Monday, August 17, 2020

60% of New Modular Home Builders Never Buy a Third House

Looking around the residential modular housing industry for the average builder can be quite enlightening. After hosting numerous Builder Breakfasts, Boot Camps, factory Open Houses, Roundtables and visits to established modular home builders throughout the East Coast as a sales rep for several modular home factories, I can tell you there is no such thing as an average modular home builder.

There are high end custom home builders, affordable housing builders, green and energy efficient builders, young ones and older ones. There are some that build 50+ modular homes a year and some that build only one or two. A few of them also site build and a few also sell HUD homes.

But all of these builders have one trait in common, they have built three modulars or more. In this industry that is saying a lot.

60% of all builders and developers that come over to modular housing and make a commitment to a factory to buy homes from them fail to buy more than two homes before they either give up on modular and go back to what they were doing before or fail completely and go out of business, usually leaving unfinished homes in their wake.

When a “new to modular” builder or someone that wants to begin selling modular homes contacts a factory and asks how to become one of their builders, the sequence of events that happens next is probably the reason 3 out of 5 of them fail.

The sales manager is probably the one that gets the initial contact and gathers the information from the prospective new builder if it a phone call or direct email. From past experience, the sales manager at some factories will let it go to voicemail when the receptionist tells them what the call is about. They don’t want to get caught on the phone answering questions for an hour.

The SM usually gives the lead to the sales rep assigned to that territory knowing the rep will quickly jump on this potential new source of revenue for the factory. A week later the rep remembers he/she forgot to get back to the person and says “Oh well, they probably wouldn’t buy anyway.” OR, they look at the caller’s town, shake their head and says to themselves that the builder 40 miles away is selling 3 homes a year and doesn’t want to jeopardize that relationship. This is 10% of the rep’s total business for crying out loud.

If just trying to get a foot in the factory door isn’t tough enough, those new builders that do establish a relationship with the rep are for the most part left to their own devices to succeed. 

Some of these new builders never order their first home and a few buy one, maybe two the first year and become so discouraged that they stop calling the rep or answering his “I will be in your area” emails.

So why is there such a high failure rate for “new to modular” builders?

Here are just some of the reasons:

  • Oversold on advantages of modular construction
  • Unfamiliar with factory quoting process
  • Never learned the entire process
  • Subcontractor cost overruns
  • Apathy by factory reps
  • Working with a set crew
  • Unsure of retail pricing
  • Codes, regulations and code enforcement
  • Delivery problems
  • Working with factory service

And to make matters worse, many factories don’t encourage their builders talking to each other. There are even factories that won’t take on new builders but welcome established ones only. These factories know how to play the game.

Gary Fleisher is a housing veteran, editor/writer of the, blogs and the ‘coming soon’, Construction Consultant’s Directory. 


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