Monday, November 14, 2016

Service After the Sale - Who Pays the Bill?

Ever since I became involved in the modular housing industry I have noticed that one of the biggest problems facing builders and factories is who services and repairs new modular homes.

For this article I am talking about Single Family Detached homes (SFHD) only.

I’m not entirely sure who is responsible for what part of each individual home built, delivered, set and finished for the customer but I’m sure there has never been a perfect house built, site or factory built….ever.

There are only three types of SFHD builders; tract builders, independent site builders and independent modular home builders. All three of these have their own unique ways of handling service problems but I will only be looking at modular.

When the end consumer buys something, anything, they expect it to be as advertised. They have an assumption of practical use which simply means that what they purchase will actually work for their needs without problem.

Nobody buys a new car assuming that it will be back to the dealership within a couple of days because multiple things either were missing, broken upon delivery or broke within 3 days.

Same thing with televisions, corn flakes and just about anything else you can think of, with the possible exception of a new home or marriage.

When someone buys a new modular home they are excited, not only to begin the process but also to the day they receive the key to their new home, close the door, look around and smile knowing that it is really their new home. What a great feeling.

But like most adventures, building a new modular home, or any home for that matter, is not a journey for the faint of heart. So let’s take a look at what happens when someone decides to actually buy a custom modular home.

Modular homes are sold through a network of factory authorized independent home builders that have home offices, showrooms and in some cases, model homes.

The buyer walks into the builder’s office believing that like just about everything else sold in the US, that builder will stand behind his/her product. 100%! And that is what happens in the vast majority of the modular homes sold.

What is happening behind the scenes is an entirely different story however. Things go wrong and “placing the blame” is an age old problem in the modular housing industry.

I did not write this article to point fingers at any one person or company. I wrote it to show that problems are inherent with all types of construction and the longer a problem goes without being resolved, the more antagonistic all sides become.

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There are 6 main culprits when it comes to pointing out and/or assigning blame.
  1. The modular home factory
  2. The set crew
  3. The builder
  4. The Subcontractor
  5. The Customer
  6. The inspector

Here is a closer look at each and how they intertwine sometimes making a simple oversight into a huge problem that only gets solved after a lot of time, money and energy is expended.

The Modular Home Factory

This is where the first part of the actual assembly of the house begins. Drawings, quotes, redrawing, requoting and finally the drawings become approved and plans stamped, the quotes become a contract between the builder and the factory and things begin to happen to turn the house plans into reality.

Like anything in life, if things go wrong, they tend to go wrong at the most inopportune times and in the most inappropriate ways. Special order parts and materials must be ordered and arrive in time to be placed in the module as it goes down the assembly line. Plans that were approved and stamped may get adjusted at the last moment by the customer and the revised ones don’t reach the production floor in time. Hundreds of component parts and pieces must be assembled in the proper way and on and on and on it goes until all the modules are built, wrapped and ready to ship.

The modular factory stands behind all of the materials and construction in those modules. If something didn’t arrive in time, was assembled slightly different than called for in the plans or just about anything else the factory was responsible for is screwed up, the factory has an obligation to fix, repair or replace.

How many homes built in a factory have ever arrived at the jobsite in pristine condition with every part and component in perfect condition. Please don’t say you’ve seen this happen because the chances of this actually happening are astronomical. Buy a Powerball ticket if you have.

The Modular Home Set Crew

The first people to touch your house when it arrives at the job site is the set crew. They unwrap the house, hook it up the crane, guide the modules into position, raise the roof sections and shingle them and if they are contracted to do more like attach dormers and other optional ship loose items, they should have a 4 module set and weather tight in one day.

But here is where problems begin for the factory and builder as any of the following things often could and do happen:

  • The crane is late
  • The crane can’t set up properly
  • The crane is too light
  • The modules can’t get into the right position
  • Not enough ‘pick points’
  • Roof lines don’t match up
  • Electrical drops in the wrong position
  • Rain or snow happens and nobody brought tarps
  • Unclear instructions in the set crew’s contract with the builder
  • Builder not on the jobsite, homebuyers are
  • Modules don’t line up
  • Foundation not square
  • And on and on.

I don’t know of any set crew that shows up to house set with the idea of shorting the builder on what they contracted to do. The first problem facing the builder is that their contract with the set crew is vague or the builder underestimated the cost and told the set crew not to do certain items, that he would do them.

The next problem is when key parts to the house needed by the set are either missing or built wrong at the factory. The set crew may need to stay another day to finish the work if this happens, then the dilemma is who pays the additional costs; the factory or the builder?

Occasionally the set crew will cause the problem. A broken door, improper connections, failing to do something required in the contract. Who pays for that? It certainly shouldn’t be the factory or the buyer but I’ve seen these little problems become major blowups.

The Modular Home Builder

This is the most difficult of all the parts in the delivery of a good home to the customer. Not only do all the problems from their customer and the local inspectors fall on their shoulders, all those factory and set problems roll uphill to bite  them in the butt.

When the factory is the party making the mistake and nobody from the factory is present at the set (and can actually make decisions), then the factory needs a ton of details and pictures. A factory can’t send out a service truck for small problems that could be better done by the builder or a subcontractor. However, the decision by the factory to handle a service call this way opens the floodgates to who is going to do the service work, how much will the factory allow for it and when will the factory reimburse the builder?

And after the repairs are completed, who stands behind them, the factory that paid for the repairs, the builder or the subcontractor?

What should a factory do when the problem is obviously the builder’s and the builder wants the factory to pay for the repair or at least the materials? And who is responsible for water damage caused by a sudden storm because the builder didn’t bring any tarps to the set...the factory?...the set crew?

The Modular Home Subcontractor

A modular home builder fortunate enough to find a good subcontractor is like buying a single lottery ticket and winning one of the big prizes. They become a valuable member of the team.

But alas, that is the exception to the rule when you are always looking at price as your determining factor in choosing a sub. Cheap wine and cheap subcontractors both turn sour quickly. They not only put a sour taste in your mouth, they have a tendency to leave one in your customer's as well.

Every sub from the electrician, plumber, siding. flooring and even excavator will probably be talking to your customer more than you will over the course of finishing the home. The customer actually wants to talk to these people, to learn what they think of their new home and you, the builder.

That's when the wheel can and usually falls off the cart. Yell at the sub in the morning for not showing up for three days and your customer will hear about how they hate working on one of your modular homes in the afternoon. The sub will not only point out problems they have encountered, they will make it their mission in life to show your customer things they feel the customer should bring to the builder's attention, imagined or not. That'll show that mean old builder!

When a sub does terrible work, breaks something or doesn't do the work he contracted to do, who pays the bill? The builder. There is no going back to the factory for this unless you can prove beyond a preponderance of a doubt that the factory was to blame for the repair.

The Modular Home Customer

Oh how we love our customer! Oh how we wish they didn’t have selective hearing!

How many modular home builders have been stung with added expense simply because the customer simply knew they would be getting something extra and they were specifically told they weren’t and it wasn’t in the contract.

When backed into that kind of corner, some builders, not many but some, actually try to throw this off on the factory saying that “I told the factory but they forgot to put those gold plated faucets in the house.” Now the customer AND the builder are on the factory’s butt to produce things that were never part of the contract. That is called human nature.

And how many times have your customers walked through the house while nobody else was there and noticed things that would probably have been corrected or finished by you, the builder, but instead of calling the builder, they called the factory to tell them they needed to come and ‘fix’ the problem. Then the factory calls the builder to tell them not to let the customer call them and the builder knew nothing about it. Yeah, that never happens.

The Local Inspector and/or Hired Home Inspector

I remember years ago I had just finished a home for a lovely young couple and their 4 year old son. I had checked out everything before I called for the final inspection. When the code officer arrived, she spent an hour going through the house and wrote me up for only one thing...an electrical recept with reversed polarity. I told her I would fix it right then and there but she insisted I call my licensed electrician to do it and would return either later that day or the next day. It cost me a fine and return visit fee totaling $35 and $85 for the electrician. Thank goodness my sub came right over and she returned two hours later without calling me first. Who do I bill for the $120 I needlessly spent?

The final person that can throw a wrench into the works is a Home Inspector. Some lenders actually still require an independent Home Inspector to do a complete walkthrough of the home with their report being added to the mortgage file.

Have many of you seen one of their reports without at least 3 things that need attention? They think they are on a mission to find something wrong and they rarely pass up a chance to ‘show off’ what they learned at the 4 day ‘wonder’ training course that cost them about $1,500.

When either of these inspectors finds a problem in the closing hours and something needs repaired or replaced, the builder has to decide who caused the problem in the first place; the factory, the set crew, their customer, one of the subs or one of his crew. Nobody comes out a winner in this scenario.

Presenting the new home buyer with the home they paid for is the most important thing the modular housing industry can do but who ultimately pays when the wheel wobbles or falls off the cart? You guessed it, the builder.


13 comments:

Builder Bob said...

Coach, I found your article hit a lot of the key problems facing the builder every time he takes delivery of a modular home. It's a crap shoot until the very end of the process.

You forgot to include a few other people that like to throw their two cents into the mix. In-Laws, Parents, friends and all their Facebook and Twitter friends.

That could be another article.

Anonymous said...

You are right about subs. Find a good one and keep them happy.
My set crew who I been using for years is a great sub but he came to me a couple of weeks ago and said he might not set any more of my houses because the factory I buy from isn't paying him. It can take 3 months or more to get paid from the factory even though I pay for the set as part of my invoice which is paid in full before I even get the house.
I called the factory and they told me it is just the way their bookeepins system works and will look into it. Thats bull. When I tell them it is OK to pay my set crew with my money which I gave them they should pay them
Now I have to choose between getting another set crew or finding another factory. The problems aren't always with the builder.

Anonymous said...

To Anonymous regarding the factory not paying the set crew. Watch that factory. We had that problem and the factory went bankrupt leaving a lot of builders stuck!

Set crew who cares said...

The set crew gets blamed for a lot of things beyond their control. Unless they contract to get the crane it is not their fault if the crane is late or the site isn't properly prepped or the crane isn't the right size. Problem is there are too many builders who know nothing about modulars and are only in it to make a quick buck. They don't care to be involved in any of the stages. They just want their money and expect all the subs to take control.

Then you have the factories who don't care if they build the modulars correctly or send all the parts. They again just want their money and run. They don't send reps to the sets and aren't available if the set crew needs help. The factories sell the modular and then walk away not caring if the builder has any experience with modulars. Then the factories sell to homeowners who have no clue.

Who pays the set crew when they have to stay another day when it wasn't anything they did? NO ONE! The set crew has to eat the additional cost. Builder and factory both say "not my problem"!

Yes there are times things go wrong because of the set crew's actions. A reputable set crew will make good even if it means coming back to make repairs. Some builders only look at the quote the set crew gives. They don't check out the set crew's reputation to see if they set and run or are there if you have any problems later. Like we say, you get what you pay for!

Carl Robinson said...

the industry now has a benchmark to judge all factories that might be failing. The rise and fall of IBS should be taught in MBA classes.

Anonymous said...

To Set crew who cares: "You said you have the factories who don't care if they build the modulars correctly or send all the parts. They again just want their money and run. They don't send reps to the sets and aren't available if the set crew needs help. The factories sell the modular and then walk away not caring if the builder has any experience with modulars. Then the factories sell to homeowners who have no clue."

I hope that is not the case but if you are a set person, then you've seen more houses than I have. My factory has had some small hiccups over the years but have taken care of each one. Our set crew is great and try to handle factory caused problems during the set that is not in their contract. That is the time to fix them.

Set crew who cares said...

"I hope that is not the case but if you are a set person, then you've seen more houses than I have. My factory has had some small hiccups over the years but have taken care of each one. Our set crew is great and try to handle factory caused problems during the set that is not in their contract. That is the time to fix them."

I have been doing this for a very long time and have seen factories come and go. There are many good factories, homes go together really well, they pay fast and have someone at the set or at least reachable by phone in case there is a factory problem. Then there are a few who do not send all the parts or the parts don't fit together or dormer openings are wrong size or they don't have any of the panels labeled for a very large set or don't have any idea how to fix the problem. This is why it is very important for the builder to be at the set and the factory rep at the very least be reachable by phone. We fix what we can when doing the set if it is possible. Some of the fixes take no time and others may extend the set another day. My goal is to please the builder and I go out of my way to make that happen. I have many builders who I have been setting for them for many years so I must be doing something right.

Attended your last round table said...

Coach, what say you have a Round Table devoted to this problem. An open forum where both sides could begin working this problem out. Bet no factory would show up, bet every builder would. I say go for it.

Anonymous said...

It used to be that the Builder was the Set Crew. The problem today is that most "Builders" aren't builders. They hire everything done. And expect subs to run the job. And it gets messy.

Ron D'Ambra National Manager 2-10 Home bUyers Warranty said...

The article and contents hits home with everyone. The situations discussed among this article is the main reason why a third party insurance backed warranty is essential for today's builder and new homebuyer. The coverage may vary, along with the respective providers, but the key feature of the warranty is "understanding of what is and is not covered, and the means for both the homeowner and builder to mitigate the circumstances without emptying their bank account". In short, the contents and arbitration feature of a quality third party insurance backed warranty available to every builder in our industry. Additionally, the means for a quality provider to mitigate certain circumstances BEFORE arbitration is requested by either party is also the key to everyone walking away with a smile when a situation occurs. In the event that the matter is not settled at the initial stage, arbitration is then an option instead of litigation, which is costly to everyone involved, and the matter is then addressed by a non-bias arbitration service, and the binding arbitration decision is reached on the facts of the complaint and the coverage outlined in the warranty document. Anonymous stated, "the problem is most builders are not builders, and they hire subs and expect them to do everything"? This practices has been going on for a very long time, however, regardless of any statement made by the "builder", the company and/or individual he/she hires is in fact a "sub-contractor", and the regardless of any attempt to shift fault to the sub is a mute point, since the "builder" is in fact recognized as a "builder", and he/she is responsible for their hired sub contractors work to the homebuyer, why? Simply stated: It is recognized by major governing agencies that the builder consummated the purchase of the home with the homebuyer, therefore, the builder is the responsible party for all work performed by any sub-contractor he/she hires to perform during the construction and completion of the home purchased by the buyer. Understanding the key elements of being a "builder", a "homebuyer" and a "sub-contractor" is the first and most important step to maintain a positive relationship with everyone involved in the sale and construction of the home, the very next step is "risk protection" minimizing to the best of his/her ability, and that is with a quality third party warranty, this affords the builder to transfer risk, instead of assume risk.

Chuck said...

I am a builder. I custom design most of the modular homes we build. It is critical to have a detailed understanding between us and the customer as to what is included, what's not and who is in charge of every aspect of the build.
A solid and complete contract is essential from the start. Over the years, my contract has grown with every situation I was backed into a corner on along the way. I devote at least 2 full pages to what is NOT included in the build. I devote a considerable amount of time outlining what is included and provide detailed specifications on every aspect of the build. During the contract negotiations, I take the time to read and explain every word of the contract with the homeowner.
Another critical element is to firmly establish the pecking order and stick to it. The homeowner can speak with me or my job super. He/she is expressly forbidden to speak to my subcontractors or the factory directly. Too many things can get screwed up in a big hurry should this pecking order be sidestepped. I have no problem reprimanding the homeowner if he oversteps his boundaries. Same with my subs. If they speak directly with my client, without my permission, he pays for the disputed problem and it's the last one of my jobs he works on, period.
A well controlled job from start to finish is a happy job for everyone involved. Everything must be in black and white. There should be no grey areas.

Anonymous said...

Cry and complain, if you are all so great at what you do start your own factory and no one will have to listen to your constant crying.

Anonymous said...

This is the very reason I stopped selling mods the builder takes the S--T and makes less and less and the factory says "who me? I'm not paying "
Sorry just can't take the BS any longer