Factory-built homes might be shaking their low-end reputation, as climate-controlled home-building factories increasingly cater to high-end home buyers and investors with customized, amenity-filled homes.
Edward Mathis, a Re/Max agent in Saddle River, N.J., for 12 years, has recently come across more than a few modular homes -- also known as factory-manufactured -- being built and put on the market, a sign that homeowners and homebuilders in his well-off area are seeing these homes as luxurious and just as sturdy as traditional homes built on site, otherwise known as stick-builts.
In the United States, about 3 percent of homes are modulars, Mr. Mathis said.
Mr. Mathis is the listing agent for a Westwood, N.J., modular home being built by Excel Homes, based in Liverpool, Pa. When he shows the high-end home, people don't know it's modular, he said. He said that he thinks interest will grow because there is a strong market for new homes with more amenities.
"It's really about customization and giving the client what they want," he said.
Robert Caruso, managing partner and owner of Big Sky Custom Homes in Ho-Ho-Kus, N.J., has been the exclusive New Jersey builder for Westchester Modular Homes of Wingdale, N.Y., for about five years. Homebuyers, he said, can work with a design team on a 3-D monitor in his studio, avoiding an outside architect and extra costs, or the company can create a design from someone's plans.
"We're getting away from the old-school way of sitting down with a catalog and picking a house. Whereas now we're pretty much open to build almost anything you want," Mr. Caruso said.
Of course, there are caveats if you want to build a modular home.
First, you'll need buildable land. And unlike when purchasing an existing home, which would involve a conventional mortgage, putting up a new modular home -- or any new building for that matter -- requires a construction loan. Those loans are riskier, carrying higher interest rates in the 5 percent range and terms of just six or 12 months. And some lenders unfamiliar with the construction process may be unwilling to lend to modular home builders.
But once the home is complete, you can refinance the construction loan into a conventional 15-year or 30-year mortgage to bring down interest rates to around 3 percent, said Michael Sema, president of Elmwood Park, N.J.-based Amber Sky Home Mortgage, which typically refurbishes existing homes to resell.
And while prospective buyers can dicker with traditional contractors or home sellers, pricing on modular homes is less flexible. Once a price is quoted, it's set, said Mr. Caruso of Big Sky Custom Homes. On the other hand, the buyer doesn't have to worry about the price of a new home going up.
"We don't have the worry of a no-show contract or material increases," he said.
Mr. Sema is scouting modular companies to build a home for eventual sale on a lot his firm bought for $160,000 in Oakland, N.J., where the original home burned down. He plans to have the five-bedroom, four-bathroom home, with a total of 3,900 square feet of living space and a fully finished basement built for around $300,000. Through a stick-builder, this could cost around $400,000, Mr. Sema estimates. Ultimately the home will have an asking price of $749,000.
Usually, the price per square foot in construction is $100 to $150, depending on how high-end a builder is. Now, he's getting a home built for about $75 to $80 a square foot, possibly $100 depending on the finishing touches, Mr. Sema said.
The homes save on labor costs because builders can buy products in bulk rather than for specific projects and can avoid extreme weather that can delay construction, Mr. Sema said.
Rob Ebbets, executive vice president of Innovative Building Systems, Excel's parent company, has found that people save 5 percent to 20 percent, depending on the amenities.
He said his company has found that people are buying older homes, tearing them down and replacing them with a new modular home.
This is especially true in urban areas, where construction sites can be exposed to theft or vandals. With modular housing, all the pieces arrive and are bolted together weather-tight in a day, Mr. Ebbets said.
Michael and Jennifer DiBella, after finding that building a single-family, customized modular home was around the same price for them as buying a town house in Secaucus, N.J., bought an overgrown lot in Rutherford, N.J. They contracted Big Sky to build their dream modular house, and the whole process took less than a year.
Jennifer DiBella said that with modular homes, you have control over where each room goes.
"They pretty much designed it to the way we described it," she said.
That wasn't always so. In the middle of the last century, modular homes looked like more like double-wide mobile homes, not the modular mansions of today, Mr. Ebbets said.
And the average person can't tell how it was built, he said, even though they come flying down the highway on trucks in as little as two to as many as 20 sections.
While industry professionals can spot thicker walls, doubled-up beams in basements and hinged roofs, a homeowner can tell by peeking under the kitchen sink, where there should be a plate with the home's manufacturing data, said Michael Del Greco, owner of Accurate Inspections Inc. in Woodland Park, N.J.
Among the modular homes Mr. Del Greco has inspected in his 19 years of experience, there weren't issues from the manufacturer. If there was an issue, it came from a homeowner adding something -- like new electrical wiring or an addition.
When modular homes are being constructed in the factory, there's continuous supervision to ensure the home is built up to code before it leaves the facility, Mr. Del Greco said.
"I would have no problem at all in recommending and purchasing a modular home myself or recommending one to a family member," Mr. Del Greco said.
About 12 years ago, customization became more of the standard for modular homes with its expensive, high-quality modular mansions built to a design in three months, Mr. Ebbets said.
"Speed is a big thing for people," he said.
Douglas Smith, owner of Ringwood, N.J.-based Environmental Construction, which builds both modular and stick-built homes, said he sees modular home construction increasing annually.
"I think that the quality is better, and today they are offered basically everything you can get in a custom home and in some instances even more -- very high quality, energy-efficient, more green," Mr. Smith said.
Mr. Smith's company is working on a four-bedroom, 21/2-bathroom, two-story colonial in Westwood, with about 2,500 square feet of living space and a two-car garage, priced at $549,000. Although the home is still under construction -- delayed by Superstorm Sandy -- it was started in late summer and has a completion date of March 1, about six weeks earlier, Mr. Smith estimates, than the timetable for similar houses.
It should save 25 percent on energy costs because of tighter sealing and insulation.