Under Fannie Mae Selling Guide B4-1.4-01, an appraisal of a manufactured home must include:
Correct Answer
A) A detailed and supported cost approach
Fannie Mae requires a detailed and supported cost approach for all manufactured homes, in addition to the sales comparison approach, with enough detail for the lender to replicate the figures (for example, from a published cost service). Furniture and warranties are not real property.
Why This Is the Correct Answer
Option A is correct because Fannie Mae requires a detailed and supported cost approach for manufactured homes, in addition to the sales comparison approach. The cost figures must be detailed enough for the lender to replicate them, for example from a published cost service.
Why the Other Options Are Wrong
Option B: Only an income approach based on lot rent
Option B is wrong because an income approach based only on lot rent is not the required method. Fannie Mae calls for the sales comparison approach plus a detailed, supported cost approach for these homes.
Option C: No cost approach, as these homes depreciate quickly
Option C is wrong because omitting the cost approach on the theory that these homes depreciate quickly contradicts the requirement. Fannie Mae requires a detailed and supported cost approach for manufactured homes.
Option D: The furniture and warranties as real property
Option D is wrong because furniture and warranties are not real property. Including them as real property would overstate the value of the real estate being appraised.
Manufactured means cost approach required
Link 'manufactured' to 'cost': a home built in a factory gets a supported cost approach to go with its sales comparison approach.
How to use: Use this when asked which approach Fannie Mae requires for a manufactured home appraisal.
Exam Tip
For Fannie Mae manufactured home questions, look for a supported cost approach alongside sales comparison, and reject answers that count personal property as real estate.
Common Mistakes to Avoid
- -Skipping the cost approach for a manufactured home
- -Including furniture or warranties in real property value
- -Using only lot rent income to value the home
Concept Deep Dive
Analysis
This question tests a Fannie Mae requirement for manufactured home appraisals. Fannie Mae requires a detailed and supported cost approach, in addition to the sales comparison approach, so the answer rejects options that drop the cost approach or treat personal property as real property.
Background Knowledge
Manufactured homes financed as real property must meet specific requirements, including being legally classified as real property. Fannie Mae requires both the sales comparison approach and a detailed, supported cost approach for these properties. Personal property such as furniture is excluded from the real property value.
Real-World Application
An appraiser values a double-wide manufactured home permanently affixed on a privately owned lot for a Fannie Mae loan. Along with the sales comparison approach, the appraiser develops a cost approach using a published cost service and documents the figures so the lender can replicate them.
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