PRICE VS. VALUE

Jim Martin shares his thoughts on the

#1 pitfall that many home buyers fall into.

A friend of mine who is a large commercial builder [we’ll call him “George”] once told me that the most frustrating part of his business is when he’s bidding a job for a customer who refuses to recognize the difference between price and value.  “You can’t treat construction like a basic commodity”, he told me.  “You can’t shop for a home-builder the same way you shop for a gallon of milk or a box of nails”.

I’m not sure George used the term “commodity” in the proper context, but the point he was trying to make was loud and clear: price alone should NEVER be the primary consideration when you’re choosing a builder – the lowest price is almost never the best value.

The rock-bottom-price mentality is extremely common today.  Thanks to retailers like Wal-Mart, we have raised generations of consumers who’ve been indoctrinated with the notion that smart shopping is all about price.  When you’re shopping for basic, everyday, household goods, I suppose that’s true.   Aside from a handful of subjective factors like convenience, it really doesn’t matter where you choose to buy most household products so there’s really nothing wrong shopping for price alone. 

But the same simply cannot be said when it comes to construction – particularly modular construction.  In fact, to a truly shrewd homebuyer, price barely makes the top five on a list of their most important considerations.  The most important factors tend to be:

• the reputation & integrity of the company/contractor/salesperson
• the quality of the workmanship
• and, the quality of the building components (not necessarily in that order). 

With a few moments of objective thought, you’ll surely agree.

Let’s think first about the reputation of your builder.  How long has the contractor been in business in your area?  Can they provide references?  Have you met the company’s owners and do they make themselves available to you? 

Back in the late ‘90’s and early 2000’s while the housing boom was in full swing, several manufactured housing dealerships popped up in our territory – no less than 6 new competitors within a 10 mile radius.  They leased property, set up a small sales office, slapped together a few model homes and quickly set forth to capture as much of the market as they could with a sales approach centered almost exclusively on price.  Their owners were largely absent and unknown within the community.  They had no references to speak of, and were selling a low-end product at very low prices.  To bring perspective to the pricing, at the time, most reputable manufactured home dealers were selling a 1350 square foot sectional for about $40,000.  These nomadic builders, on the other hand, were baiting their prospects with prices in the low $30’s for a similarly sized home – (“size”, however, was where the similarities ended).  Of those 10 dealerships, only two are still in business today – most were gone within 3 years, leaving behind dozens of customers with substandard homes, substandard on-site completion, and absolutely nowhere to turn when the problems started appearing.  Unfortunately, I would bet that few, if any, of those customers gave much weight at all to the quality of the company they were dealing with – they were seduced by a low price.

My company, Homestead Oak, has been in business at the same location since 1989.  It remains a small, family-owned business and our customers can find my wife and Ion site, 5 days a week.  We’re raising our family here, we play an active role in our community, and fully intend to conduct business right here, the way we always have until we retire.  Prospective home-buyers will have no problem finding us or looking into our history should they so choose.

Then there’s the quality of workmanship.  One of the first men my father-in-law hired when he started this business was a master woodworker named Chris who was, at the time, employed as an interior trim man with a builder whose niche was the 3000-4000 square foot, high-end, “McMansions” that had been the trademark of the housing bubble.  To refer to Chris as a run-of-the-mill trim man is an injustice – he was fantastic – truly a master at his trade.  And Chris was just one of several quality guys that my father-in-law brought on board to make up his crew.  Guys with that kind of talent and work ethic don’t come cheap.  Simply put, a company who is selling their homes at rock bottom prices just can’t afford to employ guys like Chris.  With that in mind, it’s not at all hard to understand the adverse correlation between low prices and quality workmanship.  So it really comes down to weather or not you’re willing to bear the cost to have superior workmen on your project, or are you willing to take the risk of working with the guys at the bottom of the construction food chain.

And finally there’s the quality of the building components to consider.  One of the easiest ways for a contractor to cheapen his build or widen his profit margin is to skimp on quality materials.  I could go on for forever talking about the superior quality of the components we use in our homes but for the sake of brevity, I’ll mention just one – cabinetry.  The manufactured housing industry is fraught with homes with extremely shoddy cabinetry.  A Homestead Oak home, on the other hand, is beautifully outfitted with cabinetry certified by KCMA (the Kitchen Cabinet Manufacturers Association).  That may not sound like a big deal until you learn that a KCMA cabinet has been put through an extensive series of rigorous test for strength and durability.  For example, the shelves of a KCMA certified cabinet are loaded with 15lbs per square foot for a period of seven days during which there must be no signs of excessive deflection and no visible sign of separation or failure of any part of the cabinets or mounting system.  And, to test the ability of doors/hinges and means of attachment, 65lbs. is applied to the door. The weighted door is slowly operated through 10 cycles. The door must remain weighted for 10 minutes, after which the door and hinges must show no signs of damage, and connections must show no signs of looseness.  I’ll spare you all the details of KCMA, but the point is, cabinets are just one of literally hundreds of different components that make up your new home.  Think of all the different components of your home; light fixtures, water fixtures, carpet, countertops – the price shopper has to be willing to turn a blind eye to the quality associated with all of these.

So, what can you do to guard against these pitfalls?

1.     LOOK BEYOND THE GLITZ.  Some designers of system-built homes are very good at disguising cheap construction with a lot of eye-catching frills.  Learn to look beyond the beautiful fireplaces and decorative windows.  Ask instead about the construction specifications.  Look for things like KCMA certified cabinetry, Energy Star Certification (for energy efficiency), 16”oc exterior construction, and quality workmanship in general.

2.     COMPARE “APPLES TO APPLES”.  If you’re comparing several homes against one-another, begin by leveling the playing field.  Obviously the homes must be similar in size and layout, but you’ll also need to make sure the homes have comparable specifications.  You would never expect to buy a Ferrari for the price of a Ford – likewise, two homes cannot be fairly compared if they’re not built to similar quality and construction standards.  Making “apples to apples” comparisons will help you make the right choice.

3.     THERE’S NO FREE LUNCH.  Many system builders will advertise artificially low prices to “hook” their customers who later learn that their price didn’t include necessary basics like delivery, set-up, tax, utility connections, etc.  And don’t forget to consider your builder’s reputation for service AFTER the sale.  There’s nothing worse than finding problems that resulted from shoddy workmanship and later finding out that the builder has no intentions of returning to make it right.  Asking the right questions will reveal that the dealer’s price wasn’t a bargain at all.

4.     LOOK FOR EXPER-IENCE.  Who will be delivering, installing and servicing your home?  How experienced are the company’s crew and sub-contractors?  What is the reputation of the dealer and the home’s manufacturer?  Many unwary buyers fail to ponder these questions when, in fact, these are arguably the most important factors in your purchasing decision.  You can’t put a price tag on quality products, good service and solid reputation.

5.   SHOP FOR VALUE NOT PRICE In other words, the lowest price is almost never the best deal.  Like any other product, system-built homes are offered in many different levels of quality and price.  All homes are not created equal so don't be fooled by two apparently identical products that are substantially different in price- there's usually a very good reason why one is priced much lower than the other.  Remember what your parents taught you long ago...

       You get what you pay for.

Today’s system-built homes (i.e. manufactured homes and modular homes) offer the weary buyer a fresh approach to building with both quality and affordability – VALUE.

Sure there are cheaply built manufactured/modular homes out there, and our industry has yet to entirely weed-out some of the less scrupulous builders, with a little due diligence on the buyers’ part, they should be able to build with few surprises or disappointments.  Call one of the professional consultants at Homestead Oak to day to schedule a no cost, no obligation appointment to answer your questions.