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Indiana University Bloomington

Department of Finance

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Research and Publications

Journal Articles

Appraisal, Agency, and Atypicality: Evidence from Manufactured Homes

2005, Real Estate Economics

Dennis R. Capozza, Ryan Israelsen, Thomas A. Thomson


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.


Capozza, Dennis, Ryan Israelsen, and Thomas Thomson (2005), "Appraisal, Agency, and Atypicality: Evidence from Manufactured Homes," Real Estate Economics, Vol. 33, No. 3, pp. 509-537.


Subprime, mortgages, manufactured homes, mobile homes, foreclosure, default, lending, appraisal, valuation, agency, atypicality, spatial autocorrelation, manufactured house, real estate