Getting to the heart of home buyer complaints

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For today’s home buyers, there are two primary sources of dissatisfaction. We talked to builders and customer satisfaction experts to find out how they tame these two tigers.

Getting to the heart of home buyer complaints

Getting to the heart of home buyer complaints

September 28, 2012

A house is the largest, most technically complex, most expensive, and most emotionally charged purchase that most people will ever make. So complaints should come as no surprise. Issues that a buyer might let slide when buying a shirt, a computer, a TV, or even a car can push them over the edge when buying a house. Plus, the home-buying process includes elements that buyers typically don’t experience in other purchases, such as obtaining a mortgage, selecting options, and moving.

According to Eliant founder Bob Mirman, quality issues with a house don’t vex home buyers nearly as much as the service — or lack thereof — during the process. “Statistically, quality issues don’t have anywhere near the impact as service on a customer’s satisfaction,” he says.

For today’s home buyer, the two biggest sources of dissatisfaction are the lending experience and a lack of proactive communication about the entire building process. We talked to builders who are pulling in top satisfaction scores in both areas to find out how they managed to tame these two tigers.

Leashing the Lenders

From the surveys that Eliant collects from buyers and escrow companies, Mirman says that, far and away, the biggest source of complaints is the lending experience. “When we talk to buyers and escrow companies, the lenders don’t seem to get it or they don’t care — probably a little of both,” he says.

So what does that have to do with builders? After all, they’re not the ones putting the buyers through hell over paying a late fee on a water bill five years ago. Satisfaction survey results have shown that if a builder sends a buyer to a preferred lender, the buyer doesn’t distinguish that the lender is a separate company with its own rules and processes. If the lender does an okay job, the builder gets a neutral response. If lender does an extraordinary job, the builder gains some benefit from that in a buyer’s satisfaction. However, if the lending experience falls below the buyer’s expectations, the buyer is less likely to refer the builder.

Some of the biggest complaints are centered on the closing experience. It should be a memorable experience, and for many buyers, it is, but for all the wrong reasons.  

“We have so many occasions — buyers and escrow companies tell us the same thing — that lenders seem unwilling to take the time two days before closing to send out the final statement,” Mirman says. “How difficult is that?” 

The Changing Forum for Home Buyer Complaints

In the old days, when a customer had a complaint about his house or the home-buying experience, he told the builder and probably his family and maybe a couple of friends and co-workers. Depending on how the builder handled the complaint, it likely stopped there.

No more. Builders who ignore or downplay complaints do so at considerable risk. We live in a world of instant and widespread communication. Think about it. A decade ago, a teenager who was angry with her dad about her chores yelled at her dad and complained to friends in her third-period math class. Now, she posts on Facebook, her father sees it, and responds in a YouTube video in which he shoots her laptop. It gets seen more than 34 million times, the Los Angeles Times blogs about it, and Good Morning America shows up on the guy’s front yard.

“The most interesting aspect of what’s happening in the service world is not what’s complained about as how,” says Paul Cardis, founder of Avid Ratings. Social networks and search engines have revolutionized how builders represent themselves. Some builders are putting all their customer reviews, including complaints, on Facebook.

Customers have the Internet to voice their issues and “they’re doing it in droves,” Cardis says. “If you’re not getting ahead of it and controlling the conversation, you’re going to get hit on the search engines. We have a number of builders who struggle with homeowners posting videos of quality issues on YouTube.”

Handling customer complaints in a public online forum rather than taking it offline allows a builder to gain trust points with new and existing buyers, Cardis says, because it shows that they stand behind their product. Builders have learned this from other industries, he notes.

“It’s commonplace for companies like Apple to resolve issues publicly,” he says. “It’s a badge of honor to do that. Customer service has absolutely evolved. The age of transparency is where we’re at today. That’s the way to differentiate.”

He’s also heard from dozens of escrow officers who say that lenders rush buyers through the process of signing the paperwork at closing to meet an artificial time deadline. “I hear consistently that the lender will call at 3:00 or 3:30 and say they need all the papers signed by 4:00,” Mirman says. “To the buyer, that’s the last step in the process before they get the keys. It’s what we call the ‘recency effect’ — the most recent things have the most weight in the buyer’s mind. If you get to closing and the situation goes to hell in a hand basket, it diminishes all the things that happened before and the builder gets the blame. If they get the blame, why shouldn’t they be holding lenders accountable for the experience?”

Mirman hears enough complaints about the financial portion of the home-buying experience to create a certification program focused on it. And he thinks builders should be holding their lenders’ feet to the fire for how they treat the buyers.

“You have the right and the obligation to tell preferred lenders that they must treat your customers with respect,” he says. “It’s so important to your future as a builder. Customers should come first, not the policies and procedures of the lender.”

That’s pretty much how it works at MBK Homes. Rick Fletcher, VP of sales and marketing for the Irvine, Calif.-based builder, says that his company breaks down lender expectations into three categories: a minimum capture rate of 95 percent, a minimum of 80 percent of closings as on-time closings, and a minimum customer satisfaction score of 95 percent.

MBK’s lender (currently Bank of America) has been able to achieve or exceed a 95 percent capture rate, Fletcher says, because the company picks and commits to one lender team “from the president on down. That creates confidence within the sales team. The buyer feels that. If the sales team is on board with supporting the lender, the buyer will be on board.”

The lending team has to be built “like your own sales team,” he says, taking into consideration the builder’s buyer demographics. For his company, that includes the influx of Asian investment dollars and multi-generational buyers. “That has an impact on who your lender should be and the languages they should speak,” he says. Plus, the lender needs to be competitive as to interest rates, loan programs, extended rate locks, underwriting, and fulfillment.

To help create a successful lending experience, MBK developed a pre-qualification process that benefits the buyer, Fletcher says. Sales associates can’t write a contract and sales are not reported until a buyer is prequalified by the lender.

“That does a couple things,” he says. “It lets me report a real deal and it allows the lender to start to establish a relationship with that buyer. During prequal, they’re educating the buyer and setting the proper expectations.”

To help achieve the rate of 80 percent on-time closings, Fletcher says the MBK team communicates “constantly” with its lender and the buyer from the time the purchase agreement is signed until escrow closes. The onus of achieving loan approval within 30 days is put on the lender. A builder lender report covers every aspect of every loan that’s in the works “to see where the performance gaps are.”

When the buyer signs the purchase agreement, he receives a “Countdown to Closing” document with every milestone notated with a target date initialed by the buyer and the builder. He’s also given sample documents that he’ll be seeing during the lending process, as well as a handout with lending do’s and don’ts — such as “Don’t buy a new car” and “Don’t transfer a lot of money around” — to keep the lending process on track.

Any dip in the customer satisfaction score as it relates to lending is addressed immediately. “We’re all over it,” says Fletcher. “In my mind, if they don’t have a metric to measure performance, then it’s very difficult to see improvement.” 

With the lending industry’s tendency in recent years to put buyers on the rack to get a loan, how can builders get bankers to play nice? Fletcher says that the lending environment has been driven by refinancing for so long now that securing builder business is an asset.

“The building industry is starting to show signs of life,” he says. “If lenders want a piece of the pie, they need to respond. We have used the same lending manager for the last six years. The conversations occur when we’re meeting with her VP, her division managers, and regional presidents. We’re asking, ‘Where are you originating? What about underwriting? What about fulfillment?’ A builder almost needs to be a lender these days.”

That’s exactly the approach that Amy O’Connor advocates with her builder clients when she does training on the mortgage process. Years ago, sales associates could hand buyers the phone number of a preferred lender and say, “See you at closing.” Today, the sales trainer with Shore Consulting tells sales counselors that they need to take a much more active role in getting their buyers from the sales office to the closing table.

As with all aspects of the home-buying process, setting the proper expectations can pay huge dividends. She recommends telling buyers up front that the lender is going to ask — perhaps several times — for a ridiculous amount of information. They may ask for things the buyer has never heard of. They may ask for documents at the last minute. Whatever it is, let the buyer know that it’s not personal and they shouldn’t let it rattle them. Sales associates should offer to walk them through it, to the point of scanning their documents for them.

“Go through the application with them and explain it,” O’Connor counsels. “Tell them that instead of filling it out at home, they can bring everything in to the office and you’ll do it with them. Tell the buyer, ‘I’m going to help you with all of it. Once it’s finished, you’ll be in your new beautiful dream home.’”

Controlling the Conversation

Of the issues that drive a person’s willingness to refer a family member or a friend to a builder, tops on the list is proactive communication during the sales process, Eliant’s Mirman says. This includes items such as keeping the buyer informed of the decisions that need to be made and documents that need to be signed. 

At a typical sales office, the responsibility for communicating with buyers falls on the sales associate who handled their contract.

“They’re also supposed to be selling options and houses and tracking their own escrows,” Fletcher says. MBK uses a community team approach; everyone who buys a house will get a phone call within five days from the salesperson, the superintendent, the escrow officer, and the lender. “It makes them feel like everyone is on the same page,” Fletcher says.

The director of construction and customer care gets a weekly status update on every buyer. Every Wednesday, the team meets to make sure that everyone is on track with their tasks. “The worst someone on a team can do is disappoint other people on the team because it makes more work for them,” Fletcher says. “Each team holds each other accountable. They police themselves.”

Staying in touch with buyers can yield significant results for builders. Those with the highest referral scores have the highest rates of proactive communication, Mirman says.

Minto Communities Florida, winner of Eliant’s 2011 award for highest percentage of sales achieved from referrals (41 percent), has a structured system to keep buyers in the loop, from contract through the end of the first year after move-in.

“There’s no excuse now,” says Glen Trotta, VP of marketing for Minto. “You should be able to reach a person by phone, email, or in person. You just don’t give up. Sometimes it means communicating news that’s not as favorable as you would like, but you need to deliver it.”

The company has an eight-step communication process that starts with selecting their floor plan, home site, elevation, and structural options, and includes helping them complete a mortgage application. It also includes selecting interior finishes and options, meeting the builder, and touring their home before the walls go up. A representative of the company’s Master Care quality assurance program walks them through the home, reviews their design selections, explains the structural and mechanical systems, and demonstrates the builder’s quality and attention to detail. They’ll meet with the Master Care rep again before closing; at that point, the rep will demonstrate the features of the home and offer maintenance tips. That meeting helps reinforce the fact to buyers that they need to protect their investment through proper cleaning and maintenance of their homes.

Trotta says that the meeting with the builder and the pre-drywall tour are critical elements of the process. Those steps demonstrate the home’s features as it’s completed and explain how everything works.

“Setting the expectations is key,” he says. “The highest-quality home needs care. They have a responsibility to maintain their home.”  

Local buyers want to be able to touch and feel what’s behind the walls, but international buyers often have to be represented by local real estate agents or other family members.

“You can’t give up that you’re going to communicate with them because they’re an absentee buyer,” Trotta says. “If the customer isn’t immediately available, get the Realtor who represented them or a family member or friend in the area. We treat them like the buyer and get them to these ‘meet your builder’ meetings. When people buy short sales and foreclosures, those inspections are not like these celebrations.”

Internally, team members have weekly customer satisfaction and care meetings to stay on top of every house and its stage in the process. Pre-closing customer meetings make sure that buyers aren’t met with unpleasant surprises when they show up at the closing. Minto’s lender and title partners are part of the weekly meetings to make sure that buyers aren’t running into trouble.

Of all the possible reasons that a buyer might complain, lack of proactive communication is the one that has the potential for the biggest payoff — and it should be the easiest to control.

“It’s not hard to do and it’s not expensive,” Mirman says. “You just say, ‘You’re required, Mr. Salesperson, to call all of your customers every two weeks, even if it’s to tell them nothing has changed since the last time you talked.’”

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