RSS
September 06, 2009 | | Comments 0

Kit Home Companies Going Broke

Troubles with Kit Home CompaniesHow does a Kit Home Company go broke?

There has been cause for concern over the number of Kit Home companies that are in financial trouble and the number of customers and Owner Builders that have been adversely affected by this.

In particular, if you had a chance to read the recent article in the Bundaberg Newspaper about an Owner Builder losing money with a kit home company that went broke, and basically the Owner Builder having no protection under any warranty legislation. When you have a moment check out the article:

Kit Home Customers Fall Through Cracks

Here are some insights into the issue:

  • First of all the UBuild mantra for Owner Builders should be: Trust No One. The Building and Construction Industry is an extremely volatile and difficult industry and whether you are owner building or not, you should be extremely careful with every transaction. Ensure that you have good written contracts in place and that you manage your risks very carefully.
  • Kit Home Companies should not go broke! It’s that simple. Kit Home Companies go broke because their parent company or their manufacturing company goes broke. Any Kit Home Company that manages their own manufacturing or that is owned by a building company is a risk because they need to feed the beast, and so all revenue goes back into ensuring cash flow for the parent and partner company.

As a potential customer/Owner Builder you should be asking the following questions of a prospective Kit Home Supplier:

  1. Do you operate solely as a Kit Home Company or are you a building company with a division that is a Kit Home Supplier? 
  2. Do you own the suppliers you put the kits together from? ie The Frame and Truss Manufacturing (Steel or Timber), the Window Manufacturing Company, etc?

If the answer to these questions is “Yes” then you are at risk because these businesses require large amounts of cash flow to keep them going. Your kit home deposits go into that pool of cash flow.

A Kit Home Company should be cash flow positive. In other words they should be using their buying power to source the Kit Home Package for the client at the best possible price by ensuring that good suppliers are competing against each other for the business of that Kit Home Supplier. Kit Home Suppliers should then be flexible and customer driven in their ability to manage the needs of the customer in terms of product and finance.

UBuild cannot comment in detail about the Warranty Insurance issues raised in the Bundaberg Newspaper article, except to say that in every state the Home Warranty Insurance process is different – and that it is a mess. The fact that there is on ongoing Federal Government enquiry into Home Warranty Insurance is a testament to that fact. 

The bottom line is that customers should not lose money dealing with Kit Home Companies. These companies, if properly managed, should be service focused, flexible, wholesale building material supply companies. If they are involved in other businesses then you, as a potential customer, are at risk.

Please check out a recent article on the Owner Builder Advice site about a real customer who was rescued from a difficult situation because of the inherent flexibility in the UBuild Kit Homes process:

Close Shave for a Kit Home Customer

Good luck out there and keep us posted with any challenges or questions.

Entry Information

Filed Under: Kit HomesOwner Builder Tips

Tags:

About the Author:

RSSPost a Comment  |  Trackback URL

*