Thursday, October 23, 2014

Just Some Random Pictures in a West Coast Prefab Factory

Recently I was sent some stills from a video produced by a well known West Coast prefab factory. I would like to share them with you only to show how a steel built home differs from an East Coast wood built home.

The first screen shot has 3 guys up on ladders working while 6 guys stand in a circle and appear to be making gestures over a set of blue prints (one has a cup of coffee) and another is bending over looking for a screw. In PA we call this a PennDOT work crew; 6 supervisors and 3 workers.

Here is another shot from below with 3 guys balanced on two ladders while a supervisor looks on. I really don’t think this is the way the ladder manufacturer wanted his ladders used.

The third picture appears to be a guy, again on a ladder, using an angle grinder above his head.

My friends keep telling me not to point out these obvious funny things until they get blue in the face. It doesn’t stop me.

The Dreaded State Tax Audit for Modular Factories and Builders

This article, written by one of the most respected attorneys serving the modular home industry, is not the usual fare that I post on this blog. In fact, if I had my way, the subject he writes about should be banned from the face of the earth.....taxes! But in reality, the taxes that have to be paid as a modular home goes through the process from factory to set to finish can prove to be quite a chore to everyone involved. I equate a tax audit with an alien probe, so without further hesitation, here is Steve Snyder's article about this important topic.

State Sales Tax Audit


Surviving a Modular Sales and Use Tax Audits
Prepare now, before a state tax auditor calls to make an appointment

When was the last time your company underwent a state sales tax audit?  For most modular companies that have gone through a state sale and use tax audit, they will tell you that they would rather have had a root canal performed. There are a number of reasons why, companies in the modular industry dread sales and use tax audits so much. 

“For most modular companies that have gone through a state sale and use tax audit, they will tell you that they would have rather had a root canal performed.”

Whether your company is involved in the modular industry as a residential or commercial modular manufacturer, a residential modular builder, or a commercial modular wholesale or retail dealer, there are things you need to know about a state sales and use tax audit before you go through one and there are things your company can do to insure that the outcome is not a disaster. But you should take steps now, before you get audited.

When a particular state’s tax department auditors comes to audit your preceding years tax records for sales in that state, they will want to review the contracts and related documents for each sale made in that state. As a result, the way you structure your sales transactions, and the associated documents used to memorialize each sale, will be the information the auditors use to base their decision on your tax liability.  And make no mistake; they will do everything they can to find liability, whether you actually do or do not have any.
Ideally, the best time to structure your business transactions, and prepare the contracts and related documents used between manufacturers, contractors and subcontractors and retail buyers, to memorialize the sales transaction, is when you are a start-up, on day one. But for companies that have been doing business for many years, it is not too late to review the contracts you are using and restructure your sales and use tax methodology if needed to ensure your company does not receiving a big bill the next time you are audited. If your company decides to begin doing business in a state or states where you have not previously done business, that is the time to review that states sale and use tax law. 

Today, every state is in a financial crisis, and states are looking for ways to increase tax revenues…one way to accomplish that, is to target certain industries and then send out the tax auditors to beat the bushes in order to generate additional tax revenue.

Problem1:  Most state sale and use tax laws were written before there was a modular industry or with little or no understanding of how the modular industry does business. With peripheral understanding of how the conventional construction industry did business, and knowing next to nothing about the modular industry, state legislatures passed sale and use tax laws without regard to how the modular construction industry would be affected.  Fast forward to today, and you have tax auditors and their respective tax policy officials trying to compare the existing tax law with the modular construction industry, and it’s like trying to fit a square peg into a round hole, determining how existing state tax law relates to the modular industry.

Problem 2: Even if the current state tax law on the books is applicable to the modular industry, most state sales and use tax auditors…and the heads of their respective tax departments for that matter…do not know their own tax law and how it pertains to the modular industry.
As a result, when you do undergo an audit, the initial determination you receive from the tax department is almost always incorrect, or at least arguable, and it often involves sizable, sometimes six figure, assessments.

“In most cases, the auditors approach is to review the company’s sales records and simply throw a big bill at the company and leave it to the company as to whether they can make a case for an appeal.”
In most cases, the auditors approach is to review the company’s sales records and simply throw as big an assessment (referred to as the “determination”) as possible at the company and leave it to the company as to whether they can make a case for an appeal. If you do decide to appeal, many states require the company to pay the tax in dispute or post a bond in order to appeal a tax dispute.  If you are successful on appeal, you will get the money back; but it could take several years. Auditors know this, and they also know that often, the approach many companies (and unfortunately their attorney’s) take, in order to lessen the financial exposure, is to attempt to negotiate as low a figure as possible, and pay it, rather than to litigate, even though the entire assessment is wrong.  It’s a lot like pleading to a lesser crime, even when you didn’t do it, because of the risk of being found guilty of the big crime, and because it cost a lot of money to fight it. (Yes that happens too!)

Sales Tax on Conventional Construction vs. Sales and/or Use Tax in Modular Construction

When a conventional building contractor or developer builds a commercial building or residence, they go to the lumber yard or purchase building supplies from a building supply retailer and the state sales tax is paid at the time of the purchased. The structure is then built on site, and other than the sales tax paid on the materials at the time of purchase, there is no more sales tax liability. Moreover, the building materials are purchased in the same state where the construction project takes place, so the sales tax went to the state where both the sale and the use occurred. What could be more simple and straight forward?

Not so for the modular industry. Modular manufacturers purchase building materials from wholesalers or building supply manufacturers in large quantities, tax exempt under a manufacturer’s exemption.  When a modular manufacturer purchases material, the manufacturer does not know, what state those materials will end up in, as part of the modular building components shipped from the factory.

Monday, October 20, 2014

Future Home Technologies Acquired by IBS

Innovative Building Systems, parent company of Excel Homes, Mod-U-Kraf Homes, All-American Homes, Keiser Homes and IDBS, announced today that it has entered into an agreement to acquire certain assets and liabilities of Future Home Technology, Inc., of Port Jervis, NY. Future Home Technology is a modular manufacturer of moderately priced to luxurious single family custom homes and commercial multi-family buildings.

Steve Scheinkman, IBS CEO, said “We have a strong national footprint with five facilities across the U.S. offering the leading brands in the custom modular home business. The addition of Future Homes expands our presence on the East Coast allowing us to serve Future’s loyal and growing builder base and provide opportunities to support our other plants and product lines.

Fotis Boliakis, CEO of Future Home remarked that “Future’s strong reputation for a high quality product, as well as our strong presence in the NY metropolitan area is a strategic fit and an accretive addition to IBS’ facilities. We are all very excited to join such a great organization with a very promising future.”

The deal is expected to close in November. Terms of the acquisition were not disclosed.

About Innovative Building Systems

Innovative Building Systems (IBS) is the leading custom modular home producer in the U.S., operating factories in Maine, Pennsylvania, Virginia, Indiana, and Iowa. It markets its single family homes under the following brand names: Excel Homes, All American Homes, Mod-u-kraf Homes, and Keiser Homes. It’s multi-family and commercial buildings are constructed at all five facilities under the brand Innovative Design and Building Services (IDBS).

About Future Home Technology

Future Home Technology, Inc. provides Custom Modular Homes in New York, New Jersey, Pennsylvania, Connecticut, Vermont, Rhode Island, New Hampshire, and Massachusetts. Since 1986, they have been reinventing the future of home building using custom modular home construction techniques in their state of the art construction facility. They are proud of the 6,000 families plus who are enjoying their homes built by their company. www.futurehometechnology.com

IBS Bolstering Its Team With Seasoned Industry Professionals

Innovative Building Systems (IBS), the largest Custom Modular Manufacturer in the U.S. announced today that Kevin Flaherty  and Doug Stimpson have joined the IBS team  to further support its growth, especially in the Midwest markets.  Together these individuals have decades of experience in the custom modular business, and both will play key roles in the company’s management team.

Kevin Flaherty

Kevin Flaherty joins IBS as Executive Vice President of Business Development. Kevin will initially focus his efforts on growing the Midwest market served by the All American Homes facilities in Indiana and Iowa. Kevin is a 30-year veteran of the modular home industry, most recently as Vice President of Marketing for Champion Homes. Kevin commented “I am thrilled by the prospect of joining the leading custom modular manufacturer in the country, and am looking forward to working with the IBS team as the company continues its remarkable growth.”

Doug Stimpson

Doug Stimpson joins IBS as Vice President and General Manager of the All American Homes facility in Dyersville, Iowa. Doug will be working closely with Kevin to grow the markets served by the All American Iowa plant. Doug has held several GM positions in modular factories and brings a broad perspective as he was most recently on the builder side of the business as VP of Operations for New World Homes. Doug stated “I am excited to start to pursue the goals we have established for the Iowa plant with IBS and look forward to leading the team at the All American factory in Iowa. They have a great reputation and I am excited by the growth opportunities going forward, especially with the financial support of the IBS ownership.”

Phil Hickman, Executive Vice President of IBS and President of All American Homes said “We already have a strong company with five facilities across the U.S. and leading brands in the custom modular home business. Both Doug and Kevin will help us strengthen and grow even more as the U.S. housing market continues its recovery. I’m excited to have them both on board.”

Innovative Building Systems (IBS) is the leading custom modular home producer in the U.S., operating factories in Maine, Pennsylvania, Virginia, Indiana, and Iowa. It markets its single family homes under the following brand names: Excel Homes, All American Homes, Modukraf Homes, and Keiser Homes. It’s multi-family and commercial buildings are constructed at all five facilities under the brand Innovative Design and Building Services (IDBS). 

Sheri Koones' Latest Article About Modular Homes

A Case for Energy Efficient Housing
Sheri Koones Oct 20th 2014

This home cost about $175 a square foot to build and is close to net zero with the addition of more photovoltaic panels. Photo courtesy of Magnus Star
Years ago, it was difficult to build a very energy efficient house because there was a lack of technology and materials -- such as extremely energy efficient insulation and triple-pane windows. The cost for solar panels was also high and subsidies were non-existent. Today this is not the case.

We know how to build houses to substantially reduce the use of fossil fuel and energy costs. You might then ask: Why aren't all houses built to a much higher energy standard? There are several answers to this question.

People aren't being forced to build more efficiently because the codes are not that stringent. Although they have improved over the years, most municipalities have a long way to go to be encouraging people to build low-energy or net-zero houses.

Another reason given for not building to higher energy efficiency is the cost. Homeowners wrongfully assume that it will cost a great deal more to build a more energy efficient house. In 2010, Habitat for Humanity built a house in Vermont to Passive House standards, using a tiny bit of energy and at a minimal cost. Many other houses have also been built in this country and around the world that are moderately priced and extremely energy efficient.

According to architect Phil Kaplan of Kaplan Thompson Architects, who designs many energy efficient houses in New England, "the up-cost for a very energy efficient house should be $0." He says, "If you increase window quality, increase insulation, reduce air infiltration, you reduce the cost of mechanical systems." When designing a house, Kaplan also designs the mechanical systems to make sure that he gets the right efficiencies in the completed house.

John Colucci, vice president of sales and marketing at Westchester Modular Homes, says the up-charge is minimal. He claims that a modular home may cost 3 to 5 percent more for a house that is 50 to 60 percent more efficient than the typical home. A house that is net-zero energy may cost up to 10 percent more. He points out that in the factory they are able to build a very tight house with advanced framing and extra insulation.

Tessa Smith of the Artisans Group, a Passive House designer/builder says: "We see a zero upgrade in our custom energy efficient homes in which spending more on insulation gets recouped by less expensive but sophisticated mechanicals, and by buying better windows, which we would anyway in this type of house.

"In our production-oriented houses (that are equally as efficient as our custom homes), we see an upgrade of between 5 to 10 percent (compared to a normal tract home) and a payback of around 6 years, depending on the project. The windows and mechanicals on these less-expensive houses are more energy efficient, of higher quality, and more expensive than the cheapest windows and mechanicals than you would normally find in a tract house."

The Artisan Group currently has a Passive House under construction that will cost $135 a square foot.

Nobody can say exactly what the return on the additional investment will be for all houses -- it varies with the products and systems used, location and the efficiency achieved. Everyone I've interviewed, with a very energy efficient house, however, agrees that their heating and cooling bills are substantially less than those of their neighbors with less-efficient houses.

There is an assumption that very energy efficient houses are not particularly attractive. But evidenced by the houses I've seen in this country and around the world -- this is definitely not the case. (Just see some of the beautiful houses that have been built to high standards in my recent book -- Prefabulous World: Energy-Efficient and Sustainable Homes Around the Globe.)

Global warming is generally accepted today as a scientific fact. It is caused by the entrapment of gases resulting from the burning of fossil fuel. Forty percent of that fuel in this country comes from the heating and cooling of houses and other buildings. I believe the environmental and financial savings pose a strong case for building a very energy efficient or even zero-energy home.

Saturday, October 18, 2014

Use This Video to Help Your Modular Home Buyers Understand Pricing

Modularhomeowners, a new website targeting the modular and prefab homeowner, produced a video that every modular home builder should make their prospective new home buyer watch. It does in 3 minutes what would take you an hour sitting down with your customer.

Friday, October 17, 2014

All American Homes Has A Great Video to Share

Kerri Kondisko, marketing specialist for All American Homes, recently posted some videos on Facebook featuring All American Modular Homes.

This has to be one of the funniest and unfortunately "just too true" videos I have seen in a long time about what most people think when they hear "modular home".

Enjoy and thanks Kerri.