The remodeling industry has a growing problem on its hands that must be addressed immediately.
Remodeler's Exchange: Make the Most of the Stimulus
The tax credits for energy-efficient remodels included in the recent stimulus package are getting a lot of attention. We talked to two remodelers who are using the credits to boost their businesses.
The tax credits for energy-efficient remodels included in the recent stimulus package are getting a lot of attention. We talked to two remodelers who are using the credits to boost their businesses. (Listen to the podcast here.)
|John Sperath||Mark Tiffee|
Tom: Mark, we’re talking about how to market the new tax credit plan that has been in place now for several weeks. Give me your thoughts on the president’s tax credit plan as you know it.
Mark: I think it’s a step in the right direction. I’ll make a disclaimer that I don’t agree with a lot of stuff that’s going on out there. I’ll agree with this component of it: What I like about it is there are two standards put into this that are above and beyond Energy Star, meaning that the solar heat coefficient and the U factor of .30, which I think is a step in the right direction for the industry. I think that in the industry as a whole, there’s too much variation and a lot of misinformation out there. To put people on a performance field that is level is a good thing. I like that aspect of it. I also like the fact that it’s more money. It’s enough money to actually get someone to make a decision versus the old tax credit that went away. At the end of 2007 it was only $500. I think this is enough money to make a difference.
Tom: I’m compelled to ask you this: $500 in 2007, and now you say it’s enough money. What is “enough money?” What is it now?
Mark: It’s $1,500 now. In 2008, it was zero. For this year and next year, we know it’s going to be $1,500 total. You can only use that in total; you can’t do $1,500 in 2009 and $1,500 in 2010. It’s $1,500 total. You’ve got to spread that between all of the qualifying measures, whether that’s windows, insulation, skylights or HVAC. You can only do the $1,500 once.
Tom: John, let’s talk about specific examples, in your case, the overall “big picture” type thing on the way you see the tax breaks from the stimulus package.
John: I agree with Mark. This is a much better program than the one they had in place. And it is probably enough to stimulate decision making. That’s the hardest thing for us; getting people to commit to a project. One of the things that we’ve found here in our area is that there’s still a tremendous amount of interest in remodeling, windows, siding and everything else. I’ve done the same number of appointments that I did in 2008. The hard thing is getting them to commit because of fear. The fear is in losing their jobs or the stock market or whatever it may be.
Tom: [To get the credit,] there is specific documentation, then, that the consumer has to have from the manufacturer, is that correct?
John: Yes. They’ve got to submit that with the credit, I understand. When you request this credit, they have to provide information that says that this particular job met these criteria.
Tom: And you’re saying that providing this documentation can be a challenge in this particular process?
John: Finding the product can be a challenge. I think it’s the manufacturers’ playing catch up. I think this thing may have caught them by surprise.
JOHN: “Finding the product can be a challenge. I think it’s the manufacturers’ playing catch up. I think [the credits] may have caught them by surprise.”
Tom: I thought finding the documentation is the problem. After talking to John, maybe finding the product is the problem. One would think there has to be some documentation that would have to go along to the consumer for that consumer to get a tax credit from this renovation project. Is that correct?
Mark: That is correct. Basically, here’s where it’s at. Bottom line is, you have to have two requirements: You have to have a U factor of .30; you have to have a solar heat gain coefficient of .30. John is very correct in that a lot of manufacturers are scrambling like crazy right now because they don’t have windows that meet these requirements. Frankly, we’ve got a lot of competition, especially the high-pressure, fly-by-night companies, who are lying and cheating homeowners, telling them their windows comply. There’s going to be a lot of problems come tax season next year when people try to get their documents. Not only does it have to comply, the manufacturer has to send a letter to the contractor that says that this is the qualifying product that was installed in Mr. & Mrs. Smith’s home.
John: It’s funny, Mark, that you talk about these fly-by-night guys. Two weeks ago, we had a home show here; it’s a big event for us. One of the things I typically do is I take off my logo shirt and put a regular shirt on, hide my exhibitor’s badge, and just wander and talk to vendors. There were two vendors who were there, unnamed, who I asked questions about this energy tax credit. What they told me, thinking I was a prospect, was, “Well, our windows don’t really meet the requirements, but who’s going to check, anyway?” That just blew me away!
Tom: They say that they don’t quite do it, but who’s going to check? Who is going to check?
Mark: I had this conversation with one of our tax professionals. He said that in some cases, they may not check. If they ever get audited that seems to me where the can of worms is going to be open. I also think that there’s going to be some backlash on certain companies like John already alluded to. I know of one national player that is doing exactly what John just mentioned. They’re telling people, “Oh, don’t worry about it.” I think there will be some major problems as soon as someone gets audited or gets in trouble where they can’t provide a letter.
Tom: What’s the most popular project that would qualify under the stimulus plan?
John: The housing inventory in our area is running 20 to 30 years old, sometimes 40, on average. At that point you replace the HVAC system, maybe the second go around. You are adding windows. While we’re adding windows, let’s do the rest of the house. While we’re blowing the new insulation in the new addition, why don’t we go ahead and enhance the insulation in the attic?
Tom: Mark, what’s your most popular project that pertains to the Stimulus Tax Credit and why?
MARK: “Frankly, we’ve got a lot of competition, especially the high-pressure, fly-by-night companies, who are lying and cheating homeowners, telling them their windows comply.”
Mark: The bottom line is, it’s windows by and large. Our bid volume for windows is staggering compared to siding right now. We’ve seen our siding business go down dramatically where the window business, while it hasn’t gone up, at least it’s kind of held.
Tom: Mark, what is your most specific and successful marketing tool or technique that you use when marketing energy-saving projects that might qualify for the tax break?
Mark: We’ve taken a little $1,500 tax credit logo and stuck it in virtually everything, whether it be our pages on our Web site or our advertising or direct mail. We put it everywhere.
Tom: John, are you using any specific marketing technique to have your consumers aware of the $1,500 tax credit?
John: We have not really pushed it like Mark has. In my experience, one-on-one conversations or small group conversations are by and far some of our best resources plus leads and referrals. When this thing first hit, we sent out several broadcast e-mails to our past clients and past prospects and announced it. We had some activity from that. It was on some of our display boards at our recent home show, which spurred some interest and inquiries about it. In any conversation that I have with anyone who is interested in doing business, it’s part of that conversation.