During a question and answer session at a recent industry conference, a home builder asked Moody’s Analytics chief economist Mark Zandi for his thoughts about the labor
CB Exchange: Sales Acumen Can Give Custom Builders an Edge
Web sites generate traffic, but when clients walk in the door, custom home builders need to know how to sell themselves as well as their product in a tough market
To listen to the full interview, download the audio here.
Custom Builder: Why is selling custom homes more challenging nowadays?
J. Bradley Simons, President Cottage Homes, Draper, Utah
Brad Simons: The market is definitely evolving. Right now, our customers range in age from the late 40s to early 60s, but the crowd starting to come into the market is younger, and Web sites are their first point of contact with a builder. It’s not a Realtor or an ad in the newspaper or a radio ad, and they’re not driving around town. They want to pull up a Web site, look at some pictures and read just enough to help them flesh out which two or three builders they’re going to investigate.
Alex Hannigan, President Hannigan Homes, Orlando
Alex Hannigan: That’s difficult for a dinosaur like me to get my arms around. I’ve always felt you don’t know the builder’s personality when all you see is a Web site. But it’s probably the only way to get people to your door in this day and age.
CB: Even so, is there still value to a custom builder getting out to certain events and functions to make personal introductions that may lead to future business?
Simons: A personal contact is always very pleasing. People work with a specific custom builder because of the product, and also because of the builder’s personality and reputation in the community. Plus, the connections you make at social events or when you’re serving on committees could drive traffic to your Web site.
Custom builders should also market themselves to local architectural firms because often clients go to an architect first. Sometimes they go to an interior designer first.
Hannigan: I belong to a group of 35 custom/luxury builders in central Florida called the Master Custom Builder Council. We send a quarterly magazine to our past clients, which is another good way of getting people to us. But they still go to our Web sites to check us out.
CB: What are the pros and cons of working with Realtors?
Simons: With custom homes, you’ve got to build in a sales commission, which can get very large. Customers often don’t want to pay it. But many custom builders do use Realtors, and I don’t know if they make less margin or just pass that cost along to the buyer.
We have two Realtor/brokers in our company in order to provide that professional level of service without involving a third party and passing along a 3 to 7 percent commission to the customer. I myself have been a Realtor since 1980.
CB: To get into the nuances of selling, are certain areas especially troublesome for custom builders?
Hannigan: It seems to me you really need to sell more than the product. You need to sell clients on how you’re going to service them and what makes you different from other builders. You sell the sizzle, and the steak just kind of comes with it.
Simons: We sit down for hours with customers before we create a bid for them. And our bid is not a phone call: it’s usually a 20- to 30-page document that includes all the details, priced out. Many of our competitors meet with potential clients for 15 minutes, then call them and say, “We’ll do it for $160 a foot.” Our bid comes in at $200 a foot, but it includes everything they want. So it’s an educational process to show them that we, too, could build their home for less, but it wouldn’t have everything they want. And if they go to the other builder and realize they forgot to include this detail or that detail and it’s going to mean a ton of change orders, they’ll end up paying more.
CB: What resources are available to small builders who want to improve their sales and marketing skills?
Simons: In addition to the local and national Sales and Marketing Councils, the Builder 20 Clubs have helped many of my friends become very successful as custom home builders. There are also consultants who specialize in custom builders. They’re kind of pricey, but they bring a wealth of experience to someone who might be a great craftsman but needs a little help on the business or marketing end. I know several builders who have utilized those resources and propelled their businesses to a whole new level.
CB: Any other recommendations?
Hannigan: When I first got into the business, I got a real-estate license and a broker’s license and sold real-estate for about a year. It was an eye-opening experience, and it helped me a lot. So I certainly would counsel anyone who is just entering the custom-building arena to spend some time honing their sales skills because it can be a little daunting to jump in with no sales experience at all.
Simons: In our market, the Parade of Homes has been a great opportunity for custom builders to demonstrate their product. I know of five or six, maybe even 10 builders who, during the good times, would sell their entire year’s production just by building and marketing a parade home. It’s been a lifeline for many of the smaller custom builders.
We’ve also been advertising our spec homes on the local [NBC] TV station’s Web site, KSL.com, which runs free classified ads. We’re getting more calls off those ads than anything else we’re doing right now.