Why Systems-Built?

What is the typical price per square foot for a modular house these days?

Tim McGrath: I don't really know how to answer that. I know that many buyers want to get a general "price per square foot" quote very early in their investigation into a systems built house. And, I understand why they need it. But, it is not very valuable for us or for the purchaser to communicate information that way.

Why not?

Tim McGrath: Well, first of all, that number doesn't "communicate well" and per square prices are easy to manipulate. What are you including in your square footage calculation? The entire house including the basement? Garage too? Only finished space? Only finished space on levels above grade? When people ask me what it costs per square foot, I always ask what they include in square feet, and I have gotten all of those answers. Then the other side of the question deals with costs. Are you including costs like engineering, permit and tap fees, utility connections and construction interest? What about the closing costs on your loan? Or just "construction" cost? So first, most people who ask me don't know what they are including in square feet, then, they don't know what they are including in the costs. So, how good are the cost per foot answers they are getting? That is before you even get into the design of the house.

A rambler has a lot more foundation cost to be spread over the same area as a colonial. Depending on what items are upgraded, the price per square foot can vary a lot. Changing countertops to granite in the kitchen or upgrading to marble from tile or hardwood from carpet. All these things, and a million others, change a per square foot cost significantly on an otherwise "same house".

Asking me what a yet to be designed house's price per square foot is, is like me asking you how much per pound your car cost. First, you won't know, second it won't matter.

Well, if that isn't the question to ask, how can a consumer get a sense of what they can buy for their money?

Tim McGrath: The right way to do it is to determine your budget. You can do that by talking to a lender to understand how much of a loan you can get based on what you can afford (Note: Links to recommended lenders may be found on our homepage). Then, tell the builder what your budget is. We can design the house to fit it. And if we can't get it to work we can find that out up front.

You keep saying "Systems Built" when I ask you about "Modular". Is there a difference?

Tim McGrath: No. There is no difference. "Systems Built" and "Modular" mean the same thing as far as construction technique. I think the industry is using "Systems Built" more often to describe modern higher end modular homes that do not fit the stereotypes of the previous generation designs that were typically associated with "modular".

What are the biggest misconceptions out there about modular or "systems built" houses?

Tim McGrath: I'd say the biggest misconception is that modular is a lot less expensive than stick building. It is not. It is a lot more efficient and it's a better value proposition but it is not a lot less expensive.

You say "a lot more efficient but not a lot less expensive"?

Tim McGrath: You still have to do the site work. You still have to build the foundation, basement, put a heating and air conditioning system in it, pay for septic or tapping into public facilities and permit fees. And of course purchase you land. Those costs are the same whether the house is modular or stick built.

There are labor savings in the efficiency of assembly line construction with the modular, and a lot less waste, but a lot of that saving is offset with material. Modulars have about thirty percent more wood in them. That is a lot more material so that sort of evens things out.

The efficient part of the equation is related to time. Less construction time means less construction period interest. It also means less exposure to risk of material price increases or availability of sub contractors who can kill your schedule. Those things mean efficiency and efficiency means savings. Some of it is hard to measure, some of it doesn't show up in "cost per square foot" projections, but they are real none the less. I say Systems Built offers a lot better value proposition.

If there are not significant cost savings associated with modular, why is your company making such a commitment to that construction technique?

Tim McGrath: Because it is smart. Maybe it is not a lot less expensive than stick building. But it is somewhat less. We tend to reinvest that difference to create a significantly better house. That is what I mean with "value proposition". Most framed walls are done with "2x4's", we can specify that we want ours at "2x6". So we get a stronger framing package. More than that, we get a wider cavity to put a higher level of insulation in with the 2x6 than is possible with the 2x4. It's stuff like that. The end product just becomes a lot better. And, we can avoid issues that are showing up in the stick built world… issues like mold. Our house is constructed in a climate controlled environment. Mold isn't something we are likely to face. Quality control inspections that are standard on an assembly line just cannot be duplicated in the stick built world. That reduces warranty calls and gets a higher level of customer satisfaction. Modular construction technique provides far better energy efficiencies. Ask any stick builder what would happen to a section of his house if it was lifted by a crane. Modular construction is just better built. I don't think many stick-builders would objectively argue that.

I'll give you more...our factory tests every delivery of lumber for humidity content before they begin to build the house. If the kiln dried moisture content is more than 19% or even less for some applications that lumber is sent back to the lumber yard. As a small builder I don't have that kind of clout with a lumber yard. What do you think the guy at Home Depot would say if I brought moisture testing devices in to inspect their lumber? Modular allows me to start with better material, then utilize a better construction technique and it takes me out of the world of "relying on the unreliable" as far as the trades go. Those are a lot of advantages, not insignificant ones either.

So yes you can save some money but a lot of people think that because it is modular they are going to save unrealistic amounts and they are not. Its a better value proposition though. You get significantly more for slightly less. That is the way that it really is.

Why aren't more builders moving into modular?

Tim McGrath: Well, I think that it is hard to totally change the way you do things. People do it the way they learned it. But the trend in the business is towards modular. Pulte Homes is one of the largest builders in the country. They opened a large facility in Manassas to construct components of their houses that are then assembled on site. They are using technology in their building processes to build better and faster. That is what we are doing as modular builders.

I read recently that modular builders grew at twice the rate of new stick built builders last year. So, it is happening.

What if you have a customer that wants to use a traditional stick built construction technique? Does your company still accommodate them?

Tim McGrath: It would depend on what their reasons are. Not all designs translate into efficient modular construction. Some designs don't break down into components that meet transportation requirements. Some designs don't break down at the right forms in the house. Sometimes the homeowner is very particular about what they want. If the modular manufacturer doesn't represent those products or those brands, we can substitute items out and get what the homeowner wants locally. But, the more of those things (substitutions) that there are, the less value you are getting from the modular package. So, there are reasons that modular isn't always the best way to go. But, those reasons are becoming fewer.

As a company, we have to maintain a stick building capability with our crews, supplier and subcontractor relationships to accommodate the designs that don't translate well to modular. Also, there are almost always some items we add to the houses like garages and breezeways that are better built on site.

OK, you have presented a very positive view on Systems Built or modern Modular home construction. Tell us the areas where modular does not compare as favorably as stick built construction.

Tim McGrath: Well, those areas are not so much in the house itself as they are with the process. We are in the era of the "educated consumer". If I tell a potential customer some benefit about going modular that they were unaware of, they go right to the web and do their own research. The stuff we are talking about is what they are going to find out for themselves.

But, there are a couple of things like that (negatively compare to traditional stick building). One would be financing. You can't go out and get a traditional construction loan and have it work well with modular construction. Typical construction loans are based on paying out many "draws" for work in place. I finish the site work and the basement and call the lender, they send out an inspector and say "yeah, that work is in place" and cut a check for that component of the project. Then the foundation, and basement. Same thing. Then the framing, and on it goes like that. You are always getting draws on the construction loan for work in place. With modular construction, you have to pay the factory in advance before they ship the house so it's important to get financing from a lender who is familiar with and typically does this type of construction lending. That would be the biggest thing.

I guess another thing would be that virtually all design decisions have to be made up front when the house is ordered. I don't necessarily think that is a disadvantage but the way a lot of people like to change things in the construction process, I guess some of them would.

A third issue can be the precision of the modular and how that can shake out.

Precision of the modular? Why would that be an issue?

Tim McGrath: Well, it doesn't have to be but it can be for the unprepared. I'll give you an example; in the stick building world, the most common foundation today is the poured concrete basement walls. Over a 50' span or so, it is not uncommon for that wall to be an inch or so out from being straight. In fact, I'd say that is pretty normal. The carpenter then begins framing and adjusts to the walls in place as he goes. When we order a modular, it isn't going to be an inch off. It is going to be exact "right on the money," so it is important to get the basement walls "right on the money" too. We can't have the basement walls off because the house isn't going to be.

So, how do you get the concrete guys to get the wall more straight for you than they are required to make it in a traditional "stick built" situation?

Tim McGrath: Good question. The answer is that you don't. They are trying to make them straight when they end up off a little bit so they are not going to be straighter because we need them to be. What we do is we go out and use engineered solutions for basement walls that go beyond poured concrete. Systems like Superior Walls (www.superiorwalls.com). Superior walls are also built in a factory to precision specs like the modules are. So, they match up on the site with the modules beautifully.

Are wall systems like that more or less expensive than poured concrete walls?

Tim McGrath: More expensive, but they are better, too. A lot better. Poured concrete walls are usually good to around 3,000 psi. (pounds per square inch). These walls are good over 5,000 psi, meaning they are stronger. That wall density also keeps moisture out of the air in your basement so that room becomes better livable space. These walls are also insulated and they are pre-studded and ready for finishing. You are guaranteed a dry basement. They are a superior product to poured concrete walls. So again, some of the savings from the modular technique go back into the house, but the result is again a better product.