A large percentage of new-home purchases are made through referrals by happy buyers.

If the buyers are not happy, however, then builders are in trouble.

According to veteran New Jersey builder and industry consultant Jim McAleer, even the hardest-to-please buyer will be happier if builders tell them up front what to expect and don't sugarcoat it.

For example, if the drywall will have some cracks, "tell the buyer and tell them that you'll fix them, if that is your policy," he said. "Tell them when you'll fix it, otherwise they'll expect you every two weeks."

McAleer said the growing active-adult market appeared to be among the most demanding buyers. "These people will sit in their houses and listen for the nail pops," he said. "And you'll hear from them almost immediately."

It is no wonder then that Del Webb Co., the venerable builder of retirement communities, "will do whatever the customer wants during the first year of occupancy," McAleer said.

It pays off, he said: Sixty percent of Del Webb's business comes from referrals. These active adults look forward to this lifestyle change. They do their homework on selecting the community. This may be their last home purchase, so they want it constructed well and with all the amenities.

Thirty years ago, when active-adult was a relatively new concept, a builder needed to provide fewer options, and there was little paperwork. Now buyers tend to be overwhelmed by the material provided at closing.

Often, there is miscommunication.

Fewer problems would arise if buyers and builders understood each other's positions at the beginning of the process.

Meeting and managing a customer's expectations is the biggest determinant in buyer satisfaction. If a buyer of any product has unreasonable expectations, then they'll be dissatisfied.

What a builder is doing is setting customer expectations. The ones who think ahead try to establish a relationship program among the community sales manager, the person managing construction in that community, and the home buyer to try to eliminate misunderstandings and make sure everyone is on the same wavelength.

The construction manager needs to know his job inside and out and should be able to communicate this to the buyer.

The salesperson must be able to sell the benefits of the home and know how to handle the customer's objections.

The sales staff has to present a realistic picture of what the buyer is getting for his or her money.

Therefore, the salesperson can’t tell a buyer that the paint job he or she will be getting on his home is the best one out there.

The salesperson has to set realistic expectations that the construction manager will have to deal with.

A typical point of conflict is the delivery date. Usually, delays are caused by the weather. But many buyers don't understand that changing options, such as switching granite for slate countertops or stone for wood mantles, will delay completion of their houses past the 90 to 180 days from agreement of sale they were promised.

That, of course, is another function of managing expectations. If a builder can't deliver on time, the builder should say so up front, or at least let the buyer know all the variables beforehand.

There are meetings between buyer and builder staff along the way to formally check the progress of the house. Most builders have pre-drywall, pre-settlement, and day-of-settlement inspections.

Builders also try to minimize the number of call-backs after closing.

Some states mandate home-warranty programs that require a builder to take out a policy that will protect the homeowner against defects specified in that warranty 10 years from closing.

A typical warranty policy on a $200,000 house costs a builder about $500, depending on the volume of sales, McAleer said. Many builders in other states offer their own one-year warranties.

The language in the state-approved programs is both builder-friendly and fair to buyers. If there is a dispute, the warranty company arranges outside arbitration services that, nine times out of 10, settle the problem.

Disputes arise when the buyer fails to read the warranty book, provided at closing, that outlines what is covered under the policy. Problems arise when the builder, fearing a public fuss, gives in to a complaint by the buyer that is not covered in the warranty.

If there is a scratch on a refrigerator, it is not covered, for example. However, the builder typically will go in and repair the scratch. Some buyers want the entire refrigerator replaced and threaten the builder with some sort of public display until the builder backs down.

Published: August 29, 2002

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Al Heavens writes about real estate and home repair and improvement. He is the author of What No One Ever Tells You About Renovating Your Home: Real-Life Advice For Hassle-free, Cost-Effective Remodeling.