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Appraisal, Agency and Atypicality: Evidence from Manufactured Homes

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  • Dennis R. Capozza
  • Ryan D. Israelsen
  • Thomas A. Thomson

Abstract

The appraisal of the "market value" of homes serving as the collateral for mortgages is a fundamental part of the underwriting process. If a loan should default, however, it is not the retail market value that the lender obtains, but rather the "recovery value." In this research, we show how recovery values differ from market values at origination and explore the reasons for the differences. Using a large sample of chattel mortgages on manufactured homes, we explore the relationship among the selling prices, the book values, and the fitted values from simple hedonic models with spatial autocorrelation. We then address the differences between selling prices at origination and recoveries from repossessed homes. We find that the spread between them varies systematically with home characteristics and especially with "atypicality," that is, with measures of how unusual a home is. Selling prices both at origination and recovery affect borrower defaults. Copyright 2005 by the American Real Estate and Urban Economics Association

Suggested Citation

  • Dennis R. Capozza & Ryan D. Israelsen & Thomas A. Thomson, 2005. "Appraisal, Agency and Atypicality: Evidence from Manufactured Homes," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 33(3), pages 509-537, September.
  • Handle: RePEc:bla:reesec:v:33:y:2005:i:3:p:509-537
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    Cited by:

    1. repec:kap:jrefec:v:57:y:2018:i:2:d:10.1007_s11146-017-9621-4 is not listed on IDEAS
    2. Neil Bhutta, 2011. "The Community Reinvestment Act and Mortgage Lending to Lower Income Borrowers and Neighborhoods," Journal of Law and Economics, University of Chicago Press, vol. 54(4), pages 953-983.
    3. Steven C. Bourassa & Donald R. Haurin & Jessica L. Haurin & Martin Hoesli & Jian Sun, 2009. "House Price Changes and Idiosyncratic Risk: The Impact of Property Characteristics," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 37(2), pages 259-278.
    4. Neil Bhutta, 2008. "Giving credit where credit is due? the Community Reinvestment Act and mortgage lending in lower-income neighborhoods," Finance and Economics Discussion Series 2008-61, Board of Governors of the Federal Reserve System (US).

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