Q: My husband and I have been house-hunting for more than two years. We finally found this home that we loved — it’s in beautiful condition, set up perfectly for our family, the right size, the right location, etc. We made an offer and got it!
Anyway, in the disclosures we learned that the house is actually a modular home that was prefabricated in the factory and moved to the lot in several pieces. It was attached to a permanent foundation and hooked up to all the utilities with permits from the city. We don’t care that it’s a modular home, but some of our family members expressed a lot of skepticism about it. Then, they were surprised when they actually came and saw the house. What gives?
A: Modular homes have gotten a bad rap in the past because people used the term modular, manufactured and mobile homes interchangeably, while they’re really quite different. The second- and third-generation modular homes that I see now often are totally indistinguishable from "stick-built" homes (homes built, traditionally, on-site) at a glance, with the exception that they may have some sort of siding skirt that covers the joint where the building and the foundation are connected that you don’t see as often on a stick-built home.
My trusted home inspector and appraiser both tell me that they feel late-model modular homes are often structurally superior to stick-built homes, due to superior engineering at the factory (often incorporating steel with the wood framing and floor support structure) and smarter design. Modular homes often lack the "ton-of-bricks"-type chimneys that are so often separated from the rest of the building or otherwise in disrepair where I live, in earthquake country.
The materials that are used in modular homes are often selected by engineers for durability against the predictable ravages of time, wear and the elements, rather than what’s available or popular locally — which drives more stick-built housing material selections than you might imagine. Modular homes are often fabricated in more than one piece, and then connected at the site, attached to a permanent foundation, and required to pass the same city building permit and inspection requirements as a "normal" home.
Manufactured homes, on the other hand, are essentially mobile homes — which are admittedly much nicer than they used to be. Think of this like when the marketing folks renamed prunes "dried plums" — same thing, or a new-and-improved version of the old thing, renamed to get rid of the stigma and connotations of the old name. Manufactured and mobile homes are actually vehicles, that are driven to the home and then placed on a foundation — or not. Manufactured homes can have additional pieces that are fastened to them on the site, but are often made in a single piece.
The city’s building inspectors are required to check out the places where the local utilities — electrical, sewer, etc. — are connected to a manufactured home, but not the actual home itself, which is not technically real estate to them. The U.S. Department of Housing and Urban Development issues a set of guidelines that these homes must meet, but they are not required to meet local building codes.
In tough-to-call situations, appraisers often look for wheels, a vehicle identification number and a HUD approval certificate under a manufactured home, to tell it apart from a modular home. The distinction is critical because many lenders will not make residential home loans — purchase or refinance — on manufactured or mobile homes, but will lend money to owners of modular homes on the same terms as on a stick-built home.
Also, modular homes are thought to appreciate similarly to stick-built homes, while manufactured or mobile homes are thought to depreciate over time, more like a vehicle than real estate in this respect.
If your modular home floats your boat, and your lender agrees — go for it! But before you remove your contingencies or allow your objection period to expire, talk with your lender to get a good understanding for what lending restrictions are common for modular homes in your area. Keep this in mind — if it’s too difficult to finance, that may narrow the pool of buyers who are able to purchase the home from you when it’s time for you to move on.
Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.
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