Video - Beginners Guide to Modular Homes

This is a great video from the Modular Council showing the basics of the building a modular home.



Faster, Better,Cheaper - Awesome!

Champion Enterprises

Phyllis Knight, the CFO for Champion Enterprises, gave a speech today about the company at the Morgan Stanley Small Cap Executives Conference in New York. Here is the link to her presentation and slides. If you have any interest in the direction that Champion and the industry are taking, it is worth listening to her presentation.

Here are some of the highlights:

• 2007 HUD code Deliveries - 115,000 est. (All-time High in 1999 - 379K units)
• By 2011, Their sales will be split evenly between HUD code homes, modular and international modular
• There will be no growth in HUD code homes. 115,000/yr for a long time.
• Production capacity is in the 40-50% range today (1 week backlog) - Hopes to see it in the 80s soon
• They have strong cash flow and low CAPEX - They have the free cash flow and can do more "bolt on" acquisitions of modular home builders
  

Champion really has its model figured out. The future to factory-built housing is not in the HUD business - It's in the modular business. "The man with the gold makes the rules" is so true today. The financing is biggest hinderance to the HUD business and with modular you know longer have a financing problem.

When should a Manufactured Home Dealer Sell a Client a Modular Home?

10 Reasons to Consider

By Chris Tawney

As construction lenders that specialize in factory-built housing, we often are contacted by dealers who are struggling to complete a difficult manufactured home transaction. They have spent countless hours contacting lenders trying to find a loan program that just does not exist. They could be saving themselves time and possibly saving a transaction if they just discussed with their client building a modular home instead.

When we pose the idea of a modular home to a dealer, we often hear, “a modular home cost so much more than manufactured home.” True, a modular home could cost $10,000 to $20,000 more than the same size manufactured home because of the costs for the specific state and code upgrades, the added cost of the permanent foundation and additional set up costs. But, what the dealer fails to realize is that the upfront costs are usually outweighed by the other advantages of a modular home.

First, the mortgage interest rate that the borrower can get on manufactured home is always higher than a modular. Lenders perceive an added risk to a manufactured home and adjust their rates higher for that risk. This higher rate equates to a higher monthly mortgage payment for the client. Conversely, the buyer of a modular home will get a rate that is consistent with current market rates. The client has to look at all of the costs of homeownership and not necessarily just the additional upfront cost of the modular home.

Secondly, the modular home will appraise for more than a similar manufactured home home. It has been our experience that the costs of the project are typically 10% to 30% less than the appraised value of the home. It goes without saying, this equity created is something that is extremely beneficial to the client. We recently had a client come to us wanting to purchase a piece of land and build a manufactured home on it. When we did our appraisal the value was equal only to the total costs of the project (land, home & improvements). We suggested doing the appraisal as if the same was a modular. When we did that the home didn’t appraise only for the costs – it appraised for $180,000 more than the costs!

Here are 10 reasons when it makes sense to sell a client a modular home –

- The land value is too great and the highest and best use of the property is to build a modular home on the property.

- The borrower needs a stated income loan program.

- Once the manufactured home is installed on the property it will not have sufficient value

– There are no comparable sales in the area.

- The borrower does not fit into any of the available loan programs available for manufactured housing (Conventional, VA, FHA or specialty loan programs).

- The borrower would like in the future to have a home equity line of credit (HELOC). National lenders do not offer a HELOC for manufactured homes.

- The borrower would like to do a Zero Down loan program and he can’t qualify for an FHA program. If the client built a modular home, any immediate equity would be considered in his loan approval.

- The borrower has a FICO below 620 and does not qualify for an FHA loan. There are modular home construction loan programs for credit scores as low as 550.

- An investor client wants to develop a piece of land. There are few alternatives for construction financing for manufactured home investment properties. There is ample investor financing options when using modular.

- The borrower needs a sub prime loan.

- The client will create a non-conforming property – This happens when a manufactured home is placed in a neighborhood of site-built homes. This home will be nearly impossible to finance, and ultimately sell in the future. This is a big disservice to the client.

The reasons to sell a client a modular home are many. There are countless other reasons for when it makes sense to sell a client a modular home. Sometimes it is the dealer’s responsibility to talk the client out of one these solutions especially if the client is paying cash for the home. So, the next time a client is about to walk out of your office because they can’t get financing ask the question – What about a modular?

About the Author

Since 2005, Chris Tawney of Eagle Nationwide Mortgage (formerly Sunset Mortgage Co., LP, now a division of Eagle National Bank, NA.), has completed more than 80 modular home construction financing transactions for clients throughout the western U.S. He specializes in construction financing for factory-built housing. His offices are in Phoenix, Arizona and can be reached at (877) 898-1465 or on the web at www.FactoryBuiltLending.com