THE SNOWBALL EFFECT

You’re the happiest you’ve been in quite some time.  The customer that wants the 3,000 sq ft custom modular home has gotten his mortgage approval.  The bank  gives you enough to order the house from the factory and you start planning the excavation.

The factory gets your check for $25,000 and decides it needs the cash to help meet payroll.  Besides, there will be more checks coming from other builders next week.

You’ve subcontracted the excavation and have given your poured foundation company $2,000.  Everything is going along just fine.  Happy times! 

The factory doesn’t get any orders the following week and only has a couple of floors on the line.  They need to meet payroll again, so they don’t order your windows and doors and start building your house with the reserve material they have on hand.

The customer calls and says he was just laid off and the bank tells him that he either has to cut back on the mortgage or get dropped all together.  OMG!  What happens now?  First, the customer tells you he can’t afford to build without the mortgage and wants his money back.  You tell him that the factory will not return it and you’ve already given most of his initial deposit to the factory and selected subs.

You have other jobs going and can’t spare any money to help him out of his problem. Even though the factory hasn’t actually started to build his home, they say they have so they don’t have to return the money.

Your excavator just completed his work and wants paid.  You tell him that the customer backed out and he is very understanding.  Yeah, like that would ever happen!  Now you have the excavator, the foundation company and the customer wanting money.  The factory is saying “Too bad” and your spouse isn’t aware of any of this yet.

You can’t stop work on your other jobs because you need the cash flow.  Within days, both the bank and the customer are calling about the money given to the factory….they want it back.  The bank tells you they will pay your excavator but you need to get the deposit back from the foundation company and reimburse them.

Your spouse finds out about the problems and wants to know what is going to happen to the family and their personal house?   OOPS!

The bank and the customer file a lawsuit against both you and your factory.  The foundation company people reluctantly give back your deposit.  The lawsuit hits the newspaper and several people you’ve talked with about building their homes have stopped returning your calls.  Your current customers start calling you everyday. 

And this is just a typical day in the life of a Modular Home Builder.  And stick builders have it worse!