Well, it's here again....Fall. Just when you thought it couldn't get any worse, the National Association of Realtors announce the latest downturn in the price of both new and used houses. The time on market is increasing and one of their biggest fears is that the number of Realtors is going to decline. My question is simple. Aren't Realtors the ones that put such high prices on homes and got rich during the past few years?
Countrywide Mortgages just made a statement that the real reason that there are so many foreclosures is that people bought new homes and still hadn't sold their first. They also blame people buying vacation homes. Very little is said about mortgage companies making bad loans and needing the federal government's help in bailing them out.
Who can you blame for slow business and tight money? You, of course! Some of you saw the market changing early and started to cut costs, control budgeting and scaling back on new purchases. Some saw the downturn as just a short lived thing and continued to do business as usual. And finally some acted like it was 2005 and just kept spending.
What can you do now that the market hasn't turned around and it looks like it could be 2009 until it does? It's never too late to start budgeting what you do and look to working smarter. Continue to advertise but make sure they are effective. Here are a couple of things that I've seen builders in other parts of the country doing. Maybe one will get you thinking.
A builder in Pennsylvania offered a discount to volunteer firefighters if they built this year. Another I heard about one in Tennessee that offered to do discount remodeling for senior citizens and got some local publicity. Many are putting on Home Buyer Seminars and offering builder packages at discounted prices for those attending.
No matter what you do, at least it's something. For those that are still in business after this downturn, you will be stronger and hopefully better informed if it happens again.
Wednesday, September 26, 2007
Tuesday, September 11, 2007
Follow the Auto Maker's Lead.
The car dealers showed us how it works. They have safety packages, luxury packages, towing packages and many others.
A really easy way to add options to a house is to give your prospect "packages". A lot of builders do this, especially the tract builders. Give your prospects something that they would have a hard time duplicating on their own.
One of the best is an Appliance Package consisting of a side by side frig, range, microwave and dishwasher. Another good one is the Flooring Package where you give them hardwood or tile in certain rooms.
Don't overlook Deck or Patio Packages featuring a BBQ area and Gas Fire Pit or the Entertainment Package that includes built-in wall units for stereo, TV and surround sound speakers.
A lot of manufacturers do not include TV or Phone jacks a standard. Create a package that includes these items and maybe an alarm system and include it in your base price. Call it the "Connective/Protective Package" and include it as standard in every house. Whatever you do will be more than your competitors.
Don't limit yourself to just these, create new ones just for your business. Remember, these packages don't have to be bought from the modular home manufacturer. Shop for bargains in local area from hometown stores. They will refer people to you if you use them.
I know a builder in MA that builds $1,000 into every house he builds and at the end gave them a special housewarming BBQ for them and their friends. She told me that there was almost always someone from that party that talked to her about a new home! Now that's a great package!
A really easy way to add options to a house is to give your prospect "packages". A lot of builders do this, especially the tract builders. Give your prospects something that they would have a hard time duplicating on their own.
One of the best is an Appliance Package consisting of a side by side frig, range, microwave and dishwasher. Another good one is the Flooring Package where you give them hardwood or tile in certain rooms.
Don't overlook Deck or Patio Packages featuring a BBQ area and Gas Fire Pit or the Entertainment Package that includes built-in wall units for stereo, TV and surround sound speakers.
A lot of manufacturers do not include TV or Phone jacks a standard. Create a package that includes these items and maybe an alarm system and include it in your base price. Call it the "Connective/Protective Package" and include it as standard in every house. Whatever you do will be more than your competitors.
Don't limit yourself to just these, create new ones just for your business. Remember, these packages don't have to be bought from the modular home manufacturer. Shop for bargains in local area from hometown stores. They will refer people to you if you use them.
I know a builder in MA that builds $1,000 into every house he builds and at the end gave them a special housewarming BBQ for them and their friends. She told me that there was almost always someone from that party that talked to her about a new home! Now that's a great package!
When to talk about Upgrades
In the past I've talked about upgrading your customer's garage and adding features when your customer chooses a 9' ceiling. However there are a couple of things to do before you start adding these extra profit items to your customers dream house.
One of the first mistakes that most modular builders make is trying to get everything in the house on the first quote. If you've already said that your homes will cost about X dollars to build as a ballpark quote, adding all these features can shoot the price up 15-30%. It is best to give your prospect your base price and then tell them that most people choose to upgrade their home by 10-30%. Features that make their house unique to them.
What you establish is a dollar amount in your prospects mind as to how much they can afford to add to the house without embarrassing them and having them go somewhere else to look for a home. Let's say that your prospect has $200,000 in mind for everything including foundation and closing costs. You give them a quote, including all the things they said they would like to have, for $220,000. You've shown them something they want but now can't afford. Do you really believe they will tell you they can't afford it? Nope! They will ask things like "is that the best you can do?" or "what if we do some of the work ourselves?".
Remember the old saying, "Buyers are liars"? Well, they're really not lying, just embarrassed. How would like to be shown something you really want and then be told you can't have it? Not a good feeling.
A very good approach to the first quote, and believe me, there will be more than one, is to quote the house as a basic model with only structural options. A cape might need dormers and a front porch. Your 2 story customer might need walk up storage area in the attic. Whatever the fundamentals the customer wants, give it to them. Add everything that will make it a turnkey house. After your prospect tells you that this is OK, then is the time to start working on options.
Lay them out for the prospect like a menu. Give them prices for a 9' ceiling, upgraded cabinetry, hardwood flooring, etc. Tell them that most people choose between 10-30% of the base house for options and upgrades. Then they can choose for themselves without embarrassment.
A little time spent here will pay big rewards later on because your customer chose the option that fit their budget.
One of the first mistakes that most modular builders make is trying to get everything in the house on the first quote. If you've already said that your homes will cost about X dollars to build as a ballpark quote, adding all these features can shoot the price up 15-30%. It is best to give your prospect your base price and then tell them that most people choose to upgrade their home by 10-30%. Features that make their house unique to them.
What you establish is a dollar amount in your prospects mind as to how much they can afford to add to the house without embarrassing them and having them go somewhere else to look for a home. Let's say that your prospect has $200,000 in mind for everything including foundation and closing costs. You give them a quote, including all the things they said they would like to have, for $220,000. You've shown them something they want but now can't afford. Do you really believe they will tell you they can't afford it? Nope! They will ask things like "is that the best you can do?" or "what if we do some of the work ourselves?".
Remember the old saying, "Buyers are liars"? Well, they're really not lying, just embarrassed. How would like to be shown something you really want and then be told you can't have it? Not a good feeling.
A very good approach to the first quote, and believe me, there will be more than one, is to quote the house as a basic model with only structural options. A cape might need dormers and a front porch. Your 2 story customer might need walk up storage area in the attic. Whatever the fundamentals the customer wants, give it to them. Add everything that will make it a turnkey house. After your prospect tells you that this is OK, then is the time to start working on options.
Lay them out for the prospect like a menu. Give them prices for a 9' ceiling, upgraded cabinetry, hardwood flooring, etc. Tell them that most people choose between 10-30% of the base house for options and upgrades. Then they can choose for themselves without embarrassment.
A little time spent here will pay big rewards later on because your customer chose the option that fit their budget.
Monday, September 10, 2007
When is a Modular Home Like a Custom Home?
This is another trick question. Today some of the better modular home manufacturers offer homes that rival custom homes right from the start. I know, yours are really custom. Let's see what makes that statement inaccurate.
1. Your homes are designed by architects and engineers. So are custom modular. The difference is how much you pay for their services. I've seen architects charge the customer up to 10% of the home's value. You would think for that amount of money it would be perfect. Wrong! Have you never heard of a "change order"? Typical modular companies charge about $1,000 for plans and these are stamped by an independent third party inspector to make sure they pass the local building codes. Saves a lot of dough for your customer.
2. Did we mention "change orders"? If you are a stick builder you are used to having the customer make changes on the fly, telling you that they wanted marble, not laminate for the vanities, that they want to upgrade the kitchen that was ordered last week and that they now decided that you were right in the first place about the fireplace location. Can we change that? With modular they have to make up their minds before the house is ordered. This saves you from having the customer looking over your shoulder looking at every detail of their "perfect" home. This saves your sanity.
3. It's all about the money. You typically finish a custom home in about 8-10 months. This keeps your crews busy and you always have work. If this were a modular home, you would put in the foundation and sill plate and be waiting for the home to arrive. It was being built while you put in the foundation...good timing. It arrives 80-90% complete. You do your stick built stuff like porches, decks and garages and viola! the house is completed and the customer has moved into their new home in about 30-50 days. 90 days versus 250 days. If you make the same amount of profit, what are you going to do with the extra 160 days? Why, you're going to build 3 more homes! Saves you from having to keep your crew on the same house for 250 days.
And that saves money for you and your customer.
Custom Homes are custom homes are custom homes. If you preceive modular to be boxes put together and rolled on a foundation, you deserve to be a stick builder. But if you really look at the custom side of modular homes, you're going to be surprised at how much money can be made while giving your customer their "Custom Home".
1. Your homes are designed by architects and engineers. So are custom modular. The difference is how much you pay for their services. I've seen architects charge the customer up to 10% of the home's value. You would think for that amount of money it would be perfect. Wrong! Have you never heard of a "change order"? Typical modular companies charge about $1,000 for plans and these are stamped by an independent third party inspector to make sure they pass the local building codes. Saves a lot of dough for your customer.
2. Did we mention "change orders"? If you are a stick builder you are used to having the customer make changes on the fly, telling you that they wanted marble, not laminate for the vanities, that they want to upgrade the kitchen that was ordered last week and that they now decided that you were right in the first place about the fireplace location. Can we change that? With modular they have to make up their minds before the house is ordered. This saves you from having the customer looking over your shoulder looking at every detail of their "perfect" home. This saves your sanity.
3. It's all about the money. You typically finish a custom home in about 8-10 months. This keeps your crews busy and you always have work. If this were a modular home, you would put in the foundation and sill plate and be waiting for the home to arrive. It was being built while you put in the foundation...good timing. It arrives 80-90% complete. You do your stick built stuff like porches, decks and garages and viola! the house is completed and the customer has moved into their new home in about 30-50 days. 90 days versus 250 days. If you make the same amount of profit, what are you going to do with the extra 160 days? Why, you're going to build 3 more homes! Saves you from having to keep your crew on the same house for 250 days.
And that saves money for you and your customer.
Custom Homes are custom homes are custom homes. If you preceive modular to be boxes put together and rolled on a foundation, you deserve to be a stick builder. But if you really look at the custom side of modular homes, you're going to be surprised at how much money can be made while giving your customer their "Custom Home".
Thursday, September 6, 2007
Mortgage Delinquency Rates on the Rise
WASHINGTON - AP
The number of homeowners receiving foreclosure notices hit a record high in the spring, driven up by problems with subprime mortgages.
The Mortgage Bankers Association reported Thursday that mortgage-holders starting the foreclosure process in the April-June quarter reached 0.65 percent, marking the third consecutive quarter that this figure has set an all-time high.
The delinquency rate, which tracks the number of people who are behind in their payments but have not yet entered the foreclosure process, was also up sharply during the spring, rising to 5.12 percent of all loans, up nearly three-fourths of a percentage point from the same period a year ago.
This is not good news from the The Mortgage Bankers Association! However, there is a small silver lining to this. The prospects that you will be sending to the bank for mortgages will be better qualified and have a good financial picture. This means that whoever you build for won't be getting kicked out of their loan before the house is finished.
I'm not sure that has ever happened to you but take it from me that it does happen. I had a couple that had a construction loan to permanent mortgage. While their home was being built, they leased a new Mercedes for her at $566 a month and a new boat for him at $177 a month. With the down payment for these toys coming in about $3,000, it changed their monthly allowable mortgage payment.
I had to take a second on the house for about $35,000. Thank goodness I only had to do it for 24 months until the loan seasoned and the mortgage company refinanced them for the total of both loans. The bank did not have to do this.
Just be careful.
The number of homeowners receiving foreclosure notices hit a record high in the spring, driven up by problems with subprime mortgages.
The Mortgage Bankers Association reported Thursday that mortgage-holders starting the foreclosure process in the April-June quarter reached 0.65 percent, marking the third consecutive quarter that this figure has set an all-time high.
The delinquency rate, which tracks the number of people who are behind in their payments but have not yet entered the foreclosure process, was also up sharply during the spring, rising to 5.12 percent of all loans, up nearly three-fourths of a percentage point from the same period a year ago.
This is not good news from the The Mortgage Bankers Association! However, there is a small silver lining to this. The prospects that you will be sending to the bank for mortgages will be better qualified and have a good financial picture. This means that whoever you build for won't be getting kicked out of their loan before the house is finished.
I'm not sure that has ever happened to you but take it from me that it does happen. I had a couple that had a construction loan to permanent mortgage. While their home was being built, they leased a new Mercedes for her at $566 a month and a new boat for him at $177 a month. With the down payment for these toys coming in about $3,000, it changed their monthly allowable mortgage payment.
I had to take a second on the house for about $35,000. Thank goodness I only had to do it for 24 months until the loan seasoned and the mortgage company refinanced them for the total of both loans. The bank did not have to do this.
Just be careful.
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