Modular homes can be quite a controversial type of housing. Advocates claim modular homes can help end the housing crisis, while skeptics question their quality and costs.[1]
Let’s explore some pros and cons of modular homes to help you decide whether it’s the right option for your situation. We’ll also touch on whether or not modular homes are cheaper, common problems with modular homes, and whether or not a modular home will appreciate in value.
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What is a modular home?
A modular home is a type of prefabricated home that consists of fully constructed sections (modules) built in a factory. They’re shipped to and assembled on the final site.
The main difference between modular homes and other prefab homes is that modular homes have to be placed on a permanent foundation. They must also adhere to the same state and local building codes as traditional homes.[2] This makes modular homes the closest alternative to stick-built houses among all prefabs.
Pros and cons of modular homes
As with other prefab houses, there are advantages and disadvantages to modular homes. It’s important to understand both before you buy one.
Advantages of modular homes
Lower cost of construction
Modular homes are generally cheaper than traditional homes, which is one of the main draws for potential homeowners. It has become even more apparent in certain markets around the country in the last couple of years.
Recently, the construction industry has faced labor shortages, which affect the prices and schedules of building a home from scratch.[3] Factory-built homes allow for savings from this perspective as well. You can own a house at a cheaper cost, especially if you avoid pricey customizations.
Sustainability
Modular houses are both energy-efficient and eco-friendly. Creating parts in a factory allows for perfect assembly, which impacts the home’s insulation.
Many manufacturers also opt for more sustainable materials and work with professionals who have obtained LEED certifications. Generally, modular homes can be an excellent option for an eco-warrior or those who want to use innovations in the construction industry to lower their carbon footprint.
High quality
Many modern modular homes boast excellent quality because they’re built in a controlled environment with limited exposure to poor weather conditions. These houses also undergo multiple quality checks before being shipped to the building site.
Finally, modular homes must meet the same standards and building codes as traditional houses, which underscores their durability. If you order your home from a quality manufacturer, you can expect it to last as long as a stick-built one.
Faster construction time
Fast construction is a top selling point of modular homes. According to the modular home company Next Modular, most modular homes take three to four months from order to delivery.[4] In comparison, a traditional contractor-built house would take 10.7 months on average.[5]
Such speed is achievable thanks to parallel on-site and factory construction by workers trained for this specific type of home construction. While you still have to include installation and utility connections in the time frame, modular homes are a clear winner in this regard.
Common problems with modular homes
Limited customization options
Modular home manufacturers usually offer plenty of customization options to help you make the home your own. But compared to stick-built homes, modular homes are still limited when it comes to specific customizations. With many companies, buyers can only choose from set floor plans and cannot create each modular piece according to their specific preferences.
Your dream home plans could include an all-glass rotunda or a log cabin–style living room, but modular home options are much more limited. If you have a unique vision for your future home, a modular house might not be your best choice.
More complicated financing
Buying a modular home that’s already built and assembled follows the same process as buying a traditional house. Most lenders offer standard mortgage financing options, such as an FHA loan, VA loan, or conventional loan.
But things can get tricky if you plan to build a modular home from scratch. In this case, you would probably need a construction loan to finance the process and possibly also a land loan to buy a lot.
When move-in time arrives, you would likely have to convert the loan into a regular mortgage. It can be done, but it’s not as straightforward as a typical mortgage, which is one of the disadvantages of modular homes.
Land costs and restrictions
In addition to the purchase price of your modular home, you’re going to need to buy a place to put it. Depending on where you wish to live, land costs can add a decent upcharge to your home building cost.
But even if you find (or have) an inexpensive piece of land, you’ll need to ensure it has access to utilities, water, sewage, and more. Drilling for water or building a septic system can add tens of thousands of dollars to the overall cost of your home build.
Public perception
There are some common misconceptions regarding modular homes. In some cases, people mistake them for other prefabricated homes. In others, they don’t do enough research.
Public opinion could make it more challenging (compared to traditional housing) if you decide to sell your home. For example, it could be more difficult to find a willing buyer even if the quality of the modular home matches that of a traditional house.
Are modular homes cheaper than traditional homes?
Yes, modular homes are typically cheaper than their stick-built counterparts. The price of building a modular home ranges from $80 to $160 per square foot.[6] In contrast, the average price of building a new stick-built home is $150 per square foot.[7]
However, heavy customization and unique features could impact this price and drive up the final cost. It’s generally considered that a modular home will be 10-20% cheaper than a traditional one in the end.
There are a few reasons modular homes are less expensive to construct, including:
- Economy of scale: Manufacturers can buy materials in bulk, which affects the product's final cost.
- Less material waste: The factory environment allows for more precision in using materials, minimizing waste and its costs.
- Reduced labor costs: Because most of the construction takes place in a factory, fewer workers are needed for the project, and their labor can be streamlined more easily.
- Shorter construction time: Quicker construction and speedy setup reduce labor costs further and play a role in lowering the overall expense of the home.
Costs to remember when building a modular home
If you’re shopping around for a modular home, you might notice a wide disparity between the base price of your home and the final cost. While certain factors depend on your vision of the house, others are unavoidable.
| Cost breakdown | Average price |
| Base home price | $50–$100 per square foot |
| Land preparation | $2,750 |
| Foundation installation | $8,500 per square foot |
| Permits and fees | $500-$5,000 |
| Sales tax | $5,000-$10,000 |
| Sewer main installation | $3,200 |
| Water main installation | $1,600 |
| Electrical wiring | $1,350 |
Keep in mind that these are average prices. The exact cost depends on the manufacturer, your location, and your particular situation.
Also, modular home companies typically charge extra for any modifications or additions. For example, the average cost of adding a two-door garage is $28,000, and a basement could cost anywhere from $18,000 to $30,000. If you want to create a highly customized modular home, it may offset the initial cost savings and drive the price closer to that of a traditional house.
Do modular homes hold their value?
Yes, modular homes hold value and can appreciate over time at the same rate as traditional houses.[9] The home's condition is one of the deciding factors in how its price changes. If you plan to sell your modular home later, choosing a reliable manufacturer and taking good care of your property will positively affect its future value.
Of course, perception could affect how your modular home is appreciated vs. a stick-built one. Public opinion of modular homes is still catching up with the advantages they offer. Potential buyers who confuse them with their less advanced prefab counterparts might prefer to buy a traditional home instead.
Ready for a modular home? First, find the right agent
Modular homes can be an affordable option for those who want a quick build. However, it’s essential to consider the disadvantages as well — especially if you plan to sell the home in the future.
A Clever Real Estate Agent can help you find the right home for your situation, and you can receive $250 to help with your move. If you buy and sell with Clever, you’ll receive $500 in Clever Cash Back. Find an experienced Clever agent in your area today.