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Sunday, June 3, 2018

How to Tell Your Customers About Price Increases

Telling your customers about price increases in the home they want to buy from you is one of the toughest emails that you’ll send.

It doesn’t matter if you have given them a quote for their new modular home or simply an estimate, informing them of a price increase from your modular home factory will always come as a shock to them.

In the past modular home factories have almost always had yearly price increases but it typically only happens once a year. Today tariffs, labor costs, trucking and rising energy costs are forcing factories to raise their basic home costs several times within a short period of time.

If you haven’t been telling your prospective new home buyers about these rising costs which may exceed 10% this year you may have some very bitter customers when it comes time to build with you and they learn their “new” price. Many builders will look at their profit going out the window if they choose to absorb all the rising costs just to build another house.

Be Honest. Don't try to hide it. Explain to your customers upfront that your factory and you are being forced to raise prices. Tell them that the market has increased since they first talked with you about building a modular home. Explain it’s not just modular homes that are climbing in price….it’s all housing.

Some of your new home buyers are able to absorb the price increases with little or no problem. Others will find they might have to give up some of the higher priced options they want in order to keep their anticipated mortgage while some will find it no longer makes sense to build with you or in fact to build a new home.

Letters and emails have been going out from the modular home factories to builders and developers for the past month with the latest round of increases and some GM’s have told me it’s not over yet.

If you have quotes from your factory over 30 days old you may want them updated. When you get the new price immediately calculate your customer’s new home price and contact them. Head off problems at the beginning.

But what happens when you have a house under contract to build with a deposit?

These are just two of the most likely scenarios that could happen when you inform them the price is going up:

They want their money back. This could be a tough situation for many small builders. Some builders, both modular and on-site, need to dip into their customer’s deposit to make ends meet. If your contract has an escape clause in it for the customer if the price rises above a certain amount or percentage (and it really should), then you must return it.

If you’ve already paid most of their deposit to the factory you will need to review your contract with your factory to make sure if it possible to get back all, some or none of it. Factories may have already ordered special materials your customer wanted for their home. Every factory is different and the devil is in the factory’s details.

Word of Warning: If your customer wants their deposit back because you breached the contract by raising the selling price without any clause in the contract that you could, you may end up in court.

The customer wants to change the specs or the entire house to stay within the dollar amount their lender has given them for a mortgage. This is not the worst situation. It may mean a lot of extra work for builders but it will still provide a house to the customer, work for the factory and hopefully an almost normal profit range for the builder.

This is the scenario you should try to reach with your customer. Both sides give a little and both win.

In today’s market a modular home builder must be transparent with their customer not only about price increases but about everything that will affect their house being built to their specifications. Not only do you need to send them emails, actively encourage email replies. Back up your promises by responding to queries quickly to make sure that everything is squared away.

These emails should not be sent out under the “info@company.com” as many people will view it as a junk email even though they gave you thousands of dollars. You need to send them personal emails from a real person. Get their attention with a good subject line.

The worst scenario is not informing your customer in a timely manner or simply not telling them at all. As I said in the beginning, “Telling your customers about a price increase in the home they want to buy from you is one of the toughest emails that you’ll send.”

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