The Company seeks to assist its home buyers in obtaining mortgage financing
for qualified buyers. Substantially all home buyers utilize long-term mortgage
financing to purchase a home and mortgage lenders will usually make loans only
to qualified borrowers. In connection with the Polygon Acquisition in 2014,
the Company acquired a membership interest in an unconsolidated joint venture
which provides certain mortgage brokerage services, in part, to its customers
in Washington and Oregon.
The management team responsible for a specific project develops marketing objectives,
formulates pricing and sales strategies and develops advertising and public
relations programs for approval of senior management. The Company makes use
of advertising and other promotional activities, including on-line and social
media, brochures, and the placement of strategically located sign boards in
the immediate areas of its developments. In addition, the Company markets all
of its products through the internet via email lists and interest lists, as
well as its website at www.lyonhomes.com. In general, the Company’s advertising
emphasizes each project’s strengths, the quality and value of its products
and its reputation in the marketplace.
The Company normally builds, decorates, furnishes and landscapes three to five
model homes for each product line and maintains on-site sales offices, which
typically are open seven days a week, however, in some cases the Company will
operate out of an on-site sales trailer prior to model home construction. Management
believes that model homes play a particularly important role in the Company’s
marketing efforts. Consequently, the Company expends a significant amount of
effort in creating an attractive atmosphere at its model homes. Interior decorations
vary among the Company’s models and are carefully selected based upon
the lifestyles of targeted buyers. Structural changes in design from the model
homes are not generally permitted, but home buyers may select various other
optional construction and design amenities.
The Company employs in-house commissioned sales personnel to sell its homes.
In some cases, outside brokers are also involved in the selling of the Company’s
homes. The Company typically engages its sales personnel on a long-term, rather
than a project-by-project basis, which it believes results in a more motivated
sales force with an extensive knowledge of the Company’s operating policies
and products. Sales personnel are trained by the Company and attend weekly meetings
to be updated on the availability of financing, construction schedules and marketing
and advertising plans.
The Company strives to provide a high level of customer service during the sales
process and after a home is sold. The participation of the sales representatives,
on-site construction supervisors and the post-closing customer service personnel,
working in a team effort, is intended to foster the Company’s reputation
for quality and service, and ultimately lead to enhanced customer retention
and referrals.
The Company’s homes are typically sold before or during construction through
sales contracts which are usually accompanied by a small cash deposit. Such
sales contracts are usually subject to certain contingencies such as the buyer’s
ability to qualify for financing. The cancellation rate of buyers who contracted
to buy a home but did not close escrow at the Company and its joint ventures’
projects was approximately 18% during 2014 and 17% during 2013. Cancellation
rates are subject to a variety of factors beyond the Company’s control
such as individual customer circumstances and current economic conditions.
