The Home Store's Blog

Tales of a Modular Home Builder

Should You Tear Down and Replace Your Home

Why Tear Down Your Home     

Are you considering replacing your existing home with a new modular home?  You have lots of company.  Many of us are happy with our neighborhood, local schools, and commute to work.  We’re also attached to our property, often because we like its size and views.  If only our homes were big enough for our families.  If only they had layouts that worked for how we live.  If only they had modern features and better energy efficiency.  If only we could fix our problems with some reasonable and affordable remodeling.

But what if remodeling is not viable?  What if you’d prefer a new home?  If so, you’ll likely consider purchasing a building lot – if not in your neighborhood, at least in your town.  But what if your town is well established with a home already built on virtually every lot?  You might then consider “tearing down” your home and replacing it with a brand new modular home.

Can You Tear Down Your Home

Before you contact a modular builder, you should learn what your town’s zoning, planning, and building departments allow.  Their regulations are partly in place to protect the existing character of your town and neighborhood.  They dictate whether and how you can tear down your existing home.  They also determine what you can build as a replacement.  This usually includes the size, footprint, square footage, height, and style of your home.

If your home is in a historic preservation district, you may be prohibited from tearing down your home, or at least required to adhere to the architectural standards of your neighborhood.  In fact, your abutting neighbors will likely have some input into what you can build.  It’s often best to speak directly to them in advance of pushing ahead.  If your property is part of a subdivision that is governed by a homeowners association, make sure it’s bylaws do not prevent your home from being torn down.

You should also check with your gas, electric, and water utilities to learn how you can disconnect these from your home.  You should consult with your fire department to see what they need. You should expect your town to require an inspection for toxic materials, such as asbestos or an old diesel tank.  And you should speak with your board of health, if you have a septic system, to see what’s needed to comply with its regulations.

If you skip these steps, and assume you can tear down your home, you may waste a lot of time designing a home you cannot build.

The Cost to Tear Down Your Home

Be prepared to pay between $5,000 and $25,000 to demolish your existing home, haul the materials away, and cover the disposal fees.  You’ll pay even more if your home has asbestos or other toxic materials.  You’ll also likely need to pay for a demolition permit.

How to Finance the Tear Down and Replacement of Your Home

If you are financing your project, you must qualify for a construction loan and mortgage in terms of income, debt, and credit.  (Check out my blogs that explain what you need to know about financing a modular home.)  In addition, there are a couple of financial considerations that are unique to demolishing and replacing your existing home.  Take these seriously, since they’ve tripped up many customers in the past.

Unless you own your home outright, you cannot tear it down without first paying off the existing mortgage or obtaining written permission from your current lender.  However, your lender will not grant permission if the loan balance is more than the value of the land, since the land will be the only equity left after the demolition.  Should you tear down your home without paying off your loan or obtaining permission, your lender will invoke the default clause in your mortgage, which will create some serious legal headaches for you.

If you have an existing mortgage, you will need a loan that covers the balance owed on your existing home, the demolition, and the construction of your new home.  A consideration for your lender is whether you will have sufficient equity in your property after the demolition and repayment of your current loan balance.  The equity is needed to serve as a down payment on your new loan.  If the outstanding balance is substantial, however, you may not have enough equity, unless you have another source of funds

A second consideration for your lender is whether the value of your finished home will be sufficient to support the total of your new mortgage. The lender needs to be confident that if you default on your loan, they can recover the balance by selling your property. They will determine the value of your new home by obtaining a professional real estate appraisal.

For more information about why and how to tear down your home so you can replace it with a new modular home, see Why Build Modular and Financing a Modular Home in my book The Modular Home.

A Modular Home that Allows You to Age in Place

I’m a member of the baby boom generation.  Like most people in this demographic, I’m not as nimble as I once was.  Even so, I get around well “for my age”, although I do have the help of a new left hip.  I exercise regularly and don’t need the assistance of a cane, walker, or wheelchair.  I’m proud to say that I can still climb stairs as fast as most 30 year olds.  But this won’t always be so, and it’s important that I recognize that, especially when my wife and I build our next home.

Our T-Ranch model home built to Universal Design specifications. This is one of our most popular homes.

Our T-Ranch model home built to Universal Design specifications. This is one of our most popular homes.

In my experience as a modular home builder, however, many people underestimate the inevitable effects of aging when they design their home.  It’s not because they fail to think about it.  Nor because we fail to bring it up when discussing their selections.  In fact, our T-Ranch model home displays several Universal Design features that should be considered by anyone who wants their home to be user friendly as they age.  But most people have a budget and when forced to make a choice between a feature that will benefit them in the distant future or an amenity they really want now . . .  .  Well you know how that goes.

Adding a bridge can create a level entry without having to build a ramp. The moat keeps the dirt away from the front of the house and allows the water to drain away.

Adding a bridge can create a level entry without having to build a ramp. The moat keeps the dirt away from the front of the house and allows the water to drain away.

The most vivid example for me occurred not long after we built our T-Ranch model home.  Two sisters in their 70’s decided to build a custom one-story that contained many of the Universal Design options in our model.  However, they didn’t choose to eliminate the stairs to their front or back door.  They said they were in good health and able to get around on their own.  I pointed out that it was easier to create a level entrance without ramps if we did this while building their home.  This is always true, but it’s particularly true on a property that’s very sloped, which was true of their lot.  The stumbling block was the extra fill required to build a “bridge” to one of her exterior doors.

There were two reasons they decided against this.  One was because the fill would cost a few thousand dollars, which they could only afford by giving up the hardwood floor in the dining room and living room.  In addition, they didn’t like how the property would look with the extra fill.

Sadly, one of the sisters had a serious stroke two years after they moved into their home.  Although she survived, she could no longer move about without a wheelchair.  Since there was no level entrance, the sisters had a ramp built to their back door.  It was quite sizeable – and by their own admission unattractive – because the door was five feet above the finished grade.  But it was the only practical choice at that point.

When I tell this story, most people are surprised the sisters made the choice they did.  But I’ve found that many people make these kinds of choices because of how strongly they want their dream home to include all of their desired amenities.

Ultimately it’s your choice what you build.  But give serious thought to building a home that meets your family’s needs now and into the future.  Design it so it allows you to age in place without forcing you to make expensive renovations, move, or radically alter your lifestyle when your abilities start to slip.  It’s certainly something my wife and I will do.

For more information about selecting specifications that will meet your family’s needs now and in the future, see Modular Home Specifications and Features in my book The Modular Home.

Second Story Modular Additions

Advantages of Second Story Modular Additions

If you are building a second story modular addition, you are most likely doing it to create more living space rather than a separate living unit. The general contractor will turn your one-story into a two-story by removing the roof from your home and immediately setting the new modular second story with its own built-in roof on top.

The speed of modular construction is a tremendous benefit when building a second story addition, since the addition can be set in place within hours after the roof is removed from your existing home. Once the modular addition is in place, the inside of your home is protected from a sudden storm. A site builder cannot realistically protect your home as quickly. Another advantage is that the second story can be finished faster. This means your family can use the upstairs more quickly, even if it must wait to enjoy the downstairs until the remodeling is completed.

Requirements for Second Story Modular Additions

There are two conditions that must be met before you can build a second story modular addition. First, the exterior dimensions of the existing home must be compatible with one of the modular manufacturer’s production sizes. If your home is too wide, a modular will not easily work. If your home has multiple bump-outs, a modular might work, but it may be impractical and expensive. A home can be up to 3-feet narrower than a module, however, and adding a wider second floor can create an attractive, cantilevered garrison colonial look.

The second condition is having an existing home and foundation that are structurally capable of carrying the additional weight, which is substantial. You will need to hire a structural engineer to make this determination. He may give you specific instructions on fortifying the structure or the foundation, which might be unacceptable or too expensive. If you decide to carry out his instructions, the GC will complete them as part of his remodeling. Before the engineer completes his final written report, he will need to see plans of exactly what you are building and receive detailed information from the manufacturer.

Design Issues for Second Story Modular Additions

When designing an addition, you must decide where the stairs to the second floor will be located. You must also determine a location for a chase from the basement to the second floor to carry the electrical wires, HVAC supply and return ducts or pipes, and plumbing pipes for second-floor bathrooms. If the GC is connecting to a forced-air system in the basement, the chase must be larger, since the ducts will take up more space than hot-water lines.

Second Story modular additions can make ranches look like brand new homes.

Second Story modular additions can make ranches look like brand new homes.

The design of the second story elevation must be coordinated with the first-story elevation. The window locations on the second story should be arranged in a pleasing fashion. This decision should be made early in the design process, since the location of the interior partition walls on the second story must be coordinated with the window locations (you cannot put a wall in the middle of a window). In addition, the window style and sizes should be matched as closely as possible to the existing home.

The exterior elevation of all four sides of the finished home must take into consideration any first-story bump-outs or structures. For example, the location of an existing bay window, porch, sunroom, portico, recessed entry, or garage can pose special design challenges. The second story must be planned so that it does not affect either the function or aesthetic appeal of these structures. In some cases, it might be necessary to remove a part of the bump-out or attached structure, such as a garage roof, before installing the second story. If the modular second story will be cantilevered, the overhang can pose additional problems with a first-floor bump-out, such as a bay window.

The exterior siding on the second story must fit with the siding on the first story. Otherwise, the siding on the first story will have to be replaced. If you currently have wood siding, you might need to repaint or restain it to create a color match. Similar coordination issues arise for shutters and other exterior trim details.

If you have a chimney on your existing one-story home, you will need to make it taller to reach above the roof of the second floor. In addition, all trees overhanging the first story will need to be removed.

Material Disposal and Second Story Modular Additions

The actual removal of the existing roof as well as any other materials you are replacing in your existing home, such as the siding or windows, will be a task unto itself. The cost of disposing of these materials will be appreciable.

Most importantly, when you are done building your second story modular addition, it will almost feel like you have just built a brand new home.

For more information about building second story modular additions, see Building a Modular Addition in my book The Modular Home.

Attached Modular Additions

The Two Uses of Attached Modular Additions

Attached modular additions are sometimes built to create a separate, additional living unit and sometimes to create more living space. Most zoning boards consider any addition with a separate kitchen to constitute a separate living unit, which requires that the wall between the two units must serve as a “fire stop.” The easiest way to accomplish this is to have the modular manufacturer build a fire-rated wall on that side of the addition.

Zoning and Attached Modular Additions

To qualify as an addition, your community’s zoning regulations will require that it be connected to your home. Detached additions are almost always disallowed. You can connect the two by attaching the addition directly to your home or by joining the addition and your home to another room in between, such as a small site-built mudroom or large, modular great room.

Locating Attached Modular Additions

Your property’s topography may limit where you can build an attached addition. If one side of your lot is wetlands or contains a septic system or municipal sewer pipe, you might not be able to build on that side. You will have the same problem, although to a lesser extent, if one side of your land has a steep slope or an outcropping of rock. Although you will want to locate the addition so that the floor plans of your home and addition work well together, you may want to consider an alternative if the preferred location would incur substantial additional expenses.

The modular manufacturer will want to take into account whether the proposed addition will impose structural loads on the existing house or whether the existing house will impose structural loads on the proposed addition.

The modular manufacturer will want to take into account whether the proposed attached modular addition will impose structural loads on the existing house or whether the existing house will impose structural loads on the proposed addition.

Roof Design of Attached Modular Additions

In designing a modular addition, the dealer and GC should make sure that the intersecting roofs shed water and snow properly. This is particularly important when the addition is being built in areas with the potential for heavy winter snow, because the roof of the addition needs to be attached to the existing home so that the two can carry the load together. Depending on how and where the modular addition will be attached, the manufacturer may ask you to hire a structural engineer to determine what needs to be done to make the two structures work together. The engineer may require the GC to beef up the existing roof to carry the additional load.

The windows on the left side of the living room and family room in the existing home will have to be removed, and a new opening will need to be added in the living room to receive the door to the addition’s kitchen. The two left side windows on the second floor on the existing home will also need to be moved if the roof pitch on the addition is steep.

The windows on the left side of the living room and family room in the existing home will have to be removed, and a new opening will need to be added in the living room to receive the door to the attached modular addition’s kitchen. The two left side windows on the second floor on the existing home will also need to be moved if the roof pitch on the addition is steep.

Matching Openings Between an Existing Home and Attached Modular Additions

Before your modular addition is built, the GC must measure exactly where the openings into your existing home are located. The modular dealer will then use that information to line up the connecting openings in your addition.

Scope of Work for Attached Modular Additions

If you are attaching a modular addition directly to the existing home, the GC will need to remove the siding on the existing home’s wall. Any windows or doors on that wall will also need to be removed, and the resulting holes will need to be closed off and finished so they match the home. No matter how well the addition is set alongside the existing home, there are bound to be small gaps between the two. The GC will need to tie the two buildings together on the inside and outside to hide any gaps. Next week I’ll discuss the second-story modular additions.

For more information about building modular additions, see Building a Modular Addition in my book The Modular Home.

Modular Home Additions and General Contracting

Modular Home Additions Need a General Contractor

When building a modular home, it is recommended that you hire a general contractor (GC) with modular-construction experience. In some respects, this advice is even more important when building modular home additions. There are usually a number of surprises when building an addition, regardless of the type of construction. Most of them derive from the fact that you are connecting a new structure to an existing structure that was not specifically designed to accept it. Surprises are typically more frequent and complex with an older existing home. Construction surprises almost always cost money and time, and they can cause personal stress, especially if you remain in your home throughout the project. The best way to manage the challenges of building an addition is to have a professional GC directing the activities.

The Scope of Work for Modular Home Additions

If you are able to build a modular home addition, you will need to work with each of your dealer candidates to determine a floor plan, specifications, and price. The steps will be essentially the same as for building a single-family modular home, except that you will probably need at least one of the dealers to help you create a custom plan. Although most manufacturers build additions, few offer standard plans that were created specifically for this purpose. Many standard modular house plans, however, can do double duty as modular home additions. For example, small ranches can serve as in-law apartments, and the second story of an appropriately sized two-story can work as a second-story addition.

I recommend that you provide prospective dealers with photographs and approximate measurements of the inside and outside of your home. This will help them create a design that meets your needs and fits your existing home. When you sense that a particular dealer can help you, invite him to see your home and take his own measurements.

Take similar steps with your GC candidates. Once you have confidence in a candidate, invite him to visit your home to make sure he can do what you and your dealer are proposing; he should also take his own measurements. He can then finalize what he needs to do to build the addition and present you with a price for his services. Add his price to your dealer’s price and decide if the project can meet your budget.

The GC tasks for modular home additions will be similar to those in building a new modular home. These tasks include completing the site work, foundation, plumbing, electrical, heating, and interior and exterior carpentry. The GC will need to build any site-built structures you need, such as a deck. He will also be responsible for completing some construction tasks that are unique to building an addition, which will be discussed in the following sections.

Septic System and Sewer Hookup

If your existing home has a septic system, you must obtain approval from the local board of health to use your current system with your modular home addition. The determining factors usually are whether your new combined home will have more bedrooms than your existing home and if the septic system was designed to accommodate them. Without the approval, you will not receive a building permit to go forward. The board might give its approval only if you first enlarge or replace the existing system. Even if the system is adequate as is, connecting to it can create some additional expenses. For example, if your addition has a new bathroom and its waste pipe is below the line connecting to the septic or sewer system, you will need a pump.


You should expect that part of your lawn and landscaping will be disturbed by the excavation work. You can preserve some of your shrubbery by relocating it before the construction begins. If you have a paved driveway, it might suffer some damage as well.

Utility Wires and Antenna

If any utility wires are in the way, the GC should arrange for their temporary relocation before work begins. Since utility companies often require a few weeks’ notice, this must be scheduled in advance. In addition, other items attached to your home that may affect the construction of the modular home addition, such as a TV antenna, will be need to be taken down before work is begun and then reinstalled after the addition is complete.

When building modular home additions the electrician can use the existing electrical meter or add a second meter when connecting the addition to the electrical service.

When building modular home additions the electrician can use the existing electrical meter or add a second meter when connecting the addition to the electrical service.

Electrical Work

The electrical service to your home might need to be upgraded, especially if you have an older home with a 60- or 100-amp service. The location of the electrical panel box will influence the amount of work the GC needs to do to connect to the modular home addition. If it is on the opposite side of the home, it will cost more to make the connection. To be safe, the GC should instruct the modular manufacturer to make each electrical run long enough to reach the panel box. Another option is to use a junction box or subpanel. If you are building the modular home addition as a separate apartment, you may want to install a separate electrical service, so that the occupants will receive their own electrical bills. The electrician can do this by installing a dual-meter socket.

When building modular home additions the general contractor should connect the smoke detectors in the addition to the smoke detectors in the existing home.

When building modular home additions the general contractor should connect the smoke detectors in the addition to the smoke detectors in the existing home.

Smoke Detectors

The building inspector or fire marshal might require you to upgrade your exisiting home’s smoke detectors. You should do this even if it is not required. Have the GC outfit your existing home with hard-wired detectors, if it does not already have them. Instruct your modular dealer to coil an extra wire in the basement that connects to the smoke detectors in the addition. The electrician can then pull the wire into the existing home to connect the smoke detectors in the existing home to those in the addition. When the two systems are interconnected, a fire in any part of the home will trigger the alarm in all parts, which is exactly what you would want.

Heating and Air Conditioning

If the GC intends to tie the modular home addition into your current HVAC system (heating, ventilation, and air conditioning), your boiler or furnace might need to be upgraded to take on the additional demand. You might be able to do this affordably if the heating system is slightly oversized and retains some untapped heating capacity; it is not unusual for contractors to provide more capacity than is actually needed. Otherwise, you will have to consider an entirely new heating unit.

This same point holds for central air conditioning. You will only be able to tie into the existing compressor if it has sufficient capacity.

You can avoid the expense of replacing the heating system by using electric-baseboard heat in the addition. Putting electric heat in a second-story addition for a home with hot-water or warm-air heat on the first story might even save you money. Since the second story is likely to be made up of bedrooms, you can take advantage of the fact that the temperature in each room can be controlled separately with electric heat. However, if you have central air conditioning on the first floor, you will likely want to extend the ducts into the addition.

Electric heat can also work well with a small in-law apartment; its small size will keep the heating cost low. If you have a separate electric meter for the apartment, you and the occupants will be able to identify the exact usage.

Another option is to install a separate boiler, furnace, or compressor for the addition. You may want to consider this alternative when your current heating and cooling systems are on the opposite side of the home from the addition and the GC believes the distance will cause too much heat and cooling loss between the unit and addition.

Water Heater

You will have similar issues with supplying hot water to the modular home addition as you will have with the heat and air conditioning. Unless you have excess capacity in your current system or want to upgrade, you will need to add a separate water heater for the addition.

Next week I’ll discuss attached modular home additions.

For more information about building modular home additions, see Building a Modular Addition in my book The Modular Home.

Modular Additions

Modular construction is a great way to build an addition. You get the quality and price advantage that modular homes are known for along with faster build time. Speed is particularly beneficial when building an addition, since the construction will temporarily disrupt your family’s life, especially if you remain in your home while the work is being done.

Modular Additions:  Attached and Second Story                                     

Modular additions come in two types. The most popular type is attached to the side of a home to create either a separate living unit, such as an in-law apartment, or additional rooms, such as a new kitchen, dining room, and great room. Some customers build an in-law apartment at the same time that they build a new modular home. The second type of modular addition is set on top of a one-story home to make it into a two-story.

An ECHO modular in-law addition added to the right side of this modular T-Ranch

An ECHO modular in-law addition has been added to the right side of this modular T-Ranch

Modular Additions:  Ensuring You Can Build

Before you spend too much time considering an addition, find out whether or not you can build one, and what will be required if you can. There are any number of issues that can prevent you from going forward. Not surprisingly, several of the issues that affect your ability to build an addition are the same as those that can restrict what you can do with a particular building lot.

Modular Additions:  Covenants, Deed Restrictions, and Easements

When building an addition, you will be compelled to abide by any covenants and deed restrictions that apply to your property. Almost all subdivisions have covenants limiting what you can build, and a previous owner of the property might have placed a restriction on what you can do. Although covenants and deed restrictions do not usually address additions, the only way to know for sure is to check. You will also be prevented from building an addition on any part of your property where someone has an easement or right of way, unless you negotiate new terms that are recorded on your deed.

It's impossible to tell from this photo that this was a ranch made into a two-story with a second-story modular addition.

It’s impossible to tell from this photo that this was a ranch made into a two-story with a second-story modular addition.

Modular Additions:  Zoning Regulations

Local zoning requirements may affect several things you might want to do with your home. Setback regulations will prevent you from building an addition too close to abutting properties or the street, which could force you to build the addition on the side of your home that is less practical and affordable. If your property does not have a current survey, or if the boundary stakes are not in place, you may need to hire a surveyor before you can convince the building department that your addition complies with the setback requirements. It is unlikely the setback requirements will have much bearing on your plans if you are building a second-story addition.

Most communities have specific zoning regulations governing if and when you can add a second living unit to your home, such as an in-law apartment. Some require a special permit or a zoning variance for any two-family unit, regardless of use or size, while others provide an exception for an in-law apartment. Still other communities allow you to build only two attached single-family units on larger lots than are required for a single-family home. Zoning regulations can dictate how large a home you can build. Some communities restrict how tall the roof can be.

Modular Additions:  Building Codes

Some building codes require anyone constructing an addition to upgrade their existing home to current building-code standards. For example, the building inspector might stipulate that you outfit your existing home with approved smoke detectors that connect to those installed in the addition.

Modular Additions:  Module Access

In order to build a modular addition, the transporters, crane, and set crew must be able to set up in the proper location on your property. Even if your original home is modular, and access was not a problem when you built it, it is possible that you could run into a problem with the addition.

Modular Additions:  Financing and Appraisal

Before entering into a contract to build an addition, determine how you will pay for it. If you intend to use a lender to finance the construction, you may have a choice of either an equity or a construction loan. To use an equity loan, you must have sufficient equity in your home, since the lender will only allow you to borrow against that equity. An appraiser hired by your lender will determine the amount of equity in your home. If you owe money on your home but the mortgage is small, the appraisal is less likely to matter, since the lender will have sufficient collateral even with a low appraisal.

If you have little equity in your home, and need a construction loan, the lender may require a down payment. It will also want an appraisal of your home that includes the proposed addition. Before you spend too much time exploring construction costs, speak with a couple of lenders to see what they can do for you.

When Modular Additions Are Not the Best Choice

There are times when it does not make good financial sense to build a modular addition. In general, it only makes economic sense to build a modular structure if the modules are reasonably sized and have some value-added features. A one-room addition, such as a great room measuring 20 feet by 27 feet 6 inches, does not meet these criteria. A small multi-room apartment, however, with a kitchen, bathroom, bedroom, and living room, such as a 22-foot by 24-foot in-law addition, does; for example see our Harmony 1, 2, and 3 in-law addition plans. As these examples show, size is not the only relevant factor. The great room is bigger than the in-law apartment, but it is full of empty space. This kind of structure is better built by a conventional stick builder.

Next week I’ll discuss the general contracting work required for modular additions.

For more information about building modular additions, see Building a Modular Addition in my book The Modular Home.

Multitask Your Preconstruction Tasks – Really!!!

These days most of us are forced to tackle multiple tasks at once both at work and home.  The fact that the demands on our time and energy are so stressful is bad enough, but the evidence is that we aren’t even getting much for our efforts, since multitasking is often unproductive. So it might surprise you when I suggest you’ll need to multitask  your “preconstruction tasks” when planning to build a modular home – if you are to build it on schedule.

Work on Several of Your Preconstruction Tasks at the Same Time

Actually, I’m not advocating multitasking. What I’m encouraging you to do is to work on a few of your preconstruction tasks at the same time.  For a little background about how many preconstruction tasks you’ll need to complete before your modular home is delivered, see these three posts:  Your Modular Dealer and Financing Tasks, Your Permit and General Contracting Tasks, and Other Preconstruction Tasks.

As you might imagine, if you do each of the preconstruction tasks one at a time – that is, sequentially, it’s going to take you a lot longer than if you do a few of them at the same time – that is, concurrently.  This doesn’t mean you literally should work on several preconstruction tasks at the same moment or even the same day, which is what you do when you multitask.  But it does mean you should get the ball rolling with as many tasks as you can so all of the balls are rolling forward together a little each day.  This is especially important because many of the preconstruction tasks take several weeks and much of the work done during this time is being done by others.

For example, here’s how long it typically takes to do each of the following:

Receive, review, and revise 2 drafts of plans and 1 set of permit plans from the factory – 8 weeks

Obtain an engineered and approved septic design – 4 weeks

Close on a construction loan – 6 weeks

Obtain all signatures required to apply for a building permit– 2 weeks

Starting Your Preconstruction Tasks Won’t Take a Lot of Your Time

Keep in mind that starting each of these preconstruction tasks will take comparatively little of your time even though it will take weeks for others to complete them. For example, the engineer will take several days to design your septic system, and the town will take a couple of weeks to approve the design.  So although it will only take you a few hours to locate and hire the engineer, you will add four weeks to your schedule if you don’t start this preconstruction task until you’ve received your financing and permit plans.

The Consequences of Completing Your Preconstruction Tasks One at a Time

Now imagine you wait to start each of the four tasks until another one is completed.  In that case, it will likely take 20 weeks to get through them all.  But if you start all of them within a couple of weeks of signing a contract with your modular dealer, you can be done in as little as 8 weeks.

I’m not advocating that you sign a contract before you have received a preapproval from your lender. But once you have the preapproval, I recommend that you move ahead with your other responsibilities.  If you do not, you are likely to fall behind your own schedule by weeks, and more likely by months.

For more information about insuring your home during its construction, see  Selecting a Modular Home Dealer, Selecting a General Contractor, and Building a Modular Home on Schedule in my book The Modular Home.

Modular Home Insurance During Construction

Modular Home Insurance                                               

When building a modular home you need insurance coverage for five parts of the project:

  • The delivery of the modules
  • The set of the modules on your foundation
  • The work done to your land before and after the modular delivery (tree clearing, excavation, foundation, etc.)
  • The work done to complete the “button-up”  of your modules after the set
  • The completed home after you receive a certificate of occupancy from the building department

Most of this coverage should come from the companies that are completing each step.  The delivery and set  of the modules, including the crane, should be insured by the modular manufacturer and/or modular dealer.  To ensure your modular home insurance is in place, you need to ask each modular dealer you are considering to have their insurance company mail you an insurance binder.  It is best to receive it directly from the insurance company, since it is fairly easy to fake the forms. Make sure the coverage includes sufficient liability insurance and workers’ compensation; ask your insurance agent for the recommended amounts. This will limit your potential liability if the dealer or one of his subcontractors is not fully insured and something goes wrong during the set, such as an accident causing a serious personal injury or significant property damage to your home.

You need to follow the same procedure with your general contractor (GC) and any subcontractors you directly hire to complete the work to your property and the button-up of the modules. Secure a certificate of insurance from each of your contractor candidates before making your final selection.  Ask your own agent to review the coverage.

You should also insist that your contracts with your modular dealer and contractors state what modular home insurance coverage each of you is obligated to provide. You should accept responsibility for obtaining a builder’s risk policy or its equivalent. The contractors should accept responsibility for providing general liability insurance and, if they have employees, workers’ compensation.

Modular Home Insurance with a Builder’s Risk Policy

The advantage of a builder’s risk policy over a typical homeowner’s policy for your own modular home insurance is that it automatically provides coverage for theft of building materials and supplies as well as vandalism. You should direct your insurance agent to provide this additional coverage even if you opt for a homeowner’s policy. Since your personal circumstances may differ and your agent may offer other alternatives, consult with your agent.

Modular Home Insurance and Lender Financing

If you are paying for the modules with funds from a lender, which means you are paying by the assignment-of-funds method, your lender will require you to have your modular home insurance in place when you close on the loan. If you are financing your home with your own funds, have coverage in place before your GC begins any work.

If your lender is paying for the modules after the set, the dealer’s insurance should be responsible while the modules are parked on your property before the set, since you will not yet own them. If the dealer does not provide coverage, you should direct your insurance agent to provide it. If you are using private funds to pay for the modules upon delivery, your insurance should provide coverage when the modules are parked on your property, since you will already own the units. You should verify this. Your insurance is less likely to provide coverage when the modules are stored away from your property in a staging area. If you cannot obtain coverage for your situation, ask the dealer for help.

Instruct your insurance company to mail or fax your modular dealer a certificate of your modular home insurance a few weeks before the scheduled delivery. This proves that you have the necessary coverage. The effective date should be set at least 48 hours before the scheduled delivery date and remain in place for at least a week. The certificate should state, “[Dealer’s company name] is loss payee as interest may arise.” The certificate protects the dealer and manufacturer should your modules suffer damage after they are set on the foundation but before your lender pays the dealer. This might happen, for example, if lightning were to strike the modules the first night of a two-day set. Should this unlikely event occur, the certificate ensures that your insurance company would compensate the dealer so he can pay the manufacturer. Once the dealer is paid for the house, he no longer has any insurable interest, so your insurance coverage reverts to you and your lender. The manufacturer’s insurance should cover the modules while they are being delivered to the site. The dealer’s and crane company’s insurance should cover the modules while they are being lifted onto the foundation.

Modular Home Insurance for Personal Property During Under Construction

Do not move any of your belongings into your home before your GC finishes his work without his permission. If the GC agrees, he will ask you to use those rooms he has finished. If you intend to store your things in the basement, he must have already completed all of his work there. Since you are responsible for theft or damage, ask your insurance agent about your coverage.

Modular Home Insurance Costs Less

Modular home insurance during construction will save money compared to insuring a site-built home due to the shorter construction time. The shorter construction period also lessens your exposure to the typical risks that attend construction sites, such as vandalism and the pilferage of construction materials. Vandalism is further curtailed because the modules can be secured more rapidly than a site-built home. The ability to quickly secure the modules also makes it more difficult for someone to steal construction materials. Pilferage is further reduced because of the size of the modules; you cannot walk off with a module in the way you can carry away a few boards of lumber. Completing the home more quickly also reduces your biggest financial risk, that of a personal injury to a contractor working on the job or a neighborhood child playing around the home after hours.

For more information about modular home insurance during its construction, see  Selecting a Modular Home Dealer, Selecting a General Contractor, and Financing a Modular Home in my book The Modular Home.