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Factory Homes May Be Better

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | April 27th, 2018

The next time you get behind a slow-moving tractor-trailer hauling what looks like a house, or parts of one, don’t scoff. The end result may be a better-built, less-expensive place than the one you live in.

Sure, most people prefer to live in a so-called stick-built home: one that’s put together on the job site, board by board, nail by nail. But it may surprise you to learn that many houses are built, at least to some degree, offsite in a controlled environment -- out of the weather and with far less waste.

The broad heading for this aspect of home building, which Tom Hardiman at the Modular Home Builders Association calls “three-dimensional volumetric construction,” is prefabrication (“prefab” for short).

There are many types of prefab. One is panelization, a term that covers several different techniques. Devin Perry, director of the Building Systems Council at the National Association of Home Builders, says it’s “a catch-all” label that includes pre-engineered floor and ceiling trusses and entire walls. The walls can come framed out, ready to be lifted into place, or they can be almost complete with siding, drywall, wiring, plumbing, windows and insulation.

Many major builders who put up the same three or four models over and over again use some form of panelization. But most smaller builders, the guys who put up only a few houses a year, still prefer to build the old-fashioned way, maintaining that it’s cheaper to do so.

However, Hardiman says the high demand for houses, rising costs and the lack of labor to build them are causing more and more builders to rethink that assessment. “They realize they can’t keep building like they used to,” he says. “They have to be more efficient.”

And building in a climate-controlled factory is nothing if not efficient. Here’s a shorthand version of the process:

The materials are sent to a factory, where they are stored under cover, preventing warping from snow, rain and the hot sun. As the lumber is needed, it’s placed on a series of rollers where it is cut -- sometimes by a skilled worker, other times by a programmed robot -- to the correct size. Still indoors, the pieces are put together, placed on a flatbed truck and hauled to the job site.

It happens quicker than the lumber could be cut and assembled on property -- and remember, time is money. There’s very little waste, if any, and no lost work days because of harsh weather conditions.

There are many other types of prefab construction, including modular homes, manufactured homes, log and timber homes, and structured insulation panels. Modular and manufactured are two of the more common.

Modular construction is a method in which the house is built in large three-dimensional boxes or modules in the factory and shipped to the job site, where they are lifted into place by a crane. Once assembled and permanently attached to a foundation, they are virtually indistinguishable from conventionally built houses. And they are built to local building codes, so they meet the same requirements as site-built houses.

Surprisingly, considering their positives, modular houses have made very few inroads in the housing sector. They reached their peak in 1998, when they accounted for 4 percent of total housing starts, says Perry of the NAHB. But since 2009, they have taken only a 2 percent share. “There has been a slight decline over the last 20 years,” Perry says, “but interest in them has been increasing lately.”

Once known as mobile homes or trailers, manufactured houses were rebranded some time ago to escape their poor image. Nevertheless, they lost their luster around the turn of the century and are just now starting to make a comeback.

In 2000, manufacturers were in their heyday, producing 350,000 to 370,000 units a year. But by 2014, production had slipped to just 64,000 units. However, the NAHB counted 94,000 manufactured homes last year, and expects production to hit 100,000 this year and 111,000 in 2019.

Unlike other factory-built homes, manufactured homes are built to a federal building code promulgated by the Department of Housing and Urban Development. The HUD codes preempt local codes, which are often more stringent.

The units are completely constructed in a factory on a chassis and axles much like the frame your car rides on. They are then delivered via trailer -- hence the “trailer park” term -- to the site. Sometimes units are placed on a permanent foundation; sometimes they are simply parked on the lot.

While it is true that many manufactured homes never move again, some do. As long as the home is still solid enough to withstand the rigors of the journey, the wheels can be put back on and the home towed to another site. The chassis will always be there as part of the structure.

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Going and Coming

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | April 20th, 2018

So you’ve sold your house and are about to move into a new one. Other than the physical move itself, you think you’re about done with the process.

Well, think again. You still have plenty to do.

For starters, notify your utility providers that you will be leaving your current address on the day you close the deal on your old place. Once you close, the utilities are your buyer’s responsibility.

At closing, you might give the buyers a list of the house’s utility providers and their phone numbers. This isn’t required, but it is a courtesy, especially if they’ve been cooperative through the entire process.

It’s also a nice gesture to dig up all the manuals (if you still have them) for your appliances and hand them over to your buyers. That way, they’ll be able to safely operate that fancy range or refrigerator, and have the customer service phone numbers at hand, if needed.

While you’re dealing with the gas, water and electric companies, set up those services for your new home. If the new place is in the same service area, this should be a simple matter of switching your existing account to a new address. But if you are moving farther, you might have to post a fee to open a new account. Don’t forget your other services such as cable, trash pick-up and the like.

Let the post office know your new address, and send change-of-address notices to your friends, relatives and credit accounts. If you don’t notify your creditors, you could be hit with expensive late fees and penalties as your bills are slowly rerouted.

Call your insurance agents to tell them of your impending move. You’ll need to have home insurance in place at the closing on your new digs, and proof of coverage. If you are moving into a flood zone, you might also need flood insurance; otherwise, your lender will balk at closing. Fortunately, flood coverage is available from more than just Uncle Sam’s National Flood Insurance Program. Many private carriers also offer policies, so shop around. Just be sure to have it in place at closing.

Of course, you’ve already lined up a professional mover or a gaggle of buddies to help haul your stuff. But have you started bringing home plenty of boxes? What about newspapers or bubble wrap so you can protect your most valuable and delicate items?

If you are using a moving company, have some cash on hand for tips -- if they do a good job. As for friends, you’ll want to provide lunch and maybe even dinner. Pizza, perhaps, or sandwiches, and obviously some cold drinks -- or hot, depending on the time of year you are switching houses.

While awaiting your move, it might be a good idea to learn your new neighborhood. Figure out your new commute to work; find out where the grocery store and other essential shops are located; ascertain where the restaurants, movie theaters and other entertainment venues are.

Here, your local realty agent -- or the builder’s salesperson, if you are buying a new house -- can be of immense help. He or she should be able to provide maps, pamphlets and other information that can be extremely useful.

At settlement, you’ll be given a stack of important documents, so don’t lose or misplace them in the chaos of moving. Make some kind of provision to put your papers in a safe and secure place until you can store them permanently.

You’ll need your closing statement and perhaps some other documents come tax time. And keep receipts for any move-related expenditures. If you are moving because of work, you may be able to write off these expenses, as long as you meet the IRS’s rules and requirements.

Unless your children are old enough to help with the move, make plans to keep them out of the way. Hire a sitter, or leave them with a friend or relative. But don’t shut them out of the move completely. After all, this is their new home, too. Once everything is unloaded into the proper rooms, the kids can be brought back to help unpack a few things.

Speaking of progeny, make sure to enroll them in their new schools prior to the move. Take them to see the school so they can familiarize themselves with the building, and possibly meet a teacher or two and a few new classmates. Any advance work of this kind will help make the transition smoother.

Along this same line, you might want to walk around the new neighborhood on a weekend with your kids in tow, so all of you can meet the new neighbors. If no one is outside, don’t be shy about knocking on doors and introducing yourselves.

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Verbal Offers; IRS Agreements

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | April 13th, 2018

Cash offers are one thing. But when they are verbal, realty professionals agree that they’re not worth the paper they’re not printed on.

A few months ago, Janice Zaltman, an agent with Keller Williams Partners in Hollywood, Florida, received a text from another agent -- who should have known better -- that he had a client who wanted to make a cash offer on a property Zaltman had listed. Her response: “Please put it in writing and show proof of funds.”

She never heard another word, she said in a recent post on real estate site ActiveRain. When she followed up with the other agent, “he informed me that he could not reach the buyer. She had disappeared.”

Four days later, Zaltman received a similar text from another agent. Her response, again, was: “I don’t do verbal offers.”

Writing offers is what good agents do. It’s part of the job description. “Nobody wants to waste their time,” Zaltman said in her post. But “writing offers and presenting them to get accepted ... is part of our business.”

The responses from other realty pros were nearly unanimous. “I totally agree,” said Kristin Hamilton of Keller Williams Realty in Redlands, California. Her standard response? “I will present all written offers to my sellers.”

Added Jeff Dowler of Solutions Real Estate in Carlsbad, California: “If it’s not in writing, it’s not real. Gone are the days of handshake deals.”

In Maryland, reports Buzz Mackintosh of Mackintosh Realtors in Frederick, verbal offers are not binding. Offers there must be in writing to be enforceable. Ditto in New Jersey, said Marna Brown-Krausz of RE/MAX Greater Princeton.

Bruce Kunz of Century 21 Solid Gold Realty in Brick, New Jersey, contended that “if a buyer can’t sign a paper, there is no way to take them seriously.”

Theo Shaw of Baird and Warner Residential in Evanston, Illinois, said, “When the buyer can’t be bothered to submit a written offer, they are not serious buyers.”

Zaltman, who started this conversation, wrote that there are important reasons never to accept a verbal offer. Several are for the protection of the listing agent, but a couple apply to the sellers.

For example, if you agree to a price verbally, the buyer could rethink their offer and submit a lower one. Or, if the offer is accepted and the buyer has a change of heart, the buyer loses nothing: With no written contract, there is no deposit to forfeit.

Also, verbal offers rarely take into account the many important details that are covered in a written contract. Price is just one item. Among other things, there are points, deposits, inspections, appraisals, financing and the closing date.

The moral is this: If you receive a verbal offer, even at or above your asking price, don’t get too excited. Rather, get it in writing.

It used to be that homebuyers had to pay off their past-due federal taxes to obtain financing. But no more, at least not when the mortgage is being purchased by Fannie Mae.

Under new rules from the government-sponsored company, which helps keep the money flowing to primary lenders, as long as you have an approved payment plan with the Internal Revenue Service, you can qualify for a home loan.

But realize that the monthly payments under the IRS plan will be counted as debt when your lender calculates your all-important debt-to-income ratio. Consequently, you may not be able to borrow as much as you would like.

TIP: Try to renegotiate your agreement with the IRS so you have smaller payments and a longer payoff period. It’s the monthly debt that counts against you, not how long you have to pay it, so this step should allow you to borrow more.

Alternatively, pay your entire tax debt off as soon as possible before entering the housing market. Unless you have the cash on hand right now, you may have to wait a while to buy, but it could be worth it.

As usual, there are rules that come with Fannie Mae’s new guidelines: First and foremost, a Notice of Federal Tax Lien cannot have been filed against you in the county in which the property is located. Also, at least one payment under the IRS agreement must have been made prior to closing. The lender must obtain extra documentation, including:

-- An approved IRS installment agreement with the terms of repayment, including the monthly payment and total amount due.

-- Proof the borrower is current on that contract. Acceptable evidence includes the most recent payment reminder from the IRS, reflecting the last payment amount and date received, and the next payment amount and due date.

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