WE NEED MORE TRUTH IN THE HOMEBUILDING INDUSTRY

You can't handle the truth

Perhaps I pay too much attention to what occurs in our industry but I have recently noticed a number of situations in the homebuilding business where the truth seems to be lacking.  I am not suggesting that the people involved were actually lying but, rather, that when the truth needed to be told it was conveniently not volunteered.  So that would seem to me to make these situations “untruths” by virtue of omission.

Although Colonel Jessup (A Few Good Men, 1992) suggested that we can’t handle the truth, I would disagree.  Not only can we handle the truth in the homebuilding industry, we cannot survive and prosper without it.  We need to hear the truth every day and listen to it every single time. 

A builder who is active in one of the markets in which I work fired his real estate broker last year because he was unhappy with the sales staff consistently bringing in “low-ball” offers. The builder reportedly interviewed six different firms before selecting the one that appeared to him to have all the right answers yet the new sales team soon was bringing in the same “low ball” offers.

If this builder (thankfully not one of my clients) would have asked me, I would have told him that his homes are very ordinary, offering nothing that cannot be obtained from several other builders currently operating all over his local market.  When “low ball” offers are made, it is always due to the fact that the buyers do not perceive the value of the homes. Although part of that perception might be due to lack of talent on the part of the sales staff, more probably it is caused by the builder having failed to provide a marketable USP (unique selling proposition) within the home and community. In that situation, price will always win out and this builder will continue to receive low price offers as will his competition and the builder that accepts the low price offer will make the sale.

I was not present when the new broker was hired but I would wager that he was eager to get the listing and either did not know what the reality of the builder’s position in the marketplace was or, giving him the benefit of the doubt as to his knowledge of the market, conveniently failed to inform the builder of the facts.  This new broker also has a reputation of using a builder’s new home listings to sell resale housing so I will also wager that within the year the builder will fire this broker too and the cycle will begin again.

One of the talented advertising agencies with whom I have worked created a new marketing campaign as requested by a builder (again, fortunately not one of my clients) and showed me the program as a sample of their recent work.  The campaign included major revisions to the homebuilder’s web site and a new social media effort plus new print ads, billboards and direct mail, all of which were admittedly very well done.  Thousands of dollars were spent but, from what I have subsequently heard, although traffic increased slightly, there was no discernable improvement in sales and that was no surprise to me.

I am familiar with the market in which this builder operates and I have seen this builder’s homes. Once again, they are simply nothing special.  In fact, he has effectively been building these same designs for the past ten years and now almost every other builder in the market offers the same homes.  But even worse, now this builder has sold out all of the close-in locations that he had and his new communities are on the far fringes of the urban area.  So he is offering stale designs in less desirable locations and competing not only with numerous other builders but also his own resale houses which enjoy superior locations and lower cost basis.

I know that business is slow for many ad agencies in the homebuilding industry but was there not an obligation on the part of this agency to have at least suggested to the builder that prior to changing the web site or running new ads he should look at his market position and strategic plan?   

The reality is that even the best new sales team cannot solve the problem of homes lacking competitive superiority.  And the best new advertising campaign cannot cure the inherent underlying issues of location and price. In both cases they are “tactical” attempts to correct “strategic” failings and are, therefore, inherently doomed to failure. I believe that the broker in the first situation and the ad agency in the second situation failed in their ethical, moral and business obligations to tell the truth.  But I also fault the builders in both situations for failing to seek out the truth.   

Truth - road sign

As my dear friend Bonnie Alfriend said in a reference for me,…”As one mutual builder client shared with me, ‘I may not always like what I hear from Dan but one thing is consistent; he always tells the truth and he is always right.”   I am not certain that I am always right but I always tell the truth because while the truth may not set you free (please forgive the adjustment to John 8:32) it is a start to understanding reality and creating an opportunity for success in homebuilding.  And I believe that every consultant and related industry professional has an obligation to tell the truth to their builders.  But that’s just my opinion.

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14 thoughts on “WE NEED MORE TRUTH IN THE HOMEBUILDING INDUSTRY

  1. I’ve been reading along for a while now. I just wanted to drop you a comment to say keep up the good work.

  2. Good evening, Dan
    I just read your article “We Need More Truth in the HomeBuilding Industry” and I agree with you. It does you, the real estate broker that the builder has contracted with to help him increase his traffic and sales, to just continue to try to sell a product that hasn’t been changed for many years. It doesn’t work no matter what you try to do. It is up to the broker to be honest with the builder after the broker has done his/her due diligence to find out everything about the product, the price, the competition and the advertising campaign so that he can give the builder a true assessment of the project which means that the broker must tell the builder that the product isn’t selling because the home designs are too old and the location of the communities are not in the right locations if this is the case. The builder has to be willing to accept an accurate assessment of his home designs and community locations if he has tried several brokers and sales teams, but hasn’t had much success in selling the homes or else the builder is going to continue to hire and fire brokers and sales teams without selling homes which is his ultimate objective.
    The truth is out there and it will definitely set you free if you are willing to face the truth and do what the truth tells you to do to be successful.

  3. Hi Dan:

    In this economy, it is more important than ever to make adjustments to our business models, to reinvent our companies, and prepare ourselves for the new reality that we will face in the future.

    To do that, it is essential that we “look in the mirror” and really look at the truth of what we have been and what we can be. I have found in the past that having an outside consultant’s dispassionate advice and council is essential for me to see the “truth” and face the hard facts. None of us really loves change, but the status quo won’t help us prepare to succeed.

  4. Hi Dan, I met you the first time at the Trulia / New Home Feed dinner at IBS 2010. I was sitting to the right of Myers Barnes and to your left.

    I do think we need more truth in homebuilding. I think we need more truth in business in general. Truth is the foundation of trust, and trust is what creates chemistry in our companies. Trust is also critically important in the consumer buying process.

    Thanks to the Internet, transparency / truth has revealed itself to be one of most important aspects of commerce. Just imagine what eBay, Hotels.com, and Amazon would be without the unfiltered reviews they display.

    Business is more competitive than ever before, and we need partners to navigate this new and rapidly changing business climate. That’s not going to happen without the trust that comes from being truthful.

    Great topic Dan.

    Jim Adams – CEO
    New Homes Directory

  5. I often tell my clients you can listen to me now or your bank will listen to me later, which do you prefer? I agree with your comments on ad agencies. Often in the past the lead people at the agencies were an important part of the strategic position …we need more of that.

  6. I think that we definitely need more truth in the industry. I think the average consumer is very uninformed when they go into a major home project. We try to be as informative as possible. Kill ’em with information when you can and they will have more confidence in you. I wish all my competitors would do the same, rather than underbid to get the job and then jack up the total cost in the end. Or leave the work unfinished or poorly done. I write about that in my blog.
    Great topic!
    Holly C Bertsch
    Taylor’d Home Improvments

  7. Thank you for bringing this to the front. As most builders should be aware of the market conditions prior to starting they should also be aware of them well into any development. In today’s market many sales people are blamed for the lack of sales or even the ability to sell a moderate home at a higher price than normal. There are many items affecting the value of a home today, Mortgage value, appraisal value and market value.

    We as professionals must look at what has happened to the market conditions over the past 20 years and we must inform what WILL happen in the next 20 years. This is not just telling the truth, but it is in the ethics of it.

    Thank you Dan.

  8. Dan,

    Your comments are very appropriate for today’s business and consumer world. We all know that the evolution of social networks like Facebook and Twitter have propelled us into a community of increased transparency in business and personal lives. The honesty of broker and ad professionals with their builders is critical for a new home community’s success!

    In our profession of model home interior design, we also have the opportunity to honestly advise our builder clients on their product design, making any adjustments at the planning stage – and even later during a frame walk through. A critical part of our job as the Interior Merchandiser is to advise our clients on opportunities to differentiate their home from their competition down the street as well as offer innovative floor plan ideas to ensure that homes are meeting the buyer’s changing lifestyle. Without honest sales, strategy and design consultants on the builder’s team, potential home buyers may not understand why it’s the perfect home for them. The sale is then lost – unacceptable!

    Ashley Jennings
    Kay Green Design

  9. Sounds so simple to just tell the truth… and then something happens; we assume we know how the prospective buyer will react to what that truth may be. By telling the truth that simply does not matter… When holding back on relevant information the question to be asked is; How would they react if they realize I was not totally forthcoming? That is a risk one should never take because the it is not worth the risk. Plain and simple.

  10. Untruths via omission will always, at some point, be devestating to a lasting, profitable, relationship – regardless if the omission is by the service provider (Marketing rep., Realtor, Architect, etc.) or product manufacturer (Builder).

    As to untruths told to the home purchaser, think your state’s Property Code, Fraud, DTPA, etc. In other words, Pinochio should not be in the business of building or selling homes.

  11. I agree: more truth–in homebuilding, and everywhere else.

    I would be interested in what you see as features of “competitive superiority.”

  12. Dan,

    Loved this post. As the owner of an ad agency, I can tell you that I have just been awarded 2 large accounts because the developer said “you are the only person who told me the truth”. Honesty can pay off.
    In this instance, I shared with the potential client that the market could not absorb their product and that they would be better off doing high end apartments. This is what they chose to do. I am not sure all agency personnel understand real estate though and may not be able to offer such advice.

    On the other hand, after 21 years in business, I have lost track of the number of times I have told a builder or developer the truth, was told I was wrong, and was told I had to implement their plan. Sometimes people don’t want to hear it.

    Keep challenging us with good thoughts like this.

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