There's no way Sivage Homes can come close to competing with D.R. Horton's market domination in San Antonio, said Jamie Pirrello, the company's CFO and San Antonio division president. (Editor's Note: Pirrello also is a frequent contributor to Big Builder and Big Builder Online.)
Yet in the shadow of the Horton giant, the little builder is carving out its own market of buyers by offering what Horton can't, a level of home customization in its entry-level product.
"In flat-out numbers, they kick our butt," said Pirrello regarding 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 the company 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," said Pirrello. "It's hard work though. I feel like it's hand-to-hand combat every day."
A major weapon in Sivage's arsenal to help it grow in a contracting market is its floor plans, which offer various bump-outs and other pre-planned expansion modules so buyers can add a hundred square feet here and there to fit their needs, something relatively rare 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," said Pirrello. "I think it's been helpful for us."
Also, while other builders pluck options out of its homes, Sivage has added things in as part of its "measure up" sales campaign. For instance, 42-inch garden tubs are standard in its homes. It's adding three four-foot-wide windows to bring in more light while other builders are trying to eliminate windows.
Every buyer is given a $2,100 allowance to spend on technology chosen from the 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.
Packages of appliances can be bought for the home at the price Sivage pays, no mark-up added, giving buyers more perceived value that doesn't cost Sivage any extra.
Pirrello said the company works hard to come up with options that buyers value more than what it costs the builder to include. Paint color is a good example. While most production builders charge more for paint colors beyond Realtor 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 said.
The strategy has helped generate sales and higher margins, said 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 said, adding that, unlike public builders, private builders must be profitable.
"We are working really hard to stay ahead of our competition, and the good news is that we are enjoying a level of success," he said.
Despite the current success, Sivage continues to brainstorm new ways to distinguish the builder from the competition. Most recently, it added 7.5-foot-high lit and decorated Christmas trees in its spec homes and had the exterior professionally decorated with lights as well. The efforts helped the homes stand out and maybe even helped to pull a few emotional heartstrings, allowing buyers to picture themselves in the new homes by the holidays.
"I felt a little guilty putting those up in late October, early November," Pirrello said, adding that Wal-Mart was already running holiday commercials.