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November 14, 2007
Builders Remodeling their Core Businesses
In the course of doing some research for Brian Bruce (site director for HGTVPro.com), I e-mailed some remodeler friends of mine and asked them if they're seeing much in the way of new-home builders turning to remodeling during the current slowdown. As it turns out, several of them have, but none of them seems to feel threatened. They have good reason, too. They're really good at what they do.
Remodeling is a very different animal from new construction (although many remodelers do both, particularly with custom homes). Every remodeling job is unique; there's no such thing as "production" remodeling. Remodelers have to use excellent trade contractors, since there are often peculiar situations created by previous "remuddling" projects or even from original construction. And, of course, the remodeler's own crew and the trades people are actually working in someone's home -- not an empty shell. They have to be able to interact effectively with the family and understand how disruptive remodeling is to their lives.
The remodelers I heard from also mentioned that new-home builders work on different margins. New construction is less labor-intensive, so lower margins work. But if they try to do remodeling at those same margins, they're going to lose money. Once they see the hit they're taking, they even may abandon a project halfway through, leaving the homeowners with a torn-up kitchen or bathroom and an urgent need to find someone to finish the work. Other builders just walk away from remodeling as soon as they realize just how different it is.
Have you had any experiences with this scenario? If you're a new-home builder who has diversified into remodeling, how are you dealing with the difference in margins? Or do you even find it to be a problem? Do you expect to stay in remodeling permanently?
If you're a remodeler, has your market been affected by builders moving into remodeling? How are you coping with the usually lower bids from these new competitors?
One thing's for sure: The industry is going through some changes. Let me know how it's panning out for you.
Posted by Marjie O'Connor, HGTVPro.com Staff at November 14, 2007 12:34 PM
Comments
We speak to builders every day, and it seems a lot of them do adapt during times like these, as I think everyone does when the economy does this. It seems like many people are in a competitive market to sell their personal houses right now, and having a builder come in a do a little remodeling may be just the push they need to sell.
Posted by: House Plans at November 14, 2007 5:43 PM
I am a remodeler who has seen many builders in my area "branch" out into remodeling, landscaping, evenpaving and excavation work. They are undercutting everybody but they are not making money, they are basically doing it to maintain the crews they have. If they don't keep these people on payroll they will not have a business for long. A lot of them have large crews upwards of 30 men. Initally they tried to charge what they needed to make to cover the salaries but they had no work, now they are low balling but setting time limits and therefore quality limits on how the job will be done at a competative price.
There actions are definatly keeping me busy, I have picked up two kitchen remodles and a bathroom mid stream because of there quality and their employees atittudes.
Posted by: Stillwater HI at November 21, 2007 8:29 AM
I have been a builder for 30 years and did a few remodel jobs a year. Two years ago we made a change and went all out after remodeling and I love it. It is different and some things do not apply to both but I find it more challenging. You must get double the margins of new home construction but it only takes a couple of jobs to figure that out, it is the small remodlers that don't get the margin thing. They do half their work for free.
Posted by: scott at November 21, 2007 9:25 AM
been doing military service past few years and had to step away from construction and remodeling,a lot changes in that short time, whats the best computer program currently available for project estimating that covers both new construction and remodeling or does a program exist to cover both- i know there are a lot of difference between the 2(labor wise that is)and i know price of materials has definitely changed for the worse.
Posted by: robert at November 21, 2007 2:22 PM
I have been a new construction builder and remodeling contractor for 32 years. I enjoy the remodeling jobs much more than the new construction jobs. We are efficient, fast and very experienced at all phases of remodeling. Call backs are extremely rare. The majority of our work is billed at time and materials only. We usually have more work requested than we can fit into our schedule, even in a slow market.
Val Jensen-owner Jensen II Builders.
Posted by: Val Jensen at November 23, 2007 10:36 AM
