What Is a Modular Home? For Starters, It’s Not a Boring Old Box

If you’re looking to buy a home, or considering building one, you may have heard that modular homes are an increasingly popular option. But what is a modular home? In a nutshell, it’s a house whose parts are built in a factory, then transported to the property and assembled there.

First introduced near the end of World War II, modular homes—also called factory-built, prefabricated, or prefab—still represent only about 1.5% of the homes built in the U.S. today. But prefab homes are getting hotter than ever with design-savvy buyers who want the flexibility to choose their floor plans and styles.

In other words: Just because it’s made in a factory doesn’t mean it’s a boring box just like everyone else’s.

“There is a preconceived notion that modular homes are plain Jane or boring,” says Fred Hallahan, a housing industry consultant with Hallahan Associates in Baltimore. But in reality, modular homes can come in any style the homeowner wishes, from Cape Cod to Mediterranean to modern, and with any number of architectural and design flourishes.

Modular homes should also not be confused with manufactured homes (aka mobile homes), which are built entirely in a factory, then transported in one piece. Modular homes, by contrast, cannot be moved; they can be much larger and offer some unique benefits over homes built from scratch on-site.

Advantages of modular homes

There are three main benefits to choosing a modular home over a traditional one.

Speed: The main shell of a modular home can be completed in a factory in just five to eight days, with assembly and finishing work completed on-site. Weather issues pose less of a delay for the building process, unlike traditional construction.

Cost: Modular homes may cost less because they can be built faster; some builders will say they can build a home for as little as $35 per square foot—compared with $125 per square foot for a home built on-site. However, keep in mind that that $35 is just a quote, and applies only to the base price. You’ll need to buy the property and install electrical lines and plumbing. You may also want to make additions or modifications for your home. The more realistic all-inclusive price for a modular home hovers around $110 per square foot.

The cost advantage will be more pronounced in areas where building costs are higher, which is why they are particularly popular in areas like the Northeast, where they constitute nearly 4% of all new builds, says Hallahan.

Quality: Homes built in a factory may actually be of superior quality to those built on-site, primarily because the materials are not exposed to the elements, from cold to precipitation to humidity. Modular homes also often benefit from better supervision than when multiple subcontractors are working to build a home. Prefab homes also tend to be more energy-efficient, which means you may be able to save on your energy bills.

How to buy a modular home

You can shop for pre-existing modular homes on realtor.com. If you want to build your own, you can shop styles and sizes at ModularHomeowners.com. Modular homes use “construction to permanent” financing, just as if you were building a regular house. The process begins with a construction loan during the building phase and then once the modular home is complete, your loan will be converted into a “permanent” loan.

Some additional notes about modular homes not addressed in this article.

Many states/cities do not recognize a difference between a modular home and a manufactured home. A modular home is still titled like a manufactured home or a vehicle. Even if it is placed on a foundation or a basement. The title is usually found on the inside of a kitchen cabinet or by the electrical panel. Because the house is titled many appraisers will consider it a depreciating property versus an appreciating property. In other words, it is losing value over time, not increasing value. When purchasing an existing modular home this titling issue may make getting a mortgage problematic in certain states. The average consumer cannot tell the difference between stick built and modular and as the author of this article points out, a modular home is usually a better built home due to better assembly methods and lack of exposure to extreme weather. Unfortunately, the building codes in most cities do not recognize this benefit and consider any house that can be delivered on a truck and then assembled to be manufactured. Modular homes get a bad rap because they come to the home site in sections but realistically how is that different than a truck delivering a load of 2 x 6's or dry wall? If anything, the process is much better and less costly. Quick Loans does offer mortgages for modular homes.

Many subdivisions will not allow a modular home because they don't know the difference between manufactured and modular. Check with the subdivision about any covenants pertaining to modular homes. There are numerous subdivisions in the Charlotte area that do not allow modular homes because current home owners of stick built homes feel the modular home will decrease their home values. They think this because they believe a modular home is a manufactured home, which it is not. Ignorance is not bliss in this case. Review the HOA covenants.

When you resell your modular home you must disclose that the house is modular and not stick built. This is a material fact and must be conveyed to the buyer. Again, many financial institutions will not issue a mortgage for a modular home. They may write a personal loan (like a car loan) at a much higher rate. Also sometimes. modular homes can be difficult to insure as they age, just like a manufactured home. Always do a title search on all property prior to purchasing. Lastly, every state and subdivision is different. Check out the requirements and restrictions before you purchase a lot or land that you wish to utilize for a modular home.

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