What do home builders look at when shopping around for equipment and installation contractors? When they are building tract homes by the hundreds and thousands, they look for the best prices and highest margins.

But what about the builders who dabble in custom homes, maybe only a dozen or so each year?

“We build mostly production housing of 2,500 to 3,500 square feet and get bids from our contractors,” said David Steuer of Steuer & Canvasser, Inc., Farmington Hills, MI. “After reviewing the dependability of the product and the installer, we execute a contract for the entire project.

“We do not switch brands for the customer. However, in the custom homes we build, often with two or three furnaces per home, we put in what the customer specifies.”

Crosswinds Communities of Novi, MI, looks for the best packages when it sends out bids for equipment. “We try and partner with two or three local contractors,” said Crosswinds’ Glenn Frank. “And we offer upgrades to our home buyers based on the equipment in our model homes.”

The company builds about 5,000 homes a year in the Detroit area and depends on contractors who offer a variety of systems.

Customer Consultations?

Another Detroit-area builder, Biltmore Homes, Troy, MI, places equipment and service value high on its list of priorities when choosing an hvac subcontractor. But individual consultations between customers and home buyers might not work — for logistical reasons.

“There are two reasons why allowing the customer [to choose] would be difficult in our situation,” said Biltmore’s Gary Denning. “First, we are a volume builder and have made arrangements with certain trades to get volume discounts. We do evaluate each product based on the value it gives the customer and its price.

“Second, allowing customers to choose which hvac system they want installed opens up a whole new custom feature to our homes.

“Potential drawbacks from this would include ‘retrofitting’ a customer’s home with the system they have selected, from the standpoint that our plans already accommodate a certain system.

“It is understandable that some customers may want to be able to choose their heating and cooling system. However, it is unlikely that a volume builder offering lower-priced products would be able to provide such an option.”

Good With The Bad

Francis Franck of Texas Furnace, LLC, Houston, TX, had some bad news and good news.

“As a group, builders do not like contractors talking to their customers,” he said. “This is a very large obstacle to overcome, and with some builders it is never overcome.

“In other situations, some contractors are allowed to work with the owner in selling upgrades. To do this, the contractor will have to build a level of trust with the builder. Part of this will be to develop a sell-up plan, with definite pricing approved by the builder that puts specific additional dollars in the builder’s pocket when the sell-up occurs.”

Steuer talked about a similar bad news/good news scenario.

“My salespeople hate to change a product from what’s in the model because their buyers rely on the model for what their home will be like,” he said. “And previous buyers always hear about changes and lose confidence in what went into their home — the builder’s reputation inevitably suffers. So we only change specs midstream if there is absolutely no way we can continue to offer the product.”

On the positive side, Steuer said, “I think the contractor’s best bet is to offer a free happy hour for members of each local builder association and educate them about their advantages. Price and previously satisfied builders impress me the most.

“Offering a free hvac package for the model home with a commitment on the whole sub is a common way for dealers to ensure that their product stays with the whole development.”

Profitable Upgrades

Frank added that his partner-contractors can do quite well if home buyers want to upgrade beyond a standard 80% efficient furnace.

Frank said his company has a national contract to sell and install Carrier products. When his company is planning a new community, they bid out the equipment installations to local dealer/contractors.

However, there is never any face-to-face selling between his contractors and homeowners. That philosophy has at least one contractor perplexed.

Airtron/Encompass of Indian-apolis, IN, installs a great deal of hvac systems in new residential homes, but its general manager is still looking for a way to sell the right upgrade package.

“It is very possible to market directly to homeowners,” said Eric Woerner. “We just haven’t been able to figure it out yet.”

Publication date: 10/29/2001