In September 2021 I sold a lot to Marissa who had a dream of building a wine country home with a pool in Kenwood. But how do you go from buying a lot to taking delivery of your Connect Home, one of many prefab homes being built in Sonoma County? In this blog post, we’ll follow the journey from finding a lot to choosing a prefab home to see it delivered. We will also share the most common mistakes to avoid. But before we get into the details of Marissa's journey let's discuss the different types of modular homes and the pros and cons of a prefab home compared to a traditional built home.
What is a prefab home?
There are really two types of pre-fab homes: a manufactured home and a modular home.
Manufactured Homes are literally built in a factory. They have a bad reputation because of the image they conjure up of a 1970s manufactured home delivered on a trailer. Connect Homes, are manufactured homes, but they are one of the coolest looking homes out there.
There are lots of different companies out there that make them but, Connect Homes have 23 different models to choose from so while you are limited to one of their floor plans you have lots to choose from. The home is literally built in a factory and then delivered on the back of a truck or rather multiple trucks. If you don’t like the look of the homes or the layout of one of their configurations then they are not the right company for you.
Modular homes on the other hand are different because they are more akin to designing and building a home using a pre-determined set of building blocks. You have a lot more freedom in designing a home to your specifications as long as the home is designed specifically for a modular system like Lindl Homes or Dvele (formerly Blu Homes). The components are all built in a factory before being delivered to the building site to be assembled a bit like a big Lego house.
So What Are The Pros and Cons of a Prefab or Modular Home?
A Controlled Environment
Whether it is a manufactured home or a modular home. the great thing is that the home is built in a factory in a controlled environment. How many times have you seen a house being framed out and then it sits there in the pouring rain before the roof goes on. You just don’t get this with a home built in a factory. As well as the overall environment being controlled, there is also a greater opportunity for quality control of the labor in a factory where you don’t have to rely on casual labor or sub-contractors to maintain the quality.
Generally, a manufactured home is more sustainable than a traditional built home not just from the materials used but because many pre-built homes, such as Dvele, are built to be highly energy efficient because the efficiencies can be designed into the DNA of the home. On top of that, there is generally less wastage, because the homes are being designed and manufactured to a highly optimized template.
The other big benefit is that it is easier to control the costs. We’ve all heard of general contractors issuing change orders through the construction process which can result in an overrun of 20%, 30% or even more over and above the original estimated cost.
The good thing with a pre-fab home is that once you sign the contract you know what it is going to cost. There just aren’t the same variables that cause the costs to go out of control. While the build cost may not be much cheaper overall there is less risk, or rather more certainty, over the finished cost.
What Are the Disadvantages?
The first one is the fact that there is less customization. By their very nature, the homes are pre-designed or in the case of modular homes, have to be designed to the specification of the modules. Even with a manufactured home such as a Connect home, you can choose some of the finishes but there is a very specific set of materials that you get to choose from.
The other disadvantage is that the locations where they can be built have their physical limitations
Because a home like a Connect Home is delivered on the back of a truck with the need for a Crane to then lower the homes into position on the foundation, you can’t build a manufactured home in a location where you can’t get a huge articulated truck! This might not sound too limiting but these are big trucks that need to be escorted down the freeway so you definitely can’t build one up a small lane or in the middle of the forest. A modular home has more flexibility but you still need pretty good access
Finally, the price you see on the website is not the price of the finished home!
The price you see on the website is literally the cost of the home that is built in the factory. It does not include the cost of preparing the site, building the foundations, all the landscaping, hooking up utilities, and all the other elements that need to be done to get a home completed. These costs can easily increase the cost by 50 percent on top of the price of the manufactured home.
Buying The Lot
How much does it cost?
In Sonoma County, it's pretty much impossible to get a lot for less than $250k. If you want a lot that is build ready in one of the popular places in wine country, you are going to be in the $500k to $1.5m range. If you see a lot for less than $250k in a decent location, the chances are there is something wrong with it
Marissa bought a flat lot, one acre lot back in a great part of Kenwood for $750k. For the home, she was looking to build, because you want the price of the lot to be not more than 25% of the value of the finished, this price point was pretty much perfect. In her case, the finished home will be worth over $3m and is in a neighborhood that can easily support that valuation. What you don’t want to do is to buy a lot in an area where building a modern pre-fab home will be too much house for the neighborhood.
What About Utilities For a Prefabricated Home?
When you are buying a lot there are four key services to think about which if you don’t know what you are buying into can cost you a lot of money: water, sewer, electric, and gas.
In a lot of rural properties, you will need a well which needs to be producing an absolute minimum of 1.5 gpm per structure. Without this, you can’t build in Sonoma County. In reality, you really want a well that produces at least 5 gpm. In Marissa’s situation, she purchased a lot that was on public water so that bit was easy.
Electricity and gas were available at the edge of the lot so again this infrastructure was very easy in her case but it still requires you to pay hook up fees. Bear in mind If you need to run electricity from half a mile away it can cost you a six-figure amount.
The most challenging part for Marissa’s lot was the sewer because the property was on a septic system. Because the property was a burn lot, which often means you can use the existing septic system with minimal fuss, but in Marissa’s case she wanted the flexibility of a 4 bed system, not a 3 bed system so she needed to put in a new septic system. The location of the existing septic system also limited her options of where she could put the pool and the house which was another reason to start over with the septic system.
The good news is that when she bought the lot all the work had been done to determine that the property would support a 4 bed system. If you are thinking of buying a lot this is probably the most important thing to think about. You need to find a lot that has a perc test to support the number of bedrooms in the home you want to build. If you don’t have that there are no guarantees you will be able to build what you want to. Putting in a septic system will likely cost you $60-$100k once the perc test work has been done but there are lots where a septic system can cost nearly $200k so again you need to know in advance. If you want to know more about putting in a septic system then please see this blog post which gives you everything you need to know about putting in a septic system.
What about Site Access?
Another key part of buying a lot is to think about access. This is especially true when you are considering buying a pre-fabricated home because you will need to be able to get a large crane onto the site.
In addition to the access to the building itself, you will need to create and build a driveway. If there is no existing driveway this can begin to get very expensive if you need to do substantial grading work on top of building the road itself. Because Marissa’s lot previously had a house on it that burnt down, it had a driveway and gates although Marisa will be looking to change its location due to the layout of her home on the site.
Even though Marissa’s lot checked a lot of the boxes to make building a pre-fab as easy as possible, there was still a lot of work that needed to take place before the trucks arrive to drop the modules onto the foundations.
Preparing The Site
Marisa worked with Nader De Fever from D3 Consult Design Build who is the general contractor doing everything that Connect Homes don’t do. It definitely pays to work with someone who knows exactly how things need to be done to take delivery of the homes as well as complete the project once the cranes leave.
Again Marisa chose a lot that needed minimal preparation in terms of clearing brush and vegetation because it was a clean flat lot. However one of the first things that needs to be done first is to do any grading and soil work which will determine the type of foundation. It might sound strange but the type of soil can make a big difference to the cost of the foundations even on a flat lot. Once the drawings are completed, the contractor will need to excavate the dirt for the footings, complete any drilling if piers are required, and then build the footings and the stem walls that make up the foundation.
One of the biggest things the contractor needs to do outside of building the foundation and prepping the site is build out all the infrastructure such as running water main service lines, running gas lines, coordinate with the utility (often PG&E) on installing all the necessary equipment as well as installing temporary power which will be needed by ConnectHomes once the buildings have been set on the foundations.
Once all this work has been done, D-Day arrives. The Day the trucks roll in with the different modules on the back.
The Big Delivery Day
I have never seen the delivery of a home of this scale so it was very exciting.
In the case of Marissa’s project, she had an ADU, a 2000 sq ft home, and a Connect Home carport delivered. The ADU was the first module to be set down on its foundations. Because the ADU is a self contained unit, it was delivered almost move-in ready. The floors were in, the tile was in, and even the appliances were in the kitchen! The only thing it didn’t come with was a bed and dining table and chairs!!
The main house was a little different because it was delivered as six different modules that all needed to fit together like a big Jenga puzzle. It was so impressive to see them picked off the trucks one by one and see them get dropped into place. Including the delivery of the carport, the whole process took just over 5 hours which is pretty impressive!
Once the units were delivered I was able to take a walk through. You could see that all the walls were finished, the bathroom fixtures were all completed, and even tiled.
What Happens After The Modules Are Delivered?
Once the delivery trucks leave there is still quite a bit more to do. Connect Homes take care of everything that needed to be done within the homes. For example, the different modules all need welding together and securing to the foundation. Once that is done all of the interior finishes need to be completed including installing all the flooring as well as cleaning up all the walls, putting in baseboard, and getting the homes into their finished living state.
The big job for the contractor is to complete all of the hook ups to the various utilities which request. Beyond that there is still a need to do all the landscaping, putting in the driveway. Combined with the completion work by Connect Homes this will likely take another three months.
How Do People Typically Finance Homes Like This?
Marissa worked with Ty Kirkpatrick, Arroyo Consulting Group who specializes in working with clients who want to finance construction as well as have someone to help them through the process. They provide both lot and construction loans as well as permanent financing at the end of construction with about 50% of the business working with individuals and the remainder with spec builders.
In very general terms 50% of people will pay cash for a lot and the other half will finance it.
A construction loan for a pre-fab home is typically a bit different from a traditional construction loan because there are two distinct parts to it: The financing for all the site work with a general contractor and the financing for the prefab home itself.
The mistake people make is by looking at the cost of a prefab home on a website and then thinking that is the cost of the home. If you make your decision based on that cost you will likely run out of money!
For a 2000 sq Connect Six L the list price is $684,000 before any upgrades and the cost of the ADU was $184K making a total of $868k but the cost of the site work can easily add another 50% on top of that which is a significant percentage. Even on a flat lot the cost of the prefab home to site work and infrastructure can be two to one so on a more complicated lot that ratio will only increase.
While the funds to pay the general contractor are dripped out as the work progresses the purchase of the Connect Home requires a pretty significant 10% upfront payment on signing the contract, then another 25-30% once the home starts to be built in the factory, another 20-30% on leaving the factory and then the balance on completion. The great thing about the loan on this project is that as soon as the construction is complete it automatically rolls into a regular loan without requiring a new loan or a new appraisal. Once you are approved initially, you don’t need to re-qualify.
Is A Prefab Home The Right Choice For You?
I personally have always loved the idea of building a prefab home. It just makes so much logical sense. I have seen quite a few examples outside of Connect Homes including Blu Homes (Dvele), Stillwater Dwelling, and Lindl Homes. While many of them do have a modern aesthetic, you can equally have a more traditional looking home.
If you are looking to build a pre-fab home because it is a lot cheaper. Most of them are not by the time you add in the contractor costs for all the site work. However, if you have a fixed budget and some certainty over the finished cost and a timescale that is relatively fixed then they may well make sense.
If I am being super picky, I sometimes feel the finishes are not as good as say at a higher end custom $3m home but I can look beyond that because you can get a home that looks stunning and will stand about from anything around it. I can’t wait to go and take a look at Marisa’s once it is move-in ready.