The Insider's Guide to Manufactured Home Dealers

What you should know about manufactured home dealerships.

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Buying a manufactured home is a great option for anyone wanting a custom home at an affordable price. 

Once you have made the decision to purchase a new home, the next step will be choosing the builder. There are approximately 70 builders in the US, offering more than 300 different models. You will want to be especially careful to notate the parent company of the builders. Mergers and acquisitions are a regular occurrence in the manufactured home industry.

 

The largest manufactured home company in America now owns many different builders. At last count, four companies own more then 70% of all manufactured home builders in this country. Companies that appear to be competitors are actually sister organizations. 

After you have chosen the builder, you'll need to pick a manufactured home dealer and this decision is just as important as the builder.

Dealer Profit 

All dealerships must be licensed and bonded to sell manufactured homes. A dealership can sell homes from only one builder or several. 

Every business has to make a profit and manufactured home dealers make their profit in several ways. The most notable are hold backs, retail markup, and referrals. 

Manufactured homes have a built-in profit for the dealer called the hold back. This is a set percent added to the invoice price. Even if you purchase a home that is only 1% above the invoice price, the dealer is still profiting from the hold back, they just don't get it until the end of the year.

 

Display Homes

Dealers have to have display homes for the consumers to inspect. A dealer can buy a home directly from the factory if they have the capital. If not, they can use floor plan financing. Flooring companies buy the homes for the dealers and the dealers pay interest every month.

Factory-Direct Dealers 

Builders cannot legally sell homes to consumers so they either contract independent or franchise dealers to carry their models or they create a separate business.

A factory-direct dealer is usually owned by the same parent company that owns the builder, but they are completely different entities whose main purpose is to be profitable. 

Factory direct dealers are often thought to have the lowest prices, but in reality it's usually the exact opposite. The dealership still buys the home from the builder and both need to make a profit. Factory-direct dealers aren't the cheapest option for most, but they aren't the most expensive option either. 

Independent Dealers

An independently owned dealer is usually a small, locally owned business that offers a limited selection of homes.

Their display lots are normally not as fancy as the others. Homes are obviously setup temporarily, without furniture and décor. They have lower overhead costs which help them offer lower prices. 

The Mega-Dealership 

Mega dealers are getting more popular. They will carry several different makes and models.

These dealerships are usually very nice establishments with homes setup perfectly with skirting and decking, furniture and décor. There is a reason for this, when homes are setup to look like someone lives in them it entices consumers on an emotional level. They envision themselves in the space and create an emotional bond.

Consumers that make large purchases based on emotion are the most profitable. 

These mega dealership are often the highest priced option for consumers. They often use the middleman financing, mentioned above, to get the display models. Their overhead is high and that is added to the price of the homes.  

Buying Tips 

Regardless of the dealer you use, secure your own financing and insurance and avoid adding them into the home financing. 

It's absolutely possible to get a quality manufactured home at a fair price. Knowledge is power and learning all you can about how an industry operates can help you make better decisions.