Your home: Don’t take it personally

Yet again this week I was reminded of how personal a home sale can be. Really, the same applies to a home purchase as well. This week we listed a home for some great clients in the Midtown area. They have been incredible clients to work with during the preparation stage. They have followed all of our advice from the start, including a pre-inspection and then immediately began addressing any safety issues or items that we noted should be fixed. The photos came back and their house looked amazing.

The listing went “live” five days ago and yesterday we received an offer…wait for it…for 86 percent of list price! What a joke, right? I knew that this offer would go over like a lead balloon, and I was right. Rebecca, our Director of Operations, sent the offer summary to our clients and me. I decided not to call them right away but rather to give them some time to react to the low ball offer. Within five minutes I received an email from both of them confirming that waiting to call was the right move. They were HOT! They were offended and mad, quite honestly. Do you blame them?

We are in a seller’s market still, right? Yes, we are, but that will not stop reckless offers from coming in. So how should you handle it?

Most importantly, try not to take it personally. It is easy for me to say, and hard for some clients to do, but it is a must. Let’s use our aforementioned clients as an example When the low ball offer came in on their house, their initial reaction was to reject the offer. However, over time our team has learned that every offer deserves a response. Time and time again during the recession we would receive low ball offers and eventually get the buyer to a price that worked for both the buyer and seller. Here are a few rules of thumb when handling low ball offers:

1. Always present a counter offer. Regardless of how offensively low an offer might be you should always counter. Trust me, I want my clients to be honest with me and usually they are mad and hurt. Low ball offers feel like an insult or personal attack on the quality of their home. Once they process through the anger, we then discuss our response. I often coach my clients to give me their response (what they would like to tell the buyer), and then we take the emotion out of it and draft a calculated response. Never forget that the first offer is statistically your best offer. However, there are exceptions.
2. Its not about where you start, its about where you end up. As I shared before, often a low ball offer leads to an acceptable offer. You never know how a buyer is being coached from their agent, their family, their spouse, their financial advisor, CNNMoney, etc… Some buyers come to the table with a preconceived notion of a certain percentage that they should get off the price. Usually the market will teach them that their preconceived notion is wrong. Unfortunately, that may mean that they have to miss out on a couple of homes first before the lesson sinks in. Nevertheless, always receive an offer with gratitude. Be grateful for the offer (even a low ball one) and keep the end in mind.
3. Know when to walk away. Okay, now I have “The Gambler” by Kenny Rogers in my head. By walk away I mean there comes a time when buyer and seller must recognize that they are not a fit for one another. If we go back to my Midtown clients example for a minute, I will share with you what I mean by not a fit. When we received the low ball offer, my first move was to call the other agent and get the buyer’s perspective. How did they arrive at this offering price? What did their agent coach them to do? Are they negotiable or is their offer firm?

In asking those questions I discovered that this was the second home that this buyer had low balled. On the first home, the buyer and seller could not meet eye-to-eye. Apparently, the buyer felt that the first home was grossly over priced. Funny thing: The same buyer also thinks that our listing is over priced. Hmmmm. Sounds like a pattern.

The last nail in the coffin was that the buyer had informed his agent that our client had purchased the home in 2007 at the peak of the market (true). And that it was not worth what he had purchased it for because the market tanked right after he bought it (false). Yes, the market tanked in late 2007 and continued to do so until 2013. What the client does not understand is that values have rebounded at an incredible rate. In an earlier column, I shared that at the end of 2012 we were 24.2 percent behind the peak values of 2007. However, half of that loss was recaptured in 2013 and in 2014 homeowners who purchased at the peak (in some cases) are able to sell a home for what they bought it for or even a little more.

Needless to say, my clients walked away from the buyer. After all, they weren’t really a buyer to begin with in my mind. They were a trier. The buyer also taught us that he was a terminal negotiator. Someone must lose for him to win. That just didn’t work for us. We wish him luck. Maybe the third time will be the charm.​

Your home: The potential Homestead land purchase, not another Mission Valley debacle

Homestead1

For the first time in the history of my column, I am going to discuss the same topic twice. I have decided to do so because of the calls and emails that I have received since my last column about the Homestead land. All of which have been in favor of the land acquisition by the city of the Homestead Country Club greenspace along Mission Road.

More importantly, I strongly believe that our parks and greenspace are what set us apart from other cities in the area. Parks are a part of our community and our lifestyle. And they provide a place for neighbors to get to know each other to build a stronger community. In addition, they have a direct correlation to home values and resale. I want to help to protect our home values in Prairie Village and our residents’ equity is my business. So let’s dig a little deeper into the topic.

Recently, a story here on PVPost.com made a slight comparison of the potential Homestead land purchase and the Mission Valley land sale. I have heard this come up a couple of times over the last week and I would like to clarify a few points that I think strongly differentiate the two.

1. Land Pricing: The Homestead land price is $2,400,000 for a little less than six acres. That is approximately $500,000 an acre (43,560 square feet). To put that price into perspective, our team has recently sold a 16,000 square foot lot in the area for $340,000. That particular lot was one third of an acre and sold for $340,000. That makes the $500,000 an acre price seem pretty fair. Now, I am not a commercial Realtor and I don’t pretend to be one. The lot that we sold already has plumbing and electrical running to it so it is ready to build on today. The Homestead land is purely green space.

The Mission Valley land (18 acres) sold for $4,350,000, or $241,666 an acre. Unbelievable! Yes, that was during the recession, but wow, what a steal. Comparing that land purchase to the potential Homestead purchase would be unfair to say the least. That would be like comparing the resale value of a Cape Cod from 2011 and today. It just doesn’t work. I have a fear that some of the city council members might be using the Mission Valley pricing as a guide. Please don’t! When I sell a home today and the buyer’s lender sends out their appraiser to justify the sales price of the home, that appraiser will not accept sold comparables in the area that are more than six months old. That same line of reasoning should apply to this scenario as well.

2. Land Use: I don’t even want to spend a lot of time discussing the Mission Valley land deal and Tutera. There is such a black cloud around that topic. It is right up there with discussing politics or religion in public. I don’t even bring it up because of the drama surrounding it. That said, I do want to discuss one point: The land use.

The land use and design of a retirement community have been met with much resistance. We won’t get into all of the reasons why. My point is that not all residents are excited about the potential of a retirement community in that location and of that size. Contrast that with the Homestead land and the proposed use by the city as a park. Who doesn’t like parks? I don’t see people lining up to protest additional park land. Has anyone ever seen a “no more parks” movement? I don’t think so.

My last column that ran in May about the Homestead land opportunity received the second highest page views of a Sponsored Column in the history of PVPost.com — more than 1,200 pageviews (and counting). Clearly there was a lot of passion around this topic. If you remember, we had a survey at the end of that column and to date 415 readers have responded to the survey with a resounding 90 percent of them in favor of the city of Prairie Village purchasing the land to be used as a park. Call me crazy but that sounds like a clear message to our city council that Prairie Village is excited about the opportunity of a new park.

3. No more “closures”. When the school district decided to close Mission Valley, the ripple effect was felt throughout the community and to this day the land is an eye sore. As Realtors, our team has to drive clients by that land on a regular basis and explain why 18 of the best acres of land in the city are still sitting there overgrown and abandoned. Trust me, it does not instill confidence in future residents or business owners.

As a Homestead Country Club member, I have been fearful that my opinions about the land purchase would be received as self serving due to my membership. City council members, I am speaking to you specifically right now. The future success and reorganization of Homestead and the land sale are two very important issues. However, they are two separate issues. It would be reckless of the council or any other party to link the two issues. If the city purchases the land from Homestead, it would not guarantee a certain future for the club. I’ll just say it. It is not a bail out. We shouldn’t even let that thought enter our heads.

The potential land purchase is simply a great opportunity for the city and could possibly assist the club in its reorganization. Since when did a win-win become a bad thing? Does someone have to lose for the other to win? I don’t think so and I believe that the residents of Prairie Village feel the same way.

Photo credit: PVPost.com

Your home: Is our housing affordability gap widening?

My family just returned from a vacation to Seaside, Florida. What a beautiful part of the country! Being Realtors, of course we were curious about the real estate values. For example, homes in Prairie Village sell on average for $150- $200 a square foot. The homes there were selling for anywhere from $500-$1000 a square foot. Unbelievable! I share that to put things in perspective for this column. At the end of the day, we have some of the most affordable housing and cost of living in the country.

But the gap in affordability seems to be widening.

CNN Money recently had a story called, “America’s Growing Housing Affordability Gap” and it made me think of Prairie Village. In the article, the writer shared, ” For the typical American household earning the median income, 65.5 percent of homes were affordable in the first quarter, according to a survey by the National Association of Home Builders (NAHB) and Wells Fargo Bank’s Housing Affordability Index.”

The article went on to share that in cities like San Francisco, where the median home price is $815,000, only 13.3 percent of homes could be purchased comfortably by households earning the median income of $100,000. Isn’t that sad?

So I am curious about our neck of the woods. The median home sales price in Prairie Village hovers from $180,000 to $190,000. The estimated median household income in 2011 was $76,006. All that being said, it seems affordability should be pretty high. According to the city of Prairie Village, 81 percent of all of the housing in Prairie Village is owner occupied. Again, this makes a pretty strong case for affordability.

The gap that we are noticing that seems to be widening is the gap from a starter home to the next step up. And then from that second home to the third. Quite often that we have a client moving from a $150,000 home to a $225,000 just to gain an additional bedroom, another bathroom, and hopefully another living space. This 150 percent increase in a home purchase price is not affordable to all for sure.

And when buyers begin to explore outside of our city and learn that they can accomplish a lot more of their wish list in other areas, oftentimes they defect (I use that term jokingly). According to the National Association of Realtors, in 2013 the number one concern for home buyers was getting a good value. It all depends on what your definition of value is. For some, value is the most bang for their buck and for that reason they move to Shawnee or Olathe where a move up home is larger.

For others, value might be paying the 150 percent increase to stay in PV because walking to the shops and local schools surrounded by a mature neighborhood is important to them. Each to his or her own. That is the beauty of real estate.

But back to affordability. Is the price gap between moves widening? I think that it is. And what effect will this widening have on our city? Will more Prairie Villagers go south or west?

For me, the widening gap means two things. If you are running out of space, or are just in need of making a move up, DO IT NOW. Daily I am shocked at how quickly values have recovered and are now quickly approaching peak values that we saw in 2006 and 2007. If inventory stays low and demand stays high, a buyer’s move up will continue to cost them more and more.

Secondly, if you are thinking of selling, do so. As prices go up, we are seeing more and more buyers electing to stay put (and possibly add on or remodel) or to rent in lieu of a home purchase. As a seller, you do not want to see your home buyer pool shrink. Or if you wait too long you might see your buyer make the move out west or south. Don’t wait for the gap to widen.