Monday, December 30, 2013

Stacking the Deck


Stacking the Deck

Let’s assume you need to make some form of community modification requiring approval by the local municipality.  You work with your consultants to prepare the modification.  You work to gain support of the community leaders.  You review with and finalize terms of the modification with the city planning staff, gaining a positive recommendation for presentation to the city council.  Finally, you reach out to the individual council members to bring them up to speed on the rationale behind the amendment.  It seems you have covered all your bases.  Approval should be a rubber stamp.  What can go wrong?

The wild card here is the city council hearing itself.  You should always assume that someone or some group will come to speak out against the proposal.  As council members are publicly elected, they have a duty and responsibility to pay attention to their constituents.  Let’s do the math for a minute.  Assume four people come to speak out against your proposal and two speak in favor.  Regardless of everything you may have done right leading up to the hearing, you may find yourself with a problem.  There is truth to the statement that the squeaky wheel gets the grease.  With more physical evidence against approval staring the commission in the face, they will be hard pressed to disregard the naysayers and give the logical approval.  Call it unfair, call it injustice, call it aggravation.  I call it democracy.

The good news is that this problem is easily solved with proper up front planning.  Make sure that you have sufficient numbers of supporters present at the hearing to speak in favor of your proposal.  Feed them, bus them, throw them a party.  Whatever it takes.  Just make sure that they show up to let the council know that the correct decision is also the one that is most wildly supported.

Unfortunately, life is not always fair.  However, there are many times that life can be better controlled by stacking the deck in your favor.  Knowing that the best laid plans are usually the best plans, make sure that when your proposal comes up for a vote that you have plenty of people there to speak out on your behalf.  Nothing pleases a council more than to know they are enforcing the will of the people.

Until next time…

Keep kicking the dirt!

Jeff Gersh is President of Gersh Consulting Services, a real estate advisory firm, headquartered in Orlando, FL.  He may be reached at jsgersh@gmail.com or 407-468-9328

 

Friday, December 20, 2013

I Did Not See That Coming


I Did Not See That Coming

A large part of the new home buying experience is not just the relationship established between the sales associate and the home buyer, but also the relationship between that same buyer and the whole home building organization.  Nowhere is this more prevalent than in highly amenitized lifestyle communities, where the home owner may actually perceive the builder to be a larger part of their daily routine than the builder realizes.

In these lifestyle communities, the first job of the sales team is to help the buyer fall in love with the community, and, after that, to help those buyers find an appropriate home to meet their needs.  Since so much time is spent extolling the virtues of all the community provided conveniences, the buyer feels that they are truly purchasing more than just a home.  That allows the builder to gain an edge over less amenitized traditional subdivisions.  However, this double-edged sword does have the ability to swing dangerously backwards.  It is the savvy builder that strives hard to make sure that the sword does not cause a decapitation.

Even with a builder’s promotion of lifestyle elements, their main job is to still sell homes.  They are not necessarily geared towards providing all the non-sales oriented community services that the homeowner often feels they are entitled to receive in these communities.  I will give a true example.  During the summer of 2004, several hurricanes rolled back to back to back through the state of Florida.  During this stressful time, a number of well-meaning residents came to the builder’s main office and asked what steps were being taken to secure the life-safety conditions for the residents.  I am not talking about securing construction job sites and implementation of community storm water pollution protection plans (SWPPP).  They wanted to know how the club would be staged as a shelter and how the builder would provide evacuation services for residents.  On one hand, it was heartwarming to see that the community perceived the developer as more than just a homebuilder.  On the other hand, it was concerning that the community perceived the developer to be more than just a homebuilder.  Fortunately, a middle ground was struck to help establish neighborhood patrols that would interface with the appropriately trained and staffed emergency response municipal organizations.

There is a saying that if you are going to run with the bulls, that you will sometimes get the horn.  I think that there is another way to look at this analogy.  If you are going to run with the bulls, then make sure you are adequately prepared to avoid the horn.  I believe that the thrill of the experience will not suffer by taking steps to minimize and downgrade potentially dangerous and uncomfortable situations.

I hope you all have a wonderful holiday season.  This is a busy time for homebuilders as they work hard to reach year-end targets for home sales and closings.  More importantly, though, it is a time of year when homebuilders help families to celebrate and create holiday memories with their loved ones by giving them the gift of new home ownership.  It truly is a special industry.

Until next time…

Keep kicking the dirt!

Jeff Gersh is President of Gersh Consulting Services, a real estate advisory firm, headquartered in Orlando, FL.  He may be reached at jsgersh@gmail.com or 407-468-9328

 

Monday, December 16, 2013

Guns vs. Butter


Guns vs. Butter

In my college macroeconomics class, we studied the relationship of guns vs. butter.  Basically, you can invest in defense or civilian goods, but cannot maximize your investment in both.  You need to decide how to strike the appropriate balance between the two needs. 
In real estate, I find there is a similar corollary between home design and pricing.  It is impossible to get everything you want when contemplating new product design if you also want to make sure you hit a certain price point.  I refer to this as the battle of the sales team vs. the bean counters.  I know it does not sound as glamorous as guns and butter, but follow along with me for a moment. 

On one hand, the sales team will want good architectural design with strong home elevations on the front and rear.  Heaven forbid you have any secondary bedrooms less than 12’ x 12’, the furniture just won’t fit.  You have to have granite countertops as a standard, as well as a preponderance of different size windows to make sure all the rooms are cheery and bright.  Also, make sure that the garage is at least 20’ x 20’ or the cars will bang doors against each other.  Finally, the outdoor covered lanai must have a textured finish to the deck, since no one really wants broom finish concrete.  With all these items in place, the sales team will then tell you they will be able to hit your monthly sales targets.  All will be well in the world and bonuses will be plentiful. 
The financial team will then throw cold water on that parade and tell you that you can’t afford that level of detail and finish and also expect to make any profit at market price points.  End of story.

The struggle is how to resolve the dilemma without throwing everyone into the MMA octagon to see who is the last man standing.  (My money is on the sales team, but that is a story for a different day).
As with the guns and butter dilemma, the key is compromise.  I find it best to identify market price points first.  After all, a family only has so much money to spend for their home.  With that in mind, you can then prioritize the home features to strike the best balance between cost and price.  At the end of the day, the market will tell you what features are necessary at each price point, so long as you are providing the right mix of benefit and value. 

Unfortunately, I can’t tell you how many times I have seen product and feature design serve as a justification for higher than market price points due to the level of detail and finish being provided in the homes.  In these cases, the teams eventually learn the hard lesson that you can have guns or butter, but you can never have the same amount of both.
Until next time…

Keep kicking the dirt!

Jeff Gersh is President of Gersh Consulting Services, a real estate advisory firm, headquartered in Orlando, FL.  He may be reached at jsgersh@gmail.com or 407-468-9328

 

Monday, December 9, 2013

The Root of the Problem


The Root of the Problem

I was at a public hearing the other night when the issue of damage from street trees was addressed by the City Council.  There was a brief discussion on the value of these street trees since, in a mature condition, their roots were beginning to damage sidewalks and sprinkler systems.  I became saddened as I listened.  In my opinion, the whole premise of the discussion was wrong.

This issue should not be whether or not the trees are worth the damage that they cause.  The issue should be whether we as a society are doing enough to make sure our communities are as aesthetically pleasing as possible.  Area repairs due to the maturation of a neighborhood are small prices to pay to make a community desirable.  In my opinion, you can never have too much community detail.  Let me put it in perspective.  If you are going out for a fancy night on the town, you want to make sure you look your best, right?  You want to celebrate and you want everyone who sees you to know that you look incredible.  You may need to spend extra money on your appearance and clothing, but isn’t it worth it?  Don’t you feel better about yourself?  Your community is no different.  Don’t you want it to look its best when you come home and your friends come to visit?  If you need to spend a little bit extra to make sure it is always looking just right, isn’t it worth it?

I know not everyone can afford home and community repairs.  However, isn’t the better question not if, but how can you not afford to spend the money?  Attractive communities tend to have greater community spirit.  Greater community spirit tends to lead to an enhanced lifestyle, where people care more about their community and take initiatives to meet and involve neighbors.   In general, it makes the area a better, safer place to live.  These areas also tend to have higher property values.  You may be spending more than you would like on maintenance, but your increased home value will more than offset that added expense.

So, the next time you see a sidewalk in need of repair due to the maturation of street trees, take a look around.  Don’t ask if the trees were worth it.  Ask yourself what your community would look like without them.

Until next time…

 
Keep kicking the dirt!

Jeff Gersh is President of Gersh Consulting Services, a real estate advisory firm, headquartered in Orlando, FL.  He may be reached at jsgersh@gmail.com or 407-468-9328

 

 

 

 

 

 

 

Monday, December 2, 2013

I can't believe my builder won't...


I can’t believe my builder won’t …

 
As we enter the season of love, understanding and goodwill towards man, I offer up a slightly different take on my normal blog, something I like to call: “I can’t believe my builder won’t…”

I can’t believe my builder won’t…  Offer pocket doors.  The value of pocket doors is that they take up no room space.  In tightly configured areas, I have often heard a request for them so as to do away with the swing area of a conventional door.  While some production builders may offer pocket doors, many more try desperately to stay away from them.  In simple terms, they are a warranty nightmare.  No matter how many times you explain to a home buyer to not hang anything on a wall with a pocket door, they will invariably forget or disregard the advice and hang away with picture hooks and other such items through the wall.  The problem is that this area behind the wall is where the door slides away from the opening – hence the term “pocket door”.  This leads to frustrated owners who don’t understand why their doors are becoming scratched up and no longer open properly.  Oh well…

I can’t believe my builder won’t…  Remove some windows to accomodate more wall space for furniture.  Home buyers will often fall in love with a particular model, but will ask for some window modifications to fit their furniture.  What they fail to realize is that the lighting for a home can completely change whenever some windows are removed.  That light airy feeling that attracted them to the home in the first place may seem dark and much less inviting with a window modification, all for the sake of fitting in a piece of furniture that would have been better left at the old house.  Oh well…

I can’t believe my builder won’t … Allow me to add landscaping to the side of my home.  Oftentimes, homes are located ten feet apart.  In addition to fire separation issues, this space is used for drainage swales between the homes.  Adding landscaping in these areas will very likely impact the normal drainage flow, causing water to back up in both your and your neighbor’s yard.  Oh well…

I can’t believe my builder won’t…  Add drop down stairs to access the attic space in my garage.  Please understand, trusses are designed and installed to support the roof, not to serve as a storage area for every unwanted item that you may have collected over the past 20 years.  It is not the builder’s responsibility to make sure that the truss system has been designed as a storage attic.  That is why it is not called a storage attic.  Oh well…

So, instead of saying “I can’t believe my builder won’t…” the next time he politely denies a construction request, try instead to ask yourself the question “Why would my builder ever…”.

Until next time…


Keep kicking the dirt!

Jeff Gersh is President of Gersh Consulting Services, a real estate advisory firm, headquartered in Orlando, FL.  He may be reached at jsgersh@gmail.com or 407-468-9328