Trying to get a better idea of what goes into having a house built
So I'm looking to get out of apartment living in the next couple of years, so I browse housing listings semi-frequently just to get an idea of what's out there and what I can expect cost wise.
My boss made an offhand comment about buying a lot and getting a prefab installed on it, so I started looking into it, but I came back with a lot of questions.
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Home builders seem to have preset floor plans. Every time I try and find a prefab house, all I can find are blueprints for purchase. Do you find a plan you like and then find someone to build it?
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Home builders I find all build giant houses. I always see comments online about how "Builders can't build affordable homes because of red tape," but I don't understand how that means they can only build 5B/3Ba houses. I cannot find anyone that has preset plans for a 2B house.
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How much about getting a lot "ready" would be up to me vs a builder? Is that gonna depend on the builder and what they offer? Is that all done out of pocket, or would that be included in the construction loan?
For reference, I'm in Atlanta, though I imagine a lot of these answers will be "It depends on the builder."
Oh boy do I have the Youtube series for you, that answers a lot of those questions and sort of goes into what building a house entails. https://www.youtube.com/watch?v=mn4L_aJ1rV4&list=PLRZePj70B4IwyNn1ABhJWmBPeX1hGhyLi
I cannot second enough Essential Craftsman. Scott is truly an inspiration. He is legitimately a national treasure.
"Prefab" homes are more often referred to as manufactured homes. A house is prefabricated if it is built prior to being placed on your property. Or, sometimes, it's a home made of large components that are then simply bolted together on site. What your boss is probably talking about is buying a plot of land and installing a mobile home on it. This is in fact a good way to achieve affordable housing. However, I would only ever recommend going down this route if you own the land itself. Buying a manufactured home and installing it on rented land is a recipe for getting trapped and having you ground rent raised to unaffordable levels.
You can build a smaller home, including a 2 BR one. But cities often add tens of thousands of dollars in building and permitting fees. And those fees don't necessarily scale with the cost or size of a home. A $500k home may have similar permitting costs as a $250k home. With these large fixed costs, builders have an incentive to build expensive homes only. If you're commissioning a custom home built, you can just pay the fees yourself and build whatever you want, even if such a home wouldn't normally be profitable for a builder. A builder building dozens of homes with the hope of eventually selling them to some future unknown buyer is in a very different position than a buyer commissioning a custom home that suits their needs.
This all depends on the builder. If you wanted to save a bit of money and do all the land clearing yourself, some builders might give you a discount for that. But there's not a lot you really need to do to "ready" a lot. The builders generally take care of that.
Just wanted to clarify a few terms here because I've been looking into the same idea as OP as a first time home buyer.
There's three main types of pre-fabricated homes, at least here in the US:
Mobile homes. True mobile homes are not made in the US anymore, meaning you can only buy something classified as a mobile home if it was built before the 1970's. These are also exactly what most people picture when they hear the word 'mobile home'. They're almost always single-wide structures that sit on top of a skirt to hide the trailer they sit on. If your intention is to buy one used and ship it out to a vacant lot, you should be prepared to pay cash as financing will be difficult. A lot of low-income or first time buyer programs also straight up disqualify mobile homes from financing. This is probably the option with the least customization, since it will be an existing structure and permitting extensions will be tricky.
Manufactured homes. These are usually two-section (double-wide) homes that are 'married' together on site, though they can be up to three or four sections. They can also be single-wide, but these often come with similar financing restrictions to traditional mobile homes. Your state also may or may not allow you to buy directly from the manufacturer, instead forcing you to buy from a local dealer instead. I still recommend talking directly with the manufacturer anyways though, just to get an idea of what they're like and what an ideal home from them with no travel damage looks like. I also recommend asking if they use standard parts and door frames for their homes. A common complaint on mobile homes and older manufactured homes is that you can't just go down to home depot to replace a broken door or window because it's not a standard size. I know my local manufacturers stopped doing this, but I would check to be sure with your local companies. On the topic of shipping damage, note that there WILL be travel damage in your home, I've been assured it's all covered in the buying process and will be repaired on-site but I would double check with whoever you buy from. You will have some amount of customization options, but they will be limited. I know when I talked to a local manufacturer they said they were able to customize the floor plan of the home if desired, like take out a corner to accommodate a nearby tree, add a porch or tweak interior walls, but for the most part you are restricted to customizing the existing floor space. You can't add more unless you want to move up to a model with another section. They also like to advertise the more expensive models with an attached garage, but you'll need to be aware this is not a structure or service they provide, you will need to arrange something with the contractor you hire to install the home. When you start building, you can build an in-set into the foundation, allowing the home to sit more or less flush which reduces the mobile home-ness of the appearance, but it's all about preference.
Modular homes. The name is a little confusing since it's similar to a manufactured home, but the 'modules' of these houses are pre-made wall segments, sections of the roof etc that are shipped to the site and installed on a foundation. I've had a hard time finding a company that specializes in these homes in my area so I have less knowledge of them, but my understanding is that these are essentially just normal houses. If you can find a company building these in your area, they will probably have a catalogue of existing floor plans, but they have the greatest flexibility in customization because again they're really not too different from a normal home. You can also get them built as a single story, two story, have an attached garage, all the things available in a normal home. Note that this is also the most expensive option though. It's going to be less than a traditional stick-built home but not by as much as a manufactured home.
Honorable mention to Insulated Concrete Form (ICF) homes, which are made of blocks of polystyrene foam with space in between to pour a concrete wall. Like a modular home, the polystyrene blocks ship from a factory and are installed on a foundation. They're also fairly customizable like a modular home, but it can be pretty hard to find a company experienced with building a home this way. Overall, this building method seems to be more expensive than traditional stick built homes, with the trade-off of being more weather/fire resistant and having better energy efficiency.
Quick question about manufactured homes, you said
Would that be separate from the manufacturer or dealer you buy it through? I would have expected that to be included in the cost of buying the house (specifically the installing of the home, not the garage).
It's a good question, and to be honest I'm not sure how much your contractor would be required to assist with actually getting the house on the foundation vs how much the shipper and their team would handle it. Regardless, installing the home is still going to be an additional cost beyond the purchase price of the house.
The cost you pay for a manufactured home, is really just for the home. If a dealer says you can buy home model XXX for $200,000 they really just mean you have permission to take it off the lot for $200,000. They will work with you to have your home shipped, but you will pay for the shipping yourself. Which is also why you shouldn't need to cover shipping damage, because it's covered by the overall shipping cost.
As far as I'm aware, everything else will be arranged by you and a general contractor. You will need to pay to have the site cleared and graded, assuming it's not just plain, flat dirt. You will need to pay for utilities to be brought to your site, assuming you aren't going off the grid, and lastly you will need to pay to have the foundation built. All that needs to happen before the house arrives. If your city/county is lax on permitting, you might be able to get the house installed without a traditional concrete foundation? But I haven't looked into that much because I know I couldn't get away with that where I live.
Assuming you can find cheap enough land large enough to accommodate the manufactured home you want, it's still not a bad option compared to the cost of houses in a high cost of living area.
Update:
Spoke with another dealer today and asked them about this, and yes your contractor will be expected to actually get the house on whatever foundation you plan to build. The shipper will get each section as close as they can when dropping off your home, but that's it. At that point, it will be up to your contractor to scoot each section into place and join them together. The sales rep I spoke with today indicated this is probably the most important part of your build, in the sense that if you had to hire one person who really knows what they're doing, it's the person who joins the house together.
Anecdotally, I have a coworker who just recently did exactly that. He bought some land and hired a company to build a house on it. Came out great, but the main issue was that it took an extra year or so than expected, so I would factor that possibility into your plans. The contract stipulated that they had 2 years to build it, but they said it should only take around 6-8 months. Well turns out it took over a year and a half. Still well within the contract period, but meant he had to extend his lease on his rental place a couple of times. Always some excuse as to why things were being delayed: supplies, labor, scheduling, financing, etc. Basically the builders prioritized working on large developments worth millions of dollars over individual homes like his.
So if the contract stipulates that they have X amount of time to build it, be prepared for them to take X amount of time, not what they say they'll have it done by.
Not an expert, but my understanding is that other expenses are things like foundation work, and in rural areas, drilling a well, the septic tank, etc.