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Beyond a shadow of a doubt, manufactured homes, especially multi-sectional homes, depreciate to about half their value the moment you move into one. However, that doesn’t have to be the case!
Here’s why:
The vast majority of manufactured homes are financed long term on what’s called a chattel loan (the same type loan used for automobiles). Manufactured Homes with loans like these (chattel loans) can be moved, even out of state as they’re not tied to a parcel of real estate like houses are. The two most basic reasons for depreciation are due to home mobility and it being personal property (classified similar to that of a boat, motor home or automobile). Other less significant reasons include how they are viewed by finance companies. Once titled out of the dealership’s name, they become used homes and fall under shorter finance terms and at a higher interest rate. Another reason, is the original freight bill paid by the dealership, setup cost, commission fee, relocation cost, loss of warranty, sales tax, initial HUD fees, state association fees and commission inspection fees are all in the initial cost you pay for the home.
To help make “better sense” of depreciation consider this scenario: Say you have a nice 2800 sq. ft. site-built 4 bedroom wood-framed house you built in 1994 for $225,000 on a 5 acre plot of land that you’ve raised a family in for over 20 years. Your children are grown and moved out and you want to down size and modernize with a new home. Now, let’s suppose when you built your 2800 sq. ft. wood framed home in 1994 you built it in a way that it can be moved to someone else’s property.
Will you get equity when you sell your house with the buyer having to move it?
It’s extremely unlikely no matter how nice and well-built your house is. Naturally, site-built homes rarely get moved, but they do and normally at least 1,000,000 to 1 site-built home sell on the land they were built on. However, you are the one who wants to keep your 5 acres for personal reasons because if you don’t keep your land you’ll have to give up the trees you planted 20 years earlier, your garden spot, your shed or workshop, the two giant oaks in the back yard with the tire swing, your grill pit, but more importantly you’ll sell all the memories you made on the property. Memories where your daughter was married under the two oaks, the huge family reunion gatherings, the driveway you taught your children to ride their bicycles and perhaps more importantly, moving away from a lifetime of neighbors.
Sadly, had you have bought a 2800 sq. ft. manufactured home in 1994 from Cliff Davis you wouldn’t have lost a single dime and even made money (read site-built vs. manufactured home) and now you can replace your home with a new one with the latest innovations and technologies. Believe it or not, I’m not making this up as I go and I’m not saying this just to sell homes, “it’s the honest truth.”
Therefore, there is only one factual conclusion to this scenario; only land appreciates and can depreciate but that’s a topic for another discussion! House’s depreciate just as manufactured homes do, worse if they have to be moved. No house has or will ever appreciate, only land does! Once you disconnect the house from the land it too becomes personal property like a manufactured home is. Think about it: Would you buy a site-built house that had to be moved? (See how to get your manufactured home to appreciate article). Cliff Davis
How to Get Your Manufactured Home to Appreciate
I’m going to use a real example local to the Montgomery, Alabama market area that will earn you appreciation on your manufactured home. This scenario example will hold true in most every county or city in Alabama, if not the whole USA, and I ask you to keep in mind this is only one scenario as there are others that will work also.
The scenario: I know of a level, affordable easy to develop one acre parcel of land in Wetumpka that is close to the new elementary school off Redland Road in a nice area and neighborhood. If the manufactured home buyer will buy a Cliff Davis Home and finance the land in with it, and then record it at the courthouse, the manufactured home will be counted on their property taxes, instead of buying a sticker (like a car tag). The home and land can be listed with the tax assessor and both will be grouped as real-estate and can be filed under homestead exemption. Five years later, your Cliff Davis home and one acre becomes part of whatever happens in the neighborhood area. As the area grows and Wetumpka grows more and more people settle in the area and less land is available to people seeking to locate in the area. As a result, property values go up and you earn equity (Location, location, location! It works for manufactured homes as well).