Dave Ramsey is wrong

“When you’re buying a mobile home, they go down in value. From a financial standpoint, mathematically, you’re buying a car that you sleep in—a very large car that you sleep in. When you buy a home, they go up in value.

He said it. It can be true. But it is not always true.

It is true when you buy a mobile home and rent a lot in a trailer park. In that situation it is just the trailer that is owned. They are harder to sell and cost a lot of money to move off a lot you don’t own. Couldn’t the same be said for a normal house? When a normal stick built house is moved off of it’s foundation to another location, the value of the house is extremely cheap for the exact same reason. often selling for $1.

Another example of this being true is when a mobile home is sitting on a piece of land but is not permanently attached to the ground. Lenders do not want to lend you money for a property with a mobile home that is not permanently attached to the ground because you could move it. Let’s say you borrowed $100k for the land and the mobile home. Then you sell the mobile home for $10k, leaving just the land. The value of the land probably isn’t going to be $90k without a home on it so the lender is at a greater risk should you default. Lenders don’t like that.

Another example of a mobile home not appreciating is when it never gets updated. Most don’t get updated. The same can be true about a house. I am sure you have seen old, worn out houses that haven’t appreciated once adjusted to inflation?

Okay, so I have sort of agreed with him so far in some situations. When does buying a mobile home become a good idea then? When it is permanently attached to the ground. Now, it really makes no difference to most people whether it is or is not. You are not going to “Feel” any difference inside and it really isn’t going to look much different from the outside. The only reason this makes a difference is for financing. In a world where almost everybody finances their home, you expand your pool of buyers when they can get a Conventional, FHA or VA loan. Imagine what the real estate market would look like today if you had to pay cash for a home? The values would plummet because there would be almost no buyers out there who could afford to buy a home.

As a realtor, real estate investor, advisor and friend to my clients, I can give a thumbs up to purchasing a mobile home on a permanent foundation. If you keep them in good condition and update them as often as you would a normal home, they DO appreciate and ARE a very affordable way to own a home.

Some numbers that don’t matter

After 15 years in this biz, I’m finally going to drop my opinion on some numbers that don’t matter as much as people think they do…..Let’s go.

Average days on market: This is a snap shot to tell you exactly what it says, the average. If you are a seller, you only care about the days on market of one house, your own. While the average days on market can give you a snapshot of the overall market, there are soooo many variables that it really means nothing. The average days on market is tainted by several things. Thing 1 is that it includes the loser houses that stayed on the market forever. Thing 2 is that it includes new build to suit homes which show either zero days on market or were placed on the market before ground was broken.

Average sale price for all of Lexington or the entire state: You will often see data published that will say what the average sale price is for a specific town, state or even nationwide. Again, it’s just an average and is not at all useful to anybody for any purpose other than people who are writing an article about the real estate market. If more expensive houses are selling, guess what, the average goes up. If more cheaper houses are selling, it goes down. All you care about is your own house, right?

Average appreciation: You’ll read stuff like “The average home value increased by _% this year. That does not mean it is equally applied to every house. Some houses and neighborhoods did better than that, some did worse.

The exact square footage of a house: Sometimes I will encounter a seller who thinks his house is bigger than the PVA or an appraiser says it is. Often that difference is less than 100 square feet. Buyers tend to search within square footage ranges like 1500-2000, 2000-3000, over 3000 square feet, etc. If you have 2050 verses 2150 square feet it is not going to make any difference to a buyer. Which leads me into the next item.

Cost per square foot: This is again an average thing mostly used by people writing articles about the real estate market. The average person reads it and thinks it must be important. If it really mattered, then a very plain 2000 square foot home with ancient HVAC units and a roof that leaks would be worth exactly the same as a 2000 square foot, totally updated home that looks like something out of a magazine and has brand a new roof and HVAC units.

What the PVA says the house is worth: The tax assessor drives by every house every few years in their Toyota Prius, snaps a picture of the outside and places a value on the house for tax purposes. The value is just a number used to determine your tax bill. It is not the market value. They don’t go inside so they have no idea what it is like. Often, it can take years for a house to be reassessed. I bought a house in 2002 for $118,200 that I now rent out. The tax assessment was the purchase price until a neighbor sold in 2004. It then went to $135k. It stayed at $135k until 2018. During that 14 years, the market crashed, stabilized and took off again. The same house is now assessed at $153,300 and appraised earlier this year for $225k. (I hope nobody from the PVA follows my blog….shhhhhhh!)

The Zestimate: Is almost never correct. It’s a computer that takes in a lot of data without any wisdom about what makes a house worth more or less than other ones in the neighborhood. It’s sort of like the ultimate use of averaging data. Like the PVA, it can’t take into consideration things buyers factor into picking a house like colors, cleanliness, floor plan, shape of lot, slope of driveway, amount of natural light, number of trees, or a good or bad view. About the only time I have seen it be fairly accurate is in a newer subdivision where most of the houses are similar. The less variation in condition or updatedness, the easier it is to figure out a value because the value range is less broad. The more variation, the more you need an experienced realtor.

There you go. It feels so good to get this off my chest. I hope it helps you better understand the real estate market and how it impacts what is likely your biggest investment.

Can’t find a home in your price range?

You know what happens when you can’t find anything in your price range? You usually start looking above your price range. Can’t find anything around $300k? Then look up to $325k, then $350k, etc. You usually find something you like.

I recently had something happen that was a little mind blowing.

I personally have been on a casual search for a place in the country. I’m pretty picky. I wanted a great view and lots of wooded area so I wouldn’t have to mow it all. I also wanted huge garages so all my cars can live together instead of having them scattered all over. I started out at the price point I wanted. Then upped it. Then upped it some more. Before long, I had almost doubled the initial price range. Still nothing.

Then one day I get a call from somebody who was referred to me from a past client. They had 15 acres in Clark Co. I go to see the place. I look at the recent sales and give them a number for what I think is market value.

While I am viewing their house to list it, I keep thinking things like:

“Why can’t I find a view like this?”

“Why can’t I find huge garages like this place has?”

“Why can’t I find a place with woods on 3 sides?”

“Why can’t I find a small one level home like this one has?”

After all, I have been looking at properties that were nearly 3 times the value of this one.

Later that week, I started thinking about this place again. How much I loved the view. How the huge garages are already there. How the home was the right size. Just about every house I had seen had a huge McMansion on it and I don’t want fancy and I don’t want that much to clean. I want to leave the McMansion I have now.

Then I asked myself “Why don’t I buy this place?”

And I did.

So, when you can’t find something in your price range, try looking below your price range. It doesn’t happen often, but sometimes you can find something you love for less than you were planning on spending.