Peter writes: I received a quote from a building company for a new customized, pre-fabricated home. The quote and specifications are quite complex. How can I tell if the price is reasonable and competitive with a site-built home?
Steve Bliss, of BuildingAdvisor.com, responds: To find out if the bid is in the ballpark, you can compare it to similar new homes for sale in your area. You can also check square-foot construction guides. For a more detailed comparison, you would need to get competing bids for the same or a very similar home from another builder or home manufacturer.
The key is to make sure you are getting an apples-to-apples comparison in terms of specifications, features, and scope of work. Do the homes have similar finishes, windows and doors, appliances, cabinets, bathroom fixtures, energy features and so on?
Equally important, do both bids include (and exclude) the same items. For example, one bid may include foundation, utility connections, and appliances and one may not.
If you are purchasing the house with the land as a package, you will need to separate out the house cost from the land cost, which should be itemized for you by the developer. If you are buying the land separately, make sure you account for the land development costs, which may double the price of the unimproved or “vacant” land when you add well, septic, utilities, site work, paving, permits, impact fees, and more.
With factory-built housing, prices can be especially hard to evaluate since the quoted price is often for the assembled materials or components only – without excavation, foundation, delivery, site assembly, and utility hookups.Unless you account for all these costs, your final cost will far exceed the base estimate.
Even if you do your homework, you can still expect at least modest cost overruns, which are a fact of life in home construction. Construction lenders usually add a 5% to 10% “contingency” fund to the loan amount to cover these unanticipated expenses.
First, you need to know what type of prefab house you are buying. The term “manufactured housing” is now used mainly for what used to be called “mobile homes” or “trailers”. These are generally small, simple homes pulled the site on their own axles. Two or more may be connected side-by-side, but are never stacked up to create a second story.
Higher-end pre-fab homes are shipped to the site on flat-bed trucks. These are primarily modular homes, with two or more complete sections assembled on site. Less common are panelized homes, which are assembled from complete wall, floor, and roof sections built off-site. Modular and panelized homes are often heavily customized and, when complete, impossible to distinguish from site-built homes.
The best pre-fab builders offer almost unlimited design flexibility and the quality of construction can equal or surpass site-built homes. Because they are assembled indoors under controlled conditions, modular homes may offer more consistent quality at a better cost than site-built homes.
With manufactured housing, make sure you are clear on what you are getting and NOT GETTING for the quoted price. What is included should be spelled out in the plans and specifications. However, what’s EXCLUDED may not be so obvious unless you ask the right questions.
Don’t be shy. Ask specifically what is included in the quoted price and ask what additional costs you will incur before you can move into the home. Specifically ask about excavation, foundation, delivery, “buttoning up” on site, grading and landscaping, and utility hookups. See if they will provide you with a “turnkey” price in move-in condition.
A few years ago, I priced out a high-quality modular home to be delivered to a semi-developed lot and assembled by the manufacturer. They also had a list of contractors, experienced with their homes, that you could hire independently for site assembly. The manufacturer offered standard designs, but could build virtually any design using computerized design/build systems.
For our design – a 1,700 sq. ft. contemporary Cape, I was quoted a base price of about $120,000. However, the “turnkey” cost was closer to $300,000 when you added delivery, foundation, site assembly, and utility hookups. You could add to that site work, landscaping, driveway, walkways, and, of course, the building lot. If you need a well and septic system, you could add another $30,000 or more.
The specific costs in my case (rounded off) were:
$131,000 Base price of home
29,000 Upgraded energy package, flooring, trim, and siding
20,000 Excavation and full foundation
4,000 Delivery and crane
42,000 Button up (on-site carpentry)
48,000 Site improvements (well line to shared well, septic tank/pump, trenching and connections to house, electrical to lot and house, rough/finish driveway, finish grading, topsoil and seeding)
25,000 Garage (optional)
3,000 Permits and fees
$302,000 TOTAL
Add to this the lot cost of $150,000 and you’re over $450,000. Then add appliances, window treatments, and miscellaneous costs (there are always some), and your $131,000 house may be pushing closer to $500,000. Pay special attention to the site improvement costs, which could be much higher on some rural sites, especially if a non-standard septic system is required.
You may still end up saving 10% to 20% on basic construction costs compared with a comparable site-built home, but that would represent only 5% to 10% of the total package price. Plus you can save a lot on construction loan fees and interest with a pre-fab home.
If you feel you are over your head in evaluating the estimate, I’d recommend hiring a construction manager to help you evaluate this and other bids. This could be an architect, contractor, or engineer acting as a consultant.
Lisa B says
What’s The Best Type of Factory-Built Home?
Thank you for creating a very thorough website. I am overwhelmed by the plethora of information you have generously provided. It’s a steep learning curve for me.
To make this short, I want to custom build my forever age-in home. To save money and have a better build, I was told to buy a factory built home to save on carpentry. “Factory built” is translating to mobile homes, manufactured, panel homes, tract homes….. Do you have any insight into how to search and find a quality manufacturer? My friends had their home; based on a custom blueprint: built in a plant and the walls delivered and placed on their foundation. It is stunning.
THANK YOU.
buildingadvisor says
There are many options and each has pros and cons.
To keep it simple, the cheapest option is a mobile home, now referred to formally as a “manufactured home,” and known familiarly as a trailer. These are delivered to the site on axels, but are often placed on a permanent foundation. The designs are very limited and the size is limited to a “double wide.” Some companies provide decent quality; others not so much. Often mobile homes are put on leased land in a trailer park.
At the other end of the prefab cost spectrum are “panelized” homes, which arrive at your site in large wall sections. These have all the flexibility of site-built home but savings are usually small compared to site-built homes.
In the middle are modular homes. These have always been good quality, but the designs were fairly limited in the past. Some companies now use high- tech computerized systems to turn almost any design into a modular. These arrive at the site as very large boxes, complete with doors, windows, insulation, siding, and drywall, and go together like giant Legos. You might have two modules for a small house and four or more for a larger, two-story design.
The quality of most modulars now is quite good. The savings can be significant, but are usually less than people expect. The price quoted by the manufacturer may not include the foundation, utilities, and site development, or even the on-site assembly of the modules. So unless you get a turnkey price, you have a lot of added expenses. Expect savings of 10% to 20% if you go with one of the company’s standard designs – more for custom.
You can often buy a tract or semi-custom home from a developer for a similar price where there are cost savings from greater efficiency and purchasing power, and lower land and site-development costs. Quality varies with the specific developer, but is often quite good. Materials like doors and windows are typically “builder grade” unless you pay for upgrades.
The most expensive approach is to buy unimproved (vacant) land, hire an architect to design a custom home, and hire a custom builder to build it. You can get exactly what you want, with fine craftsmanship, but at a premium price. These are the houses you see in magazines like Fine Homebuilding. Prices range from $200 to $400 or more per square foot plus land and site development.
Since you are so impressed by your friend’s home, a good place to start would be with the company that built their house. Whichever way you go, make sure you get references, visit some actual projects they have built, and get turnkey pricing – not just a bunch of parts delivered to your building site.
And be warned: You almost always spend more than originally planned. There are many reasons for cost overruns. The best way to minimize runaway costs is Planning, Planning, Planning before you start to build. Nail down the plans, specs, and costs, before starting construction. Always get fixed prices and avoid open-ended, cost-plus contracts, where costs can spiral out of control.
Read more on Preliminary Budgeting.