Infinity Homes Collection in Greenwood Village, Colo., has a very clear idea of what it wants to be. A semi-custom builder that builds 80 to 100 high-end homes a year in the metro Denver market, Infinity wants to build "the coolest stuff in the universe," general manager David Steinke says.
To get people's attention in a market crowded with national builders, Infinity's business strategy includes building a Parade of Homes house every year--and winning the event's top awards.
So far, it's worked. This fall, its Avanzare (Italian for "the next step, to move forward") model took the judges' Overall Choice Award in the 2003 Parade of Homes for the HBA of Metro Denver. It also took first place for best interior design, landscaping, and specialty area-other floor, as well as the award for most innovative.
"The Parade is the ultimate model home experience," Steinke says. "People pay to see them. There's an entertainment value to it. You have to put your money where your mouth is. You get judged by an awful lot of people. You find out how much of your business is ego and how much is on track."
The attraction of doing a show home is understandable: The events generally draw thousands of consumers over several weeks. But is it worth the time, money, and effort to build what essentially amounts to a very high-priced spec house?
Big returns potential
Peter G. Miller, the author of six real estate books and the creator of America Online's Real Estate Center, says consumers find show homes appealing because they can look at the houses with minimal sales pressure. For builders, it's a prime opportunity to showcase their skills and creativity to a much larger audience than they would normally be able to access.
"What sells homes first of all is the realization that the home exists," Miller says. "Design, features, and pricing don't count unless the public is aware the property is available. When you have a way to parade your home, that's a good thing. Home builders aren't selling the kind of product they can drag around on a truck."
Builders, developers, and real estate sales and marketing experts with show home experience say the events deliver what they promise--massive amounts of promotion, publicity, and traffic, and an increase in sales that can linger for months or even years.
"The exposure is so incredible," says Russell Burton, vice president for Denver-based Miller Burton Homes and chairman for the 2003 Parade of Homes for the HBA of Metro Denver. "We got 120,000 people last year, and we're expecting 150,000 this year. I don't know how you can quantify that. In our case, we've generated three or four sales directly from our home. Plus, you gain exposure in the industry. Denver is an area where we have a lot of builder communities, and if you're not on the builder list you don't build there. The Parade gets you in front of those developers. Rather than us having to go out and find land, we have people calling us asking if we want to buy."
One of the reasons Infinity wanted to be in this year's Denver Parade was to break into the location--the Stapleton redevelopment project. One of Infinity's goals for the year was to find an urban opportunity, and Stapleton was first on its list to pursue.
"It's not as simple as saying, 'Hi, I'd like to build in your neighborhood,'" Steinke says. "The developer is incredibly sophisticated, and all the builders in there are very successful."
Its Parade home allowed Infinity to showcase its ability to create a very unique, exciting product that would fit on a 60-by-100-foot lot. What it came up with was an alley-loaded, Tuscan-style ranch with inner courtyards that bathe the house in natural light and provide a quiet retreat in the midst of the city.
"We brought Tuscan architecture to Denver and to traditional neighborhood design," Steinke says. "To take that and bring it into a market like Stapleton, which is truly an inner-city location, and pull it off with success was the challenge and the opportunity. We wanted to introduce something that lives great but fits in."
The home also provided Infinity with a huge amount of market data in a short period of time.
"We can't compete with large nationals," he says. "We have to be selective and look for opportunities that fit within our brand. We can show 100,000-plus people a product offering and get feedback very quickly. The Parade of Homes allows us to demonstrate our skill and our passion and most importantly to collect data to identify niches we were unsure about or didn't know they existed."
When it designed the Avanzare model (the only ranch plan in the show), Infinity envisioned an empty-nest buyer. The most interest for the home came from couples in their 30s, with and without children, "looking for main-floor living in a very cool house."
Infinity also discovered a strong interest in its work from the gay community, which it hadn't previously pursued. But with dual-income households and an appreciation of strong design, they're strong prospects for Infinity.
"In a short amount of time, we learned an awful lot about markets we hadn't considered before," Steinke says.
Show home participation matters to buyers as well. Being selected to participate in a show home event "shows a certain financial capability," says Ginger Frailey, a former executive with Terrabrook who now has a consulting firm in Atlanta. "It also raises the level of reputation for that builder. There's a certain level of prestige."
Sibet Freides, principal of Atlanta-based Idea Associates, a nationally known real estate marketing firm, agrees. Having worked on several high-profile show homes, she says they can catapult a builder to a whole new level. "It makes people think you're in the top 10 percent to 5 percent of builders if you've been chosen [to participate in a show home event," she says.
Try new things
After several years of building show houses, Rial Jones has concluded that some ideas should stay on the drafting board--like the ceiling he put in one house. It was bold, it was contemporary, it was cutting-edge. At least, that's what he kept telling himself.
"I just kept waiting for it to work, and it never did," says Jones, co-owner of Jones-Clayton Construction in Orlando, Fla., a custom builder that regularly participates in Street of Dreams events. "A couple of days before the show, we ripped the entire thing out, reframed it, and redid it."
Then there was the house with the fountain in the master bathroom. It looked great, but the water sprayed out too high. Plus, it didn't have a recirculating pump.
"We had to keep filling it and cleaning the floor," Jones recalls. "We finally pulled it out and put in a planter. [We try] some crazy ideas. They seem great in your mind, but they don't work in practicality."
Still, Jones loves building show houses, so much so that he's doing two of them this year.
"They're a constantly evolving, creative palette," he says. "Every day, you're out there changing a little bit. In a strange way, they're a lot of fun."
Eyes wide open
Show homes are also a huge amount of work. If there is one consistent comment from builders who have participated in show homes, it's that you can't underestimate the amount of effort that the project will require. Veterans say you should anticipate spending an extra $50,000 to $100,000 in such areas as gee-whiz lighting, top-grade appliances and cabinets, window treatments, landscaping, and finishes. And the expenses don't stop there.
"You're having to constantly replace the annuals, replace carpeting, and repaint," Jones says. "There's the staffing for the whole show and these huge power bills, because the door is open, the AC is running, and all the lights are on."
Then there are the marketing materials and the entry fee for the event.
Participants are quick to point out that suppliers offer many products for the houses at deep discounts, enough to nearly offset the additional costs. Plus, when your niche is $1 million plus homes, it doesn't take too many sales to justify the expense.
As long as builders haven't totally misread their target audience and priced the house out of the market, show home veterans say the houses sell. In a typical Street of Dreams, half the homes are sold before or during the event, says Street of Dreams CEO Bryan Ashbaugh. The rest usually sell within six months after the show. Anything longer than that is rare.
"They've had tremendous exposure," he says. "They often receive upgrades and discounts from suppliers, so the homes are pretty good values. My biggest soapbox is telling builders, 'Don't overbuild; sell to the market.'"
But the investment goes far beyond the dollars. The house is on a tight schedule, with a drop-dead completion date. A buyer might be willing to push a closing off a few weeks, but a show home event start date is set in concrete. Street of Dreams builders who don't finish on time (it's rare, but it has happened, Ashbaugh says) face the humiliation of having their house hidden behind a screen--and they have to refund the discounts they received from suppliers.
"You're under the gun," Burton says. "Residential builders are typically your 7-to-5 kind of guys, and you find yourself tiling a bathroom at midnight to get this thing done. It's very much a challenge."
As a result, the veterans tend to recommend taking a year off between doing houses.
"It's a lot of emotional energy," says Dan Mues, president of Touchstone Homes in Denver and a builder in this year's Parade. "You want to put your best foot forward. It does have a little bit of burn-out syndrome, by the time you're done."
Ashbaugh feels the same way about putting on the shows themselves. He prefers to have a year between shows, just to give everyone a chance to recover.
"I liken it to a woman who has just delivered a baby," he says. "If you walk in and say, 'When are you going to have another one?' you'll probably get shot. It is exhausting."
For production builders, too
Rob Bowman, president of Charter Homes in Lancaster, Pa., wouldn't dream of skipping a year. Participation is an integral part of his company's marketing plan, he says.
"We want to be recognized as a company and a builder that's bringing new ideas to the marketplace," he says. "There's no place better to highlight that than a parade of homes or any other event that draws that kind of exposure."
A volume builder with products for first-time, move-up, and empty-nest buyers, Charter Homes is so committed to show homes as a marketing tool that management identifies appropriate lots in its communities and holds them off the market, Bowman says. The ideal spots are on the exterior of the neighborhood where there will be minimal disruption.
Charter places signs on the lawns of adjacent homes, identifying them as private residences, and it has even built temporary parking lots to handle the cars.
While the house will highlight the newest innovations in home building, Charter makes sure it represents the kind of home the company builds every day.
"Everything from the floor plan to the exterior to the landscaping to the interior merchandising should be very consistent with what you want people to think of your company," he says. "That doesn't mean the biggest floor plan and highest-quality finishes."
That is the approach that David Weekley Homes has taken in its first Parade of Homes house built by its Tampa division. Selected to build the 2004 showcase home for the Tampa Bay Builders Association Parade of Homes in Terrabrook's MiraBay development, David Weekley is building the Sand Dollar model, a 3,400-square-foot house that is squarely in the middle of its product line.
Six years in the market, David Weekley Homes decided to submit a proposal for the showcase house to "further our brand in Tampa," says Steve Ebensberger, division president. "We got the J.D. Power Award last year for being No. 1 in customer satisfaction, and we wanted to get our name out there even further."
With strong promotional support from the HBA and Terrabrook, Ebensberger sees the house as a tremendous opportunity to not only connect with home buyers but also to position the company with area real estate agents and developers.
"It's a lot of work, but I think it will be a good opportunity and experience," he says. "If we go full bore, it will be a huge success."
Located on a premium canal-front lot, the house will probably price at about $700,000 in a community that includes houses in the $1 million to $2 million range. Most of David Weekley's homes are in the $500,000s. Ebensberger says the house will be outfitted "above and beyond the normal model" and will feature new products that the builder will include in its homes in MiraBay.
That's exactly the right strategy, Frailey says, and one that show home builders often ignore.
"Don't fall into the trap of saying, 'I'm going to build the biggest and most expensive house,'" she says. "You ought to have a strategy that says, 'Most of the homes in this community sell for under $500,000. I'll have homes available in the community in inventory, have homes in the pipeline at different price points, and also have a house pretty much identical to the one I'm building under way during the show, so I can move someone to that house.'"
2. Build extra time into the design and construction schedule to thoroughly think through your decisions. Details are important!
3. Don't succumb to "basement envy" and try to outdo the other show home builders. Everything about your house should be consistent with your brand and attractive to your target market.
4. Don't build a show house you can't duplicate. You never want to tell a potential customer that you can't duplicate the house he's in love with. The ideal is to have a similar house available or in progress in the neighborhood.
5. Innovation is good; impractical is bad. Someone will live in the house after the show. Outdoor fountains look great, but they're bears to maintain in cold-weather climates.
6. In the design, widen the hallways to facilitate traffic flow. If the size of the house accommodates it, consider installing two staircases.
7. Create memory points--a great kid's room, a luxurious master suite, a 'wow' basement, or an inviting space to entertain--that will stick with visitors after they leave.
8. Don't spend exorbitant amounts to carpet high-traffic areas, such as hallways and stairs. With thousands of people coming through, you're going to have to re-carpet after the show. Consider using tile in hallways as an alternative. Anticipate refinishing hardwood floors after the show, so only put one coat of finish on them.
9. Don't put plastic runners in the house. People tend to trip on them. Don't allow food or strollers in the house.
10. This is a marketing expense, not a spec house. It's your chance to shine. Take advantage of the location to host VIP events.
Learn more about markets featured in this article: Denver, CO.