MODEL HOMES—AND THE furnishings that bring them to life—are critical to the success of a community. But at some point, builders are tasked with disposing of what is sometimes a massive amount of furniture and accessories.
Builders do their best to recycle most of those furnishings at least once, deploying them in new models opening in other communities. Since the purchase of the furnishings is depreciated, builders aren't quite as concerned with getting the last ounce of use out of their investment as they are in freeing up warehouse space.
Most builders appear to take one of about six routes to dispose of model home furniture. They sell the model furnished; give the furniture to charity; send it to consignment shops; sell it at rock-bottom prices to their employees as a company perk; sell it to their home buyers as a courtesy; or hold a public sale or auction. When a public sale or auction is the chosen route, employees generally get first dibs.
Non-company employees who volunteered to work the sale could spend up to $500 for every three-hour block of time they volunteered at the event. Trade partners were invited to come shop an hour before the doors open for the public sale. John Laing and the charity split the proceeds.
“This mass thing worked pretty well,” Staky says. “Half the proceeds went to the charity, and we got rid of a ton of furniture.”
Years ago, the Corky McMillin Co. held model home furnishing sales for its employees and real estate agents. While the events were successful, preparation for the sales required several days to inventory and price each item. Then, volunteers would need to be recruited to work the sales.
The overall cost of running the events, especially in terms of manpower, however, was the main reason the builder eventually eliminated them. Plus, to sell the merchandise in one day, it had to be heavily discounted, even though it was practically brand new. And then there were complaints that, “some people would arrive early and nab all the good stuff, and of course, there was also the occasional discord created when more than one person wanted the same item,” Perlatti says.
Packaged Deal McMillin's current system offers model home buyers a package deal at a price of 20 percent to 30 percent of what the items cost new. It recoups about the same amount of money that the builder used to get from labor-intensive employee sales, “and there is no brain damage in the process,” Perlatti says. In the rare instances when the buyer doesn't want the furniture/accessory package, McMillin tries to keep the package intact to use in another model.
“This works well with today's hot market conditions,” Perlatti says. “The homes are selling so quickly, the furnishings and color schemes do not go out of style before they can be put to good use a second time.”
Practices almost always vary by region at Lennar/U.S. Home Corp., says Erin Hunsinger, design manager of the builder's mountain operations. One division uses a local consignment shop, which picks up all the furnishings and gives Lennar 50 percent of the sale price. Another will hold items in storage “until they feel like having an auction,” and another holds cash-and-carry auctions at the models.
“It is the most fun and brings in the best return, yet it still gives everyone a great deal considering the quality of furnishings that we use and what the original retail value was,” says Hunsinger.
Professional Auctions Houston-based David Weekley Homes is one of 25 to 30 national builders to use Builders Auction Co., a third-party auction house, to handle its sales.
“We do these auctions every now and then,” says company spokesperson Cindy Haynes. “Basically, we do it if we don't have an immediate use for the furniture and our current model is closing out. Sometimes it's better to sell it rather than store it. It's too hard on the furniture.”
Individuals pay a $20 fee to get access to a Web site for advance notice of upcoming sales, says Bruce Sutter, CEO and founder of Builders Auction Co. (www.buildersauctioncompany.com). The fee covers the cost of shooting digital photos of the items up for sale, he says.
Before a sale, Sutter's staff goes on site, tags all the items, and photographs several pieces for the Web site. The auction itself takes anywhere from an hour to 90 minutes per house.
“We provide a continuity of standards throughout the country that [the builder] couldn't provide otherwise,” says Sutter. “It's much better than putting the burden on a marketing director whose time is much better spent doing other things.”