SHOW TRANSCRIPT

 

 

[00:00:03] Speaker 1 So here we are. Welcome to another episode of the Go Watch on show today we have Brian McGranaghan, Pat Kearns and Michael Schnitzer with us, and we are going to talk today about the Stanley Martin Custom Homes process for starting construction. You know, once the permit is released and we’re going to talk about change orders. So Pat, do you want to, you know, give us, give us. Well, let me let me just give us a quick run through of how you get kind of to that point. So when you come into the Stanley Martin program, the whole process starts with a contingent contract. And while you’re in your contingency period, we help you understand what it’s going to cost to build a home and what’s involved in site work. You remove your contingency and then pat what happens quickly to get to the point where

 

[00:00:53] Speaker 2 you get the probably I’ll take this and then watch it over the pass. Sure.

 

[00:00:58] Speaker 3 Talk about the buildup and you can talk a lot about the steps that take place. And I’m going to

 

[00:01:03] Speaker 2 just give high levels. Yes, so. So we’ve got to prepare the building plan in the grading plan, right? Sometimes were delayed while customers consider changes and things of that nature, but building plan and grading plan, then we have to go through the selection process. Then we’ve got to send all their selection criteria in the plans to the trades, basically just to coordinate takeoffs and things of that nature, to be in a position to start construction. And so what we tell customers and we give them a timeline and we actually send them timeline updates regularly is that we need all the information complete about 60 days before we start construction so that Pat and his team is in a position to actually build the home with as little errors as possible with the thought process that the more unknown and uncertainty there is before the start of construction that trickles down into construction. So one element of uncertainty could be 10 errors in the construction phase. So I think that’s probably a good a good start.

 

[00:02:20] Speaker 3 Yeah. And there’s a lot of stuff that we’re doing in the background leading up to that point where it gets released to us, right? The the back office and our staff on the production team are reviewing the plans, making sure there’s no, you know, things that are going to impact that selections that they made. Because if they cheat, then your trim or different type, the cabinet layout or things like that, it may impact the overall plan and how everything works. So we’re reviewing the play and going through those things, making edits, making markups, going back to the customer, letting them know if there’s something that’s impacted that they may want to change or adjust just to make sure that we’re presenting them and giving them the house that they’ve imagined. You know, then we’ll sit down with them and do their pre con meeting, which we talked a little bit about previously and different episodes just going over and making sure everybody’s on the same page, right?

 

[00:03:09] Speaker 1 So broken that short for pre-construction construction.

 

[00:03:12] Speaker 3 So we’re we’re introducing ourselves to them. We’re explaining the timeline. We’re talking about the process, trying to answer a lot of those questions that people are typically pretty anxious about because they’ve gone through a long, drawn out process. Not always long and drawn out, but in the in the amount of time that it takes to do all the things that Michael talked about getting through the approval process, getting the grading plan, making their final selections. All these things, it takes time. So there’s a lot of build up and excitement for both them and us, right? We’re looking forward to starting a new project and for us a lot of times it’s as soon as that permit comes out there. Like the customers, they want to get started, they want the process to start, they want to see something actually happen on the site. But there’s a lot that leads up to us being able to do the stuff on the site, which is what we’re going to talk about today. And so the permits get released to us. We have to make sure all the the parts and pieces are in place, like Mike talked about that we’ve reviewed and signed off in the plan that everybody’s on board with it. The back office and us have kind of had our meeting to go over the plan to make sure that the information that was passed to the back office, the little small details get conveyed to us so that we know what to expect and what the customer is expecting. And then we have to set up with the county to do something similar to what we do with the customer, which is the second meeting with the county, right? So Brian’s really familiar with this. He’s worked in a lot of our different jurisdictions, which is why he’s here with us today to kind of go over that and talk about some of the steps in the process that we have to go through just to be able to begin construction of the home.

 

[00:04:54] Speaker 2 And maybe one thing and then we’ll let Brian kind of, you know, give us some of the details is. We anticipate different things like permits, so we will have the pre-construction meeting X number of weeks in advance, right? We want to get all the permits and then say the customer, Hey, let’s have a pre-construction meeting. So sometimes in terms of people being anxious to get started. A lot of it is because we’re taking them up. Right, right. We’re having this pre-construction meeting. What do you mean you haven’t started? Well, we’re having it early. So we’re in a position to succeed when we get the permits right now. And so, yeah, I’ll turn it over to a

 

[00:05:30] Speaker 4 construction meeting is also driven drives our turnover meeting, which is where we’re meeting with the back office and getting the download of the house and all the ins and outs.

 

[00:05:41] Speaker 1 Right. So the turnover meeting is when it’s just the in-house, yeah, in-house, right? So that’s when

 

[00:05:47] Speaker 2 that’s prior to the pregunta, the preconditions,

 

[00:05:50] Speaker 1 actually. And that’s when really they’re meeting the team is meeting with you, the project manager, and they’re explaining to you what needs to be built before you’re meeting with the customer so you can get your. That’s what a turnover meeting is.

 

[00:06:01] Speaker 4 Yeah, and we generally do that about the week before so that once we do the pre-construction with the customer, it’s fresh on our minds. Right. You kind of know everything about the house. The site cost in time frames, moving moving forward.

 

[00:06:16] Speaker 2 But to Pat’s point with regard to we get the permit. I mean, it may take a day or two to get it picked up because we got to pay the fees and blah blah blah. And then what happens, Brian? I mean, maybe just take the example of the house that we started out on on Route 50.

 

[00:06:35] Speaker 4 So we’re something what ends up happening once we get grading approval. You know, the the depending on the jurisdiction, like some jurisdictions, we have to reach out to them, other jurisdictions, they reach out to us and we do a pre-construction with the site inspector. And what they’re after is, is they’re going to go over the erosion measures for the job. They usually will allow you to go in clear enough to put the silt fence in and put the construction driveway in and then they want to return back out. Make sure that that stuff’s in so that we’re not contaminating any of the waterways, roads, right? And then once they approve that, that’s what drives in the building permit, at least in Loudoun County and Fairfax and some of the other jurisdictions. You just have to usually have your building permit and then you just have to have the pre-construction and the site. Inspectors sign off before we’re allowed to do the first step of clearing. I mean, if it’s clear a lot of it just be excavation, but next time you have something you have to clear and you’re not allowed to do any site work until that pre-construction meeting is within.

 

[00:07:40] Speaker 2 And so really, it’s two phases. You have to have a pre-construction meeting just to review the plans with the inspector in case they want to make any changes to the plans because they have the right to usurp what’s on the plan, right? Then you have to get the work done. Then you have to wait for the inspector to come back out to certify the work is done the way the plans call for, plus whatever changes he may want to make. And then you can begin starting. I’ll call it land developer and

 

[00:08:06] Speaker 4 they may approve it. And it may be another four days, though, before you actually get the release of the right.

 

[00:08:12] Speaker 3 The Yes building permit? Yeah. So the big thing to keep in mind is there’s a couple of things going on here, right? One is we’re meeting with the county site inspector to review the approved erosion and sediment control plans. They may adapt those or make changes to them when we’re out there because they see something in the field that they want us to to to protect even more than what’s already there. You know, you also have in a lot of cases, we’re going into areas where we’re trying to save or preserve trees. So you’ll have an arborist that’s involved with it as well that walks to site with you, that looks at what tree protection measures we’re putting in. What trees we’ve agreed to take down. How we’re going to take them down. Are we going into a protected area? Do we have to take extra measures to protect the trees that we’re trying to save? You know, root pruning. All those things are included in that inspection that we have. Once we get the permit released to us or in some cases, we have to go in and do these measures to get the permit released. Mm-Hmm. You know, we have to go through and review that and go over with it. Then we have to. On top of that, even though we’ve met, we then have to get means utility called out because we’re going to be doing digging because we’re going to be putting in fence. We’re going to be, you know, digging up and doing fruiting measures were not allowed to hit utility lines with away from this utility. Come out and mark. You don’t want to do that too early because if you call it in too soon, the markings go away and then you have to recall it back in.

 

[00:09:41] Speaker 2 And then isn’t the ticket invalid after what is it, Brian like week or yeah, yeah. Yeah. So if you call it in, if you try to anticipate too early, you just got to recall it. Yeah, yeah.

 

[00:09:50] Speaker 4 And actually, we have contractors that some of our excavating contractors, especially in the this region, they just have someone in their office call on a weekly basis and it’ll be you’ll have. Finished landscaping saw down and Miss Utility will be out there and will be calling the excavator saying, Hey, call off the dogs, yeah, yeah, they’re spray paint. My brain is so yeah, but that’s just, you know, to cover cover. They’re about to be right, obviously.

 

[00:10:17] Speaker 2 So how many weeks, Brian, maybe how many weeks does it take from the time when average maybe used an example of like infill, right, like inside the Beltway versus outside the Beltway?

 

[00:10:31] Speaker 4 So if you’re you’re inside the Beltway, it’s probably a week to get the inspector to even show up to get out there. And then once you get them to show up, I generally it takes about a week to get your contractors in line, so they’re usually scheduled at least a week out. So if you get your erosion measures in and then you know the construction entrance, you’re probably looking at like a total of three weeks or something before you can.

 

[00:10:58] Speaker 2 So three weeks would be reasonable in a normal environment. If it gets busier, the county slows down. Sometimes the trades need more lead time or they just have more work and we can use our weight to kind of move that around. So it could go from three to four or five, depending on, especially depending on the county.

 

[00:11:20] Speaker 1 So Clark clarify the timeline for me, Bryan. So three weeks from when?

 

[00:11:25] Speaker 4 So from so.

 

[00:11:27] Speaker 3 So in a jurisdiction where we have the where with the building permit is released to us and we’re going to schedule it to be able to start construction they typically have, they’re allowed seven to 10 working days to respond to our request. Right. So they can take the full seven to 10 days, contact us and schedule the appointment. That doesn’t mean the appointments happening within seven to 10 days, right? It means they’re scheduling the appointment with us in seven to 10 days. Yeah. Then we have the meeting with them. Mm hmm. Maybe, probably two to three days after that, typically depending on how busy they are. So you’re looking at at least two weeks at that point from the time we got the permit released to us.

 

[00:12:06] Speaker 1 Gotcha. So and that’s what I was trying to just kind of tie together here. So. So and really, when you’re talking about pre-construction meetings, there’s two different there’s a pre-construction meeting with the customer. Correct. Right? And that usually happens in anticipation of the permit being released, then the permits released. But that’s a misnomer because it’s not really released.

 

[00:12:27] Speaker 2 Well, sometimes it is, and sometimes it is. In some jurisdictions they release only the land development. I’ll just call it this okay and development permit, and you have to get all these things done before the release, the building permit. Other jurisdictions, they release everything. But regardless of how you look at it, there are multiple steps before we’re in a position to start to start construction. And it could be three weeks to four weeks. And before we even demo

 

[00:12:56] Speaker 3 we have a jurisdiction we work in where you have to post, you have to go pick up a sign once the permits released, post it in the yard for everybody to be able to see that it’s been posted. And the county has up to five days to come out and acknowledge that the sign has been posted before. They’ll allow us to schedule the African meeting.

 

[00:13:14] Speaker 2 That’s in Montgomery County.

 

[00:13:17] Speaker 3 So, yeah, I mean, it’s just and it’s just some of the things you said.

 

[00:13:20] Speaker 4 It’s kind of all over the board because then you look at Prince William County, Prince William County releases everything. There is no pre-construction meeting and you just start. So they I

 

[00:13:31] Speaker 2 it’s the Wild West.

 

[00:13:31] Speaker 4 Their theory is, is that if the building inspector comes out for the first inspection and you have no erosion controls in place, he’s just going to automatically fail you you until you get them put in place, which at that stage you’re already two months into the build, you know?

 

[00:13:48] Speaker 1 Mm hmm. So, yeah, and I mean, this is an interesting conversation for me because from a sales perspective, I’m not dialed in to all these nuances that are going on in all these different jurisdictions and neither is anybody on my team. And, you know, so we give very high level answers to the public and then we always tell them, you know, when you get further into the process, we’re going to get you more detailed answers. But it’s really interesting how different it is from jurisdiction to jurisdiction.

 

[00:14:17] Speaker 3 Yeah. Yeah, it’s there’s there’s a lot of different little things that nuances that are out there and that’s why we have the team that we have is because their experience with them, they know how to navigate through them. They they’ve worked in these different areas and are familiar with not just the process, but a lot of the people and inspectors that are working in those areas. So a lot of times that helps us facilitate the process and hopefully it isn’t as drawn out. You know, our obviously our goal is we want to get the process started and start building the home right away, too, because that that leads to successes for us as well. Right. So, you know, and and I think the thing for us is we get it. We understand, Hey, look, the customers of our clients have been through a lot leading up to that point. There’s a lot of anticipation and a. Excitement on getting it started, and they’re lathered up and we want to see something happen. And it’s just as frustrating for us too, because we’d love to get in there and just knock everything down and start building a house, right? But it’s the nature of the world that we work in, and we try to navigate them through this process and make them understand that, hey, there there are some steps that are going to have to occur before we can actually put a shovel in the ground, right? And you can start to see the progress of your new home. And that’s that’s kind of, you know what we wanted to kind of discuss and go over here is is to help help guide you through that process, right?

 

[00:15:44] Speaker 2 But isn’t there aren’t there times, Brian, especially on the infill projects? Not when we’re building on 10 acres where there is a lot of coordination with the neighborhood or at least the adjacent neighbors, because the trees, because I

 

[00:15:59] Speaker 4 don’t know, share joint fencing, you know, we’re taking joint driveways. Yeah, yeah. Yeah. And there’s there’s no

 

[00:16:07] Speaker 3 parking in the street.

 

[00:16:09] Speaker 4 The cutting trees down on the property line, you know, you know, because there’s a lot of shared trees and we’ll get letters from the neighbors saying that it’s OK, but obviously going to notify them and make sure that they’re not right. Covenant partners, when you say that,

 

[00:16:20] Speaker 2 we’ve already gotten permission if we’re taking a shared tree down, so it’s right. In fact, the county wouldn’t release a permit if it showed that we were taking a tree down on the property line. Right. But you still don’t want the neighbor who already approved and signed the letter right to come back. Go to work and come home that next day. And I was like, Where’s the tree? So we want to coordinate with the neighbors to make sure that we have, you know, just a good relationship.

 

[00:16:48] Speaker 1 Yeah. So go ahead, Brian.

 

[00:16:50] Speaker 4 And we get with those in Phil’s a lot of concerns from the neighbors, especially when you have a property that you know, down slopes to somebody else’s backyard where they have it fully landscaped patio and they’re worried about the runoff because of for good reason. So, you know, a lot of times once we start, you know, we start on that. They’re they’re coming over and they’re talking because they want to share their concerns.

 

[00:17:13] Speaker 2 Sure. Yeah. And sometimes does that lead to getting with our customer and taking potentially extraordinary measures that aren’t even on the plan just to appease the neighbors in a good way? Right? I mean,

 

[00:17:26] Speaker 4 we do get silt fence or, you know, super seal fence instead of standard seal fence and then putting civilians in front of that berms.

 

[00:17:32] Speaker 2 I mean, high level when we go to build, it’s also a marketing event, right? So if we’re not doing if we’re not being good neighbors to the neighborhood, that doesn’t help us with future sales. Sure.

 

[00:17:44] Speaker 3 So I think the other important thing to to that we try to keep in mind too here is that the customers moving into that home and has to live with those neighbors long term. Right? You know what I mean for us? We’re building there. We want to keep a good marketing name. We want to hopefully, you know, encourage other people in the neighborhood that we’re considering doing the same thing, that we’re the right builder to go with. But more importantly, once we’re done and we turn the keys over to that customer, they have to cohabit that space with whoever was next door to them or behind them or adjacent to them or across the street from them while they’re living in that house. Mm-Hmm. And you know, we’re trying to keep in mind that, you know, even though we’re the builders that customers, the one that has to move into that home and live with those people. And, you know, they want to have a good neighborly relationship and maybe the dredge of the neighborhood because

 

[00:18:36] Speaker 2 we have pets. Here’s a here’s a key. It’s a good point. And here’s a key metric. We have some neighborhoods, especially in the infill, because now you know, when you’re out in Prince William or Loudon or in Paul’s ville, Meryl, I mean, depending on where you are, you can’t even see your neighbors, right? I mean, you just don’t even know that they’re there. But we have certain neighborhoods and certain streets where over the past 10 or 15 years, we’re the only builder that has built a new house on that entire street. I know it’s pretty cool. Five six seven eight nine 10 customers. So we must be doing something right for the entire neighborhood to want to continue to use us right if we do bad work, right? It’s it’s not good.

 

[00:19:19] Speaker 1 Yes, absolutely. And I and I yeah, you guys do a really great job with with managing the neighbors during the build. And I know that for a fact because I rarely rarely ever get a phone call from anyone. And you know, the sales number is on the sign in front of the house. So if anybody’s upset about anything, we get the call.

 

[00:19:38] Speaker 2 Well, are there are RPMs, so we send out letters to the neighbors or teams will give neighbors their business cards, right? So if something is up, you know, let us know. Let us know. We may be on site, but we may be managing, you know, two or three other projects. And so, you know, just get on the horn with us. I mean, there’s there’s been occasions where we’ve. Gone to the store and purchased no part, even though you can park on the street, right, we purchased no parking signs to make sure that there are no construction vehicles, right? Parking.

 

[00:20:12] Speaker 4 No U-turn in driveways. Yeah. You know, certain certain like pipe stem type driveways where people will pull in and then they’ll U-turn in somebody’s driveway and that, you know, we’ll stick up signage for that as well.

 

[00:20:24] Speaker 1 So all of these things can add time. So and it’s great to be here today, you know, to kind of talk about this from a sales perspective and from a from a building perspective, because we have to give very high level answers as a sales team and every single build has its own set of unique challenges that have to be addressed. And there’s no really one black or white answer. I think from the time you get the permit to, when do we start building for every customer, right? Because it’s going to vary jurisdiction by jurisdiction. It’s going to very neighborhood by neighborhood, and it’s going to vary depending on neighbors, right? So when we reach out to the neighbors and they need some extra attention, it’s going to add a little more time. So. So before we take a break, is there anything you pad that you want to add to this conversation about the timeline? I think when we come back from the break, we’ll kind of recap the timeline and just kind of walk everybody through the steps and then we’ll talk about change orders.

 

[00:21:21] Speaker 3 The only other thing that I think we probably talk about is once we get all of those measures installed, we then have to reschedule an appointment for the inspectors to come back out and verify that everything was done accordingly. Right. And then the fun process happens, right? That’s when we get the start getting to work after that’s been approved. And I think, you know, the one thing that I found that’s really interesting in this line of work is that there’s a lot of different things that we do at that beginning stage because there’s so much excitement that’s been built up. And I think that’s one of the more interesting things that I’ve seen is, you know, some people throw block parties. Mm-Hmm. When the house is being demoed just to have a celebration, invite all the neighbors there. There are different people that have different rituals that they do to just demarcate the process that I found fun and interesting. You know, some of them being religious, some of them being just family things that they do that really, you know that we work with them to to to make sure that we’re allowing them the opportunity to experience that. And I think, you know, I know Brian has has dealt with some of this as well. It it it adds a little bit to to the whole process and the character of the process as well. You know, just having that experience with the buyer and letting them have some of those things where it’s like, Hey, come on out and we’re going to have a barbecue when the house is being demoed for the whole neighborhood and it’s like, OK.

 

[00:22:48] Speaker 2 So but I think that the first law of demolition is always coordinate with your, your customer, the data, the demo, because if you don’t, they could be highly disappointed. It’s a big thing for yes.

 

[00:23:03] Speaker 1 Yes, that’s

 

[00:23:04] Speaker 4 a that’s a popular thing to watch is is the house coming down? Yeah.

 

[00:23:08] Speaker 1 So anything you want to add, Brian, before we close out this segment?

 

[00:23:11] Speaker 4 Yeah, I don’t think so.

 

[00:23:13] Speaker 1 All right. Well, we’re going to take a quick break. And when we come back, we’ll just recap the timeline that we go through from kind of the the the the ramp up phase that Michael talked about to the permit to when we actually do demolition and then we’re going to talk about change orders, so we’ll be right back. Sounds great. We’re back with Brian McGranaghan, Pat Kearns and Michael Schnitzer, and so so let’s recap the conversation we had from the first segment, too. So Pat, you wanted to have something you wanted to add before we kind of recapped it? Yeah, I just

 

[00:23:49] Speaker 3 kind of tapping off what we were talking about earlier with, you know, when we’re doing a lot of these infill projects, you know, it varies. Sometimes the homes that we’re taking down and deconstructing have been in their family for generations. Right. So there’s a lot of attachment there, and that’s when you see some of these things happen where people are wanting to go in and they’ll want a brick from the old house or one, you know, they there’s a piece of trim where they mark the heights of the kids as they grew up, that they want us to pull off and incorporate into the new home. Mm-Hmm. You know things along those lines that we really have to, you know, that’s you know, that’s why we meet with people upfront and have these conversations and try to to peel back the onion and find out the layers and find out, Hey, is this just the property they purchased for the purpose of deconstructing and and building a new one? Or is this something that’s been in their home for generations that we need to take some care with and actually kind of handle with kid gloves and have some conversations with them and make sure that we’re meeting their expectations there? So that’s that’s one of the things that’s different than when you’re dealing with just a production home or production build where it’s a bare piece of ground that you’re putting 20 or 30 homes in. Right. This is sometimes something that’s emotional, some history and has some emotion to it. Yeah.

 

[00:25:07] Speaker 2 And then, Brian, you wanted to say something.

 

[00:25:09] Speaker 4 Yeah. One of the thing that seems to be kind of a reoccurring item that comes up at the pre-construction, you know, like Pat said, the customers anxious to get going, they’re excited. And you know, part of the steps to get us to that start is making sure that that on the office side that we’re ready to build with with with regards to the site cost being signed off, the building plan, the site plan and all these things, we’re anticipating dates that that we think they’re going to be ready and we’ll schedule our pre-construction knowing that we’re going to have that stuff done in time. But then there will be things that hang it up and it ends up taking a little bit longer. And if it

 

[00:25:59] Speaker 3 does. I think the biggest thing is that we want to be aligned with the customer, right, and make sure that everything is been approved and signed off for them before we get too far into the process. Right. So if they, you know, one of the steps that we take is we we do a final review of the grading plan with them. We go over it to make sure that everybody’s aligned and we ask them to sign off on it.

 

[00:26:19] Speaker 2 Well, this is why this is much prior to having a precaution. Yeah, but I think Pat Recon, yeah, just pre- come with the customer. And sometimes, you know, customers think their thinking process and approval process is different, right? They dwell on things and whatever, and sometimes it can slow us down. Not that we’re slowing down the county, pre con and getting everything teed up right, but we could get to a point where, Oh, this thing is not done. The grading plan is not signed off or the site calls aren’t signed off. We aren’t moving forward. They don’t want us to move forward, right? We got to be a hundred percent

 

[00:26:55] Speaker 1 aligned, right? Right. Absolutely. Good.

 

[00:26:57] Speaker 2 I would say the only last thing is I don’t want to get too too in the weeds with this, that a lot of customers with demolition will do deconstruction.

 

[00:27:06] Speaker 3 Correct? That one. Yes. So there are services out there that you can think basically that will take materials from the existing home and reuse them. Mm-Hmm. You know, some of them are reused for with veterans services, right? Tied to the veterans services. So they’ll they’ll use those those things for, you know, you know, Brian can probably talk to this more, but a lot of times it’s for training too. They’ll take the stone or the brick and use it to for for people to learn how to become a mason. Mm hmm. You know, they’ll take the trim work or the windows and things like that, and they’ll remove them.

 

[00:27:47] Speaker 4 I think there’s different levels of deconstruction. I mean, I’ve had it all the way to where they’re taking the floor, Joyce and any two by fours they can salvage out. You know, I don’t know where they end up after that.

 

[00:27:57] Speaker 2 Well, they go to a so depending on who the Deacon company is, there’s a place in Savage, Maryland where they take the materials and they resell it. And customers, we talked to customers we give them. This is when customers are a we talk to them. When we first give them a say cost estimate about this, then we talk to them when they remove their contingency about the construction. Then we tell them to speak to their financial person or their accountant to make sure this is legit, and we give them some names that they may want to call. But the end of the day, we stay a little bit of an arm. ARM’s length away, we give them all the information, but sometimes if there are tax positive tax consequences, meaning in a good way, we don’t want the customer to think well, we told them that they may get back x in in tax deductions and they don’t. So we give them the information. But there is there is a reclamation process where they where where there’s facilities that resell the products.

 

[00:29:01] Speaker 1 And I think the point of all this really is we started the conversation in, you know, trying to. The purpose of this conversation really is to help manage the expectations of our buyers with regard to the timeline, right? So. So just kind of, you know, these things all impact the timeline. So if you’re going to do deconstruction, you know, from the time you have your pre-construction meeting with the team, the customer pretty calm meeting till the time you actually start building the house is going to be a little bit longer because you have to allow time for the deconstruction company to come in and deconstruct the house. And then we continue with our with our process. So. So Michael, high level, can you give us just a flyover then of the timeline from a contingent contract?

 

[00:29:44] Speaker 2 So once a customer signs a contract there in contingency, typically 30 days could be a little longer. But our boilerplate is 30 days and we can extend that. Then, I would say, from removal of contingency depending on customer, depending on jurisdiction. Right. Because we don’t push the customers to sign a plan by date X. We tell them this is the date that they should, right? I would say anywhere from four to six months could be longer. And then for start up that that start up phase Brian or pet,

 

[00:30:24] Speaker 3 I mean, I would say on average, somewhere in that three to five week period is what you’re looking at.

 

[00:30:29] Speaker 1 So four to six months to get the permit. If we’re talking high level, yeah, three to five weeks to start construction after the permit has been issued because of all the things we just talked about, right?

 

[00:30:38] Speaker 2 Correct. Good.

 

[00:30:39] Speaker 1 Good. Good. Good. All right. Fantastic. That was really informative for me. I learned something new every time we have one of these conversations, so thank you for that. So let’s talk about change orders. So, Michael, I’m going to go back to you. So there are no change order fees up until what point in the transaction, because people change all kinds of things when they’re starting up and picking finishes and all this and that. At what point do change order fees kick in?

 

[00:31:06] Speaker 2 Right. So let’s try to separate because we have two programs. One is a program for customers that can make any changes to the plan, customize the plan to their heart’s content, right? And go outside of our standard finishes at our design studio.

 

[00:31:22] Speaker 1 Right? And just to clarify or to add to that we have on our price matrix. When you start the process with us, there’s an option that you can select right on the price matrix that allows you to customize your home right and enter into this.

 

[00:31:38] Speaker 2 And there’s an option that allows that where we actually credit the customer right for not customizing their home exact. So we have to separate the two categories. But for those customers that are customizing, they can make as many changes to the plans and pick as many finishes that are outside of our design studio as they want. Sky is completely the limit, and there’s no cost for them to dream. They want to see light fixture x price falls, why they want beams and this and we get them all the pricing. Hmm. There’s this is during the startup process, right? No cost. Once we start construction, we needed. So I’m going back to when we first started. Yeah, we needed a way to get the customers to stop dreaming and stop slowing down the process. So what we said is we’re happy to to entertain any change request after we’ve started construction. Mm-Hmm. Right. But we want you to think first. And so what we say is you pay us a minor change order fee. That fee gets applied to the price of the change order. Mm. If they purchase what they’ve asked for. So let’s say the customer purchased something via a change order after started construction that was a thousand dollars. Right, right. The change order fee, we get applied to the thousand dollars. So basically, the fee goes to zero. Right. So we don’t really charge them. Yeah. So there’s really no cost for for a change after the start of construction. As long as the customer buys, the change buys the change. If they don’t, it’s a great mechanism to say. OK, are you sure you want to spend money to keep dreaming, right? So that’s that’s kind of our yeah.

 

[00:33:40] Speaker 1 So what was happening before we had this system was

 

[00:33:42] Speaker 2 people were dreaming and asking for price and in the back office that was chasing customers dreams. After we started construction very, very 98 percent of the time, they were not buying them right. They had to come up with a Mac.

 

[00:33:57] Speaker 3 Yes. And I think the biggest thing to point out here is is that a lot of those dreams and things are worked out during that process. So it’s very during the

 

[00:34:05] Speaker 2 start, during the start process. Yeah, the

 

[00:34:07] Speaker 3 start up process, the start up process were there. You know, we’re we’re you know, the things that were pricing out and the things that the selection process and the minor changes to the plan. And and you know, the one thing that I’ve noted since working with Stanley Martin Custom Homes is the the the the ability to adapt and change and mold the elevations and and make modifications to to really adhere to this style of home that the customer wants to build. Is it a more modern style? Is it more contemporary? You know, do they want a farm style? You know, all those things that we’re able to work out and do prior to actually us getting the plan so that the things that we experience and we deal with customers on the change side once we build the home are typically minor in nature, like they’re little things that maybe the customer didn’t think of until they’ve walked in the home and are like, You know what, we’re building this deck on the back and we’re going to cover it. We didn’t think about putting a ceiling fan in this area,

 

[00:35:10] Speaker 2 so they would have thought about it because we would have it. But I mean, it’s a good example. Yeah, it’s just

 

[00:35:14] Speaker 3 it’s just an example.

 

[00:35:15] Speaker 2 We’re going over that with

 

[00:35:17] Speaker 3 a process there. And a lot of times when we’re going through this, like we have customers, they’re like talking to us about they. They put too many, too many things in front of me as far as options to select because there’s just so many things that are out there now, right, that it’s like, I don’t know why they bothered me with this. I never would have even considered doing this, but we’ve put it in front of you anyways, right? As far as to try to cover as many things as we possibly can before we finalize that plan and get into the construction process, because look, we’ve had the questions about, you know, putting heated floors in the bathroom or putting heated floors in the shower or, you know, things that that most a lot of people don’t really think or consider. But you know, somebody went to a hotel that had a heated toolbar, right, that they thought was really impressive that they want to incorporate into their home. Mm hmm. OK, well, we’ll look into that for you.

 

[00:36:18] Speaker 2 Yeah, yeah, yeah. And we’ve certainly done that and pretty much how I want to say anything, but mostly anything that a customer brings to us we’ve already done. And you know, we give a customer a list of we call standard options standard features. So there’s a there’s there’s many faucets to pick from lots of flooring and cabinets and tops and pop up up a bar. But it’s finite, right? If a customer wants to go the unknown, use the word infinite but the exponential route. Then they go outside the four corners of the design studio, where the four corners of the page that lists all the options and the features, and they can dream with whatever they want. I think the the big thing and maybe Brian can talk to this is everything’s being handled prior to start right through the office. Mm hmm. Right. But once Pat and his team, once we do the kickoff meeting, that’s the discussion, the turnover meeting,

 

[00:37:23] Speaker 1 the pre-construction meeting with the customer, right?

 

[00:37:26] Speaker 2 Then for all intents and purposes, everything goes to the PM. And so now now Brian is driving the change order bus, right in terms of requests on the Brian, if you want to

 

[00:37:39] Speaker 4 as a way. So you know, we do the pre-construction, we tell them this is where we start the house. Usually by that point, we are done with contracting. So anything moving forward is is going to be the change order process, which is like, Michael said, we’re going to collect a change order fee, then we actually have a form. We would fill out the form. If a homeowner is requesting to change their front door, let’s say. So we would take the form it has, you know, the date that you’re submitting it, it has a description of what the change is going to be the stage that the house is in because a lot of times that’s going to affect the pricing or it could slow the the process down because if we’re stopping to wait for a door to be installed and we can’t close up the house, it may delay the the house for. You know, two weeks or whatever the timeframe be. And then we also have a column that we if there’s any kind of gut or terror, you know, because if we’ve already installed a door and they hated it and they wanted to rip it out, then we would put that in there. We send that form into the office and then it usually takes them about depending on what the item is. I mean, like Michael said, some of the stuff it’s like we’ve priced out. So all they do is they look into like, OK, we already have a price for that. But if they have to go back to trades, it could take

 

[00:39:01] Speaker 2 three to five days.

 

[00:39:02] Speaker 4 Yeah, you know. Yeah.

 

[00:39:04] Speaker 2 So but I think the most important thing is Brian, for instance, knows exactly where the stage of completion and what things have been ordered. So if a customer using that door analogy, if the customer says, Hey, I want to change the door, and Brian goes, Oh geez, I ordered doors months ago, right? And by the way, I know that the doors are for Just-In-Time delivery already at the at the the warehouse. Right? Well, you either got to pay for the door twice. Yeah, or you got to pay a restock fee only Brian knows that answer. Right? So Brian is so that’s why we need the PMS because they opine and tell a the customer and be the back office delays added costs, rip and tear. Because once in time. Yeah. Because you know, so, so.

 

[00:40:01] Speaker 4 And there’s a lot of times that the customers are just they really don’t know what is involved. If you end up with any kind of a situation where they want to do a structural change and we’ve already started the build. I mean, I actually had a customer fairly recently ask about putting dormers in a loft, which is a truss, and you’re talking an engineer, the architect, then resubmitting to the county. Then you once all those things are done, then you actually are going to start the construction that can get very, very costly to them. They’re looking at the trusses saying, Well, there’s these like two foot. We’ll just put a window in between the two of them, you know, and run some floor out to it, you know, and that and you know, typically we cover those kind of things that are weekly meetings and then, you know, so they bring it up. And then I would discuss with them. And most of the time when it’s a situation like that, it’s like, you know, I don’t want to say, we’re talking him out of them, out of it. But once we educate them on how much is involved, they’ll say, Okay, never mind. I don’t want to

 

[00:41:00] Speaker 3 do that floor. And I think part of it, too, is that sometimes you have to have those hard discussions with people and talk to them about what ultimately what is more important to them. In some cases, they may be considering or wanting to do something, but they’re more focused on a timeline of getting into the home by a certain date. Right? And you have to walk them through that process, OK? Hey, we buy by all means we can consider doing this for you. We’re going to try to give you a guideline. And I think guideline, because we we don’t know in some cases how long it’s going to take the design to be changed, right? Or for the engineer to come up with it or how long it’s going to take the county to review and provide the plans back for us to build. So we’re going off of estimates of what our experience has been in the past. So we’re trying to provide them a guideline or snapshot of, Hey, this is what we believe or estimate the amount of time it’s going to take to process this change that you’re considering. Mm-Hmm. This is going to impact the back end of the project as far as when we’re going to be able to deliver the home and for you to move into it. Is it that important for you to add this feature at that point in time? And sometimes it is because, hey, look, this is your one opportunity to do this right? Because you’re not going to want to go and do this once you’re living in the house, right? But sometimes even though it may not be beneficial for us monetarily right. We may go to the customer and say, Hey, look, if you really want to put this deck on the back of your house, you may want to consider doing this after the fact because it’s going to stop us from me and I’ll deliver the home when you want right and you can live without a desk for a month or two months and have it installed once you’re in the home, right?

 

[00:42:44] Speaker 1 But the dormer you would have to do? Yeah. So how long would it take? I mean, I know you don’t know, right? But well, so we can

 

[00:42:50] Speaker 2 give some so. So I think there’s there’s two things. So one is the once Bryan coordinates with the back office and gives the customer their price right? Based on the date that the office sent Brian, the information that change orders only valid for a certain number of days, right? It can’t be valid in perpetuity because Brian keeps moving on with construction. So there’s a limited time frame where a customer can actually approve otherwise. If a customer says two weeks after we’ve I’m just picking the system, two weeks after we given them the price, they want to make the change. Sorry, that price is no longer valid and we’re not going to honor it because now we got a. Price everything out against the order, right?

 

[00:43:35] Speaker 4 Yeah, and there’s a lot that goes into the change order because, you know, using that door as an example, I may have to go back to the selection staff, right? They would have to pick the door that there were coordinating with the with the purchasing side to four lead times. And and when you really look at it, it may be it goes across five different people’s desk before we actually come up with an answer. And in between the time frame and the cost of

 

[00:44:04] Speaker 2 the good news is people can dream even after they start. We have a throttle on it and we don’t discourage it. Everything runs through the the PM and we’re happy to entertain. And you know, there’s a finite time frame from when we give them a price and then the specifications to when they can either accept it or if they don’t accept it, it’s automatically rejected over time. Right. To answer your question, I would say if it’s a major structural change, adding

 

[00:44:41] Speaker 1 a dormer, if something

 

[00:44:42] Speaker 2 so, it depends. When they added the doormats, they added This dormer when we’re pouring the footers right is a lot different. If they add the dormer and we’re under a roof, right?

 

[00:44:53] Speaker 1 So there’s no black and white answer to any of these questions, which is really difficult. This is great because it’s hard to explain.

 

[00:44:59] Speaker 3 Exactly.

 

[00:45:00] Speaker 2 But let me just say one thing, though, so we can control how quickly our design or our architecture department and our engineer can turn things around, including getting the customer now to approve the plan. Again, yeah, but we can’t control how long it takes the county to re review and to approve the change. Yeah, so that sorry, I was just I,

 

[00:45:25] Speaker 3 you know, and I think that’s part of it too. One of the things we always advise them of is, Hey, look, if you’re considering doing something, it’s better to talk to us about it as soon as you’re considering it. Yes, rather than wait and try to make a decision as to whether you really want it, because there there’s information we can provide you that can help you make that decision. Yeah, not so much direct you in a way away from the decision, but help guide you in it. And that’s that’s the important thing, too, that we talked to people. A lot about is, Hey, look, we’re going to provide you with information. It may not be what you want to hear. It’s not because we’re trying to discourage you from doing this or moving forward with it. We’re just trying to prevent present you with as much information as we possibly can to help you guide through the process

 

[00:46:10] Speaker 2 to manage expectations,

 

[00:46:11] Speaker 3 manage expectations so that you understand, Hey, look, I know that you really want that dormer. Yeah, but this is this is all the cause and effect of what adding that

 

[00:46:21] Speaker 2 it may be worth it all. And so I’m going to live in the house for the rest of my life. I want the dormer. I’ll accept a one month delay taking,

 

[00:46:28] Speaker 1 and I think that’s that’s I think that’s what I would say to, you know, and I think there are a lot of people out there that that when this when the sticks go up and the house gets framed up and all of a sudden they say, Oh my gosh, I really wish we had put a dormer up there. And you’re right, Michael, if they’re going to live there, I say, invest a month, invest them, whatever. We’re not saying it’s a month. I don’t know what the timeline is, but you know, if that’s the way you think and that’s what you see and you’re agonizing over it, you should just bite the bullet, I think, and put it in because you may regret it. You can’t go back and put it in later.

 

[00:46:58] Speaker 3 You know, there’s a lot of things that we can demonstrate to dimensionally, to people. And on paper, yeah, walking out and actually physically experiencing it sometimes is a different effect, right? And the one thing that I try to advise people of to is, Hey, look, you’re the person that has to live in this long term. You have to be here, you have to walk up to this house. You have to walk into it every day for the next five, 10, 15, 20 years. If this is going to be something that every time you pull in your driveway, you cringe because you didn’t do it, then invest the time. Absolutely. If it’s something that is just, Hey, I really, you know, kind of one of those wishy washy things that you’re really not sure about, then you might want to consider not moving forward with it.

 

[00:47:42] Speaker 2 But I would make a comment. I’ll let Brian kind of talk to this. There’s for the science people. There’s the first law of thermodynamics, construction people, there’s the first law of construction, meaning the more often you delay construction, the harder it is to build momentum. And Brian, I know if you want to talk to that because speed is everything.

 

[00:48:07] Speaker 4 Yes, and there is a cadence to the build. And when you interrupt that, it’s it. And as long as I’ve been doing this, I don’t understand why it happens. But you interrupt it, you slow it down. And then it seems like it’s like getting it. You’re trying to get to Tricia.

 

[00:48:23] Speaker 2 That is hard to learn again.

 

[00:48:24] Speaker 4 And it just it takes off super slow and it’s building up and it takes I mean, it can take weeks, two weeks to get the house back on to

 

[00:48:32] Speaker 2 that or sometimes. Depending on what it is longer, yeah, but that inertia is huge, and when you rock the inertia boat, it can look terrible. It happens. It doesn’t matter if it was Stanley Martin, Martin Stanley or somehow juggle up all the letters it can. It’ll happen to any builder. It’s just the fundamental law of construction.

 

[00:48:54] Speaker 1 Yeah, good to know. You know, do you want to add something else?

 

[00:48:57] Speaker 4 I was going to talk about one one of the houses that we put up so many. We got the house framed up. I don’t even know if we had the the. I don’t think we had the porch poured yet, but they stepped out onto the porch and they were like this too small? Hmm. And that was one of those examples where it was a pretty major structural change.

 

[00:49:18] Speaker 2 Brant, let me just bring up because I know this customer is and we had gone over the depths multiple times because it’s it’s a it’s a hot spot for customers. How deep is your porch? What do you plan to do when your porch or you’re going to have chairs? And what’s this and blah blah blah?

 

[00:49:34] Speaker 1 Well, we start that conversation. No, no, right at the very, very first sales meeting that we ever have with.

 

[00:49:39] Speaker 2 So just keep that in the back of your mind. So that’s a legacy issue. And then buy into what it’s like.

 

[00:49:44] Speaker 4 That was saying, you know, on paper, they probably looked at it and they thought, Okay, I can fit my two chairs. They had a beautiful view out of the front of their house, but as soon as they stepped down on it, they were like, This is going to be too small. I’m not going to be able to set my chairs and do what I want with it. And fortunately, it was the porch, so it’s like we could still continue to move with the interior of the house. But that was it was a, I would say,

 

[00:50:07] Speaker 2 three, three or four weeks. No, I think the engineering. Oh no, no, no. It’s just their decisions. Think about when they start at three to four months from the time they brought it up to you. Yeah, because of

 

[00:50:23] Speaker 4 what ended up happening is is the rest of the interior was done, but I didn’t have this porch done on the front, so I couldn’t put siding on. I couldn’t finish the stone like there is. There are so many things critical path. Yep, yep. That that it, you know, it was a, you know, chain reaction of right at the very end. I mean, it was like, typically there’s something going on right after drywall and I was putting it up like weeks before.

 

[00:50:46] Speaker 3 And there’s there’s a lot of things that go into some of these the these changes that people really don’t consider. So a lot of times when you’re presenting it to them, they don’t understand what is all involved in it and and as a result, don’t necessarily understand the cost to do those things. So you know what I mean? That’s that’s the one thing that I think we benefit from is that we have people with such experience and knowledge that they can walk the customer through it and kind of explain to them, Hey, look, I understand you may not understand where this is coming from, but let me walk you through all the things that we have to do in order to incorporate this change, right? You know what I mean? Like, it’s not just pouring a little bit of concrete to extend it. We’ve got to put new footings in the ground. We’ve got to excavate that area. We have to form new walls. We have to then go back where we’ve already poured your porch and try to tie in new or deconstruct what’s already been done. We’ve got to go to the the manufacturer. We have to not just bring out new trusses, but we have to design them to make sure that they have the right loads and the right the right calculations to make sure they they can withstand what the code requires them to withstand. So we’ve got to go through all that design process and change to incorporate that into the plan. So there’s there’s a ton of things, then we have to actually get them built, right? You know, so there’s a lot that goes into it. And the other thing too is, you know, there’s a wonderful thing that we do now, which is, you know, one of the other things we explain to people is we do with we have an automated build peace cycle. So it’s great for construction in our in our in our in our contractors because our schedule that we have that our PMS use is tied directly to how we pay our contractors. So back in the day when I was a PM or a construction manager, I would schedule every day in the 1920s.

 

[00:52:41] Speaker 2 Yeah, in the 1940s.

 

[00:52:42] Speaker 3 And then I would have to go spend two days in the office, right? Reviewing and approving bills and signing off on everything. And is it the right right amount and all this stuff will now we preload all of our contracts before we even start the build process? Right? So all that stuff’s loaded into our system. And then when our project managers sign off or check off that an item has been completed, it automatically pays our contractors right away electronically. It goes through and they get paid for it. We don’t have to go in and review invoices. We don’t have to sign off things. We don’t have to cut checks to them, right? You know, manually, it all gets done electronically, so they’re getting paid quicker. We’re able to schedule things easier, right? It takes less time. But the one detraction is is that when we make a change? Yeah, we have to reload that contract. It has to be uploaded back into the system, so sometimes the one thing that drags is, OK, the customer comes to us, they want to add a ceiling fan. Great, it’s already a pre priced option. Let’s add it in. Let’s get them to sign off on it. OK, why isn’t it installed yet? Well, we have to get it loaded, so the contractor knows that they’re going to get paid for it. They see it in the system. Then they send the first not to do the way. So there’s a little bit of delay there because of the way our system set up, but it’s just one of those new nuances. Yeah, but it’s kind of there,

 

[00:54:04] Speaker 2 but at the highest level, that system is designed to for velocity. Yes. And so even if there is some slowdown in that, overall, we are light years ahead of the industry in cloud based technology and how we pay people and things of that nature. Hmm. And I think at the end of the day, even with that example, Brian, that that you’re talking about the customer still happy. That’s just it was a long, drawn out process. Right? But in the end, they love their house. And, you know,

 

[00:54:37] Speaker 3 it’s something they really felt was important. It’s the way they want to live in the home. It was one of those things that we had to assess and talk to them about. And you know, is this that important to you? Yes, it is. OK, we’re going to move forward with it.

 

[00:54:51] Speaker 2 And it was important to Brian. Yeah.

 

[00:54:54] Speaker 1 Well, and I will say I’ve been in I’ve been in this industry for a long, long, long time since the 80s.

 

[00:54:59] Speaker 2 We can tell John just looking at you.

 

[00:55:02] Speaker 1 But it’s very unusual to be working with a team of people who are so patient and understanding with with the buyer, the customer and, you know, everybody in our team from Michael. I think a lot of it comes from Michael. Michael takes an extraordinary amount of time with our buyers to explain what’s going to happen and what’s going on, and I think his DNA is throughout our entire organization. You know, it goes down to the PM’s. I mean, I’ve heard from many, many, many customers that they really appreciate that we take the time to educate them because we do this every day and they don’t, right? And that’s what a big part of this conversation was today with the change order. We’re going to take the time to explain in your example, Brian, with the front porch, it took the buyer, the customer, a very, very, very long time to make their decision as to what they wanted in the porch. But we worked with them to get it done. You know,

 

[00:55:58] Speaker 3 correct. And I think, you know, it’s not always what they want to hear, right? They don’t always want to hear the things that are impediments for them to have this done to their home, right? But for us, it’s more important that we get that out upfront rather than give them the bad news after they’ve made the decision to do it right. And, you know, I think that’s one of the really important things is is the communication process and making sure even though you may not want to hear this right now, we want to make sure you understand the impact of this decision, right? We’re not trying to keep you or shy away from doing it. It’s just a matter of we want you to understand and and follow along with us and be part of this decision so that we can give you as much information as we possibly have available to us so that you can make the decision that’s right and educated.

 

[00:56:48] Speaker 1 This is fantastic. Anything else anybody wants to add about change orders? Brian?

 

[00:56:53] Speaker 4 Yeah, I think that’s yeah, that’s great.

 

[00:56:56] Speaker 1 Fantastic conversation. I do want to close and say one quick thing. So Brian, you mentioned our conversation about weekly meetings that we had earlier. You referenced that earlier in the in this episode. So episode 30 is a conversation that Brian and Pat and Michael and I had some weeks ago, and it is off the rails. It’s our it’s our number one downloaded episode and it’s the last one we dropped. I think anybody that’s listening here today. If you want to learn more about how things work during the construction process, in the week to week events that happen and what happens in the weekly meetings, go check out episode 30 and take a listen to what Brian and Pat and Michael had to say about the week weekly meetings. It’s really it’s a good episode in the feedback we’re getting back from the public is phenomenal, so I know you’ll enjoy listening to that, but we’re going to close out today. We’ve had Brian McGranaghan, Pat Kearns, Michael Snitzer here for another conversation. Today we talked about the startup process and change orders. We hope you enjoyed listening. Thank you for joining it.

 

[00:57:59] Speaker 4 Thanks. Thank you.