Custom Clients, Custom Headaches

In a way, custom builders have always had an advantage over their peers in the production or semi-production home building business. A custom firm depends almost entirely on client referrals for future success, so clients often get the royal treatment. Reputation is everything.

"Expectations are going up all the time," notes John Barrows, a custom builder, remodeler and consultant in Wainscott, N.Y. "Everybody is much more knowledgeable. Most are not on their first house any more. They may have already lived in a production house and a lower-cost custom home, so they approach the process knowing what they want — or at least what they don't want."

Carol Smith, an author and customer relations consultant in Monument, Colo., says custom builders must now meet the same customer satisfaction standards as big corporations such as Walt Disney Co. or Federal Express.

"They're getting pressure from three sources," she says, "first from savvy consumers; second from survey companies such as Eliant and J.D. Power and Associates; and third from threat of litigation."

Even if a client's gripe never reaches the courtroom, she says, "about half of the states have some version of the right-to-repair law. These laws give the builder no choice but to respond to complaints in a timely manner."

Right-to-repair laws, enacted in about two dozen states, require homeowners to notify builders about construction problems before filing any legal action. Although rules vary by state, builders typically have a certain time period to respond. Often, a third-party inspector analyzes the complaint. The idea is to keep the complaints and remedies specific — and out of court.

Builders in states with a right-to-repair law often find themselves in a sticky situation. Such laws typically allow them a "pre-litigation" procedure, but that procedure can be time consuming and may still lead to expensive repairs. An angry client can use such laws to make a builder's life miserable for months.

Beverly Koehn, a business coach in San Antonio, Texas, says the growth of litigation has transformed builder-client relations. The silver lining: custom builders have become much more sophisticated.

"I'm really proud of what this industry has done," she says. "There's been so much education on customer care and zero-defect construction. I think we've really made progress, when you look at what we're up against."

Client conflicts often start, Barrows says, with a simple system failure. For example, something the client requested in an early meeting was not recorded, or a salesperson went around the normal selection process.

"Make sure your systems protect you from the beginning," Barrows urges. "In other words, you shouldn't be discussing how change orders work at your first building inspection. That should be laid out in the very first meeting with the buyer."

Smith says she has identified a common point at which custom builders' systems fail and they lose control of their client relationships.

"By far the most common reason for trouble is growth," she says. "Right where their volume hits 45 or 50 homes per year, they get into trouble. The warranty work starts to slide because the superintendent, who has been handling both the construction and the warranty work, can't handle both any more. Suddenly you've got customers picketing your homes."

Smith says most conflict with clients stems from bad communication.

"As a company gets bigger, fewer people can see the big picture any more," she says. "They don't have all the information, so they often say or do the wrong thing when a problem arises."

Koehn adds that the growing list of expectations among highly affluent buyers has become so intense that some high-end home builders now limit their volume to two or three homes per year.

"They do that on purpose," she says, "because they need the time to focus on keeping those customers happy."

S. Marc Thee, co-CEO of Marc-Michaels Interior Design in Winter Park, Fla., lives in a rarified world of eccentric, demanding custom-home clients. But in his experience, it's not the super-rich client building the third vacation home who is making waves.

"If somebody is doing a primary residence, he or she realizes they are going to be there for life," he explains. "That client with the $200,000 home is going to be much harder to please than somebody with a second vacation home. On the other hand, everybody cares how you spend their money, no matter how wealthy.

"When we have a problem client on our hands," he says, "I tend to step in and take over. That sends a clear signal. The owner is putting the company's best foot forward. At the same time, if what she's complaining about is exactly what we showed her, and we've spent 600 hours on it, and I have her signature on a contract, I'm not going to take a hit."

Initial meetings allow for this kind of tough love later, he explains, because you have set realistic expectations.

"I literally had a client crawl into a cabinet, look at the bottom of the cabinet and find an imperfection," he recalls. "But I tell clients at the beginning: perfection does not exist. Accept that reality.

"On the other hand," he adds. "If it's something that I know will bug them every time they walk by, we have to go in and make it right. But I am only going to guarantee what I know I can back up."

Barrows says understanding a client's personal hot buttons is key to avoiding conflict.

"You really have to listen," he says. "If you're not paying attention, that's asking for trouble." He cites the example of a client who led him to the sink in his old house. The faucets had been installed off center.

"It was a builder house," Barrows recalls. "He pointed at the valves and said, 'I'm warning you right now. This is not going to happen in my new house.' And you can bet I listened."

That kind of humility is something you might not have heard from a custom builder 20 years ago, when the Internet was a novelty and lawyers had never heard of black mold.

In the early '90s, many of the most talented builders featured in our own magazines were old-school mavericks who rarely admitted a mistake.

But ego has its down side. At least two of our most decorated award winners from those glory days ran into big trouble. They got into costly struggles with clients and almost lost their companies.

Today's builders, along with designers and architects, have learned the Zen of compromise and even submission, when the time is right.

"Don't have an ego," advises Barrows. "Leave room for give and take. It really helps to keep the big picture in mind."

"I once had a legal challenge where I knew I was in the right," Koehn says. "My defense was, I'm not gonna pay this. It's against my principle. My attorney said to me, 'We can get out for $2,500 and sacrifice your principle, or spend $15,000. He asked, 'What's your principle worth?' I said, 'Not a dime,' and we paid the $2,500."