Construction Classifications – Stick-Built, Manufactured, What Does It All Mean?

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LET’S GET SEMANTIC.

As technology inevitably advances, it pushes its way into the housing market in many different ways. An infinite selection of components is available to finish out a home, homes are more energy efficient — saving both money and valuable natural resources, the internet and digital media are streamlining the legal real estate process, and perhaps most notably, building methods are evolving at a blistering speed.

This injection of technology into what has always been a traditional field of old fashioned elbow-grease has made what has always been an easy determination in the homebuying process remarkably difficult and more important — the determination of exactly what type of construction a home is. The present ubiquity of factory built housing and the ongoing design and implementation of improved manufacturing methods has made it necessary to exercise a higher level of scrutiny when looking at any particular house. A knowledge of the different types of construction as well as the pros and cons of each type is crucial to any purchasing decision as well as endeavors to market and sell a home.

All types of housing can be broadly categorized into two main types; factory-built and site-built. It is important to remember that the terms outlined below are commonly misused in describing a particular method of construction and the only way to be certain of what type of construction was used for any particular home is to look for the characteristics inherent in each type as well as verification through the county or city building department with jurisdiction over any specific property. It is also important to remember that there is an exception to every rule, and there are many exceptions to the rules when it comes to housing.

Site-Built Homes

Site-Built homes are houses that are constructed on the building site itself using traditional building methods. This method of construction offers a greater degree of flexibility in architecture, layout, etc. over prefabricated (see below) construction due to the fact that these homes are built piece-by-piece, completely from scratch. In addition, no trade-offs to compensate for transportation are necessary, therefore the completed home is seamless and can be finished with whatever materials and/or features are desired. Historically, site-built homes do not depreciate in value as quickly as other types of housing and do not suffer from stigma based on construction methods when offered for resale. Historically, site-built homes have been loosely referred to as “stick-built”, however this term is technically inspecific and inadequate in today’s diverse real estate market.

Factory-Built Housing

Factory-Built homes are also known (technically incorrectly) as manufactured homes, prefabricated homes or off-site construction. These structures are built to varying degrees in a controlled factory environment and can vary widely in terms of quality and finish. Most types of factory-built homes suffer from several detrimental factors, most notably the rapid depreciation associated with them due to not only quality, but also history and (often unwarranted) stigma. Within the broad category of factory-built housing there lies two other main subcategories of housing, each substantially different from the other; manufactured homes and modular homes.

Manufactured Homes

Manufactured homes, also referred to (technically incorrectly) as “trailers”, (also often incorrectly) “mobile homes”, or “on-frame modular homes” are prefabricated homes that are constructed entirely in a factory, built on a steel undercarriage (or “chassis”) complete with axles and wheels, and driven to the final homesite in one or more sections. The sections are then joined together on-site and only minor finishing work is required to complete installation. Of all the different types discussed here, manufactured housing suffers from the most rapid depreciation. There are two main causes for this accelerated depreciation:

  1. Quality. Manufactured housing is designed to be affordable and transportable and therefore the quality of structural materials, mechanical systems and finish materials is typically much lower than that of other types of housing.
  2. History. When manufactured homes were initially developed, they were specifically designed for a much higher level of mobility than seen today. Whereas today the tongue, hitch and axles are usually removed and the home is set on a foundation, initially all of these components were left intact and the structures were considered to be vehicles and therefore shared the depreciation present as such. A degree of this categorization exists today and is present in the depreciation of manufactured housing.

Manufactured housing is also divided into two more technically-oriented subcategories; mobile homes and true (by definition) manufactured homes. Both types are similar by virtue of general construction methods, however in 1974 Congress enacted the National Manufactured Home Construction and Safety Standards Act, authorizing the U.S. Department of Housing and Urban Development to create and enforce federal building standards for the construction of manufactured housing (now known as the “HUD code”). Since 1976, all manufactured homes must meet not only applicable regional and state building codes but also the HUD code. This contrasts sharply with other types of construction which are built to meet regional and state building codes only. The HUD code has differing requirements for different regions due primarily to the occurence of severe weather such as hurricanes or earthquakes within specific areas. In coastal Georgia, manufactured homes must be built to the HUD designated “Wind Zone II” specifications, which require that manufactured homes be built to withstand a 100-mph fastest-mile wind speed. This is to prevent catastrophic damage to manufactured homes during hurricanes.

Manufactured homes built prior to the enactment of this legislation are technically referred to as “mobile homes”, while manufactured homes built after 1976 are referred to as “manufactured homes”. True “manufactured” homes are legally required to display a permanently affixed “HUD Tag”, a small, red metal tag on each section of the home which bears a serial number for that particular section. It is very important to note that manufactured homes on which this tag is not visibly present are not eligible for conventional mortgage financing.

Although most modern manufactured homes are readily distinguishable by virtue of architecture (such as low-pitched roofs and the often unreliable “four-sided box” footprint) as well as quality, many are built with a level of quality rivaling that of site-built homes. Manufactured homes which are financed by conventional mortgage financing are typically setup on permanent foundations with brick skirting and poured footers , which often make the identification of them even more difficult. In these cases, manufactured homes can be identified by the presence of two items; the first being the presence of the red HUD tags on each section and the second being the presence of one or more steel beams running down the length of the home underneath the floor joists.

“On-frame modular” homes are, in practice, a mixture of manufactured homes and modular homes (see below). These are homes which have been constructed on a steel chassis but are instead built to local building codes. These types of homes do not quality for conventional financing unless it can be proven that they also conform to the HUD code.

Modular Homes

Modular construction encompasses a wide range of building methods and degrees of prefabrication. They are also referred to as “off-site construction”, “off-frame modular” and “engineered or pre-engineered construction”. Common usage of the term “modular” refers to homes that are, like manufactured homes, built in one or more sections and transported on-site. The main difference between these types of modular homes and manufactured homes, however is that while manufactured homes have a built-in chassis, axles and wheels, modular homes lack these features and are hauled to the homesite on the back of a flatbed truck. They are then placed onto a conventional type foundation. At this point, higher-quality modular homes can be virtually indistinguishable from site-built homes.

In contrast to these multi-section modular homes, some modular homes are simply homes with major components built off-site but assembled on-site (roofs, individual walls, etc.).

Like site-built homes, all modular homes are built to local building codes (as opposed to the HUD code for manufactured homes) and as a result are typically higher quality than manufactured homes. Since they are constructed in assembly-line fashion in a controlled factory environment, they can cost considerably less than site-built homes. This can, in some cases, be a detriment, since many modular homes designed for low-cost utilize lower quality materials than present in traditional site-built homes.

On the other end of the modular home spectrum, many modular homes are comparable to, or exceed the quality of many site-built homes. This “blurring of the line” has caused considerable upheaval in the real estate sector due the lack of proper legal classifications for modular and site-built homes. Many zoning ordinances and community covenenants prohibit manufactured homes, however modular homes are still regarded in many areas as being comparable to manufactured homes and therefore fall into somewhat of a grey area in these communities. Sometimes disputed due to confusion, modular homes do qualify for conventional mortgage financing in most cases and in most cases, when quality is comparable, they are considered to be the equivalent of site-built housing.