There’s no way Sivage Homes can compete on size against D.R. Horton’s market domination in San Antonio, says Jamie Pirrello, the company’s CFO and San Antonio division president.
Yet in the shadow of the Horton giant, the private production builder is carving out its own market of buyers by offering what Horton can’t: a level of home customization in entry-level homes.
“In flat-out numbers, they kick our butt,” says Pirrello, referring to big public builder Horton. “There are certain buyers who want to buy a spec home for some reason. For that buyer, Horton is going to win. But we win the buyer who wants the features we offer, and they don’t.”
Last year Sivage closed 222 homes in San Antonio, an improvement over 2007. In 2009, the company is expecting to deliver 285. “And that’s in a market that has continued to shrink,” Pirrello says. “It’s hard work, though. I feel like it’s hand-to-hand combat every day.”
A major weapon in Sivage’s arsenal for growing in a contracting market is its selection of floor plans, which offer various bump-outs and other pre-planned expansion modules. This allows buyers to add a small amount of square footage (approximately 100 square feet) here or there fit their needs, which is a relatively rare option in the $90,000-to-$160,000 price range where Sivage operates in its six San Antonio communities.
“It allows us to offer something that is better for our customers, even though it’s not that expensive to us because it’s incremental square footage,” Pirrello says. “I think it’s been helpful for us.”
Also, while other builders pluck options out of its homes, Sivage has added features in its “measure up” sales campaign. For instance, 42-inch garden tubs are standard in a Sivage home, and the builder is adding three 4-foot-wide windows to bring more light into the home at a time when other builders are trying to reduce the number of windows in there.
Sivage also gives every buyer a $2,100 allowance to spend on technology from its design center. That can be structured wiring, a big-screen television, surround-sound speakers, even a central vacuum system. The thought is that when the buyer gets into the design center, he will choose to buy more than what is included in the allowance.
Buyers can also purchase appliance packages for their home at the same prices Sivage Homes pays, with no markup.
Sivage also tries to offer options that boost the perceived value of their homes to buyers. Paint color is a good example. While most production builders charge more for paint colors beyond basic beige, Sivage allows buyers to choose their paint colors for free, including three accent wall colors of their choice without any extra charge.
"Sometimes you have to add a little bit more cost, but the value is greater than the cost,” Pirrello says.
The strategy has helped generate sales and higher margins at Sivage, according to Pirrello. “I am absolutely confident that we are able to generate premium pricing because our margins are generally better than our public builder counterparts,” he believes.
Sivage continues to brainstorm new ways to distinguish itself from its competition. Most recently, it added lit and decorated Christmas trees more than 7 feet high in its spec homes and decorated the exteriors professionally with lights. The builder believes that the extra effort highlighted these inventory homes and appealed to buyers on an emotional level, by encouraging them to picture themselves in a new home by the holidays.
Teresa Burney is a senior editor at BUILDER and BIG BUILDER magazines.
Learn more about markets featured in this article: San Antonio, TX.