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Finish That House on Schedule ... Or Else

Posted by: Peter Coy on November 22, 2005

What’s one of the things that most angers buyers of new homes? When builders miss their deadlines.

That’s what emerged from a survey of customer satisfaction with homebuilders that was conducted by J.D. Power & Associates (which recently became a sister company of BusinessWeek under the McGraw-Hill Cos. umbrella).

This was the first year that J.D. Power asked homebuyers whether their homes were delivered on the date originally promised, and whether they were 100% complete when delivered.

Those answers were not counted in the satisfaction rankings. But lo and behold, the companies that came out tops in the satisfaction rankings were the same ones that most often delivered houses ontime and complete. So says Paula Sonkin, the executive director of J.D. Power’s real estate industries practice.

The reason you haven't read this anywhere before is that it was missed in the news reports about the satisfaction rankings, which came out in September.

Sonkin says that it's better for a builder to be complete and late than ontime and incomplete. But both are way worse than ontime and complete. Dissatisfied customers let their friends know how unhappy they are, hurting builders' future sales, says Sonkin.

Here's what Sonkin told me:

Satisfaction is unbelievably highest when homes are ontime and complete. What’s surprising is how resistant a lot of builders are to doing that. I had a builder say to me last year, "90% of my homes are a month late." I asked him, "Why don't you just add a month to your completion date so you'll be on time?" He said, "If I do that, we’ll always be a month late. In our culture, it’s become acceptable to be a month late."

Still, there are some builders that have organized themselves to meet deadlines. Pulte Homes and Centex Homes ranked highest in customer satisfaction in more markets than any other homebuilders, so presumably they're figuring out how to deliver on time. (Sonkin won't confirm names because the detailed data is for sale.)

Making deadlines has a halo effect, Sonkin says: "When you’re really happy with your builder, you might rate everything high." Conversely, "When you have a miserable experience, everything will tick you off."

Some homebuilders try to avoid missing deadlines by waiting until the home is mostly finished before giving a delivery date. But that's not a solution that pleases customers, says Sonkin:

When in the process do homebuyers want to know when they came move in? The day they buy. Any day after that that you don’t know, you’re losing satisfaction.

Builders, are you listening?



BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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