Increasingly builders are looking to maximise profits to ensure the sustainability of the business. Cost to operate continue to rise and competitors are constantly looking at ways to trump competitor offerings and maintain profit margins.
The buyer today is savvier. Has a greater understanding of what can be achieved. What to ask for and how to get a better deal. Or so they think.
Builders seek innovative ways to market their products to clients. One method is to commit the client to a process that invests time and most importantly “emotional commitment” in the process. Focus the client on an ideal that the builder can make a reality. The client’s “dream” of owning a house becomes real with the “help” of the builder. At that point, the cost of the upgrades and the overall finish is the unknown.
Profit before responsibility should never be the answer to any business seeking a long-term presence in the marketplace. Unfortunately, builders are repeatedly placed in a position to cut the profit margins to meet the consumer expectations or risk being left behind.
Good building companies innovate. They look to their suppliers, forming strong partnerships that collectively allow their respective business to flourish. They look at the long-term strategic goal of market perception. They seek good outcomes for today and the medium short term. However, they understand better than others that their core focus is over the long term. Planning positional sustainability years in advance. This is a sustainable model that looks beyond the next contract and towards the future.
Some builders have taken the position of a clear programme of Quality Assurance that sets them apart. I make this statement as we at Darbecca have inspected thousands of homes and the difference between builder’s construction processes are very discernible.
Those builders in the marketplace that use KPI in respect of build quality, customer satisfaction and a reduction in defects at all stages are those that stand out in the marketplace.
That process is progressive, from the display experience to the final delivery of the home. The maintenance team, if needed is at the ready. It does not look for excuses. These builders seek out customer outcomes that are sustainable.
The sustainable model that will continue to provide a client base that understands the quality on offer and which in turn results in a reasonable profit margin.
To achieve the standing of a responsible sustainable builder takes time. It takes a commitment to a method of building with accountability as a core function. Planning years in advance of not where they are, but rather where they are going and what they will represent when they get there.
Buyers go through several phases as part of the buying process. Buyers need to find a home they want; a home that appeals to them. A home that represents their values and how they want to live and most importantly, how they want to be perceived by others. They then move onto the commitment phase. This is where some builders take a different approach.
Some builders look to emotionally commit the buyer to the home. Suggesting enhancements that present the home as somewhat unique.
The homebuyer’s subjects themselves to the process of selecting colours. Selecting floor coverings and wall tiles. The colour of cabinets, and the list goes on. They are now fully committed. Homeowners have in their mind’s eye a fuller picture of what they believe is achievable.
It is at this point that a tender document is released detailing the final price. Some negotiation may take place to trim some items to fit in the budget. But overall, the buyer is now fully committed.
It is at this time, and only at this time, that the contract is released. The Master Builders Association (MBA) and the Housing Industry Association (HIA) contracts are considered by all as being a fair and reasonable contract that seeks to blend the needs of the builder with that of the owner.
The contract conditions, as prepared by the HIA and the MBA are industry practise to most parts and commonly employed without modification by the larger percentage of builders.
What happens when the builder seeks to vary the standard form contract? What happens when the special conditions page is full of conditions that are not normally in a standard contract? What happens when additional pages are introduced to cover off the two to three other pages of other conditions that the builder wants? Darbecca is aware of builders that have conditions and specifications that rally into the 30 plus pages. All added to a industry contract that has been heavily redacted and changed.
You must ask yourself, are those special conditions or specifications in the homeowner’s best interest?
The homeowner is fully committed both in time, emotion and fiscally. Only a fool would suggest that a change made to a Standard form contract by a builder would be in the homeowners’ favour.
The probability of the builders’ special condition being in the best interest of the homeowner is extremely remote.
Remember the homeowner/s is committed. Often feeling, and in some cases being advised that they have no choice but to submit to the conditions to expediate the process or even to have the builder build.
Would it surprise you to know that this pathway to profit is common? In Victoria, there are builders that seek to commit the homeowner, only to subject the homeowner/s to conditions in a contract or specification that most other builders would never have. Had the special conditions or specifications been known at the start, likely would have little to no chance of progressing past the meet and greet.
An example is 5 pages of special conditions in one contract. In the brief description of “The Building Works”, the 52 pages of specifications or additional conditions are introduced into the contract. Think about that. 57 pages of what the builder calls his building method. That the additional pages are for clarity. A reasonable person may differ in opinion.
All of this is on top of a HIA contract that has been further modified from that used generally by most other builders.
Is this sustainable? Is it placing profit before responsibility? Is there a better way? Homeowners are getting better at finding out those that have the homeowner’s interest at heart. To operate on the premise that the homeowners are fools is a mistake of a fool.
Long term sustainability can only come from the introduction and improvement modelling that promotes the process of integrity. Looking to ensure that your Quality is industry leading. That the core focus is responsibility; that you undertake to present the best offering in the market not hiding behind words that take away fundamental rights.
Each builder should offer up their contract for scrutiny at the start of negotiations to demonstrate that they have nothing to hide and that any special condition is the contract is necessary. Not just in the interest of profit.
The sustainability of buying favourable product reviews and seeking to hide behind words will eventually run its course and be seen for what it is. Bought reviews unfortunately blind people to facts. Purchased reviews are generally a camouflage, masking the builder’s processes. Product reviews have disclaimers that are not as prominent as the reviews. They are presented in a manner that allows you to skim over or dismiss them due to their wordy nature.
Those builders that seek to improve their product, seek to make the house a real home, seek to work with the home buyer, will be supported by a loyal client base.
Referral will be easy and not bought. Profits will continue and those builders will achieve the long-term development of sustainable business models.
Responsibility before profit is the smart way forward. Those that do not adapt will fail and fall from the market. The damage caused by such practises will endure after their collapse.
By Darren Love, Director, Darbecca
Darren Love is a registered builder and Director of Darbecca, a leading independent building quality inspection firm which operates in Victoria and Queensland.
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