cared for on a daily basis.

Land Pricing

In most cases, appraisers value the home and land as a single cost. If the home isn't built on the land yet, appraisers may offer two values based on the structure and land as separate entities. Land size is the most obvious factor for either a large or small property value. However, land features also play a part too. A property with a stream or extensive grassland, for example, might appraise higher than a basic lot just 100 feet away. The modular home is merely a basic addition to the land after an accurate appraisal.

Financing any home takes considerable time for both buyers and lenders, so it's important for every document to be read and signed in a timely manner. Regardless if the home is modular or not, homebuyers must have adequate credit and an ample down payment to purchase the property. Proof of income, liability lists and other documentation must be fully transparent to the lender for any loan to be financed. In the end, all of these documents will equate to a reasonable mortgage on a fine modular home.