News & Notes Archive - November 2008
Lessons learned: Sometimes the source of problems is not the home manufacturer, the sales center, the installer or the site-prep contractor–but the home buyer.
Buying a new home under any circumstances can be quite stressful, but when it comes to shopping for, ordering, and installing a new manufactured home, the difficulties one encounters are often more complex and challenging than buying an existing site-built home. Moreover, if the manufactured home buyer is uninformed about his or her responsibilities, and unaware of what they need to do to both protect themselves and to deal effectively with everyone involved throughout the process, they can create problems that can cause a world of pain, frustration and money. Here is a recent example:
Some weeks ago I received a long 4,000 word letter from a distraught retired couple who had sold their home in California and moved to Washington state into a land-lease community (i.e., a mobile home park) where they purchased a new home from Palm Harbor Homes. They have been in it for six months. The core of their complaint was, their home’s site was cramped and the $26,000 cost for a garage, walkway, foundation and stairs they were originally quoted had ballooned to $47,000, had yet to be built, and the cost increase was putting a huge hit on their savings. Emotionally they felt railroaded and continually jerked around by a large cast of characters. I agreed to look into their case at no charge.
Their story was well written and organized and their complaints seemed reasonable, but as I studied their letter, one fact struck me: their initial visit to the Washington Palm Harbor sales center and the park into which they would move was in April, 2006, following which they returned to their home in California. It wasn’t until December of 2007 that they returned to Washington. During their more than 18 months absence, a number of events occurred: the site they had chosen (but not locked in with a contract) was given to another new tenant; the couple chose an alternative lot sight unseen; the sales person they had been dealing with left the sales center; construction costs had gone up; and a host of things verbally discussed had never been put in writing.
When I forwarded the homebuyers’ complaint to VP of Palm Harbor, CC'ing Palm Harbor's President, Larry Keener, the response was prompt, something that I've become accustomed to – PH bends over backward to resolve customer issues. Turns out that PH was well up to speed on the case and had really gone the distance to do the right thing. Example, when the couple finally viewed the home site they had been assigned, they immediately complained to the Palm Harbor sales center, whereupon the manager expressed his complete sympathy and agreed to refund the entire purchase price of their home. The couple declined and went ahead with the purchase.
As for the $47,000 quote for the garage and site work, Palm Harbor, in a good will gesture and despite having no legal obligation, renegotiated the bid from the local general contractor down to $39,000, splitting with the contractor the $8,000 loss. The couple agreed to the adjustment, signing and initialing a 7-page contract. The contractor, himself an articulate responsible professional, later completed the garage and other site work in reasonable time.
This was one of those instance where there were no bad guys and no predatory or abusive behavior. In fact, Palm Harbor and the contractor deserve high marks all around. What did strike me, however, was much, if not all, the difficulties the homebuyers experienced was of their own making.
In my response to the couple, I wrote in part:
“Forgive me if I seem a bit blunt here, but if there's a single topic the Grissim Buyer's Guide explains in detail, it's the home-buyer's relationships with the dealer, the manufacturer, the land-lease community owner/manager, and any subcontractors hired to complete site work, the foundation, the garage and any other ancillary services. Each has distinct roles and responsibilities...
“From what you've described, you as the home buyer appear to have muddled to some degree your relationship with the other players: you didn't understand fully the roles (and limitations) of the other parties; you didn't understand how to protect yourself; you seemed not to know your responsibilities, and you neglected many of the book's guidelines for the prudent home buyer, including:
- Never agree to lease a site without seeing it, inspecting the heck out of it, and doing due diligence, including a description in writing.
- Never delegate the authority to reserve a lot or obtain site preparation costs to anyone, except possibly your attorney.
- Get every agreement, even the smallest assurances, in writing, signed by a legally accountable individual.
- Always get written estimates/bids on work to be done, preferably multiple bids, with a date specific term during which the price will be honored.
- Never pay the amount in full for a home ordered at the time of signing a purchase contract; always hold back a meaningful percentage; and ensure a disbursement schedule is included in writing with specific milestones, signed by all parties.
“As for the behavior of Palm Harbor, the dealership, the contractor, and other parties, based on my findings, I don't see any egregious errors or negligence. On the contrary, I was impressed with general manager's offer to fully refund your money (no small gesture these days), and the care taken to ensure you understood (and signed off on) the increased bid amount on the contract with the general contractor...
“Thanks for giving me an opportunity to respond to your concerns. I do hope that when the dust settles, you'll find yourself enjoying your Palm Harbor home. They build a fine house.”
To which I received this response:
“John- Thanks for your considerable, thoughtful answer. We understand in hindsight that we were extremely naive. While we acknowledge our part in the whole fiasco, and we are happy with our home, we continue to feel that the dealership misled us and took advantage of our naiveté. Your discussion in this letter will serve as a guideline for us in any transaction in the future.”
Case closed.
Interview: 15 minutes with...Roger Lyons
Note: In my role as an industry observer and consumer advocate I speak with people at all levels of the manufactured home industry (MH) to gain insights I share with my readers to help them be better informed. Some I have interviewed for a one-page column that runs in an industry trade publication. In return the magazine runs an ad for the Grissim Guides. No money changes hands. I insist on this. Aside from book sales, I neither solicit nor accept a dime from the industry, and my readers have my assurance I intend to keep it that way. Here’s this month’s interview:
Roger Lyons, Founder and CEO of PennLyons Homes
Who: Founder, PennLyon Homes, Selinsgrove, PA. Chair, MHI’s National Modular Housing Council (to 9/2008). Consultant to international clients on modular home projects, including factory start-ups.
Background: Age, 66. Born and raised in Montoursville, PA, graduating from high school in ’60. Attending college for a short time, he married his high school sweetheart, Kay, in ’61 and a year later began his career in MH, working in production at the local Nashua Homes plant (“Building mostly ten- and 12-wides for park placements”). He stayed there 7 years, rising to sales manager. Following a one–year stint heading sales at a Nashua-owned plant in Greenfield, TN, returned to PA in ‘69 to accept a sales position at Skyline’s Leola, PA plant. “One of the best moves I made. I wanted to learn how a large successful corporation is run. Skyline’s plants were clean and well-organized, they got top performance out of their people, their design and quality control were outstanding.” In ’71, he followed a Skyline VP who left for major national home builder Kaufman & Broad who had purchased several plants around the U.S. to enter the MH market. Lyons stayed there three years, managing both sales and production, before quitting in ‘74 to take a job as manager of the MH division of Poloron Homes in Middleburg, PA. “What drew me there me was, Poloron had recently built a new factory to start producing modular homes, which I saw as really the future.” By ’78 Lyons was the VP of sales for both divisions. “I started pushing to build modulars nicer than the modest two-box ranches and capes we produced.” By ’79 Poloron offered a couple of two-story models but management showed no interest in building quality upscale mods that competed toe-to-toe with site-built homes.
Convinced of his vision–“I just knew I had to do this”– Lyons, now 38, wrote a business plan, found backers, and in 1981 founded PennLyon Homes (“We dropped the ‘s’ from Lyons for ease of pronunciation.”) Duplicating the look of high end upscale homes, with many multistory models–“There was nothing mobile home about us”–the company targeted NY’s Hudson Valley and the Greenwhich, CT upscale areas, and thrived. By ’87, riding a red hot market, PennLyon Homes had grown to three 50,000 sq. ft. factories and annual sales of $38 million. In the two decades since then the company diversified: producing commercial buildings, schools and offices; exporting homes to the Middle East for American oil companies; building 30 Colonial style homes in Russia; and constructing 180 town houses for the West Point Military Academy. The Lyons have two children, both involved in the company. “My daughter Debra runs our kitchen cabinet company, PennCraft Kitchens, and our son Scott runs PennLyon Solutions, our construction company that turn-keys all our construction projects.”
- Q: Your stint as chair of MHI’s modular council is about to end. How would you characterize the experience?
- A: Rewarding and productive. I’d already worked with the Building Systems Council (BSC) of the National Association of Home Builders and a third modular association based here in Pennsylvania, the Modular Building Systems Association, and so I was able to get representatives of all three organizations to work together as a coalition on a few issues, and to get to know each other. It’s worked well. It’s helped foster a mutual appreciation that will help all three work together on major issues. Plus, quite a few good modular builders have joined MHI’s NMHC during this time. I’ve been pleased. Things are moving forward.
- Q: You’ve been a strong advocate for maintaining a clear separation between modular and HUD. How has that gone?
- A: We’re having success. The main reason I joined MHI five years ago was I saw HUD producers moving into modular, and I wanted to make sure things didn’t go sideways, that they successfully make the transition to modular.
- Q: What’s been your strategy?
- A: Making the case that our competition is site-built, not HUD products, and this requires a different business model. No question the HUD guys have worked very hard to make that product more and more attractive, buts the real story is, unless it looks like a house and not a trailer, it won’t sell unless it’s way below market price. Most of the HUD people I talk to already know this, and that’s why they want to make the move to modular. The problem is, modular home building is a different business, involving a new lingo, and new construction codes. But when they master these, it goes very well. What I’ve tried to convey is that moving successfully to modular production means you have to reverse completely your HUD thinking, and put quality first, not price.
- Q: To position modulars as a viable mainstream housing option?
- A: Exactly. Modular can offer high-quality competitive priced homes at good, conforming mortgage rates that can work in the mainstream housing market. In Japan, for example, modular is so successful because the public there perceives factory-built as better than site-built. In this country that’s not yet the case because of a lot of carryover from the perception of HUD products. So the modular industry must build quality into their product if they expect to take away the site built housing business. I think the HUD people are seeing this.
- Q: What’s your take on the future of modular?
- A: It’s definitely bright. One thing that always occurs with a housing downturn is the loss of a huge number of subcontractors who won’t be there when the upturn comes. Site builders facing this will increasingly be forced to turn to modular products. Funny, I once predicted that by the Nineties–and certainly by 2005–this country would really be pushing modulars, because housing is practically the only thing left that’s NOT produced in a factory. It just shows you how entrenched the home construction industry is. But that may be changing. I know of at least one major national builder seriously looking into adopting the modular building process. When you see that happening, you can bet modular housing is poised to really take off as a mainstream housing product.