Would you recommend your builder to your friends or relatives?

A remarkable 39 percent of the 22,000 new home buyers queried in the latest survey by the NRS Corp. say they would "definitely" endorse their builders to family and friends. Only 7 percent said they most assuredly would not.

Given that most buyers regale anyone within ear shot of horror story after nightmare of things gone wrong during and after the construction process, both of those are indeed very surprising numbers.

But it is within those extremes -- the 54 percent who said they are likely or unlikely to recommend their builders -- that builders are losing a lot of money, according NRS President Paul Cardis, who pointed out that it not only costs builders far less to reach referrals, the conversion rate among referred customers is twice as high as it is for marketed prospects.

Of course, the way to obtain referrals is to have satisfied customers.

In another study, NRS, a Madison, Wisc.-based research and consulting firm which specializes in home building, found that builders with a satisfaction rate of 91 percent or better received six or more referrals from previous buyers.

However, those with a contentment level of 67 or less got none.

"They're getting killed," Cardis said of the latter group. "Their customers are probably making negative comments. The unhappy customer is a trapped customer who wants to lash out and spread the word."

All businesses strive for 100 percent customer satisfaction, and the housing sector is no exception. But according to Cardis, few home builders know what percentage of their customers are profitable to their companies, how many customers actually generate referrals and what percentage of referrals per customer makes them profitable.

Many builders use exit surveys to gauge satisfaction. While such studies are good because they are immediate, the results can be misleading, the research specialist warned. Buyers just leaving the closing table are often too excited and emotional to state their true feelings, he said, noting that the rating they give their builders is usually 10-12 points lower when queried a week later.

Cardis isn't a great fan of phone surveys or other pressure-based studies because most people don't want conflict so they won't say what they really feel. Consequently, builders often don't know what their getting with these types of surveys, he said. "It's like flying a plane with instruments that are off."

Cardis said builders should survey their buyers 30 days after they complete the purchase, then again at the 60 or 90-day service period, and a third time after they've been in their homes a full year. And he warned against asking yes-no questions, suggesting instead that buyers be given multiple choices or allowed to explain their feelings.

If builders can reduce surprises by warning customers that things will go wrong and it will take some time to make them right and then responding to their buyers' calls within 24 hours, they will go a long way toward improving their satisfaction ratings, the researcher also said. "If they are stunned something went wrong and you let their problems fester, they will go through the roof."

On the other hand, if builders can reduce the surprises and take out the worry, both their satisfaction levels and their bottom lines will soar. According to NRS, the top half of the 200 builders covered in its big consumer study last year had 51 percent more closing that those on the bottom half of the satisfaction scale.

Published: March 20, 2002

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.