Friday, September 7, 2018

Five Reasons Why New Modular Home Builders Aren’t Entering the Business

As stated many times by media pundits and housing experts, modular construction is the next big thing to happen in construction.

Photo courtesy of The Home Store

The modular factories have geared up to meet this surge in demand, commercial and residential developers are calling for more and more product and city governments are turning to modular to help solve their affordable and homeless housing crisis.

The one group of people that should be beating down the door wanting to get into the modular business is the small to medium single family homebuilder, Not only aren’t they clamoring to get on board but neither are the “new to modular” builders.

Here are 5 reasons why:

No National Campaign

The Modular Home Builders Association started a Consumer Awareness Program a couple of years ago to promote modular homes to new home buyers and it has proven quite successful. MHBA members I’ve talked with say that a number of their new prospects learned about modular through the program.

NAHB’s Building Systems Council awards Modular Home Builders and Factories that demonstrate excellence in construction and design every year. They promote modular and other types of systems building throughout the year with their monthly “Lunch N Learn” live webinars where members hear from experts in system built housing arena.

What is missing from both of these wonderful associations is training. There is absolutely no training to help new builders that want to begin using modular to build houses learn even the fundamentals of this industry.

If there is no national training, surely each factory must have a training program. No they don’t. Some do have an introduction into what the new builder needs to know about working with an individual factory but even that is rare.

Sales Reps are Busy

Imagine for just a minute that you are a sales rep for a busy modular home factory and your builders send you quotes, contracts, change orders, plan requests and a million other things to do and follow up on before a single home can be built. Now multiply that times 10 homes for each of your 6 builders. Whew!

There just isn’t enough time to do any prospecting, training, marketing, visiting a customer’s lot for a new builder. If a new builder called a sales rep today asking to see them at the builder’s office next week I would be surprised if many sales reps could make that happen.

In all honesty is it really the sales rep’s job to prospect like it’s 1990 when that was a big part of their job description? Things were much easier then. No funky roof lines, no special orders without the Sales Manager’s approval, no customization and no hard core restrictions imposed by all sorts of government agencies, both state and Federal, and no problems delivering the modules. The good old days were actually pretty good.

Sales reps and their Sales Managers want new blood to begin buying homes but there simply not enough time to make a getting new builders part of their day, week, month or even year.

Today sees builders changing factories for one reason or another but almost no new ones are beating on the factory door.

Builders Thrown to the Wolves

Let’s say a ‘new to modular’ builder is determined to buy a house from a factory, any factory. What he/she faces is a path that looks like a game of Chutes and Ladders.

When a new builder presents their new rep with a plan to draw and quote there’s rarely a mention from the sales rep that it could take up to a month. When they do get their quote from their rep they look like a deer caught in headlights. There are line items beyond the price of the home and options they simply don’t understand.

Engineering costs for special wall and floor systems, delivery charges, estimated set crew costs, state tax and more. The sales rep sends it out and contacts the builder a couple of days later asking if they got the quote and if the quote was in the ballpark. “Ballpark?, how do I make sense of this. You never explained to me there would be charges for this and fees for that.”

I just love ‘New to Modular’ builders. They actually think the factory sales rep is going to help them every step of the way from receiving the quote through pricing for the customer, finding a set crew and staging area, site prep including Engineer’s stamps all the way through helping them get the factory service department to the jobsite to make repairs.

This is one of the big reasons why over 70% of builders that try their first modular home fail to buy a second.

Lack of Training

Starting a training program for new modular home builders and continuing education programs for all a modular factory’s builders is not cheap. Huge investments in time and money are required.

Getting trained by the modular factory that a builder buys from might seem like a good thing but there is an ugly secret embedded in this process. Most builders, both experienced and new to modular, jump ship at least once with some doing it several times.

Maybe the builder’s sales rep left for another factory and the builder followed or the factory service department didn’t correct problems again or it could be as simple as the cost of one factory’s homes was less than another's. Whatever the reason almost every modular home builder has jumped ship. That’s a problem every factory shares.

So what happens when a factory that has invested heavily to start and maintain a training program sees one of their ‘trained’ builders leave with all that knowledge and go with a factory that hasn’t invested a penny in training? Do they say ‘that’s OK, we love training builders for other factories” or do they simply say “why should we train anyone?”

Bring on the Developers

The modular housing industry is rolling along quite well at the moment without bringing in new modular home builders. They have commercial developers that are simply throwing work at the factories. I recently heard that one East Coast factory bid on five huge commercial projects hoping to get at least one of them. They won all five!

What do you think will happen to their builder network when those projects hit the production lines leaving no slots for their builder’s homes?

Why are there no lines of new modular builders beating down the factory door wanting to be part of construction’s answer to growth? The answer is as simple as no time to help them, nobody to train them and really no interest in bringing them in at this time.


bill hart said...

Im a trained and skilled builder-dealer trainer..If someone at factory level actually wants to reacts to your plea Gary..Im free in late December..and would love to contribute to your cause ...and before.. its too late for the factory to ....plan ahead ...for 2019 and on..or for me for that matter.

Those interested can check me out on my PSUs Agmap website or on the linkedin site as
Bill Hart PA

josh margulies said...

Dont say “free” bill. Say “available.”

Anonymous said...

I have been selling modular homes for about 8 years now representing different manufacturers along the way and know the system well. I would love to train builders but am not sure how to go about doing it because I am in Canada. Does anyone have any advice?

Anonymous said...

Gary, some of the things you write about are true but do you have to amke them so public. Won't developers and home buyers get rturned off by you blog?

Al Grust said...

Let me give the main reason I no longer sell modular homes
At one time some factories had their own set crews, factory trained and the factory was responsible for the engineering mistakes and other problems. I believe I still would be selling them if this was the case now. Factories make the houses no matter how complicated or screwed up and throw it out there to the builder who now has to find a set crew who knows how to set it, most have little or no training other than setting some houses, so when this new design or new factory comes along most do their best to set the thing, which of course means long set times and crane fees or a house set incorrectly. Who pays for that? THE BUILDER!! I believe the factories need to stand by their homes from the first drawings to the house on the foundation. The bare minimum should be a group of set crews factory trained, approved, and paid by the factories they set for.

Coach said...

You make a good point Al Grust.

This is why I write about both the great things about modular and the things that need attention and improved. If our industry is to truly become the 'next big thing' we need to do a better job at the basics.

Simply talking about the housing economy and other general topics concerning our industry is not enough. There are areas that need attention now and that's what I try to point out.

Do I have the solutions. Maybe, maybe not but someone does and we need to listen to those people to improve Modular Housing.

B David Redmond said...


I have been interested in Modular home building and setting for a while now and have extensive experience in heavy Commercial construction, site works and foundations but have not seen an entry point into the industry. At this point I'd be most interested in developing "Modular Mini Homes" what I'd call a tiny modular home built to national standards and set on a foundation instead of wheels.

I am in Indiana