Tuesday, July 17, 2012

Becoming a Successful "New to Modular" Home Builder

Being a site builder can be fun and rewarding.  Most small builders in the US build this way.  They build stick by stick and love the smell of sawdust.  

But a lot of site builders are giving serious thought about modular construction as a way to save money, time and possibly sell more homes.

So what happens when a site builder decides he or she would like to try going modular?  If you were to ask any modular factory how many “new to modular” builders actually build more than one house, the surprising answer would be “not many.” 

There are inherent problems for a site builder to make the switch to modular and the worst place to learn most of them appears to be on their first modular house.  Things tend to go wrong almost immediately for the builder, starting when they first contact the factory. 

You would think that the factory would jump on any builder that calls in but some of them don’t.  In fact if a factory already has a builder within a certain radius of another builder, they might even tell the builder that they can’t sell them a home.  Huh?  I’ve personally had my sales manager have me tell builders that I couldn’t sell to them because one builder, who only sold 4 homes a year, already had the entire Baltimore market covered.

Here are a couple of RED FLAGS that usually come up for the “new to modular” builder.

RED FLAG #1: When the builder gets to talk to a sales rep and give them a plan to quote, the first major problems arise.  The sales rep will jump on quoting the home without regard to what materials the builder usually puts into their homes.  The rep’s first thought is to not lose this builder because of a high price and “low-balls” the quote by using just the standard building materials.  No real conversation has taken place between the sales rep and the builder as to what the builder’s target market is or what the builder is currently offering because the rep has never received training on how to do this from the sales manager.

RED FLAG #2:  Unless the new builder understands the width and height limitations when working with modular, the home plans he or she gave the factory rep will have to be revised by the engineering department.  Sometimes the house plan that is returned to the builder along with the quote doesn’t look quite like the plan that was submitted.  The factory rep says that these are the widths they build to and that kitchens and bathrooms can’t cross the marriage lines.  That’s why the kitchen was moved to the back wall of the house and the main bathroom was relocated.  If the builder’s customer had wanted the kitchen at the back by eliminating the breakfast area, they would have done it already.

RED FLAG #3:  Let’s assume that everything has gone well up to this point with the builder finding a great sales rep who presented a nice revised floor plan and a great quote using the builder’s most frequently used building materials.  The builder has been told that modular will save him about 15% over site building.  But that 15% savings from just 10 years ago has been slowly disappearing and today the real savings is the cost of subcontractors and both the builder's and their customer's time which could amount to thousands of dollars.  Most factory sales reps have never been general contractors or worked directly with subcontractors.  They have never been trained how to talk to builders about actually finishing the modular home after it is set and everyone from the factory goes home.  How much should subcontractors be paid, what is cash flow on a modular home, what happens when the local building inspector has questions about something the factory did, what about the service problems, warranties and OMG!  It just goes on and on until the builder says that it was a “learning experience” but one that they would never do again.

If you are a “new to modular” home builder, here are some suggestions to help you get the most from your factory and build more than one modular home.

  • Visit the factory production line.  If they do something different than you normally do or use different windows, doors, roofing, etc, then what you use, ask questions.  They will gladly try to accommodate your requests when they can and will be honest with you if they can’t.
  • Ask to talk with one of their successful builders, preferably one that won’t be competing with you.  Expect to spend an entire day with the builder and prepare your questions.  You need to know how to hire subs that won’t overcharge just because it’s modular.  Ask about timelines, inspections, factory service and anything else that might seem important to you.  You will never get a chance to talk to a fellow builder with as much candor again.
  • Talk to your customer.  Explain that not everything their little hearts desire might be possible with modular construction and are they willing to make small changes to their plans.  In exchange for these concessions, tell the customer about all the additional benefits they will get including a greener, cleaner home.  The factory has these benefits listed and ready for you to hand over to your customers.  Be sure to use them.

Go into modular with your eyes wide open.  The best way to do this is to visit the factory and talk with the other builder BEFORE you take on your first modular project.  This will help insure that you will have a great “first” modular home that will lead to many more.

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