Is there really a magic formula that make a builder's community a success? What crystal ball can builders find that can assure them they can at least realize a modest profit from their homes, if not a "margin" of real success financially? Those of us who have sold, marketed, or built homes always seem to have different philosophies as to what elements contribute to a fast-selling (which is not always the true mark of success) or higher profit taking product. Today's hot new home market can create a smugness that is potentially habit-forming, but no one entity knows better how the market can turn from lucrative to mediocre than the building industry. So how can we separate the effectiveness of the builder from a robust economy and terrific interest rates? It's not easy.

Take the home builder first. There are literally so many steps to bringing their product to the marketplace, that by the time the model homes are finished, the rest is almost child's play. From land acquisition to land development, final public reports to disclosures, and initial drawing of their floor plans to what appears in the "temporary" brochure (and I have to laugh, because it seems as if every brochure for new homes is 'temporary'!), builders are just do'in the deed. They're the nuts and bolts, the straw that stirs the soup, and the horse it rode in on. If you are graced with the head honcho's opinion on what makes his homes a success, he may look quizzically at you and say "I don't know, but I'm not gonna question it!" That's because, despite the patronizing words of marketing experts, land developers and the builder's esteemed peers, it really is a crap shoot as to whether a builder will sink or swim once his houses are up, at least in the builder's estimation. In reality, a builder's success can't be based on just his homes and their location alone.

Ask the on-site salesperson next. Now here's a rare breed. For the trade-off and personal sacrifice of their weekends and holidays, these individuals must create a love affair with the homes they sell, and sell them like there is literally no tomorrow, the return for which can be a tidy income. Their outlook and rationalization for builder success has to be positive, or they wouldn't be there. Successful new home sales personnel will always be "happily dissatisfied" with what they produce, or the perennial carrot would not be on that stick that keeps moving a little farther each time a sale is made. That's just how they operate. Some builders will actually listen to their salespeople whose viewpoint literally echoes from the trenches. They will even ask them what they are hearing on a regular basis from the buying public, giving them needed feedback for a re-posturing on pricing, amenities, architectural options, or even the addition of a floor plan or two. Hiring the right sales person, and then trusting their feedback can be a powerful tool in creating the runaway success they are striving for.

Last but not least, marketing experts are always willing to give their slant on what should or could be done to create a "stand in line" new home community. They can arm the builder with statistics, trends, slick marketing ideas for advertising and promotions, and make sure the presentation is always picture perfect, if given the opportunity to do so. Partnering even on a consulting basis with a marketing firm can give builders the needed extra eyes and ears for product development, competitive trends, and an effective image. They even provide data for the builder to digest on whether it is prudent to invest in land in a particular area, based on marketing trends, shifting employment bases, and competitive analyses.

What it all boils down to is this. When a market is hot, as it is in many areas today, builders feel guardedly confident their product is what caused it, salespeople have a vested interest in taking part of the credit for it, and marketing experts try to keep everyone in focus. Now is the time to analyze, however. Trying to learn all we can from a bullish new home market may keep the music playing a little longer. We shouldn't let over-confidence filter the reality that great markets don't last forever. Continuing to create fresh, new products, encouraging sales personnel not to slack off on gathering vital information on buyers and following up with them, and studying marketing trends may give us the momentum we will need for changing consumer needs. It can also enable us to make that minimum or better profit margin when the market slows. It all sounds good, doesn't it?

Whatever anyone says, however, it's still a crap shoot.

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Published: May 28, 1999

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