Pro Builder FEB-2020

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FEBRUARY 2020

MAKING CONNECTIONS THE NATIONAL SALES & MARKETING AWARDS

ALSO IN THIS ISSUE TNAH 2020: Kitchens & Baths 40 Reducing Cycle Time, Part 2 46 Infill Solutions 50

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FEBRUARY 2020 VOLUME 85, NO. 2

11 EDITORIAL: What do buyers want?

13 EDITOR’S NOTE: You’re a concierge

15 NAHB BRIEFING: The latest federal tax package

17 HOUSING INTEL: Trends among today’s buyers

21 LEADERSHIP: Build homes faster

24 QUALITY MATTERS: Safe scaffolding

30

SALES + MARKETING: Making

Connections: Winners From The Nationals Awards

40

<< DESIGN: Desert Oasis: Kitchens and Baths of The New American Home 2020

46

BUSINESS MANAGEMENT: Cycle

Time, the Gift That Keeps on Giving

50

40

HOUSE REVIEW: Infill solutions

The “mini-master” bath of The New American Home 2020 epitomizes the luxury and design diversity of the home’s kitchens and bathrooms

NEW PRODUCTS: Roofing; apps for builders

58 66 Q+A: Katie Beck’s insights for streamlining construction liability insurance

ON THE COVER: Lido Villas by Landsea Homes, in Newport Beach, Calif., a Nationals Gold Award winner page 30 PHOTO: CHRISTOPHER MAYER, WITH PERMISSION OF LANDSEA HOMES

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EDITORIAL:

What Do Buyers Want? THAT IS THE EVER-PRESENT HEAD-SCRATCHER OF A QUESTION facing home builders year in and year out. Article after article touts the newest architectural style, floor plan, appliances, surfaces, lighting, windows, flooring, and technology that are the current must-haves for home shoppers. Combine these with the ups and downs brought on by changing demographics, the stock market, mortgage and employment rates, and urban or suburban preferences, and you have a stew of competing factors that make it impossible to please many buyers. All of the above are important to consider, but if you find yourself feeling like you’re trying to attract homebuyers with an array of shiny objects, it’s time to step back and reexamine your company’s basic premise. It’s far better to nail the overarching elements first before thinking about which trends of the moment might succeed in luring new customers. After plowing through a number of consumer preference surveys, it becomes clear there are three fundamental components a majority of buyers agree are most important: Sustainability: Whether you call a home green, energy efficient, or eco-friendly, energysaving features and low energy costs rank high on buyers’ lists of requirements. Attainability: As home prices continue to escalate, creative solutions for density, smaller footprints, sensible floor plans, and efficient building practices become ever more critical. Healthy: A healthier living environment, including improved indoor air quality and the use of nontoxic materials, offers buyers peace of mind when choosing a home to buy. In an effort to get a closer look at how builders can best adhere to and apply these princiDENISE DERSIN ples, Pro Builder formed a partnership with the Energy and Environmental Building Alliance Editorial Director (EEBA) and Denver-based Thrive Home Builders. For nearly 40 years, EEBA has been the ddersin@sgcmail.com home building industry’s leading provider of sustainable building information and education, connecting its members with leaders in the high-performance home building community. Thrive Home Builders has been a national leader in the design and construction of energyefficient homes for almost 30 years and has garnered 10 Grand Awards for Housing Innovation from the U.S. Department of Energy. Thrive was Pro Builder’s Builder of the Year in 2017 and received National Housing Quality Awards in 2018 and 2019, a testament to its operational proficiency. Together we will build a home that will debut during the EEBA Summit in Denver, Sept. 29 through Oct. 1, 2020. The finished product, an approximately 2,400-square-foot detached residence we call the Ultimate Z.E.N. (Zero Energy Now) Home, will be self-powered, designed to produce as much energy as it consumes, and certified by the U.S. Department of Energy’s Zero Energy Ready program. It will also be LEED-rated and qualified by the EPA’s Indoor airPLUS program. The home’s design, a collaboration between Thrive’s Eric Sung and architecture firm DTJ Design’s Seth Hart, will offer a balance between beautiful design and modern living functionality, with a clean, simple exterior and an open plan featuring high ceilings and large windows to offer both light and a spacious feel. Pro Builder will cover the home in these pages and online throughout construction, culminating in a feature story in December 2020. In addition to the EEBA Summit, Thrive will keep the Z.E.N. home open for a year as a model. I hope you’ll take a look at it, in person or in these pages and on our website, to get some fresh ideas about how to offer buyers more of what they really want.

STAY CONNECTED TO PROBUILDER • The Housing Giants survey is now live at probuilder.com/professionalbuilder-2020-housing-giants-survey Let us know where you rank!

• Find extended coverage of The Nationals winners at probuilder.com/ nationals-2020, and a complete list of winners at thenationals.com

facebook.com/ProBuilder instagram.com/probuildermagusa

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EDITOR’S NOTE:

VOL. 85 NO. 2

3030 W. Salt Creek Lane, Suite 201 Arlington Heights, IL 60005-5025 847.391.1000 • Fax: 847.390.0408

STAFF EDITORIAL DIRECTOR Denise Dersin 703.992.7640; ddersin@sgcmail.com EDITOR-IN-CHIEF Rich Binsacca 847.391.1011; rbinsacca@sgcmail.com CONTENT MANAGER Ingrid Bush 202.780.9591; ibush@sgcmail.com SENIOR EDITOR Mike Beirne 847.391.1051; mbeirne@sgcmail.com EDITOR, PRODUCTS Nigel F. Maynard 202.549.6552; nmaynard@sgcmail.com ASSOCIATE EDITOR Annie Cebulski 847.481.6164; acebulski@sgcmail.com CONTRIBUTING EDITORS Larry Garnett | Bob Schultz | Scott Sedam DESIGNER Larry Nigh GROUP DIRECTOR – PRINCIPAL Tony Mancini 484.412.8686; tmancini@sgcmail.com DIRECTOR OF EVENTS Judy Brociek 847.954.7943; jbrociek@sgcmail.com SENIOR DATA & AUDIENCE DEVELOPMENT MANAGER Ebony Fendley ASSISTANT DESIGN MANAGER Dara Rubin MARKETING DIRECTOR Stephanie Miller smiller@nimblethinkers.com SUBSCRIPTION INQUIRIES Professional Builder P.O. Box 300 Lincolnshire, IL 60069-0300 PBM@omeda.com 847.763.4933 Toll-Free | 877.501.7540 REPRINTS Tina Kanter 847.391.1054; tkanter@sgcmail.com

CORPORATE CHAIRMAN EMERITUS (1922-2003) H.S. Gillette CHAIRPERSON K.A. Gillette CEO E.S. Gillette PRESIDENT Rick Schwer COO David Shreiner SENIOR VICE PRESIDENT Ann O’Neill DIRECTOR OF CUSTOM MEDIA & STRATEGIC PRODUCT DEVELOPMENT John Atwood

For advertising contacts, see page 63

You’re a Concierge BEFORE THE INTERNATIONAL BUILDERS’ SHOW last month, I called my hotel seeking suggestions for a good breakfast place nearby to meet with a source for an upcoming article; neutral ground, something local, and not a concession stand at the convention center. I know what you’re thinking: Why not just go on Yelp to find a top-rated restaurant? Ultimately, that’s what I did because the “concierge” at my hotel, while very nice, recommended only restaurants located within the resort. My (foolish and outdated) expectation was that the concierge, to ensure this guest (me) had a good experience and felt special and well taken care of, would offer several options on and off the property— ideally a quiet diner with great food frequented by locals, not tourists. But this concierge offered a Chinese restaurant among the hotelonly options, forgetting within 2 minutes that I was looking for a breakfast—not lunch or dinner—place. I politely ended the call and went online, feeling stupid and definitely not special. In selling new homes, you are a concierge for your company, fielding calls, emails, website inquiries, and sales center visits from people who are interested but still curious, motivated but a little lost, smart but looking for answers. This is your chance to make RICH BINSACCA, them feel special and to dig deep into their wants and needs to Editor-in-Chief serve them and deliver solutions that resonate. rbinsacca@sgcmail.com I’m not suggesting a sales approach that leads your prospective @ProBuilderMag buyers to consider, much less visit, homes besides your own (at least not on the first call), but I am intimating that the ability to deliver a positive, personalized customer experience, especially from the get-go, is a critical driver in converting a prospect into a sale. And, if you can keep delivering that exYOUR ABILITY TO perience through the entire process, a satisfied DELIVER A POSITIVE, homeowner willing to refer you to others is the PERSONALIZED ultimate marketing goal. CUSTOMER EXPERIHow? Listen first and write it down, then respond to prospects with answers (and more ENCE IS A CRITICAL questions) that show they’ve been heard and unDRIVER IN SALES derstood, and that you seek to learn more. Offer solutions that align with their wants and needs. Be honest, always, about what you can deliver. And, if your company truly and absolutely can’t meet their expectations, bite the bullet and suggest someone who could. While that may seem counterintuitive, it will definitely impress them and create a positive memory that may someday bring them back or, even better, make them reconsider their options so they can buy from you after all. Neglect that role and responsibility and you may find yourself on the wrong end of a Yelp review and competing with iBuyers and online searches and sellers that at least make it easy, if not particularly special, to buy a home … and, most likely, a resale at that. It may not be as simple as suggesting a good breakfast place, but it’s also not complicated.

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NAHB POLICY BRIEFING:

President Trump Signs Tax Extenders Into Law

PHOTO: TRONGNGUYEN / STOCK.ADOBE.COM

After record numbers of builders left the industry during the Great Recession, production has not kept pace with demand. Single-family home starts of 6.8 million over the past 10 years were far lower than the numbers seen in the half century prior to the downturn and are barely half of the 12.3 million homes started during the previous decade. The figures are more striking given the U.S. population increase over the period. Also, despite adding nearly 1 million jobs to the sector since a low in 2011, overall job numbers in construction have yet to fully recover. Years of population growth and household formations, along with reduced levels of home building, have produced a critical supply shortage. Yet surveys show homeownership remains a goal for many consumers across all segments. NAHB studied the paradox of declining inventory, rising prices, and underperforming singlefamily construction over the last decade and found the lack of building is rooted in supply-side headwinds that limit construction in expanding markets. The decline is tied to challenges related to the five L’s: labor, lots/land, lumber/materials, lending, and laws/regulatory burdens.

RHA/VA insurance premiums. An income cap starting at $100,000 applies. • The Mortgage Forgiveness Tax Relief Act, which eliminates any taxes homeowners may face after renegotiating the terms of a mortgage loan that resulted in forgiveness or cancellation of all or part of the outstanding loan balance on a principal residence. • The Section 45L new energy-efficient home credit provides a $2,000 tax credit to builders for the construction of homes that exceed heating and cooling energy

standards by 50%. Builders must have tax basis in the home, meaning they must own and then sell or lease it, to claim the credit. • The Section 25C tax credit for qualified energy-efficiency improvements provides a credit worth up to $500 for consumers to install qualified energy-efficient upgrades. • The Section 179D commercial buildings energy-efficiency tax deduction delivers a deduction of up to $1.80 per square foot for commercial and multifamily buildings that exceed specific energy-efficiency requirements under ASHRAE 2007.

SINGLE-FAMILY HOUSING STARTS BY DECADE 14,000

12,000

HOJUSING STARTS (IN THOUSANDS)

J

ust before the holiday recess, President Trump signed into law a tax package that includes a number of popular housing-related tax extenders. The bill contained several temporary tax items that expired at the end of 2017; the new law extends them through 2020, and also retroactively for 2018 and 2019. Working with Congress, NAHB pushed for the following provisions: • A mortgage insurance deduction that gives taxpayers credit for premiums paid for private mortgage insurance and FHA/

10,000 1

8,000

6,000

4,000

2,000

0

1960s

1970s

1980s

1990s

2000s

2010s

SOURCE: NATIONAL ASSOCIATION OF HOME BUILDERS

ABOUT NAHB: The National Association of Home Builders is a Washington, D.C.-based trade association representing more than 140,000 members involved in home building, remodeling, multifamily construction, property management, subcontracting, design, housing finance, building product manufacturing, and other aspects of residential and light commercial construction. For more, visit nahb.org.

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HOUSING INTEL:

WHAT THEY WANT Home-related factors in buying decisions

Larger house

57%

35-54 55+

TRENDS AMONG TODAY’S BUYERS

19%

Higher-quality home

43%

35-54 55+

27%

Larger yard

By Rich Binsacca, Editor-in-Chief

T

he best way to find out what prospective buyers want in a new home is to ask them. Whether you send a survey, query them in the sales office, or corner them at an event (ideally all three, and more), taking the pulse of your local market is critical to strategizing your approach to that market. By contrast, national trends, while not a precise indicator of local demand, can, and should, play a role in starting conversations with local buyers to validate or tweak general trends to meet local preferences. This month, we share key results from three recent national studies looking at consumer homebuying trends to reveal opportunities to create competitive distinction, get ahead of the curve, and sustain profitability. Consider the data gleaned by RCLCO Real Estate Advisors showing unmet demand (read: opportunities) to provide smaller, denser, and attainably priced housing in an “inclusive” master planned community context, ideally on urban fringe green- or brownfield sites with ready access to existing infrastructure and services— something Millennial buyers especially covet. “There are more people interested in making trade-offs for smaller homes and lots to buy in a master plan than we are currently providing product,” says Gregg Logan, the firm’s managing director and author of the study (see chart, next page). “And that model has proven to be profitable for developers and builders.” Other national trends that also can be predictive for local markets include technologies that streamline homebuying and selling. While not especially prevalent now, options such as iBuying, virtual reality, home trade-ins, and alternate mortgage financing (see chart, next page) are edging toward the mainstream. PB

32%

35-54 55+

14%

Lower maintenance

16%

35-54 55+

44%

Smaller house 35-54 55+

11% 39%

SOURCE: 2019 HOMEBUYER SURVEY, RCLCO REAL ESTATE ADVISORS

WHEN THEY’LL BUY Timing of home purchase by age range

Purchase in 2020

26% 28%

55+ 35-54 <35

23%

Purchase in 1-2 years

45%

55+ 35-54 <35

41% 42%

Purchase in 3-4 years

28%

55+ 35-54 <35

31% 33%

SOURCE: 2019 HOMEBUYER SURVEY, RCLCO REAL ESTATE ADVISORS

BARRIERS THEY FACE The top three barriers to buying a house

Saving for a downpayment

48%

MILLENNIALS GEN X BABY BOOMERS

40% 31%

Homes are too expensive

41%

MILLENNIALS GEN X BABY BOOMERS

35% 38%

Cost of living is too high MILLENNIALS GEN X BABY BOOMERS

36% 33% 21%

SOURCE: CLEVER 2020 MILLENNIAL HOME BUYER REPORT

ALL THREE COHORTS ARE GENERALLY ALIGNED on the barriers to buying a home, especially regarding home prices. That said, 43% of Boomers cite homes that do not meet their criteria as the No. 1 barrier, while the younger cohorts are less picky.

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HOUSING INTEL:

HOW THEY’LL BUY The most impactful real estate tech trends

4.8%

UNMET POTENTIAL

7.6%

VIRTUAL REALITY

Smaller homes not a priority in MPCs

Under 2,000 sf

12%

HOME TRADE-INS

0.2%

CRYPTOCURRENCY

DIGITAL PAPERWORK

45%

ALL NEW-HOME COMPLETIONS POTENTIAL MPC BUYERS SUPPLY IN TOP MPCS

5.6%

ALTERNATE MORTGAGE FINANCING

39% 25%

2,000-2,999 sf

27%

ALL NEW-HOME COMPLETIONS POTENTIAL MPC BUYERS SUPPLY IN TOP MPCS

36% 48%

3,000-3,999 sf

33.8%

25.2%

20% 17% 20%

ALL NEW-HOME COMPLETIONS POTENTIAL MPC BUYERS SUPPLY IN TOP MPCS

10.8%

IBUYING

NOT SURE

NONE OF THE ABOVE/OTHER

SOURCE: HOMELIGHT TOP AGENT INSIGHTS Q4 2019 REPORT

Over 4,000 sf ALL NEW-HOME COMPLETIONS POTENTIAL MPC BUYERS SUPPLY IN TOP MPCS

8% 9% 8%

SOURCE: 2019 HOMEBUYER SURVEY, RCLCO REAL ESTATE ADVISORS

DESPITE DEMAND for smaller, denser, and lower-priced units, master planned communities are often geared toward older and higher-income buyers and fail to keep up with (or trust the profit potential) of a more diverse product and price mix to attract sales.

NEARLY 10% OF ALL HOMES SOLD in 2018 were to iBuyers such as Opendoor, Redfin, and Zillow Offers. Nearly 18% of real estate agents present iBuyer cash offers as an alternative to traditional listings, but 98% of those offers are rarely or never accepted.

WHERE THEY’LL LIVE Top 10 preferred states for retirement among 55+ buyers

WHAT THEY’LL DO The top three things buyers are willing to do to own a home

Rent-to-own

34%

MILLENNIALS GEN X BABY BOOMERS

29% 22%

Rent out a room to afford the mortgage

18%

MILLENNIALS GEN X BABY BOOMERS

16% 16%

Offer above asking price

18%

MILLENNIALS GEN X BABY BOOMERS

21% 14%

SOURCE: CLEVER 2020 MILLENNIAL HOME BUYER REPORT

MORE SO THAN YOUNGER COHORTS, 26% of Boomers would do “none of the above” among the options offered in this question, but just 7% of Millennials would take that tack.

FLORIDA ARIZONA SOUTH CAROLINA NORTH CAROLINA NEVADA TENNESSEE TEXAS WASHINGTON IDAHO DELAWARE

44% 20% 8% 6% 5% 5% 4% 3% 2% 2%

SOURCE: 2019 HOMEBUYER SURVEY, RCLCO REAL ESTATE ADVISORS

METHODOLOGY: The 2019 Homebuyer Survey from RCLCO Real Estate Advisors derived data from 3,000 respondents aged 18 and older with an annual income of at least $50,000 who are planning to buy a home within three years. The Top Agent Insights Q4 2019 Report from HomeLight surveyed 500 leading real estate agents nationwide. The 2020 Millennial Home Buyer Report from Clever, an online real estate referral service, surveyed 1,000 Americans planning to purchase a home in 2020.

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WHILE THE MAJORITY of retirees rarely move out of state, the attractiveness of better weather, lower taxes, and a master plan of like-minded residents draws some away.


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LEADERSHIP:

Build Homes Faster Follow these steps to reduce cycle time and increase profitability By Mark Hodges

I

n 1999, when our company was exploring ways to reduce cycle time, we decided to find out how quickly we could build a home under ideal circumstances. The result: We completed a 2,200-squarefoot home in 4 ½ days—a total of 49 hours of construction time. The exercise not only gave us clues as to how we might reduce ballooning cycle times under “normal” conditions, but also drew attention to what was truly possible for our field teams and trade partners. We learned that if you can remove all of the “empty-house time,” maximize crew sizes, plan properly, and execute down to the minute, extraordinary speed and efficiency is possible, even when the circumstances aren’t ideal. Over the years, I’ve learned a lot about building homes faster; enough to fill a book. But I’ve boiled them down here to seven ways (plus some extra tips) to cut cycle time in today’s labor-constrained market.

1. Start with a realistic, achievable schedule Many builders are using and distributing schedules that have no basis in reality. They insist that if they publish a fourmonth schedule (knowing it will actually take six months to build the home), they will magically build faster. In fact, unrealistic schedules actually lengthen cycle times, as field staff and trades give up trying to meet them, instead relying on phone calls and emails to keep things moving. Provide a realistic schedule, created in agreement with all parties, and your teams and trades will be able to follow it.

PHOTO: BILLIONPHOTOS.COM / STOCK.ADOBE.COM

2. Update the status of every home each day The last act of your field team every day should be to walk the homes and update their status, and do so in a way that trade partners can access that information immediately to plan when and where to dispatch their crews. Trades will send their best crews to communities where they can rely on accurate status updates, avoid dry runs, and complete their work on schedule. If they

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LEADERSHIP:

can’t rely on your status updates, your community will be last in line when crews are assigned ... and you’ll probably get the leastexperienced or proficient of the lot, leading to more delays. Don’t make trades send an expensive foreman to find out!

5. Even out the release of homes for construction

Often builders release homes for construction according to the rate of sales, since they want to begin building homes as soon as the ink is dry on a new sales contract. The trouble is that when you have a 3. Track empty-house days great new community opening and you sell While estimates vary, it’s widely agreed eight homes in one weekend, the instincthat builders lose at least $300 for every tive reaction is to release them all for conday a home under construction sits empty. struction at the same time. But when sales I estimate, with confidence, that of the dwindle to just two homes per month, the 180 days it usually takes to build a home flow of work for trade partners slows and once it’s permitted, the they send their crews home sits empty for at elsewhere. least 90. That’s $27,000 I recommend doBUILDERS LOSE AT off the top! ing as much as you can LEAST $300 FOR EVERY When you start trackto even out the flow of ing empty-house days, releases. If you’re buildDAY A HOME UNDER your field team will ing 50 homes per year, CONSTRUCTION SITS focus more closely on start one home a week. EMPTY making sure progress is Eliminating the “pig made on every home, through the python” every day. Each day, will allow your trades to have them calculate how allocate resources more much money the company is losing when predictably and reliably, which will greatly homes sit empty. For example, 5 empty reduce the number of empty-house days homes x $300 = $1,500 lost today. caused by the uneven flow of available work and will also keep your trades happy 4. Create a Red-Yellow-Green report and showing up. Invariably, superintendents focus most of 6. Prohibit all late changes to homes under their energy on completing homes that construction are due to close (especially when they’re I have a client who asked me to help reduce behind schedule), while homes in the early his ridiculously long cycle times. When we stages of construction or built on spec inlooked for root causes, we discovered he variably fall behind. was allowing buyers to make numerous Combat this disparity by creating a changes long after their homes were unweekly “Red-Yellow-Green Report” for all derway; in fact, the builder was averaging homes under construction. For reference, more than 10 late changes per home. my system is coded so that RED means His reason: He was agreeing to multiple a home is 10 to 15 days behind schedule, late change requests “to ensure satisfacYELLOW represents a home that’s one to tion,” he said, but the delays and errors nine days behind, and GREEN is a home caused by these changes were actually causthat is on schedule. ing high levels of dissatisfaction among his Review this report weekly with your subuyers and were resulting in huge losses perintendents, which will force them to due to longer cycle times and late deliveries. focus not just on homes nearing compleI recommend no changes should be pertion, but on all of their homes. mitted once a home has been started. And Extra tip: Require that your supers presdata and experience prove this policy does ent a plan to get all homes that are in a Red not reduce customer satisfaction. or Yellow state back on schedule.

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Extra tip: I further recommend that no homes be released to construction until all of the customers’ selections are 100% complete. If you give into the urge to start building after only structural selections are made, delays are inevitable when customers conduct decorator selections later in the construction process.

7. Monitor trade crew sizes and “subs of subs” Honest trade partners admit they routinely take on more work than they can reasonably manage with their current staff. When trades take this approach, they compensate in two ways: they either send two guys when they need three to meet the schedule (in an effort to keep the superintendent from screaming at them for missing deadlines), or they subcontract work to other companies. Both scenarios have an extreme effect on cycle time. Smaller crews mean longer time in the homes (and schedule slippage), and ad hoc subs of subs don’t know the homes well enough to build them in a timely or error-free way. Extra tip: Use the scope of work in your trade partner contracts to set crew sizes, demand full crews for each home, and require that trade partners notify you in advance if they intend to sub out your work. They won’t want to follow that last one, which means you’re more likely to get their employees, not their subs. Another tip: Make sure your homes are 100% ready for each crew and trade, that is, broom-clean, all materials on hand, and free of conflicting trades. Take these steps and, while you may not be able to build your homes in just 4 ½ days, you will be able to build them faster, better, and more profitably. PB Mark Hodges is principal of Blueprint Strategic Consulting, providing planning, organizational development, and quality management consulting services to the home building industry. Write him at markhodges1018@gmail.com.


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QUALITY MATTERS:

SAFE SCAFFOLDING FOLLOW THESE TIPS TO PROTECT WORKERS AND REDUCE LIABILITY

By John Koenig

S

ome builders are surprised that IBACOS evaluates scaffolding as part of its Construction Quality Assessment Program. As a life safety item, however, a poorly constructed scaffolding setup has potentially dire consequences for workers, as well as for the builder. As such, it should be built with as much care as the house itself. First step: Search for and read a few online articles detailing the basic OSHAapproved guidelines for safe scaffolding. It’s always a good idea to refresh your memory about what OSHA requires and to adjust your practices, as necessary. This article will highlight a few important details I see ignored again and again for interior and exterior scaffolding setups and will offer some easy solutions.

Interior Setups: Mind the Guardrails Scaffolds set up inside the house, for jobs such as installing ceiling molding or hanging and taping drywall in a two-story vaulted space, are the worst offenders I see. Many of these scaffolds are assembled and disassembled the same day, then reassembled at other locations in the house by hurried workers who don’t heed the need for safety as much as they should. The missing element on many interior scaffolds is a proper guardrail, or any guardrail at all. I’ve seen some contractors use rope or warning tape, presumably to alert workers when they’re about to step over the edge, but neither of those is at all good enough.

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That’s just asking for a fine, or worse, a serious injury. A good pipe scaffold is a wise investment that all of your trades can use repeatedly for small tasks. It’s also important to protect people below. Workers on the ground are at obvious risk from head-crushing objects, such as tools or bricks, accidentally being kicked Exterior Setups: Invest in the Best off the walk boards. But if a non-worker Scaffolding setups on the outside of the gets hit, the result likely will be an expenhouse are generally better, with most large, sive lawsuit. (And don’t assume that a policy exterior scaffolds having the necessary prohibiting unaccompanied homeowners components, such as on the jobsite will have rigid guardrails, cross foolproof enforcement.) bracing, and walking “Toe boards”—vertical surfaces. Sadly, the main boards placed at the inA GOOD PIPE reason for this diligence ner or outer edges of the SCAFFOLD IS A WISE is that no one wants to planks (see top photo, at attract attention from right)—can protect peoINVESTMENT THAT ALL an OSHA inspector who ple from falling objects. OF YOUR TRADES CAN happens by. But another The ideal is to place toe USE REPEATEDLY FOR reason is that exterior boards all around the scaffolds tend to stay scaffold, but at the very SMALL TASKS up for longer periods of least, put them where time, such as a stucco walk boards cross points process of applying lath, of egress and traffic foam, and scratch and routes on site. final coats over several days. We also recommend that a scaffoldWhile most big siding crews use manuing system not in use be tagged with a factured scaffolds for whole-house jobs, sign reading “Controlled Access Zone. that’s not always the case for work done 10 Authorized Personnel Only” to help better feet or less off the ground. There, we still ensure safety and proper protocols. PB see a lot of on-the-fly, field-built setups, John Koenig drives quality and performance but we advise builders against allowing this in home building as a building performance practice. OSHA provides detailed guidespecialist of the PERFORM Builder Solutions lines for building these types of temporary team at IBACOS. scaffolds, but almost no one follows them. To be effective, guardrails must be strong enough to keep a worker from falling, which means they must be able to bear the weight of an average adult. To do so, they must be made from something substantial, like wood or steel. It’s a sound and worthwhile investment.

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DO THIS: THE CONTRACTOR ON THIS PROJECT PLACED TOE BOARDS AT THE EDGE OF ALL PLANKS TO PROTECT PEOPLE ON THE GROUND FROM FALLING OBJECTS. AT THE LEAST, TOE BOARDS NEED TO BE PLACED OVER POINTS OF EGRESS FOR THE BUILDING UNDER CONSTRUCTION.

AVOID THIS: INTERIOR SCAFFOLDS WITHOUT GUARDRAILS ARE ALL TOO COMMON ON RESIDENTIAL JOBSITES. THEY’RE ALSO AN ACCIDENT WAITING TO HAPPEN.

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SALES + MARKETING

MAKING CONNECTIONS SELECT WINNERS OF NAHB’S 2020 NATIONAL SALES AND MARKETING AWARDS, ”THE NATIONALS,” SHOWCASE THE BEST IN GETTING — AND KEEPING — HOMEBUYERS ENGAGED BY CAMILLA MCLAUGHLIN

KISSING TREE delivers a playful, captivating approach at its Welcome Center, including nostalgic touches that resonate with the 55+ active adult community’s target buyer.

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BEST COMMUNITY WELCOME CENTER

KISSING TREE BROOKFIELD RESIDENTIAL / CREATIVE LICENSE INTERNATIONAL SAN MARCOS, TEXAS

AT KISSING TREE, the design of the wel-

come center is as dynamic as the community. Rectangular and square panes of glass and streamlined timbers create an almost transparent elevation that’s inviting and syncs perfectly with the 55+ active adult community’s Texas Hill Country setting. Inside, a 26-foot-tall abstract wood sculpture of a tree reaches up to the ceiling and “grows” out from a bar at the center of the space, which also includes iconic reminders of the ’60s and ’70s, such as 8-track tapes, and muscle cars cut in half to provide seating for a video wall showcasing community activities. There are also interactive information kiosks about the residences and an architect’s studio to select and customize homes. “The playfulness and interactive nature of the displays invite potential buyers to engage,” says Claudia Gerster, founder and owner of Creative License International, the agency behind the center’s design. She says the firm’s goal was “to exceed the expectations of visitors and create a desire to be a part of the active, engaging, fun, and healthy lifestyle at Kissing Tree.” Despite some lessons learned along the way (namely, adding a greeting stand at the entry to welcome visitors during busy times), sales at Kissing Tree have increased since the center opened and are expected to continue to exceed expectations, Gerster says.

move-down homebuyers. The objective was to spark aspirational interest in its brand beyond a specific product or market by focusing on the emotional investment in a new home, which was an innovative strategy for Toll. “At the heart of every homebuying experience is a personal, emotional journey, and we wanted to recreate some of those experiences familiar to so many homebuyers,” says Wendy Marlett, the company’s chief marketing officer. To underscore the passion new homeowners often experience, Obsession was chosen as the theme for the campaign, with a specialized landing page on Toll’s website centered on that theme, followed by a succession of images of rooms, homes, and outdoor spaces geared to spark interest and evoke an emotional response. Posts on Twitter and Instagram focused on obsession-worthy touchpoints of new homes, such as indulgent baths and to-diefor kitchens. Facebook posts highlighted a range of spaces and elevations designed to dazzle. A set of videos and a hashtag were created, as well as an Instagram Story bracket challenge where the public could vote for their favorite home images. Vendors and internal sales team members also used the hashtag to create additional traction. From February through May of 2019, the campaign’s 74 posts led to 29,000 social media engagements, 6,300 video views, and 15,800 blog page views, the latter with an impressive on-page average of 5:49 minutes.

OBSESSION shook up the luxury production market with a creative and engaging social media campaign targeting well-heeled buyers, resulting in greater brand awareness.

BUILDING INDUSTRY COMMUNITY SPIRIT AWARD

PROJECT KUDOS SCHELL BROTHERS REHOBOTH BEACH, DEL.

RECOGNIZING GOOD WORKS among BEST SOCIAL MEDIA CAMPAIGN

OBSESSION TOLL BROTHERS / CRAFT WORLDWIDE NATIONWIDE

AS PART OF A BROADER BRAND aware-

ness campaign, Toll Brothers turned to social media to reach luxury move-up and

employees and giving attaboys to one another is a practice that began 14 years ago at Schell Brothers and is now standard. But the company wanted to also spread that culture of happiness and gratitude to the communities in which it builds. The result—Project Kudos—encourages and facilitates ways for members of the community to say thank you to anyone who makes

PROJECT KUDOS originated as an internal program at Schell Brothers. Today, it’s a valued and ongoing community asset that fosters happiness and gratitude.

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their day awesome and to express gratitude for things they appreciate. “It really resonates with people,” says Alyssa Titus, the builder’s director of marketing. Launched in September 2018, Project Kudos is now fully branded, with a deckedout old-school bus covered in thousands of Project Kudos stickers, bringing those

“WE’RE AUTHENTIC WITH OUR MISSION, SO COMMUNICATING THE MESSAGE IS EASY.” —ALYSSA TITUS, DIRECTOR OF MARKETING, SCHELL BROTHERS SKYLINE used multiple digital media tools, such as HTML email blasts (above), to differentiate itself from other communities nearby.

messages (and the opportunity to add more) to schools, businesses, and festivals. It also has a following on social media. After the bus visits a school, it provides a Project Kudos board to continue the practice there. Currently there are 85 “Kudos boards” throughout Virginia and Delaware, with plans in 2020 that include visiting a local charity each month. The biggest challenge in making the concept a reality, Titus says, has been manpower, as the bus is out and about almost every week. “The company has embraced giving back to the community, and this is a great way to talk about our culture and our brand,” she says. “We’re authentic with our mission, so communicating the message is easy.”

further complicated premarketing. The solution: a digital campaign to entice local Millennials to consider a place historically viewed as a suburban family location. “We had to get a little edgy with our videos,” says Lyndsay Fuller, director of marketing for Pardee Homes’ Los Angeles and Ventura markets. “It was all about evoking lifestyle and really being able to segment the brand in a fun, playful way.” The campaign included publicity, eblasts, progress updates, invitations to special events, and social media posts, including a community blog. Video was critical to highlighting lifestyle and aspects of the community. As a result, Pardee began drawing a completely different buyer profile at Skyline, and TRI Pointe saw sales boom at both community locations. Fuller attributes this success to proper planning, proper segmenting, great creative partners in Wick Marketing, and shared intelligence from TRI Pointe divisions around the country. “That definitely gave us a competitive edge,” she says. Launched in July 2018 and geared to a November grand opening, the campaign helped drive 2,500 new registrants to a VIP list of prequalified buyers, and one of the four neighborhoods within Skyline was one of the fastest-absorbing communities in Southern California. BEST LIFESTYLE PROGRAM – COMMUNITY

LIVE SMART AT HARVEST HILLWOOD COMMUNITIES / FIRSTSERVICE RESIDENTIAL ARGYLE, TEXAS

HILLWOOD COMMUNITIES debuted BEST DIGITAL MARKETING CAMPAIGN

SKYLINE PARDEE HOMES / WICK MARKETING / OPEN LINE PR

LIVE SMART AT HARVEST offers residents a wealth of one-time and ongoing events geared to forge connections, sustain interest, and contribute to the greater community.

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SANTA CLARITA, CALIF.

SELLING A NEW DEVELOPMENT before having much to show on-site is a perennial quandary for developers. For Skyline, having another TRI Pointe Group master planned community 10 minutes away

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its new “Live Smart” lifestyle program at Harvest, a 1,200-acre master planned community that combines agrarian heritage and country living with contemporary lifestyles. Concepts of connection, well-being, enrichment, stewardship, and convenience play out among a rich menu of 300plus one-time and ongoing events geared toward every age group and interest, providing residents with multiple opportunities to interact and forge connections.


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SALES + MARKETING

Central to the program is a working commercial farm operated by a professional farmer. Private garden plots and community demonstration gardens resulted in more than 1,100 pounds of produce for a local food pantry last year, while donations from events translated into 21,500 meals in 2019. Key to the success of the program is a partnership with residential property management company FirstService Residential, based in Dania Beach, Fla., which provided lifestyle management services. “They shared our vision, established what we wanted, and got the right people into the community to put it into action,” says Taylor Negron-Campbell, Hillwood’s marketing manager. In addition to orchestrating events, the on-site lifestyle manager connects future residents with existing residents who share similar lifestyle interests. The plan also ensures the program’s sustainability by enlisting the support of local businesses to supplement an allocation of HOA fees. When Hillwood moves on from Harvest, “the program is going to be just as good, if not better, than it is now,” Negron-Campbell says. BEST WEBSITE, BEST REALTOR PROGRAM, BEST COMMUNITY AMENITY, MARKETING PROFESSIONAL OF THE YEAR

ARDEN FREEHOLD COMMUNITIES / P11CREATIVE / O’DONNELL AGENCY / PEACOCK + LEWIS ARCHITECTS AND PLANNERS PALM BEACH COUNTY, FLA.

ARDEN, A MASTER PLANNED develop-

ARDEN applied core identity principles and leveraged its agrihood concept across multiple platforms to drive traffic and sales.

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ment by Freehold Communities, benefited from (and earned Nationals recognition for) the company’s Vital Communities Core principles, which guide the creation of community identity, amenities design, and the overall aesthetics of the homes— a program spearheaded by Suzanne Maddalon, Freehold’s VP of marketing and the Marketing Director of the Year recipient. Arguably her most influential creation is the agrihood that serves as Arden’s central amenity. Not only does it invite resident engagement, but it also enhances the sense

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ONES TO WATCH MOLLIE ELKMAN AND WILL DUDERSTADT We won’t say we told you so, but it came as no surprise to us that two of Pro Builder’s 40 Under 40 recipients, Mollie Elkman (class of 2012, above) and Will Duderstadt (2017, below), pop up on the Nationals radar as Ones to Watch in sales and marketing. Elkman, owner and president of Group Two Advertising, in Philadelphia, leads the full-service new-home marketing agency, which specializes in connecting builders with buyers and has been recognized three times as a Best Place to Work by the Philadelphia Business Journal. Duderstadt, VP of Digital Marketing for M/I Homes, in Columbus, Ohio, oversees all online content and marketing campaigns, lead generation, PPC, search engine marketing and optimization, social media, and content strategy for the builder’s 15 divisions in 11 states.


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SUMMERLIN went beyond price and location by appealing to the universal and unifying human values of its target market.

2020 NATIONALS JUDGES Lyda Akin VP of Brand, David Weekley Homes, Houston Denise Dersin Editorial Director, Pro Builder/ SGC-Horizon, Arlington Heights, Ill. Chris Hartley VP of Sales and Marketing, Trendmaker Homes, Dallas Linda Hebert Principal, Diversified Marketing Solutions, Pleasanton, Calif. Bill Pisetsky Principal, Pisetsky Method Marketing, Newport Beach, Calif. Steve Shoemaker VP of Sales and Marketing, Ideal Homes, Oklahoma City Ellen Weese Principal and Head Designer, Five Star Interiors, Austin, Texas Kelly Ann Zuccarelli SVP, Wells Fargo Home Mortgage, Red Bank, N.J. For extended 2020 Nationals coverage, go to probuilder.com/ nationals-2020

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of a lifestyle that promotes healthy living— another value important to Maddalon. In fact, Arden is South Florida’s first agrihood, and it immediately ensured a unique identity for this new community. “When we introduced the ‘Welcome to the Agrihood’ campaign, it totally changed everything in terms of traffic and sales,” she says. “People were so interested in the activity created by the agrihood.” In concert, Arden’s winning website showcases lifestyle and amenities that include 20 miles of trails, a mile-long centerpiece lake, and the 5-acre organic farm. The landing page features an image of a happy young boy reaping the rewards of a recent farm harvest, and the page devoted to the agrihood received 100% more page views than any other. “The website really sets the stage for our story, and we continually update it with new information to show what’s going on in the community,” Maddalon says.

“... THE ‘WELCOME TO THE AGRIHOOD’ CAMPAIGN ... TOTALLY CHANGED EVERYTHING IN TERMS OF TRAFFIC AND SALES.” —SUZANNE MADDALON, VP OF MARKETING, FREEHOLD COMMUNITIES

Arden’s Realtor program also earned kudos. Marketing director Susan Moguel designed a series of on-site lunch-and-learn events called “Arden 101,” offering exclusive information from each builder and Freehold about the community, amenities, product lines, sales incentives, and lifestyle. After completing Arden 101, Realtors are considered an official expert and receive a custom USB with digital marketing materials and photos. More than 250 agents have graduated from the program, increasing Realtor participation from 50% to 55% in just one year.

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Finally, the Lakehouse, Arden’s two-story clubhouse, received the Best Community Amenity Award. The design and amenities are comparable to a first-rate resort, with pools on two levels and a dramatic waterfall linking the two, a casual café with free WiFi providing a place for residents to connect, and private cabanas bordering the tranquil upper-level pool and spa, among a host of other features. BEST PRINT CAMPAIGN – SERIES OF ADS

SUMMERLIN—BE PART OF SOMETHING BEAUTIFUL THE HOWARD HUGHES CORP./ ROBERTSON+PARTNERS LAS VEGAS

ENTERING ITS 30TH YEAR of develop-

ment, Summerlin continues to be a vibrant master planned community with a diversity of residents and a range of lifestyle opportunities and amenities. Recognizing that homebuying is no longer just about price or location or product, Howard Hughes’ marketing team sought to design a campaign to appeal to deeper values. “An overarching brand positioning should always communicate a unifying position based on values shared by our target audiences,” says Danielle Bisterfeldt, VP of marketing. Central to the “Be Part of Something Beautiful” campaign is a series of print ads highlighting meaningful moments, from a baby’s first steps and Little League closeups to inspiring high desert terrain and intimate dinners at a Summerlin restaurant. The individual components of the campaign further break that idea down into relevant audience-segmented examples of people enjoying life, Bisterfeldt says. “Life is not made up of huge, transformative experiences, but is a collection of small, simple, beautiful moments.” She adds, “People don’t relate to things or companies or products. Any truly successful brand must behave as an authentic, fully actualized human being. Only then will people relate to, interact with, and embrace your brand like a trusted friend.” PB


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THE NEW AMERICAN HOME 2020

AN OASIS IN THE DESERT THE KITCHENS AND BATHROOMS OF THE NEW AMERICAN HOME 2020 PROVIDE FORM AND FUNCTION FOR INDOOR-OUTDOOR, MULTIGENERATIONAL LIVING BY MICHELE LERNER PHOTOS BY JEFFREY A. DAVIS

S

Serenity and abundance. Comfort and style. Luxury and convenience. These are the cornerstones of the New American Home 2020, an oasis high above the Las Vegas Valley designed by Dan Coletti and built by his company, Sun West Custom Homes. Within its 6,428 square feet of conditioned living space—and another 1,250 square feet of outdoor living areas—this single-level oasis in the desert offers kitchens and bathrooms that exemplify a design intent for multigenerational households and aging in place. The main kitchen and its ancillary spaces, including a clever indoor-outdoor nook, an extensive wet bar, and an eye-catching wine room—each with its own functionality and personalized twists—contrast with intimate en suite bathrooms and morning kitchens to perfectly balance privacy and togetherness, with repeated patterns, textures, and colors that link them into a cohesive, comfortable whole.

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In the kitchen, a T-shaped island offers extensive seating and prep space. An indoor-outdoor wet bar just off the kitchen is easily accessible but also independent, as is the nook, a casual gathering and eating space (glimpsed at right) that’s also served by the outdoor kitchen (see next page).

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THE NEW AMERICAN HOME 2020

The curving, full-height, glassenclosed walk-in wine room (above) is both a visual and physical element that effectively encloses the dining room to its left while maintaining that room’s connection to the kitchen, all the while showcasing the owner’s wine collection.

A pocketing telescoping patio door (seen tucked away on the left) is the only barrier between the indoor and outdoor kitchens, which work independently or as a unit. The cabinets and quartz counters resemble their indoor partners, while a kegerator at the end of the counter run is perfect for parties.

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THE NEW AMERICAN HOME 2020

The sand-colored tile floor from the main living area flows into the master bath (top), anchoring a freestanding tub and the floating navy-blue vanities set on opposing walls. A glass patio door in the shower leads to an outdoor shower and admits natural light. In a guest suite shower (upper right), clerestory windows afford privacy while daylight streams in. The mini-master bath (above) and the study bath (lower right) feature dramatic color schemes of their own, departing from the home’s blue hues. The former also functions as a spa for the swimming pool and outdoor yoga platform. PB

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BUSINESS MANAGEMENT

CYCLE TIME

THE GIFT THAT KEEPS ON GIVING TIGHTLY MANAGED CYCLE TIME IS CRITICAL FOR ACHIEVING SUSTAINABLE, PREDICTABLE PROFITS. NEGLECT IT, AND YOU’RE PLAYING A DANGEROUS GAME WITH YOUR BUSINESS

BY SCOTT SEDAM, CONTRIBUTING EDITOR

C

THE IMPACT OF SCHEDULE CREEP Sincere 90- to 120-day schedules for production builders were the norm prior to the big crash, and 60- to 90-day schedules were not unusual. Today, a no-tears assessment shows 150- to 180-day schedules are closer to the norm, and you’ll often find higher. Woe be to those who fail to turn over their assets at least two times, which is the best 180 days will get you. Three turns should be the absolute minimum standard, and four turns is an achievable goal for most.

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PHOTO: JOKERPRO / STOCK.ADOBE.COM

ycle time, as discussed in last month’s column “Getting Serious About Cycle Time,” has inflated significantly since emerging from the downturn, costing home builders millions in lost profit. The U.S. Census Bureau numbers show the build-to-close schedule up 30 days since 2012. Take that on back to 2007, 13 years ago, right before the hammer came down hard on home building, and everything my TrueNorth team observes shows cycle time is up closer to 60 days, on average. Cycle time is an insidious thing. For most builders, pushing back a day here or there over the months-long course of building a new home doesn’t strike them as disastrous. Annoying maybe, but nothing to panic about. Losing one day out of 180 during an inflated schedule gets lost in the process, making the slip of that day easier to stomach. Besides, with around 26 Saturdays in a 180-day stretch, surely you’ll make it up somewhere—or not. Drop that same day during a tight 90-day schedule, however, and there’s a good chance you’ll put your critical path at risk. Just where do you make that day up?


Yet, in my travels around the country, I don’t find the same sense of schedule urgency that existed 12 or 15 years ago. There are multiple explanations for this, but from what I’ve observed, the biggest cause is that builders don’t fully understand the scope, severity, or total cost of the impact of lost schedule. It’s time to work on that. Last month’s column broke down cycle time into five distinct elements and discussed the ins and outs of calculation and how to avoid common measurement pitfalls. Ongoing evaluation of cycle time and its components can’t be optional, just as closing your books and financial statements cannot be skipped. If you do track cycle time and its components continually, your processes will talk to you and tell you where the pain points and losses are. This always works, but it begs sober, reflective insight, not knee-jerk reaction over short-term variation in your processes. Wide-eyed caution is advised. If you neglect your cycle time measurements, fail to track them over time, and react to them ad hoc, you are only guessing ... and that’s a lousy way to run a business.

expenses, finance costs, salaries, bonuses, benefits, etc. That $30,000 in overhead leaves a nice pretax net of 10%, or $30,000 per unit. It’s important to note: There are innumerable practices and philosophies about where to put costs such as permits, development fees, superintendent salaries, model maintenance, finance costs, etc., making builder-to-builder comparisons difficult. You may calculate your gross and net numbers differently, but the principles addressed here apply, regardless. We work with many strong private builders that do better than 10% EBIT (earnings before interest and taxes). Many others, especially the publics, rarely reach that level, but 10% is above the national average and is considered a strong return. However, there’s one big difference between these two communities: Community A’s cycle time from foundation dig to close is 180 days—fairly typical in current times. Community B, on the other hand, turns its homes out in 90 days—impressive and challenging, but definitely achievable. Consider the impact of that cycle-time difference.

UNDERSTANDING ABSORPTION RATE

THE CRITICAL LINK

Bill Pulte, the very best of my mentors, used to say, “As goes the schedule, so goes the builder.” Absolutely nothing has changed about that statement in 30 years. For Bill, each day was a precious commodity, and the shared belief, which was part of the company culture, was a lost day could never be recovered. Yes, you might make up a day on a Saturday, but there was a price to pay, both monetarily and psychically. At Pulte, at least in those days, you lived and died by “absorption rate”—the distribution of fixed cost over the number of units built in a given time period. Bill Pulte preached this daily, along with admonitions to never neglect quality, customer satisfaction, trade relationships, or taking care of your own people. Increasing absorption rate, while simple in concept, is harder to achieve: Build more units without raising overhead and everything gets better. Build fewer units with the same overhead and there goes the Christmas bonus, next year’s raise, perhaps even your job. Back then, communities doing 10 or 12 units per month were the ultimate, but the corporate asset management team wouldn’t even entertain a new community pro forma from the field without a solid projection of at least three units per month. Below that, the numbers quickly turned south. Once it was agreed a community could support the minimum unit requirement, projected pretax net wasn’t enough on its own. Our internal rate of return was heavily dependent on cycle time. You could meet the minimum units with acceptable gross margin and pretax net, yet a slow cycle time could doom the project to failure. Consider the following example. We have two communities set up as LLC profit centers for the same builder. Both will build identical plans with equal options and selections, projecting four closings per month for a project total of 48 closings. The pro forma average sales price is $300,000, and the average hard cost is 50% or $150,000, with an identical finished lot cost at 20% or $60,000, producing a substantial gross margin of 30%, out of which we’ll pay for sales, marketing, general and administrative

Many factors contribute to how well a project runs in the field, but one thing’s certain: the job superintendent is the critical link. The role is known by many names, including construction manager, project manager, or the thoroughly confusing “builder,” leaving people puzzled as to whether we’re talking about the builder as the individual or the company. Whatever you call it, the super is held accountable for meeting the schedule. If we launch on January 2 under the 90-day schedule, we have closings available April 1. This community of 48 lots projected four per month, so we’ll close it out by April 1 of year two. Job well done. The most units this field manager would have to carry at one time would be 12. Now compare that with the 180-day schedule where the first unit isn’t available for six months, until July 1. The entire cash flow net of the deposit is pushed back a full quarter. In the 90-day example, we launch a house per week, and after three months, each start clears the schedule—and the ledger. In the 180-day schedule, that threemonth delay before units sell causes them to pile on top of one another. We wouldn’t see revenue for six months, and the project ends at the same 48 sales, but a full quarter later. WIP (work in progress) builds up significantly, requiring far more capital and more carry costs. I’ll leave it to your financial people to cost-out the impact on profit, but it is significant, and I’ll wager it’s larger than you expect. Your pretax net may still look fine, but your return on assets for a one-year period falls precipitously. How do you fix this problem on a 180-day schedule if you’re on the hook for 48 units in the same financial period as the 90-day community? Unless you have the wherewithal to make a completely focused effort on cycle-time reduction, the only solution is to start more homes, carry more WIP, and place a heavier load on your superintendent. This scenario brings up one of building’s perennial questions: How many homes can a field superintendent reasonably carry at a time and maintain schedule, quality, and supplier/trade relationships—not to

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mention his or her own sanity? The old maxim for field construction INSIDIOUS IMPACT The impact from overloading due to a drawn-out schedule isn’t management is “Every house, every day,” meaning the super inspects, limited to the field superintendent alone. Similar effects are experiand something productive happens, on each house, each day. enced by sales, the design center, purchasing, and administration of In a single community, it’s almost impossible to inspect, evaluate, all forms. On the surface, if you’re putting out the same number of and respond to the needs of 25 to 30 units per day, given all of the units annually, shouldn’t the amount of work be the same? Hardly. activity house walks generate. In multiple communities, it’s physiIf you double the number of units under construction, you have cally impossible. There are heroes who try to pull it off for a period of twice the WIP, twice as many customers to keep informed and haptime, and for a few builders that have homes so simple and repetitive, py, twice the options and selections to track, and twice the opporwith limited options and selections, high volumes can be done. Yet, tunity for late changes. And everyone knows: When it takes longer ultimately, for most supers, it’s a self-extinguishing practice. Twelve to build, more things go wrong due to weather, theft, changes in to 15 homes per day? An average superintendent with decent training trades, etc. I’ve written a great deal about complexity in the past, can handle that level (more or less), depending on complexity. With a and extended schedules are a key culprit. lot of experience, simple product, and a tight process, I’ve seen some Reducing cycle time and reaping the benefits isn’t an overnight who can handle 18 or 20, maybe more for simple starter homes. endeavor. Imagine your field staff ’s meltdown if you announced Back to our case study: At the end of the year, Community A with you were cutting cycle time in half. They already can’t keep up with the 180-day schedule has reached its 48-home goal but has also the current workload, and suddenly you’re going to cut loaded up on starts early to meet the their time to build? Instead, tell them you are signifistandard set by Community B. The cantly cutting the number of units each super manages, super is burned-out, running around and say nothing about cycle time. Their jubilation will every day with his or her hair on fire, A LONG, LOOSELY drown out the average New Year’s Eve celebration. now looking for another job; countMANAGED SCHEDULE ROBS They’ll sober up quick enough when you add that less problems and errors were missed, to make those numbers work, you’ll all have to work causing massive rework; suppliers YOU OF PROFIT AND IT together to significantly cut cycle time. How? Threats, and trades were paid much later, ROBS THE PSYCHE OF “just do it” memos, and incentive plans based in part causing considerable unrest; the warYOUR PEOPLE, PLUS YOUR on things they don’t control won’t yield success, they ranty burden soared; and customer will just make things worse. To achieve significant and satisfaction has fallen. Pretax net is SUPPLIERS AND TRADES sustainable cycle-time reduction, you will need real good, but return on assets (ROA) is thought and genuine change in your systems, processdepressed due to the increased WIP es, and people. and slow take-down. Owners and inAs I finish writing this column the week before vestors aren’t happy. Christmas, after doing some last-minute shopping (online, thankCommunity B also closed 48 homes, with a cycle time of 90 days. fully), it’s natural to think about gifts. Not many of us have ever The superintendent carried 12 homes at any given time, getting into thought of cycle time as a gift, I’ll bet, but a tight building cycle and each home daily, staying on top of every need, and continually comeverything that goes with it will reward you each day of the year. municating with suppliers and trades. He also had time to talk with However, it can also be that proverbial “gift that keeps on giving” inspectors, homeowners, and even some prospective homebuyers in the negative sense. A long, loosely managed schedule robs you the sales team brought by the jobsite. Variance was minimal, profof profit and it robs the psyche of your people, plus your suppliers it up, quality great, and customer satisfaction strong. And, at four and trades. turns, ROA is excellent, keeping the owners and investors happy, inSo, which will it be? It’s in your hands. We’re more than a month deed. Now more money is available to the builder, and at lower rates, into the new year and the clock is ticking on your cycle time. If you meaning more units at higher profit. Everyone wins. plan to reduce that time this year, you’d better get started. PB Can this super now carry more than 12 homes at a time? That depends on the product, process, and experience. If the homes are second or third move-up, “high bling” with numerous plans, mulScott Sedam is president of TrueNorth Development, tiple elevations, and a large design center—and especially if the a consulting firm that works with builders to imbuilder offers structural options—it’s rare to find a super who can prove product, process, and profits. For a free PDF of carry more than 12 or so on a 90-day schedule and do it well. In Scott’s “Preparing for the Downturn” and “Bridging today’s reality, only a very small number of builders fit this descripthe Margin Gap” column series, email your request tion and consistently build in 90 days. As you simplify product and with contact information to info@truen.com. You process, you can increase the load on your field managers, but a may reach Scott at scott@truen.com or 248.446.1275. realistic assessment is required.

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© CAMBRIA 2020 || 385142_AD

To celebrate our 20th anniversary, we’re introducing 20 stunning designs into our expansive palette that present unlimited new possibilities for any space. Be bold. Be inspired. Be revolutionary. Visit CambriaUSA.com/ProRemodeler today.

Photo credit: Roehner + Ryan

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SWANBRIDGE™ Featured project by AFT Construction


HOUSE REVIEW:

INFILL SOLUTIONS By Larry W. Garnett, FAIBD, House Review Lead Designer

T

NOVA AT THE VALE, RESIDENCE 4 ARCHITECT Dahlin Group Architecture | Planning marketing@dahlingroup.com 925.251.7200 dahlingroup.com DIMENSIONS Width: 18 feet Depth: 38 feet Living area: 1,528 sf

In this master planned multifamily community in the heart of Silicon Valley, Calif., great things come in smaller packages. Intended to capture the imagination of the Silicon Valley tech buyer, the units range from 1,500 to 1,700 square feet but are designed to live much larger. Residence 4 is a 1,500-square-foot plan with three en suite bedrooms, a walk-in pantry, and a wide-open living level—all of which accommodates various household configurations. A

B C

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En suite bathrooms are an unexpected upgrade and suit multiple household formations Walk-in pantry reduces clutter Large common space is perfect for shared living arrangements

PHOTOS: EXTERIORS, DOUGLAS STERLING; INTERIORS, TRAVIS TURNER PHOTOGRAPHY

he term “infill” historically refers to new construction on either vacant or tear-down sites in otherwise vibrant downtown areas. However, that definition is being expanded to mature suburban areas and smaller towns in many parts of the country. These quaint “downtowns” often offer pedestrian-friendly environments and economical opportunities and are especially appealing to retirees who are no longer concerned about living near work and are looking for a slower pace of life. In the following pages, you’ll find projects that range from a creatively sited multistory luxury project to a duplex in a small town and a neighborhood within a master planned community, providing thoughtful solutions for overlooked or challenging sites with designs that are compatible with existing buildings and homes.


B

A

C

A

FLOOR 1

FLOOR 2

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HOUSE REVIEW:

FIRST FLOOR

FIRST FLOOR

E C PLAN 1

PLAN 2

SIX-PACK CLUSTER ARCHITECT Jeff Addison, director of design Kevin L. Crook Architect jaddison@klcarch.com 949.660.1587 klcarch.com DIMENSIONS Width: 120 feet Depth: 130 feet Living area (per unit average): 1,998 sf

E

PLAN 3

PLAN 3

B

E

PLAN 2X

PLAN 1X

D

FIRSTDFLOOR

This cluster module achieves a density of 10 dwelling units per acre, providing a detached solution for infill sites. Parallel guest parking is available on the street, and front doors face the street to create a pedestrian-friendly scene. The six homes in each cluster share a common drive aisle, which ends at a pair of head-on guest parking spaces. The two-story homes range from 1,854 to 2,142 square feet with three to four bedrooms and are centerplotted with reciprocal use easements between homes to maximize usable yard space. Living spaces for Plans 1 and 2 orient to the side yard, while Plan 3’s living space orients to a traditional rear yard. A B C D E

A

SECOND FLOOR

PLAN 1

PLAN 2

PLAN 3

PLAN 3

Guest parking on street Common drive aisle Head-on guest parking Porches and entries orient to the street Reciprocal-use side yards

PLAN 2X

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PLAN 1X


STRUCTURAL SOLUTIONS ENGINEERED TO DEFEND YOUR BUILD ™

LP WeatherLogic® Air & Water Barrier

LP Legacy® Premium Sub-Flooring

LP® FlameBlock® Fire-Rated Sheathing

LP ® TechShield® Radiant Barrier

Introducing LP Structural Solutions, a portfolio of framing and sheathing technologies from LP Building Solutions. Learn more at LPCorp.com/StructuralSolutions.

© 2020 Louisiana-Pacific Corporation. All rights reserved. Gorilla Glue and associated logo are registered trademarks of Gorilla Glue Company. LP, LP Legacy, LP WeatherLogic, TechShield and FlameBlock are registered trademarks of Louisiana-Pacific Corporation.

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HOUSE REVIEW:

ICON AT SILVERLEAF, PLAN 2 ARCHITECT Craig Smith and Luis Enciso Robert Hidey Architects csmith@roberthidey.com lenciso@roberthidey.com 949.655.1550 roberthidey.com DIMENSIONS Width: 48 feet Depth: 72 feet Living area: 3,174 sf

Situated on a narrow parcel between an existing residential community and a commercial development, the challenge was to relate a multifamily building to its very different neighbors. Designed for California-based builder The New Home Company, the four-story ICON captures views of the golf course and Arizona desert and is located in Scottsdale’s prestigious Silverleaf community, featuring resort-style living that includes private pool cabanas, in-unit wine rooms, and spa-like baths. ICON’s private stall parking and semi-private elevators demonstrate that privacy, security, and luxury can be fully preserved in this environment. Its modern aesthetic effectively complements the rugged desert landscape, while steel construction allows expansive, uninterrupted interior spaces and extensive decks with fully retractable glass walls that blur the distinction between indoors and out. A B C D E

In-unit wine rooms Semi-private elevators Private poolside cabanas Desert contemporary finishes Steel construction enables expansive interiors and seamless indoor-outdoor spaces

A

B

D

PHOTOS: ERIC FIGGE PHOTOGRAPHY

C

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DEFEND YOUR BUILD AGAINST HEAT AND HIGHER BILLS ™

A

LP® TechShield® Radiant Barrier, from LP Building Solutions, helps reduce cooling costs for smarter home energy efficiency. Learn more at: LPCorp.com/StructuralSolutions

E

Defend Your Build™

LP® TechShield®

LP Legacy®

LP® TopNotch®

LP WeatherLogic®

LP® FlameBlock®

LP® SolidStart®

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HOUSE REVIEW:

BLACK MOUNTAIN COTTAGES DESIGNER Larry W. Garnett, FAIBD larrygarnett@larrygarnettdesigns.com 254.205.2597 larrygarnettdesigns.com DIMENSIONS Width (overall): 33 feet, 6 inches Depth (overall): 48 feet, 6 inches Living areas: 935 sf and 1,315 sf

A

An overlooked lot in Black Mountain, N.C., provided an opportunity to build two duplexes. The smaller Unit A has an open kitchen/livingdining concept with one bedroom located on the second floor, while the larger Unit B, with the same open concept, but with a corner kitchen, is a three-bedroom plan. Both units offer spacious front porches, and three inset parking spaces on the street and eight private spaces in the rear provide plenty of parking for the owners/renters and their guests. A B C

D

One-bedroom Unit A Three-bedroom Unit B Spacious front porches achieve equality between units Ample parking for occupants and guests

B

C

C

FIRST FLOOR

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DEFEND YOUR BUILD AGAINST WATER AND WASTED TIME ™

A B

LP WeatherLogic® Air & Water Barrier, from LP Building Solutions, helps avoid jobsite delays and provides a tight building envelope for long-term energy efficiency. Learn more at: LPCorp.com/StructuralSolutions SECOND FLOOR

D

Defend Your Build™

LP® TechShield®

LP Legacy®

LP® TopNotch®

LP WeatherLogic®

LP® FlameBlock®

LP® SolidStart®

D

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PRODUCTS: ROOFING

TWO-PIECE SHINGLES ZINC ROOFING

Cambridge architectural shingles from IKO feature a laminated two-piece design that provides more depth, dimension, and variation to achieve a wood-shake look, the company says. (Shown in Dual Black.) A nail line printed on the shingles helps ensure proper installation. Other features: algae-resistant granules, Fastlock sealant on bottom edges to protect against wind uplift, and a heavy-duty fiberglass mat. For more info circle 801

Rheinzink America’s architectural-grade zinc cladding— Classic, PrePatina, and ArtColor lines—can be used on roofs and walls. Roofing options also include panels and standingseam (pictured below on sloping sections). The products resist weathering and corrosion, the company says, and are self-healing and potentially last 100 years or more. For more info circle 800

PORCELAIN ROOF TILE The ceramic tile manufacturer Daltile has expanded its offerings with Perennial Porcelain Roofing. The company says Perennial offers the same look as other high-end materials but at a lower price point. Using digital printing technology, Daltile creates colors, designs, and details that replicate the real thing (such as slate, shown). Made from porcelain, the tiles are frost-resistant, impervious to water, and offer a 110 mph wind rating. For more info circle 802

SYNTHETIC SHINGLES The Nature Crafted Collection of synthetic shake shingles from DaVinci Roofscapes is available in three natural wood looks, including Aged Cedar, Mossy Cedar, and Black Oak. The shingles offer the look of real cedar with the maintenance benefits of a composite material that won’t split, curl, or fade, the company says. For more info circle 803

CONCRETE TILE Boral’s Texas Vista Collection is a line of concrete roof tile available in shades that harmonize with the state’s architectural styles. The product is made from locally sourced, naturally occurring geological material and is durable, lasting, and low maintenance, the company says. The new suite is available in two of the brand’s most popular tile styles in the region: Saxony Country Slate and Shake. Shades include Charcoal Brown Blend, Chestnut Burnt, Dark Bordeaux, Weathered Greige, and Weathered Cedar (shown). For more info circle 804

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DEFEND YOUR BUILD AGAINST FIRE AND FLAME SPREAD

SLATE-LOOK METAL Generations Slate metal roofing from EDCO Products combines the brand’s ArrowLine panel with high-definition coating technology to produce a slate appearance. Offering the strength of steel, with a multilayer PVDF “cool chemistry” finish, the product can reduce energy bills and does not support mold and algae growth, the manufacturer says. Generations Slate launches in early 2020 and will be available in four colors. For more info circle 805

LP® FlameBlock® Fire-Rated Sheathing, from LP Building Solutions, meets code, exceeds expectations, and gives homeowners peace of mind.

HIGH-DEF SHINGLES GAF’s Timberline Ultra HD line is 53% thicker than standard architectural shingles and features a dual shadow effect to achieve the look of real wood shakes. The shingles feature StainGuard Plus time-release technology, which fights algae staining, and Dura Grip adhesive to reduce the risk of blow-off. A range of colors is available (shown: Barkwood). For more info circle 806

Learn more at: LPCorp.com/StructuralSolutions

Defend Your Build™

LP® TechShield®

LP Legacy®

LP® TopNotch®

LP WeatherLogic®

LP® FlameBlock®

LP® SolidStart®

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PRODUCTS: ROOFING

METAL PANELS

“... you guys got this right, the program is awesome… SoftPlan is the best and I have used them all..” Andrew Bozeman, Montgomery, AL

Pac-Clad’s Snap-Clad 24-gauge panels offer continuous interlocking for improved structural performance and wind resistance, the company says. A concealed-fastener clip system allows for thermal expansion/contraction and helps to hold down the roof in strong winds. Panels are available with a Kynar 70% PVDF finish in 45 standard colors. Measuring up to 64 feet long, the panels shown below are used in a standing-seam application. For more info circle 807

ASPHALT SHINGLES With its blended coloration, Belmont asphalt roofing from CertainTeed is designed to replicate the look of natural slate. The shingle’s layered construction is reinforced with a fiberglass base mat for longevity and aesthetics. It has a Class A fire rating and 110 mph wind resistance. Class IV impact-resistant options are also available. For more info circle 808

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$95

/month

ZERO-WASTE SHINGLES To deliver more coverage, Atlas Roofing’s HP42" roofing shingle is 42 inches wide with an enhanced 6-inch exposure. This format uses a seven-course, zero-waste offset installation, so installers can run seven courses down the roof before having to reset, cutting up to 4 labor hours off a typical job, the company says. For more info circle 809

SoftPlan remodel kitchens | baths | additions | $985 free trial: www.softplan.com or 1-800-248-0164 Circle 779


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PRODUCTS: APPS

MATERIAL DELIVERY Developed by a builder, RenoRun allows contractors to use an app to source and deliver building supplies and materials in less than 2 hours directly to the jobsite. Ideal for renovations or new construction, the system offers two levels: flat-fee delivery or a monthly pro plan that provides unlimited, free, same-day deliveries plus 50% off scheduled and express 2-hour deliveries. Available for iPhone and Android devices. For more info circle 810

SITE WALKTHROUGHS Using the Punch List & Site Audit app for Apple devices, users can do a final site audit using the app’s simple interface, then generate PDF files that can be emailed from the construction site. Punch List, the developer Rojao says, helps builders improve their productivity by making site audits and punch-list inspections quicker and easier to carry out and manage. Ideal for audits, walkthroughs, safety inspections, insurance claims, site walks, and checklists, the app is free in the Apple store. For more info circle 811

LEED DOCUMENTATION Green Badger LEED-compliance documentation software can be used by project teams of all experience levels. Designed as a cloud-based technology with project-specific training, LEED tips and tricks, and ongoing project team support, the cross-platform solution connects team members so everyone has access to real-time updates and can document from the field and automate repetitive, time-consuming tasks. Available for iPhone and Android devices. For more info circle 812

AFFORDABLE GAS As simple as it sounds, vehicle gas prices matter to a home builder’s bottom line, so the GasBuddy app helps builders find the cheapest gas station nearby. Users regularly add information on stations, prices, and distance. The developer has partnered with a handful of retailers, such as The Home Depot and Domino’s Pizza, on a GasBack program so builders earn free money from purchases at those retailers. The discount is automatically applied at the pump. The app is available in the Apple store or Google Play. For more info circle 814

FIELD CALCULATIONS All-In-One Calculator is a free Android app that helps contractors and subs carry out constructionrelated calculations, such as unit conversions, percentages, volumes, areas, and proportions. Featuring more than 70 calculators and unit converters in several categories, the app supports temperature, length, weight, area, volume, and many other measurement units. Available for iPhone and Android devices. For more info circle 813

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ADVERTISING SALES:

AD INDEX:

GROUP DIRECTOR – PRINCIPAL Tony Mancini 484.412.8686 | tmancini@sgcmail.com

INSIDE SALES MANAGER Richard Thompson 952.449.1592 | rthompson@sgcmail.com

COMPANY

RS#

COMPANY

BASF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

772

LP TECHSHIELD . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

776

DIRECTOR OF DIGITAL & BUSINESS DEVELOPMENT Adam Grubb 317.219.7546 | agrubb@sgcmail.com

DIRECTOR OF EVENTS Judy Brociek 847.954.7943 | jbrociek@sgcmail.com

CALCULATED INDUSTRIES . . . . . . . . . . . . . . . . . . . 65

788

LP WEATHERLOGIC . . . . . . . . . . . . . . . . . . . . . . . . . 57

777

EVENT COORDINATOR Meghan Voigt 847.954.7976 | mvoigt@sgcmail.com

ADMINISTRATIVE COORDINATOR Tina Kanter 847.391.1054 | tkanter@sgcmail.com

PRINT ADVERTISING MATERIALS Erica Rivera 847.391.1049 | erivera@sgcmail.com

VP STRATEGIC PARTNERS – NATIONAL SALES MANAGER Bill Black 267.483.8788 | bblack@sgcmail.com

REPRINTS Tina Kanter 847.391.1054 | tkanter@sgcmail.com

VP STRATEGIC PARTNERS – INTEGRATED MEDIA ADVISOR Michael Stein 610.918.1828 | mstein@sgcmail.com

LIST RENTAL INFORMATION Claude Marada claude.marada@infogroup.com 402.836.6274

VP STRATEGIC PARTNERS Patty Morin 847.391.1027 | pmorin@sgcmail.com

Bart Piccirillo bart.piccirillo@infogroup.com 402.836.6283

INTEGRATED MEDIA ADVISORS – RESIDENTIAL MARKET Jeff Elliott – Principal 616.846.4633 | jelliott@sgcmail.com Eastern Canada

Tim Gillerlain 847.954.7916 | tgillerlain@sgcmail.com States: IA, IL, IN, KS, MI, MN, MO, ND, NE, OH, OK, TN, SD, TX, WI Adam Grubb 317.219.7546 | agrubb@sgcmail.com States: AK, AZ, CA, CO, HI, ID, MT, NM, NV, OR, UT, WA, WY, Western Canada

SUBSCRIPTION INQUIRIES Professional Builder P.O. Box 300 Lincolnshire, IL 60069-0300 PBM@omeda.com 847.763.4933 Toll-Free | 877.501.7540

PAGE #

PAGE #

RS#

CAMBRIA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

774

LP FLAMEBLOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

778

CONTROL4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

761

MITSUBISHI ELECTRIC . . . . . . . . . . . . . . . . . . . . . . . 27

765

COUNTRY WOOD FLOORING . . . . . . . . . . . . . . . . . . 64

783

MOHAWK INDUSTRIES . . . . . . . . . . . . . . . . . . . . . . .4-5

752

DRYERBOX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

762

NISUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

781

DRYER WALL VENT . . . . . . . . . . . . . . . . . . . . . . . . . 23

763

NISUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

785

DUPONT PROTECTION SOLUTIONS . . . . . . . . . . . . . 8

755

OMEGA FLEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

770

DUPONT PROTECTION SOLUTIONS . . . . . . . . . . . . 33

767

PROTECTIVE PRODUCTS . . . . . . . . . . . . . . . . . . . . . 65

787

FORD MOTOR CO. . . . . . . . . . . . . . . . . . . . . . . . . . IFC-3

751

PROVIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

768

GEICO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

753

RELIANCE WORLDWIDE . . . . . . . . . . . . . . . . . . . . . . . 7

754

HOUSE DESIGNERS . . . . . . . . . . . . . . . . . . . . . . . . . 64

784

ROYAL BUILDING PRODUCTS . . . . . . . . . . . . . . . . . .14

758

ICC – INTERNATIONAL CONNECTORS . . . . . . . . . . .16

759

SEIHO INTERNATIONAL. . . . . . . . . . . . . . . . . . . . . . .61

780

IRONROCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

786

SIGNATURE KITCHEN SUITE . . . . . . . . . . . . . . . . . . .19

760

JAMES HARDIE BUILDING PRODUCTS . . . . . . . . . . 39

771

SKILLED LABOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

764

JAMSILL GUARD . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

782

SOFTPLAN SYSTEMS . . . . . . . . . . . . . . . . . . . . . . . . 60

779

KOHLER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

757

TAMLYN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

773

LG HAUSYS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

756

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3. What type of construction is your firm involved in? (Check ALL that apply.) A Q Single Family – Custom B Q Single Family C Q Multi–Family D Q Remodeling E Q Light Commercial F Q Other (specify): _____________________________ __________________________________________________ 4. How many homes does your firm build per year? (Check one box only.) A Q Over 500 units B Q 101 – 500 units C Q 26 – 100 units D Q 11 – 25 units E Q 1 – 10 units F 0 units Q 5. What is your firm’s annual revenue? (Check one box only.) A Q More than $10 million B Q $5 million to $10 million C Q $1 million to $4,999,999 D Q $1 to $999,999 E $0 Q

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Q+A:

Assessing Risk for a Changing (and Challenging) Industry iability insurance underwriting for home builders has historically been an exercise in frustration, instability, and inconsistency both for builders and for the insurance industry. The latter wants hard, timely, and comprehensive data to assess risk, while builders live a life of latent defects, unpredictable warranty service calls, and changing market conditions that affect quality. Bridging that disconnect is what drives Katie Beck, head of Home Builders at Berkshire Hathaway Specialty Insurance, in Shakopee, Minn., who sat down with Jenny Simon, director of marketing communications at IBACOS, a housing quality consultancy in Pittsburgh, on behalf of Pro Builder, to discuss how builders, brokers, and underwriters can collaborate to achieve more reliable results.

L

PRO BUILDER: Why is underwriting home

builders so difficult for insurers? KATIE BECK: This has long been a tough

business for our industry in terms of losses and program structure because there isn’t a ton of data we can get our hands on, much less get our arms around, to evaluate risk in the way we traditionally evaluate other industries. And the data we do get is old. Losses, particularly those associated with construction defects, take up to 10 years to be reported and even longer to reveal the final cost outcome. With that, the quantitative data that exists is extremely volatile due to the housing boom through the early 2000s, followed by the steep decline in production in the late 2000s and into the 2010s. That makes it difficult for us to truly understand the home builder’s world. PB: How can builders best present them-

selves to insurers?

commitment to quality. Builders also need to understand that the presentation they prepare for an insurer should vary from what they prepare for an investor. What sounds exciting to an investor—new products, a new target buyer, and new designs— may scare or concern an underwriter. PB: How do you best leverage builder data? KB: Builders and insurers need to shift

their focus to look at what the data and the numbers actually mean. Underwriters should overlay statistics with qualitative information, such as trends within the builder’s warranty data, whether concerns are being addressed, and how the customer experience has changed over time. Changes to construction products or practices are also important, as are shifts in a builder’s corporate culture or market, and whether they have invested in systems that improve their quality and processes. All of that has an impact on risk assessment.

KB: If you’re simply handing over loss

runs and closing figures to your broker or underwriter, they’re probably just turning over rates based on general assumptions and broad data. To get them to do more for you, work with them to understand your “story”—the culture of your company, your internal processes, and your demonstrated

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PB: If I’m a builder with some significant

losses, how should I handle that with my broker or underwriter? KB: Builders shouldn’t be scared of their losses. Instead, they need to use them as an opportunity to showcase what they learned from those experiences and how

probuilder.com

KATIE BECK Head of Home Builders Berkshire Hathaway Specialty Insurance

their company and processes changed and improved because of them. Every large loss should have a lesson learned. The dichotomy of this is that an account could have no losses, but that doesn’t mean they are good; it could just mean they’re lucky. Alternatively, some of the best builders in the industry have had some very hairy losses, but they’ve learned from them and have become even better. PB: What’s needed to bring more stability

and consistency to home builder insurance underwriting? KB: The more insurers there are that understand the home building industry, the more stable insurance for the space will become. Often many carriers jump in and offer broad coverage without truly understanding it, only to subsequently drop the line of coverage, which creates a culture and reputation of instability in our industry for this space. But those that understand it and dig into a builder’s story far beyond the numbers can provide stable, consistent coverage, especially for builders that really care about quality. I am committed to helping builders bridge that gap. For the complete interview with Katie Beck, see probuilder.com/interview-beck


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