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Observations from a Small Volume Builder: Ten Secrets to Success

Success means building every spec house as though you’re going to live in it yourself. It often depends upon the little things, the attention to detail, that can set you apart and enhance your sales in the marketplace.

I started building homes in the early 1980s, when the prime interest rate was 21% and a 30-year, fixed-rate mortgage was at 16.5%. The term “spec” house took on a very literal connotation because they were highly speculative, and if you didn’t build a masterpiece, you probably couldn’t sell it.

But my immersion in that hostile market turned out to be a valuable learning experience. It toughened me up; as a matter of survival I learned the importance of being lean, mean and sharp.

So, the product of adversity, here are 10 secrets to thriving in a competitive environment:

1. Study absorption rates in your community, number of permits, price ranges, demographics, etc.
2. If you can find a niche, niche marketing can be a great avenue.
3. Study your competition: It is imperative to know what’s going on in your marketplace.
4. When you model your homes, be professional. Look attentive; be attentive. Provide brochures on the home, including information on the subdivision, schools, shopping, anything relevant. Remember — you only have one chance to make a good first impression.
5. Be familiar with your house and potential changes to the plan. People buy what they can see and visualize. Have you ever had a spec house that someone wanted to clone or change a little, only two lots away from the model? Learn how to repeat the plan with different elevations, etc., so it doesn’t look the same.
6. Be prudent and selective. Choose good lots in a good neighborhood. It is much easier to sell an average house in a great neighborhood than an above average house in a less than desirable area.
7. I’ve found it beneficial to keep the same subcontractors, and you don’t have to take the lowest bidder. Treat subs like good employees and they will usually respond in kind. I’ve personally had the same subs forever. They know my peculiarities and idiosyncrasies, and that makes it easy for us to work together.
8. Remember the old adage, “I don’t care how much you know — until I know how much you care!” If we have good communications with our buyers, they know we are attentive and caring, and it makes the whole building process much more harmonious. I’ve heard of buyers who didn’t even want to bother their builder with trivial warranty items after occupancy because they felt their builder was so fair, or where they could have sued the builder but didn’t because they liked him. Staying in touch can pay huge dividends.
9. Buyers don’t like surprises. Be detailed and thorough in your purchase agreements. Make sure the allowances for floor coverings, appliances, lighting fixtures, etc., are adequate for the home.
10. Do not promise unrealistic completion dates. If you want to enhance your reputation and be recognized for your integrity, do what you say you’ll do — with no surprises, no extra costs and no substantially missed completion dates.Your buyers will love you, and you’ll get referrals. That, ladies and gentlemen, is what it is all about: win-win relationships.

Lastly, I’d like to make a pitch for our industry and who we are. You are a very wonderful and special breed! You are the entrepreneurs of this country. You take huge risks with very uncertain and sometimes small rewards. You do what a lot of this society can’t do. So, when someone asks what you do for a living, stand tall and tell them you help supply housing for the greatest country in the world. You are part of a great and noble industry, and you are a member of the National Association of Home Builders.

Jack Knutson's business is Knutson Homes, Inc. in Bismarck, ND. He was the 2002 state president of the North Dakota Association of Builders, and the local president of the Bismarck-Mandan Home Builders Association in 1998. He has been active in local, state and NAHB activities, and is a true believer in the home building industry. This article was written in part to help prepare his son for joining the business. Knutson can be reached at 701-258-3464.

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