Making a Case for a Modular Home

modular vs stick-built home

Most people don’t initially turn to modular homes when working with real estate agents. Prefab houses have their pros and cons, but could prove a great deal for the right home buyer.

Modular homes come in a wide range of styles, and interiors can be customized to suit your tastes, but homes built on-site will always have more customization options.

Before we dive into a comparison, you should know that banks treat modular homes as they do homes built directly on your land (aka “stick-built”). Modular homes tend to appreciate in value, unlike mobile homes, which tend to decrease in value over time. Look at modular homes with the same eye that you’d use to judge any other new home.

Modular homes have a balance of benefits and drawbacks, so I recommend considering the following when adding a modular home to your potential purchase options.

Modular Home Costs and Resale Value

Pro: Home Price

Modular homes are constructed in a climate-controlled factory where weather events and materials shortages are less likely to occur. This reduces the cost of the home and often speeds up its construction. Modular-home builders often have in-house inspectors that ensure quality construction throughout the build, which also helps reduce the price.

Con: Land Costs

You need to own the land upon which your modular home will be placed. Many clients use real estate agents to help them find lots. You’ll need to own the land before you can order a modular home. Sometimes the cost of land plus the cost of the home can come as a shock. If you’re moving into a neighborhood, make sure your agent verifies that the neighborhood doesn’t have any restrictions on modular homes.

Neutral: Resale Value

There’s no guarantee that the value of your modular home will always appreciate – just like any home you purchase. Economic factors outside of the home itself often determine if values rise or fall. Choosing a modular home won’t hurt resale value, and it won’t reduce your resale prospects compared to a traditional home.

Financing Your Home

Pro: More Financing Options

Modular homes come with an additional avenue of financing that other homes can’t access: financing through the manufacturer. A modular home will qualify for standard home financing and mortgages, but sometimes the manufacturer will offer a better deal. Always read loan papers carefully, and it’s perfectly OK to ask your agent for financing advice.

Con: Payment Time Frame

Unlike financing for a stick-built home, a modular-home builder must be paid in full before the home is complete. Most builders require that you make a series of payments as construction progresses. This means financing needs to be in place beforehand and may come in the form of a construction loan that the builder will convert to a mortgage after the home is built.

The Building Process

Pro: Quick, Proper Construction

Prefabricated homes are often built very quickly. The construction is high quality thanks to the assembly-line process, and new modular homes use energy-efficient windows and insulation to help reduce energy bills from day one.

Con: Limited Variety

Modular homes come in a wide range of styles, and interiors can be customized to suit your tastes, but homes built on-site will always have more customization options. You select a floor plan for a modular home, while stick-built homes use blueprints that can be made 100 percent unique. I haven’t heard of this being a major drawback since modular homes offer a large selection of options, but they can never be the custom-built home of your dreams.

The real estate industry doesn’t have a rule of thumb for choosing between a stick-built and modular home. The best advice: Explore your options, look at the total costs and see what financing you can obtain. Whether you choose modular or on-site construction, always make sure the home you buy is within your budget.