Escalation Clause Helps Builders Be Proactive With Materials Spikes
In an environment of uncertainty about future costs for critical construction materials, builders have a back up: It's called the NAHB escalation clause.

Prices for some critical building materials — including shingles, plywood, and concrete — have spiked in the aftermath of Hurricane Katrina. Such unexpected and unforeseeable price increases can seriously erode builder profits, or even result in losses, when bids or contracts are based on yesterday’s prices and construction is not scheduled to begin till tomorrow.

At NAHB’s fall board and committee meetings this month, members shared strategies for dealing proactively with unanticipated price increases. One of these strategies is using an escalation clause in sales contracts. An escalation clause can help protect builders from the adverse consequences of price spikes, especially for materials with volatile markets or where there are indications of possible shortages.

NAHB has prepared for its members a new escalation clause that can be adapted for any number of materials that a builder may want to include.

In completing the escalation clause form, in order to avoid future disputes with the owner over the actual cost of materials at the time of the bid or contract, it is recommended that the specific building material be listed, along with its current price per appropriate unit of measurement, as of a certain date (such as the date of the contract or bid) and with the name and address of the supplier.

As a matter of fairness, both the owner and the builder should have a right of termination if increases in materials costs become exorbitant and threaten to make the house unaffordable or too expensive to build. NAHB’s sample escalation clause provides for termination in the event that increases in materials prices cause the total contract price to increase by more than a certain percent, although this also may be stated as a certain dollar amount. Both the owner and the builder should mutually agree on the percentage or the amount. The percentage or amount may be pegged to the lending limits on the construction loan or another figure that both parties find acceptable.

Because the builder must take affirmative steps to claim the increase, it is possible for him or her to waive or ignore increases considered to be minor. However, including the clause in the contract is insurance against potentially crippling builder material cost hikes.

To download the escalation clause, right-click on the link and save the document to your desktop or open the file and save it to your desktop.

For more information about escalation clauses, please contact David Crump, Jr., at 800-368-5242 x8491, or e-mail dcrump@nahb.com.

Custom Builder Symposium Moves to Atlanta
Due to the effects of Hurricane Katrina, the 2005 Custom Builder Symposium has been relocated to Atlanta, Ga. The dates remain the same — Nov. 11-13.

The Custom Builder Symposium offers a unique opportunity for a builder to ramp up quickly on the essentials of managing and growing a building business by learning from colleagues who have been there, say symposium participants who return year after year.

Appropriately themed “Build on Your Passion,” the 2005 Custom Builder Symposium features industry-specific education, exceptional networking opportunities, and activities set in the big city with Southern hospitality.

In light of Hurricane Katrina, two new features recently were added to the symposium program:

• Roundtable discussions focusing on what custom builders need to do to survive a disaster. Industry experts and disaster survivors will facilitate the discussions and share their stories.
• Noted NAHB Economist, Michael Carliner, who will discuss the economic impact Hurricane Katrina will have on the building industry.

For a complete list of scheduled educational sessions, events and other important information, please visit the 2005 Custom Builder Symposium Web site. Early-bird registration, with a $50 discount, has been extended to Oct. 11.  Read more about the Custom Builder Symposium. [return to top]

How to Help Hurricane Katrina Victims
NAHB has launched a disaster relief fund and is providing an array of resources to help Hurricane Katrina victims — both the general public and building industry members. 

NAHB has established the Home Building Industry Disaster Relief Fund and seeded it with an initial contribution of $1 million. The fund will assist builder members and their associations in Louisiana, Mississippi and Alabama whose operations have been disrupted by the hurricane to get back on their feet and help rebuild their communities. Members across the country are encouraged to donate.

To address immediate and critical housing and humanitarian needs, NAHB also has donated an additional $1 million to the Red Cross and Salvation Army.

NAHB Immediate Past President and Mississippi home builder Bobby Rayburn will lead NAHB's efforts in the Home Building Industry Disaster Relief Fund (www.nahb.org/disasterrelief).

To contribute, send checks to:

National Housing Endowment
Hurricane Building Industry Disaster Relief Fund
1201 15th Street, NW
Washington, DC  20005

Make your checks payable to the National Housing Endowment. Please note “Home Building Industry Disaster Relief Fund” in the memo. NAHB members are encouraged to contribute now.

Other NAHB Disaster Resources Can Be Found on NAHB’s Web site

NAHB also has included educational and other resources on the NAHB Web site to help the general public and building industry members. The resources are listed in the new NAHB Disaster Resources section of the Web site (www.nahb.org/disasterresources). The section contains a summary of all NAHB-related resources to date.

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IRS Grants Relief on Contributions to Katrina-Affected Benefit Plans
The Internal Revenue Service, the Department of Labor’s Employee Benefits Security Administration and Pension Benefit Guaranty Corporation officials announced today their agencies are providing relief in connection with certain employee benefit plans because of damage in the Gulf Coast area caused by Hurricane Katrina. 

Notice 2005-60 provides relief for certain employee benefit plans in the affected parishes and counties declared disaster areas because of Hurricane Katrina. These plans will have until Oct. 31, 2005, to make minimum funding contributions, or apply for waivers, if the deadline for such actions was from Aug. 29, 2005 through Oct. 30, 2005.

The relief provided by Notice 2005-60 is in addition to the relief already provided by the IRS to victims of Hurricane Katrina. For more information, go to http://www.irs.gov/newsroom/article/0,,id=147085,00.html.

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Weathering the Storm, Surviving the Aftermath
By Jennifer H. Elder, CPA

While business owners cannot prevent a disaster, they can take steps now to prepare for the worst and cope with the aftermath. Careful planning will make a big difference in how quickly you get back to business.

If you have a Disaster Preparedness Plan, you will rest easier knowing that you have taken the steps necessary to minimize the destruction and disruption. How far in advance you begin planning depends on how much work you have to do. Follow this link to a list of issues to consider beforehand and what to do in the aftermath of a hurricane or other disaster.

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Bankruptcy Amendments Will Affect Builders in Their Various Roles
By Mark Shaiken, Janet Nesse, Marc Albert, Darrell Clark, Lawrence Block and Katherine Becker, Stinson Morrison Hecker LLP

In April of 2005, Congress passed, and President Bush signed into law, sweeping changes to the United States Bankruptcy Code.  In enacting the bankruptcy amendments, Congress stated generally that the law:  “is intended to improve the bankruptcy system by deterring abuse . . . and streamlining case administration.”  The number of changes is daunting and they adjust the balance between debtors and creditors, both in consumer and business bankruptcy cases.

Follow this link to a brief overview of some of these changes, which are intended to:

• Compel more debtors to file Chapter 13 cases and repay some portion of their debts
• Restrict sheltering of assets in trusts and exemptions
• Ensure that debtors understand credit options

Members Urged to Help Defeat Costly Insulation Code Changes
NAHB members are urged to participate in a grassroots campaign to roll back onerous and costly insulation code requirements that can add as much as $4,000 to the cost of an average new home — while saving home owners only about $15 a year in energy costs, according to the U.S. Department of Energy.

NAHB is urging members to tell their code officials why the code provision should be restored to a more sensible level, and to support EC-16, a proposal to roll back the requirements to more reasonable, cost-effective levels.

The hearings to roll back the requirements are being held Sept. 27-Oct. 2 in Detroit.

The Department of Energy Supports the Rollback

The NAHB rollback campaign is supported by the Department of Energy, the sprayed-foam and cellulose insulation manufacturers, APA (The Engineered Wood Association) and the glass-block industry.

What Members Should Do

• NAHB members and representatives of local and state home builders associations should meet with code officials participating in the hearings to educate them and make our case about this issue.
• NAHB members can visit www.nahb.org/EC16 for resources that will enable them to participate in the current rollback campaign. Materials include detailed background information, a sample letter to send to code officials and state-by-state lists of more than 1,100 of the officials who are likely to be voting on this issue in September.

NAHB already has received extremely positive feedback from code officials; however, a two-thirds majority vote is needed in Detroit and member support is essential to make this happen.

For more information, e-mail John Loyer, jloyer@nahb.com, or call him at 800-368-5242 x8303.

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National Housing Quality Award Winners Announced
The NAHB Research Center and Reed Business Information, publishers of Professional Builder and Professional Remodeler magazines, announced this week the winners of the 2006 National Housing Quality (NHQ) Awards.

Patterned after the Malcolm Baldrige National Quality Award, the awards represent the highest recognition by the home building industry for quality achievement. Entries are judged by panels of experts who evaluate the role that customer-focused quality plays in construction, business management, sales, design, and warranty service.

                               This year, Gold Awards go to:

•         Ideal Homes, Norman, OK
•         Shea Homes, San Diego
•         Veridian Homes, Madison, WI

Silver Award winners are:

•         C.P. Morgan of Indianapolis
•         KB Home, Las Vegas
•         Pringle Development, Inc., Leesburg, FL

“We are proud to recognize these industry leaders for their exceptional efforts to incorporate quality assurance throughout their daily business practices. Each of these companies has displayed outstanding leadership in the home building arena and a discernable dedication to quality and customer satisfaction,” NAHB Research Center president Michael Luzier said.

For more information on the National Housing Quality Program, visit www.nahbrc.org/quality or email quality@nahbrc.org.

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NHQ Certification Can Lead to CGL Insurance Discounts
When was the last time you had a serious discussion with your insurance agent about why your company is a low risk and should receive a lower premium? If you haven't done so already, then you should.

It’s a well-known fact that companies need liability insurance to stay in business. It’s also a fact that in recent years average annual premium costs have increased exponentially. One way to mitigate this additional expense is to educate your insurance agent about your quality management system — especially if it is an NHQ-approved, fully-documented, systematic program for quality assurance. This can be one way to illustrate exactly how your company minimizes the risk of defect lawsuits and claims of poor workmanship and improperly installed products, materials, and equipment.

Today, many insurance companies require an audit of their customers to determine the appropriate risk level for policies, so it is important to your bottom line to educate the insurer about your quality system and why your company represents a lower risk. If the insurance agent doesn't understand the value of your NHQ system, the next step is to seek an opportunity to explain it to the broker or even to a representative of the insurance company itself.

The NAHB Liability Insurance Task Force and the NAHB Research Center have been working with home building industry insurers and brokers to increase the number of companies in the residential liability industry and to expand policy options for home builders and their trade partners. There are strong indications that more widespread use by builders and trades of well documented quality assurance programs that include regular training of jobsite personnel and a focus on continuous improvement can do just that.

For more information and tips on leveraging NHQ Certification with your insurance agent and companies offering discounted CGL insurance to builders who meet specific criteria, visit the Quality Education Corner or contact Don Carr, NHQ Builder program manager.

To obtain presentation materials for your local insurance agent, an explanation of the NHQ Certification Program for your local HBA, or a live Internet meeting with a quality program consultant, please contact Frank Alexander, NHQ program director at 800-638-8556.

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SHOWCASE 2005 Moves to Louisville
Given the recent catastrophic events in New Orleans, the city has canceled all meetings and conventions through the end of the year. The Building Systems Council's SHOWCASE 2005 will go on — in Louisville, Kentucky on the same dates. The following update answers many pressing questions.

At the September NAHB Fall Board of Directors meeting, the BSC Board of Trustees voted to relocate SHOWCASE 2005 to Louisville, KY. The host hotel will be the Louisville Marriott Downtown and all SHOWCASE activities will take place in the adjoining Kentucky International Convention Center. The dates and format of SHOWCASE 2005 remain as previously scheduled.

While BSC staff, SHOWCASE exhibitors, and attendees will have to make on-the-fly adjustments to accommodate this relocation, many BSC members are confident that this year’s event will reflect the same quality as the previous 19 events. The BSC intends to celebrate SHOWCASE’s 20th Anniversary in Louisville and can think of no better way to celebrate than by rallying around the relocated show.

If you have registered for SHOWCASE 2005, online or by fax or mail, your registration has been automatically transferred to the Louisville event.

If you have not yet registered for SHOWCASE, you can find information on the event Web site, which answers many basic questions about SHOWCASE 2005. You also may call the BSC staff directly at 800-368-5242 x8576 or visit www.nahb.org/showcase for more information.

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Thank You to Our Sponsor – Wells Fargo
Business of Building e/Source would like to thank our sponsor –  Wells Fargo. [return to top]

Business Opportunities From NAHB’s Councils and Departments
Share Sales and Marketing Ideas With Your Sales Team

Now you can read archived articles from Sales + Marketing Ideas magazine, published by NAHB’s National Sales and Marketing Council, in the Knowledge @ SMI section of http://www.smimagazine.com/. Featuring articles on Design Trends, Market Research, Merchandising, and Sales Management, Knowledge @ SMI is a great resource for you and your sales team.

While browsing Knowledge @ SMI, you also can purchase a subscription online.  See http://www.smimagazine.com/ for more information.

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Expand Your Niche
Want to reach baby boomers and active adults, one of the largest and most affluent groups of new home consumers?  Join the 50+ Housing Council to discover how to capitalize on opportunities within the fastest growing segment of the housing industry — a market that is expected to hit 100 million by 2012.

Council members include builders, developers, architects, marketers, sales professionals, products and services providers, and others trying to break into the 50+ housing market. Your membership in the Seniors Housing Council will keep you up to date with the quarterly magazine, 50+ Housing Magazine. Find out the latest research and other valuable information and learn from experts at Building for Boomers & Beyond: Seniors Housing Symposium, the Council’s annual conference. Gain recognition by participating in the Best of Seniors Housing Awards program, which honors design and marketing excellence for the mature market.

For more information or to join, please visit www.nahb.org/seniors.

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Enter the Mexican Housing Market
Attend the 3^rd International Housing Conference of the Americas and gain critical initial contacts with professionals in Mexico’s burgeoning residential construction industry. 

The conference will be November 3-5 in Mexico City at the Four Seasons hotel. It features six educational sessions, a property tour of higher-end housing, exhibits, and multiple networking opportunities with industry leaders and government officials.

As an added bonus, the first 100 registrants to the 3^rd International Housing Conference of the Americas will receive a complimentary registration to the 2006 International Builders’ Show in Orlando, FL.

Select this link to learn more about this successful conference series. Questions? Contact NAHB International at 800-368-5242, x8419.

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Member Advantage: Get GM Discount Pricing
GM is offering preferred supplier discount pricing on more than 80 General Motors vehicles, including Chevrolet, Pontiac, Buick, GMC, Oldsmobile, Cadillac, Saturn, HUMMER (except H1), and Saab passenger cars, light duty trucks, vans, and SUVs, as part of NAHB’s Member Advantage discount program.

Through the program:

• NAHB members get Preferred Supplier Pricing on all eight GM nameplates.
• NAHB members can realize the benefits of other GM offers in addition to the supplier price.
• NAHB members will receive their authorization codes and program details via direct mail from GM.

For complete details, go to www.gmfleet.com/nahb. The GM Preferred Supplier Pricing program runs through Jan. 3, 2006.

Other Member Advantage Discounts

For the most up-to-date details on the Member Advantage discount program and all of the participating companies, go to http://memberadvantage.nahb.org/. Or visit http://www.nahb.org/ to explore the full range of benefits associated with membership in your local, state, and national home builders associations.

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