Local purchasing groups enable custom
builders to buy in bulk
Back in the 1920s, several independent family-owned
grocery-store owners, facing stiff competition from burgeoning
nationwide chains such as A&P, formed a union that would
give them the same buying power and marketing exposure as their
deep-pocketed competitors. That was IGA.
In later years, independent hardware-store owners found that
they could stand up to the threat posed by Home Depot and
Lowe's by affiliating with co-ops like Ace Hardware and True
Nationwide competition is a more recent phenomenon in the
home-building field — but it's here and it's tough.
Dan Tingen, owner
of Tingen Construction Co., in Raleigh, N.C., noticed the local
climate change about five years ago when the supply of
available building lots dried up. The shortage wasn't due to
scarce land — it was happening because big national
companies like Centex, Pulte, and Toll Brothers were snapping
up hundreds of lots at a time.
"The larger developers don't want to deal with custom builders
anymore," says Tingen. If they can sell 100 lots to the same
buyer and close them all on the same day, he says, there's no
incentive to negotiate with dozens of small builders, none of
whom could buy more than a handful of lots.
So to compete, Tingen and seven other local custom builders
pooled their resources and, as a group, purchased 112 lots in
the Bedford at Falls River development in North Raleigh.
Today that development is largely built up and the co-op, which
has become known as the Bedford Builder Group, has moved on to
purchase 470 lots in another local development.
Price club. Of course, the
ability to buy large chunks of land is only one of the
advantages that big builders enjoy. They also get better prices
To level the purchasing field, 29 custom builders in the
Raleigh-Durham area — including Tingen — came
together this year and formed a buyers' club of sorts. With
combined annual sales of more than 600 houses, the Triangle
Builders Guild, as it's called, has already been able to
negotiate favorable pricing arrangements with many local
suppliers. Sellers of lumber — as well as of roofing,
drywall, millwork, cabinets, doors and windows, and even
granite countertops — have signed agreements to provide
the same reduced prices to all members of the guild.
Ward Russell, owner of Legacy Custom Homes and chairman of the
guild, is quick to point out that the suppliers also profit
from this arrangement. "A large percentage of our vendors were
very excited to find out that they could post their prices on
our Web site and free up their salespeople from the tedium of
pricing individual jobs all day long," he says. Of all of the
suppliers who were offered the chance to sign on as preferred
vendors, he says, "we haven't had anybody yet who said
Beyond the material advantages, guild members profit from the
opportunity to network and share business ideas. Russell also
sees the arrangement as a chance to create a brand that sets
guild members apart from typical home builders. "We're a group
of builders who have a high standing in the community," he
says. "We're financially sound, we pay our bills on time, we
care about our product. If you buy a house from us, we're going
to be here in 10 years."
Ready guidance. One reason
the Triangle Builders Guild has been able to get up and running
so quickly is that the members didn't have to go it
About 10 years ago, 50 custom builders in Northern Virginia
teamed up — at first on an informal basis — to
negotiate bulk purchase agreements with suppliers. As their
system became more refined, these builders started fielding
requests from peers in other parts of the country for help
starting up similar organizations. Two years ago, 10 of the
original members decided to form a consulting company, Custom
Builders USA (CBUSA).
"We've stacked up the lessons learned as to what is feasible
and what isn't," says Brian Pavlick, CBUSA's Southeast region
manager. At first, Pavlick helped members of the Triangle
Builders Guild set themselves up as an independent LLC. Since
then, he's worked with them to sign up preferred vendors and to
implement CBUSA's Web-based pricing system.
Builder groups who hire CBUSA pay an initial startup fee that
varies based on the size of the group but typically averages
about $2,500 per builder. As an ongoing management fee, CBUSA
also takes a portion of the rebates that vendors agree to give
the LLC when builders pay their bills on time.
Although CBUSA is currently focused on purchasing materials,
Pavlick says it plans to add money lenders to its
preferred-vendor list in 2007. Longer-range plans include
helping client groups buy land, insurance products, and other
In addition to the Raleigh group, CBUSA currently has clients
in Wilmington, N.C.; Atlanta; Cleveland; Houston; Orlando,
Fla.; Albuquerque, N.M.; and central Indiana. CBUSA expects to
have clients in a total of 11 different markets by the end of
For more information about CBUSA, visit the company's Web site
at www.cbusa.us. — Tom O'Brien
•••High housing prices may be the cause of a
drop in enrollment in Florida school districts. The Wall Street
Journal reports that districts across the state have recorded
decreases in numbers of students. Principals and demographers
blame the overheated housing market and the conversion of
low-income housing to condos; families with children, they say,
are being priced out of the market and have been moving to
nearby states like Georgia and Tennessee, where housing costs
are significantly lower. Districts are also losing teachers.
Some are moving, selling their houses for a huge profit; others
discover that they can't afford housing when they are offered
new jobs in the state.
•••If every home in America replaced just one
incandescent light bulb with an Energy Star compact fluorescent
bulb (CFL), we'd save enough electricity to light 2.5 million
homes for a year. So says the Environmental Protection Agency,
which also points out that, over its lifetime, a single CFL can
prevent more than 450 pounds of power-plant emissions from
being spewed into the atmosphere. More information on choosing
CFLs is available at www.energystar.gov.
•••A new book from NAHB, Casa Y Comunidad:
Latino Home and Neighborhood Design, provides insights into
what Latino home buyers look for in a home. Latino households
tend to be younger and larger than their non-Latino
counterparts, and contain more workers. Latino families are
often multigenerational and prefer houses with plenty of
bedrooms, including ground-floor suites for elderly members.
The book's authors advise builders interested in tapping this
market to be prepared to address the financial needs of Latino
home buyers — by helping with financing, for instance,
and by offering cost-cutting alternatives.
Schwarzenegger Signs Lead-Free Bill but
Flushes Low-Flow Plan
Although concerns about technological readiness didn't
dissuade the governor from signing the lead bill, they did
influence his decision on low-flow toilets.
This year was a nail-biter for plumbing manufacturers as two
bills worked their way through the California State
Legislature, each threatening to dramatically alter the nature
of the fixtures that companies are allowed to sell in the
nation's largest state.
On September 30, Governor Arnold Schwarzenegger signed into law
assembly bill 1953, which slashes the allowable lead content in
pipes and plumbing fixtures from 8 percent to 0.25
"Protecting public health is a top priority," said the
governor. "I signed this bill to reduce the amount of lead
exposure in California's drinking water. We need to make sure
that the water we consume is safe for everyone, especially our
Industry response. The Plumbing Manufacturers Institute (PMI),
a national association of plumbing product manufacturers, which
opposed the bill, denies that existing fixtures pose a health
"The basic premise that there's something wrong with faucets is
incorrect," says Barbara Higgins, executive director of the
association. She notes that faucets in this country already
undergo rigorous performance-based testing (in accordance with
the NSF 61 product-safety standard) to ensure that the water
that comes out of the faucet is safe.
What's more, while conceding that relatively simple devices
like water meters can be manufactured with lead-free brass, the
group claims that the technology needed to re-engineer
complicated fixtures like faucets does not yet exist.
"A very small amount of lead is an essential ingredient to
manufacture brass fixtures that resist leakage, corrosion, and
everyday wear and tear," says Dave Viola, PMI's technical
director. Viola argues that an entirely lead-free faucet would
need to be made out of plastic or stainless steel — and
each of these materials, he says, has serious performance
Adds Higgins, "Contrary to what the authors of the bill said,
there are no products on the market today that are manufactured
to comply with this formula. And it's uncertain what alloys or
combination of materials can be used in the future as a
The new law is scheduled to go into effect in 2010.
More testing for low-flow. Although worries about technological
readiness did not dissuade Schwarzenegger from signing the lead
bill, they apparently had influenced his decision a few days
earlier to veto assembly bill 2496, which would have limited
maximum water consumption for all newly installed toilets to
1.3 gallons per flush (0.5 gallon per flush for urinals).
"Before imposing new mandates on builders and homeowners, we
must conduct a thorough study of the new technology to
determine its readiness for widespread use," said the governor
in his veto statement.
"A number of questions have arisen regarding the toilets
required by this bill," he added, "including whether sufficient
laboratory testing has verified compatibility with existing
Water conservation specialist John Koeller, of Koeller &
Co. in Yorba Linda, Calif., pooh-poohs the governor's
misgivings. "The plumbing industry has done a miraculous job in
engineering toilets that are superior performers," he says.
Koeller points out that 17 different manufacturers currently
offer a total of 95 models of toilets that would comply with
the bill's requirements. "Feedback from satisfied customers,"
he says, "as well as our own maximum-performance testing [see
"Toilet Testing Flushes Out Lax Performers," In the News,
9/06], indicates clearly to me that the technology is ready for
the marketplace, without a doubt."
The governor recommended that this issue be handed over to
regulators at the California Building Standards Commission, who
he suggested were better qualified than the legislature to
determine how the state should promote water-saving technology.