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Are you realizing the full potential of your PO system?
Using VPOs can help close the loop, add value to your building business
 You have carefully constructed a purchase order system. You’ve trained your back office staff, superintendents, and trade partners on when, where, and under what circumstances purchase orders will be paid. All of your staff, vendors, and trade partners now know who in your company has the authority to release a PO for payment and you are no longer paying invoices, only POs.
The system has helped speed up payments to your vendors and trade partners, which makes them happy, and you’ve even been able to smooth out schedules somewhat. But are you realizing the full potential of your painstakingly crafted PO system?
VPOs as a Management Tool
If you are doing nothing more with a variance purchase order (VPO) than adding on dollars to your original purchase order, you are missing an important management link that could help you lower your costs and increase your profits, says Mike Benshoof of SMA Consulting, a member of NAHB's Single Family Production Builders Committee. POs are not merely a different way to pay bills, he says, but “the most important thing the business uses to communicate internally and externally” and a way to monitor your quality- and cost-control systems.
“The biggest portion of your business is your direct costs so you can leverage more dollars there,” he says. “Why do we use [POs]? Better cost control. We’re sending the information out [to vendors and trades] and setting expectations for our costs.” When a PO doesn’t account for every nickel spent at a jobsite, builders need to take a hard look at why.
Click here to read about how to avoid a "costly broken loop" in your purchasing system.
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Using Preferred Lender Strategies to Sell Homes
 As interest rates rise and housing sales slow, builders throughout the country are looking for ways to make their homes more attractive and affordable.
“Builders and our builder joint venture partners have been contacting us about how we can partner with them to sell more homes as they get ready for the Fall market,” says Paul Fazzini, vice president of American Home Bank in Lancaster, Pa. One proven option is to partner with a preferred lender and provide affordability tools to buyers, he says. Many of these tools work very well in the current economic environment and result in consumers being able to qualify and afford the home of their dreams now, instead of waiting in hopes that interest rates will drop or that their incomes will increase.
Howard Hirsch, of Keystone Custom Homes, a three-time Best Builder award winner, worked with his preferred lender and joint venture partner, American Home Bank, to design financing incentives that reduced the monthly payment from $1,643, using conventional financing, to $1,124, and sold 18 homes in one weekend. “Qualifying for homes was made easier, and several buyers found they could buy a new home for less than the payment on their old home!” Hirsch said. With half of the customers providing construction-to-permanent financing, Keystone also reduced the risk of walkaways.
Another builder designed a program to sell spec homes in his inventory, using an incentive that reduced the mortgage payment from $2,100 to $1,700. Not only were a number of specs successfully sold, traffic generated by the special financing offer resulted in several additional sales.
Still another builder used a lender’s program to offer 95% financing with no mortgage insurance payments to a borrower without the hassle of a first and second piggyback mortgage. And another used a construction-to-permanent loan tool that required no payments during the construction period and pays the builder directly within 48 hours of a draw request.
Among financing options are buydowns, forwards, and construction-to-permanent financing. “These types of preferred lending arrangements are not usually found in a typical commercial banking environment,” Fazzini says, so builders should consult with their preferred lenders to find out what incentives will give them the “most bang for the buck.”
Read more about these three options for selling homes in a changing market.
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Come to Las Vegas; Fete NAHB's Custom Home Builder of the Year
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Facsimile of NAHB Custom Home Builder of the Year Award | Suspense is building among custom home builders about who will be named NAHB's first Custom Home Builder of the Year during the Custom Builder Symposium next month at the magnificent Hyatt Regency Lake Las Vegas Resort.
"This award is the first of its kind," said Mary Schroeder, who chairs the NAHB's Custom Builder Symposium Subcommittee. "What makes it so special is that it is an award presented to an outstanding custom home builder by his or her peers."
The honoree will be recognized during an elegant formal dinner sponsored by Dryvit Systems Inc., which also sponsors the award. The celebration will showcase the winner's achievements in constructing one-of-a-kind homes as well as his or her community leadership.
For more information on the NAHB Custom Builder Symposium, the NAHB Custom Home Builder of the Year Award, and this special dinner celebration, go online to www.nahb.org/custom.
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New NAHB Toolkit Will Help You Get Back to Basics
 The housing market is changing. And while nobody knows exactly what the future holds, we do know that good basic business practices apply to any market. We also know that innovative approaches can spark success under almost any circumstances. To help members in today’s changing business environment, NAHB has compiled the best of the basics, the tried and true, and the truly new. To access this new content at www.nahb.org, you must log in as an NAHB member.
Check out these resources on Measuring & Benchmarking Financial/Business Performance, Improving Business Profitability, Diversifying Your Business, and all other resources in NAHB's new Back to Basics Toolkit for a Changing Environment.
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Casa Y Comunidad: Hispanics and Homeownership to be Discussed
 NAHB Chief Economist David Seiders and Henry G. Cisneros, former secretary of the U.S. Department of Housing and Urban Development, will discuss the state of Latino homeownership and Hispanic influence on the housing market during a teleconference at 2:00 p.m. EDT tomorrow, Thursday, Sept. 21.
David Seiders will address the impact of Latinos on the overall housing market. Henry Cisneros will discuss the needs of the Hispanic market and how it is driving change in home and community design, as described in his new book, "Casa y Comunidad: Latino Home and Neighborhood Design."
The recent growth in the number of Hispanic home buyers, the nation’s fastest-growing minority, has shifted the mix of new housing production to reflect the requirements and preferences of Latino households. Hispanics make up 15 percent of the total U.S. population and are projected to account for 18 percent of the nation’s population by the year 2020.
To participate, dial toll-free 1-800-860-2442 and ask for the “NAHB Latino Homeownership” call. For your convenience, presentations and reference materials will be available for download at www.nahb.org/latinohomes, 10 minutes before the teleconference begins on Thursday.
For more information on logistics, please contact Liz Warin, at 800-368-5242, x8495, or ewarin@nahb.com.
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Builder Beware: Understand the Nuances of RESPA Rules
The Real Estate Settlement Procedures Act (RESPA) is a federal statute that governs the sale, financing and settlement of real estate. Home builders and their affiliates, therefore, are subject to RESPA’s restrictions and prohibitions. Generally, Section 8 of RESPA prohibits the giving or receiving of anything of value in exchange for the referral of settlement service business.
RESPA prohibits home builders from receiving rewards or prizes that can be tied to the referral of business. For example, a home builder is not permitted to receive tickets or luxury suites for sporting events from a mortgage lender and cannot play a round of golf when a title agency pays for the builder’s green fees. Moreover, a home builder is prohibited from participating in a “get-away” weekend for builders when the cost of the trip is covered by a homeowners’ insurance company. HUD has specifically targeted these types of gifts and prizes in the past, and home builders should ensure that they are not accepting “things of value” from other settlement service providers who are seeking the builder’s referrals.
Read more here about what is and is not allowed under RESPA.
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Builders Step Up Push for Critical Storm Water Bill
With time running short before Congress adjourns for the year, builders are in the midst of a grassroots push to advance critical storm water legislation and are urging House members to support H.R. 5558, the Stormwater Enforcement and Permitting Act (SEPA).
NAHB President David Pressly said that the legislation is needed “to reduce the regulatory burden placed on home builders, simplify compliance and provide a more consistent and sensible regulatory approach that provides better protection for America’s rivers and streams.”
Introduced on June 8 by Rep. John Duncan (R-Tenn.) and 16 bipartisan cosponsors, the legislation would update and improve the Environmental Protection Agency’s (EPA) duplicative and burdensome storm water permit and enforcement policies, which can add anywhere from $1,400 to $4,500 to the cost of a residential lot.
The bill, which now has 52 cosponsors, takes into account the differences between residential and other construction activities.
With lawmakers planning to recess in early October to campaign for the November elections, Pressly added that it is urgent to build momentum for H.R. 5558 now because it is unclear whether a new Congress will be as receptive to supporting the measure.
Contact Your Members of Congress
Voters troubled over how current storm water regulations unduly increase housing costs while doing little to improve water quality are encouraged to contact their members of Congress today and ask them to support H.R. 5558 by adding their name as a cosponsor to the bill.
To voice your opinion to federal lawmakers, send a letter asking them to support H.R. 5558 by logging on to www.capitolconnect.com/nahb. To view a one-page summary of the bill, click here. To read the legislation, click here and enter H.R. 5558 in the box at the center of the page.
For more information, e-mail Jim Tobin at NAHB, or call him at 800-368-5242 x8258.
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Business Management & IT Committee Launches Strategic Plan
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Business Management & Information Technology Committee | Last week during NAHB’s Fall Board of Directors Meeting in Salt Lake City, the Business Management & Information Technology Committee completed two days of intense strategic planning. The resulting plan is dynamic, aggressive, and aims to make the committee a leader in providing useful products and services to NAHB members.
The new Business Management & IT Committee mission statement is:
“To serve as the leading resource to the building industry in the areas of management, finance, information technology, operations, and human resources.”
See the upcoming October 2006 regular issue of Business of Building e/Source for more on NAHB’s Business Management & Information Technology Committee’s Strategic Plan.
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Storm Water Permitting: A Guide for Builders and Developers
 Prepared to help builders comply with U.S. Environmental Protection Agency regulations, Storm Water Permitting is intended to provide a starting point for builders and developers to use in locating and understanding storm water permitting requirements.
In addition to information on federal and state storm water permitting programs, the guide contains information on more than 50 of the most commonly used Best Management Practices, sample Storm Water Pollution Prevention Plans, and tips on compliance, including how to handle visits from inspectors.
It also features a CD ROM of U.S. EPA and state general permits, Notices of Intent and many other forms and guidance for 44 states and the District of Columbia. To order the softcover book and companion CD, go online to www.builderbooks.com.
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Navigate the Challenges of Land Development
 In an environment of increasing local governmental regulations, constraints on land use, and a growing concern over smart growth, land development has become an even greater challenge for builders.
To better prepare for this challenge, BuilderBooks.com has released Land Development, 10th Edition, a step-by-step guide to help builders learn how to successfully navigate the complicated land development process.
The recently released edition contains new sections examining the latest environmental regulations affecting land development, emerging demographics for targeted marketing and new innovations in housing types. The book emphasizes flexibility in order to accommodate the ever-changing trends in demographics, plan designs, technology and regulations.
Land Development is written by Daisy Linda Kone, a Houston-based architect, planner and manager in the design-build residential construction industry who specializes in the environmental impact of construction and residential construction development.
A key resource for developers, builders and students, Land Development helps readers better understand the interrelated factors that contribute to a successful land development project, including:
- Market study and analysis
- Financing
- Site selection and analysis
- Environment regulations
- Developing a master plan concept
- Site engineering and storm water management
- Neighborhood and street design
To purchase a copy of Land Development, 10th Edition, visit http://www.builderbooks.com or call 800-223-2665.
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Hurricane-Ravaged Gulf Coast Businesses Must File by Oct. 16
Oct. 16, 2006 is the deadline for businesses affected by last year's hurricanes to file and pay money due on or after Aug. 29, 2005, but before Oct. 16, 2006. The failure-to-deposit penalty will be waived for affected taxpayers who were or are unable to make their deposits during this time period.
Business taxpayers in seven Louisiana parishes and three Mississippi counties will automatically qualify for this postponement. In addition, taxpayers in other locations—covering 11 Alabama counties, 31 Louisiana parishes and 48 Mississippi counties—also can obtain the filing and payment postponements by self-identifying themselves to the IRS. Taxpayers do not need to self-identify if they have previously done so.
To ensure that they receive the relief to which they are entitled, affected taxpayers whose business, home, or tax professional were in the disaster areas should mark “Hurricane Katrina” in red ink on the top of their returns. In addition, affected taxpayers may identify themselves as eligible for relief by calling the IRS Disaster Hotline at 866-562-5277.
The filing and payment postponement applies to individual, corporation, partnership, estate, trust, S Corporation, generation-skipping, employment and certain excise tax returns with original or extended due dates that fall on or after Aug. 29, 2005, but before Oct. 16, 2006.
Although IRS can postpone the time to file the 2004 and 2005 returns until Oct. 16, 2006, the law does not authorize the IRS to grant additional interest and failure to pay penalty relief for the 2004 tax year. Taxpayers can request that the IRS grant relief from the penalty if the failure to pay is due to reasonable cause and not due to willful neglect.
For more information, go online to Help for Hurricane Victims: Information on Tax Relief, Charitable Issues.
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Take the Solveras Challenge: Save Money or Get a $50 Reward
 NAHB members will average $1,870.03 profit on 2006 credit card sales. How much will your business save on credit card processing costs? Find out with the NAHB Credit Card Processing Program’s free savings analysis.
This powerful tool will show you exactly what you are paying now and how much additional profit the NAHB-negotiated MasterCard and Visa processing rates through Solveras could put back in your pocket every month.
Request your free Solveras savings analysis before Saturday, Sept. 30. If it doesn’t show any savings on your overall monthly credit card processing costs, Solveras will send you $50. Some restrictions apply. Call 800-613-0148 for complete details.
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