Prefabricated homes, or “prefab homes,” can offer innovative, sustainable, and cost-effective alternatives to traditional housing. But are prefab homes worth it? And are they the right choice for you? Let’s dive into what exactly they are, the types of prefabs, their cost compared to conventional homes, and some pros and cons to consider.
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What is a prefab home?
A prefabricated home is a type of home built in a factory instead of on the lot where it would be placed. It can be constructed either entirely off-site and delivered in one piece to the place where it will stand permanently. Or, it may be built in sections that will be shipped and assembled by professionals.
There are different types of prefab homes, depending on how the home is constructed and assembled on the property. They include the following:
- Modular homes: These homes are built in modules at a factory and assembled on-site. They are positioned on a permanent foundation and allow the most customization. This makes modular homes the most luxe option among the prefab family.
- Manufactured homes: Also known as “mobile homes,” this type of prefab house can be transported as one piece or in a few large pieces that are put together at the assembly site. The main difference between manufactured and modular homes is a steel-beamed permanent chassis on the mobile home that cannot be removed even when the home is installed at its location.
- Kit homes: Similar to modular homes, kit homes are built in a factory, delivered as pre-cut materials, and put together on-site (similar to how you might purchase inexpensive furniture). These are easy enough for many homeowners to assemble without professional help and are usually the least advanced.
Prefab homes vs. traditional homes
Historically viewed as inferior (and with a stigma they’re still trying to shake off), the prefabricated homes of today are making a comeback as a worthy alternative to traditional (or “stick-built”) homes. Modern prefab homes can be high in quality, quick to construct, and extensively customizable. Also, they offer an excellent solution for those seeking to install an accessory dwelling unit (ADU) next to a primary property for an extra source of income or to increase their property’s resale value. According to a study, an ADU could increase property values by up to 35%.[1]
Are prefab homes cheaper than regular houses?
Yes, typically, it is cheaper to buy a prefab home than to build a traditional house. On average, the price of a manufactured home ranges from $40 to $50 per square foot, and the base price of a modular home is about $40 to $80 per square foot.[2] In comparison, constructing a new stick-built house can average $150 per square foot.[3]
The price of a prefab home depends on the type of house you decide to purchase — modular homes tend to be the most expensive type of prefabricated houses. Other factors that can impact the cost are square footage, customization level, installation, connections to utility systems, and any other additions.
As your ownership matures, the estimated value of your home will continue to depend on the type of prefab. For example, modular homes appreciate at a similar rate as stick-built houses, but manufactured homes tend to lose value over time instead.[4]
Weighing the pros and cons of prefab homes
Prefab homes can be a wonderful alternative to traditional homes, but there are also some downsides to be aware of. Let’s take a quick look at prefabricated homes' benefits and drawbacks to see whether it’s the right choice for you.
Pros of prefabricated homes
Energy efficiency
Many modern prefab homes are designed with energy efficiency in mind. Prefab manufacturers opt for innovative techniques and sustainable materials, and it’s easy to find a company that produces ENERGY STAR-certified homes. Thanks to their tight seams and quality windows, prefab homes these days are often well-insulated and can help keep your utility costs down.
Sustainability
The construction process discussed above also impacts the eco-friendliness of prefab houses. The fact that all components are pre-built and manufactured at a factory means that unused materials can be recycled, reducing waste and lowering the carbon footprint of the home. Improved insulation can also allow you to depend less on your AC in the summer and heating in winter, reducing the negative impact on the natural environment.
High quality
While a traditional home is usually only inspected once upon completion, prefabricated home manufacturers have fierce quality control standards and ensure that all components are examined multiple times throughout the process. Manufacturing a home at a factory often allows for higher precision, the tighter joining of pieces, and avoiding weather conditions that may impact the final result.
Fast construction time
In traditional home construction, the start of one subcontractor’s work often depends on the timely completion of another subcontractor’s work — for example, an electrician can’t begin their job until the frame is finished. This dependency, along with weather delays and scheduling conflicts, can slow down the building process. In contrast, the ready-to-go nature of prefab components sidesteps this issue, allowing labor to be planned and carried out more efficiently.
Affordability
The cost is one of the major reasons why prospective homeowners turn their attention to prefab homes. Due to the reduced waste, streamlined production processes, significant automation, and faster build time compared to stick-built homes, prefabricated houses usually tout a lower price tag. Generally, they tend to be 10%-25% cheaper than traditional homes.[5]
Cons of prefabricated homes
Land and site preparation
When readying a prefabricated home for occupancy, you’ll need land to assemble it on. Aside from the cost of the land, you would also have to factor in the cost of site preparations and connecting utilities. Depending on the home’s location and the specifics of the site you’re building on, it could be challenging to set up water or arrange electrical connections. All this might offset potential savings from choosing a prefab, especially if compared to buying an existing home.
Zoning laws
Rules and regulations are important to consider when trying to decide whether you want to build a prefab home. Some municipalities and local governments might have restrictions on the placement of manufactured or kit homes. Even if it is allowed, your prefabricated home would have to meet established building codes.
Financing limitations
Depending on the type of prefab you’re building, it may be tricky to secure financing for your future home. Generally, modular homes can be financed through a traditional mortgage, and the cost of construction can be paid through a construction loan. But things get more difficult if you’re looking to obtain financing for a manufactured home. There are some specialized loans, such as FHA Title I and Title II loans or chattel mortgages, but not all lenders offer them.
Longer move-in time
Even though prefabs take a shorter time to construct than stick-built ones, if you want to move quickly, it’s better to purchase an existing home in most cases. While prefabs can be efficiently completed within a few months, buying a house that’s already constructed will almost always be a faster process.
Potential difficulty selling
Depending on the type of prefab you own, you might encounter some difficulty getting buyers interested. In the past, manufactured homes were almost always of a poorer quality and assembly than stick-built dwellings, which hurt their public perception. As a result, they often depreciate while traditional homes build value over time, so potential purchasers may be turned off when they see that your home is prefabricated. While the reaction may be unwarranted, it’s the reality of the market and a risk you’ll need to account for.
Tips for buying a prefab home
Are you considering buying a modular, manufactured or other prefab home? Here are some things that could help you navigate the process:
- Research manufacturers: Many companies on the market offer prefab homes. They can differ in price, quality, and approach to construction. Do your research beforehand and opt for a company with a solid track record and positive customer reviews.
- Choose the right type of prefabricated home: Nowadays, prefab homes range from modular homes that are indistinguishable from traditional homes to kit houses, which can fit in your backyard. Compare your objective with the available options to choose a solution that fits you best.
- Think about financing: When you decide on the type of prefab, remember to check what financing options you have available. Also, start working on your credit score and down payment in advance and shop around for lenders to secure the most favorable terms.
- Take customization into account: Your choice of manufacturer will impact the customizations of your future home. Some companies offer countless modification options, while others are more rigid towards changes and upgrades.
- Examine your land: Choosing the wrong plot of land for your prefab could cause delays and extra costs. From leveling land to connecting to water and electricity, planning in advance will help you avoid headaches and money loss.
Prefabricated homes are an increasingly popular alternative to traditional houses thanks to their affordability, sustainability, and quick construction time. Just like their stick-built counterparts, they have their challenges and advantages. But you can decide whether it’s a good choice for your circumstances!
Find the right agent for a prefabricated home
If you’re interested in purchasing a prefabricated home, an experienced real estate agent from Clever can help guide you through this complex process. If you buy in a qualifying state, you will also receive $250 in Clever Cash Back to help with your move. And, if you buy and sell with Clever, you receive $500. Get matched with Clever agents in your area.