Production vs. Small: Tract vs. Custom:

Tartan Homes is a “production builder” or a “tract home builder”. We are not a “small builder” or a “custom builder”. A prospective customer might well observe: “The houses look more or less the same. What’s the difference? And why does it matter to me?”

There really is a stark dividing line between tract and custom builders, or, if you like, between production and small builders. From a customer’s point of view, the entire buying experience will be quite different, depending on which side of the line you are on. I’d like to shed some light on the differences here, as well as in my next several blog entries. Before I begin, I should say that I will be speaking in generalities.

Size and Scale:

The first and most obvious difference is size. Production builders will typically close more that 150 homes per year, whereas a custom builder will close anywhere from 5 to 35. There are very few in the 50-125 closings per year range, and there are numerous reasons for this.

The primary reason is related to economies of scale. A custom builder will have a small team of multi-tasking employees. The salesperson will do all the upgrade sales, all the related paperwork, and probably looks after all the Tarion warranty items, plus conducts numerous site inspections with the buyer.

The site super is probably the owner. He likely has one or two assistants and site employees. They will look after buying building lots, the permit application process, hiring the sub-trades, processing customer changes, building the home, and after-sales service work.

The custom builder will likely use outside consultants for drafting and accounting, and will perhaps use a resale agent for sales.

The custom builder does not have a head office, and their extended-cab truck or van often serves as the site trailer.

For a buyer, working with a small or custom builder means working with all the key players in the business. These people will have all the details at their fingertips, and will rely on their memory and multitasking abilities, rather than extensive paper trails, to get things done right. And they usually do. They are nimble, and can work with the buyer right through the building process, making small customized changes along the way.

Call it boutique building if you like. Personalized, but expensive. Why expensive? That will be the subject of a future blog. Up next: How a tract builder operates, and why there are very few 50 – 125 a year builders.

But it’s not like the model home . . .

The single most important promotional tool we new home builders have is models homes. We fuss over them greatly, and spend a great deal of time and money building them just so, selecting the best custom options, decorating them, and keeping them clean and bright.

Out of our extensive selection of home designs, it is no surprise, then, that we end up selling quite a few of the model home designs.

So when a customer says “I want a new home just like the model”, we feel a little bit pleased with ourselves, that we got it right, and that the model home is working for us as it should.

But sometimes the benefit of having a dynamite model home can become a bit of a curse.

We make every effort to identify the standard home features and the upgrade options. We also always have one model home that only had standard features for people to view. This way buyers can see exactly which upgrades to purchase, if they want their new home to be just like the model. But it doesn’t always work. We still have the occasional instance where a buyer moves in to their new home and they are disappointed because “it’s not like the model.” It can be the subtlest thing. I think some people respond emotionally to the model in the first place, which drives their buying experience. Even though we think we have covered all the bases in the buying process, their new home just doesn’t re-create the initial emotional experience.

A second issue is the evolution of the architectural design of all our homes. We have built many Royal Edwards, which is our most popular design. However, no two Royal Edwards are built in exactly the same way. Firstly, the locations of switches, plugs, lights, drain location and so on will still meet the building code, but will vary from home to home, and will almost certainly not be in the same locations at the model. There are numerous reasons for this: the stud layout can be different, the location of a custom plug will change the sequence of remaining plugs, a new trades person will begin the sequence of plug or switch locations from a new starting point, and so on.

Secondly, and more importantly, the design of the homes evolves over time. We might find a better way to run ducts, a better location for a load-bearing post or simply improve the overall design based on customer feedback. We might start using an improved component in the home. We might come upon changes that improve the structural integrity of the home. Such improvements might result in slight changes to room dimensions, or stair and door locations. And while subtle changes are allowable in the building code as well as with Tarion Warranty, they can still evoke disappointment, because “it’s not like the model”. To us, the changes are at best imperceptible improvements, and at worst they are inconsequential. But every once in a while a buyer will notice.

It’s true; I can tell a disappointed buyer that our marketing material and sales agreements say that small changes are permitted. But resorting to the fine print is almost like saying “you should have known and it’s your fault”. This is hardly a sterling example of customer care and in these infrequent instances, I always feel like I’m letting the customer down. We haven’t done anything wrong, but the model home experience has not worked. I then wonder if there is something else we can do, and I review the ways we present and talk about our models with prospective buyers. I end up concluding that we are doing the best we can. All I can say to prospective buyers is this: if you want it just like the model, make sure all the sales people know. Try and identify the parts of the model that resonate with you, and ask this question: “Are you still building this house the same as when you built the model? If not, what are the changes?”

New Homes' Superior Energy Efficiency

Our company builds new homes in the suburbs of Ottawa. And I, like many others, am concerned about climate change, and our household continues to modify our lifestyles to try and reduce our own carbon footprint. Occasionally people ask me if building homes in the suburbs is incompatible with reducing carbon emissions. Some new homes are very large: don’t they take more energy to heat? Don’t people have to drive much more? Will gas rising gasoline prices cause fewer people to choose new suburban homes?

May of these issues are beyond the control of homebuilders. There are many responses to these questions. I’d like to highlight two of them: New homes today, especially Energy Star homes (all of Tartan’s homes are Energy Star® qualified), are very well insulated. They are far more energy efficient than even a 10-year old home. Likewise with the appliances and furnaces. The energy bills of a 2011 homes will be, on an average square-foot basis, lower than any homes built previously.

Regarding driving, I don’t think gas prices will changes peoples home-buying decisions. They will change people’s car buying decisions. The automobile industry is slowly becoming aware of this, and is starting to produce smaller cars with much better mileage. They are really only scratching the surface, however. A little bit of research will show that it is quite easy to build cars that are considerably more efficient than a Yaris (my car) or a Cruze. It’s a matter of marketing and an economic incentive for the carmakers. In my view, the next ten years will see a wave of really efficient cars coming to market. While gas prices will certainly go up, the cost of driving -- on a per-kilometer basis -- will not, as more and more people opt for energy efficient cars. And people will continue choosing to live in new suburban homes for the many benefits they provide.

www.nytimes.com/2011/01/07/business/07green.html?partner=rss&emc=rss

http://autos.yahoo.com/green_center-tech-fuel_upcoming/