February 26, 2007 · 1:52 pm

The "Ego Wall" When Negotiating Real Estate

I just finished reading a great post over on UrbanDigs regarding his particular strategy concerning negotiating to help his clients receive the lowest price possible when purchasing their property. It’s a good read and has sound thinking behind it. Worth your time.

My only concern is that I have found over the years that there is an imaginary Ego Wall that exists and you do not want to get crushed by it.

What am I talking about? Well, it has been my experience that there is a point at which a seller will negotiate in good faith and a point at which he will be insulted, challenged (or any other word you would like to throw in) to the point that he will be less malleable towards making the lowest deal possible to get the transaction done.

And just like Noah (as a buyer’s agent) doesn’t know how a seller will react or where he will go on his counter offer (if he even offers one once he’s been put off) I seldom know either when working for the seller. As Noah correctly points out almost every seller comes with their own unique set of circumstances and goals.

So while I understand, support and have used the low ball strategy I also caution my clients that when you low ball it still must be reasonable. Because it is my belief that once you make the seller an enemy you may have cost yourself money.

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Filed under Cool Sites, Misc. Real Estate

February 24, 2007 · 10:39 am

New Urbanism, Smart Growth, Whatever: Just Do It

Before I get started let me just say this. I am not an environmental radical. I do recycle. I drive a small car. I’m for smart growth. I’m for anything that lessens our dependence on oil. However, I also live in our real, modern America and I have a minivan to drive around my family of six, and that vehicle currently uses oil. I live in the capital of suburban sprawl right here in Olathe, Kansas and I’ve been known to leave lights on for days at a time.

New Urbanism and Smart Growth do need more attention. Especially here in the heartland where land is so plentiful and cheap that we tend to squander our natural resources without much thought. Clean up this blighted area and recycle the land with new homes, schools and businesses? Nah, just tract out another 100 acres down by Spring Hill and start building!

There are economic, sociological and governmental forces here at play that are too large for just one guy to make a difference. (And talk about a dysfunctional city family here in the metro…KC doesn’t like Overland Park, Olathe doesn’t like Lenexa, everyone fights with everyone over business…) But I would at least like to bring it to the attention of some of you out there.

On this post you will find several links to sites that I think are worth your time to check out. Building & Philosophy sites, a National Geographic site, community sites like Kentlands in Gaithersburg, Maryland, Cherry Hill Village in Michigan and Orenco Station in Oregon to name but a few. (Imagine Zona Rosa with housing right around it so that people could safely walk to the shops and dining without having to drive!) There are even many blog sites concerning urban policy and growth.

I see hope for this train of thought here in the Greater Kansas City area. After all, the condo/loft boom in downtown and the River Market areas are a direct result of people young and old wanting to live in a community that they are actually a part of. To walk to work and dining and entertainment. To not have to negotiate I-35 each and every day.

I have even seen a few builders here in the KC metro put together some neo-traditional housing neighborhoods. Yes, they lack the overall efficiency of a true smart growth neighborhood and are often built out on empty acres miles from shopping and business centers but they are a baby step in the right direction.

True, we are Kansas City and we have different lifestyle traditions than the people on either coast. No matter how nice, spacious and well put together an all brick, three level town house is people here are probably never going to be crazy about living in one. But maybe we can mix a few in along with some well designed single family homes and surround these around a business center? Maybe we can move forward on the Light Rail for Kansas City down to Waldo. (This subject is sure to bring about a comment or two!)

I don’t pretend to have all the answers to our growth problems here in the United States. Many with my political point of view believe we have no growth or environmental problems. But I think that it is short sighted of us to not look towards the kind of city and neighborhoods we are leaving for our children. To continually strive to make a better city than what was given to us and to have affordable housing, clean air, jobs and first class educational facilities is what I believe most of us want . We just have to come to agreement on how this is to be done.

So long as the discussion is civil, I welcome your emails and comments. Reasonable people can debate issues and look for places of promise even when the disagree on many points.

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Filed under Kansas City neighborhoods, Kansas City Real Estate, Social Issues

February 24, 2007 · 8:49 am

Kansas City Real Estate: A Spring Thaw

Let’s face it. It’s been a pretty tough selling season since late November. First there was Thanksgiving followed by the Christmas season. (Yes, houses do sell during this time of year but a greatly reduced pace.) Then came about 1 month plus of snow on the ground and 4-20 degree temperatures.

This week I have noticed more traffic on my homes than I have seen in a while. The weather has broke and people are once again thinking about making a move when it comes to buying their next home and possibly selling their current one.

For sellers this is welcome news.

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Filed under Kansas City Real Estate

February 23, 2007 · 2:22 pm

March Madness is Coming!

Oh, baby! I can feel it. March Madness is just around the corner. With 3 games left the Kansas Jayhawks are tied for first in the league and have a chance at their 50th conference championship. Folks, Blair Kerkoff of the Kansas City Star did a great job talking about what an accomplishment that is.

Anyway, for those that know me well you know I’m nuts about Jayhawk basketball. Here are just a few of their successes;
  • 2 Helms National Championships
  • 2 NCAA National Championships
  • 12 Final Fours
  • 49 Conference Championships
  • 14 Members of Naismith Basketball Hall of Fame
  • 54 All American selections
  • Third all time in wins

Oh, and by the way…they are the only school to have 4 basketball arenas around the country to be named after their alumni.

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February 22, 2007 · 8:11 pm

Keller Williams Realty + Trulia + Google Base = Sold Listings

One thing I base my real estate business on is that the more places you can get your listings posted on the higher chance of success there will be of securing a qualified buyer. And beyond that, if I can be the person the clients contact when they find the home online the better off it will be for all involved in that no one will know more about the listing than me.

Anyway, I’m very excited that Keller Williams has signed a partnership agreement of some sort with Trulia and Google Base. Just today I tried to find my listings on Trulia and found all of them. It’s extremely accurate and up to date. Furthermore, when the client clicks the listing for more information it takes them directly to my website! From there they can continue their search or bounce around my website to find out more about my unique services.

Anyway, I think it’s great. Give the links a try and see where they take you. And let me know your take on the issue.

Chris Lengquist
Keller Williams Realty
Diamond Partners, Inc.
Olathe, KS

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Filed under Cool Sites

February 21, 2007 · 10:52 pm

Depreciation: You must Bifurcate!

Bifurcate depreciation? I first heard of the term when I attended one of Tom Lundstedt’s workshops on calculating the returns on investment property. (If you haven’t been, you should go. Or just order his CDs online. I don’t say this very often but he is worth every penny.) Anyway, it’s a $10 word to say separate.

I’ve referred to the 4 Benefits of owning rental property before but surprisingly I get very few comments or questions regarding depreciation. With tax season here, I thought I would hammer it home.

Pay very special attention to what I’m going to say next: Most rental property owners are improperly depreciating their income property because they are using a tax preparer who is unaware that you can bifurcate your depreciation. It may be costing you thousands!

There are 4 ways you should be breaking up the depreciation of your investment property;

  1. Land – no depreciation permitted.

  2. Building – depreciates over 27.5 years for residential or 39 years for commercial.

  3. Land Improvements – depreciates over 15 years. (driveway, landscaping, stairs, exterior lighting, etc.)

  4. Personal Property – depreciates over 5 years. (carpeting, appliances, etc.)

Hear Me! Most of you are only depreciating the Building! Stop doing that! We are entering the tax season and you need to know this so you can quiz your tax preparer. Still don’t believe me? Watch this example.

EXAMPLE 1: $200,000 duplex located in Overland Park, KS and the tax assessor says the land is worth $34,500. Depreciating the remaining number as the Building on your first year schedule will yield you a tax savings of $1,901. ($165,500 x 3.48% = $5759 x 33% tax bracket = $1,901)

EXAMPLE 2: $200,000 duplex located in Overland Park, KS and the tax assessor again says land is worth $34,500. A Cost Segregation Study shows you have a breakdown as follows;

  • Building at $127,500.

  • Land Improvements at $17,000.

  • Personal Property at $21,000.

Now your formula works out to a tax savings of $3,131. That’s a $1,230 increase in saved taxes! ($127,500 x 3.48%) + ($17,000 x 5%) + ($21,000 x 20%) = $9,487 x 33% tax bracket = $3,131.

Please, I’m begging you (and I don’t generally do that unless you have KU basketball tickets I need) to do your homework on this and make sure your tax preparer does as well. After all, whether you depreciated your property correctly or incorrectly, you will have to pay the depreciation recapture when you sell. Unless, of course, you do a 1031 exchange. (So long as that is the smart thing to do. A whole other way to go is discussed here by my friend in San Diego.)

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Filed under 1031 Exchange, Real Estate Investing

February 21, 2007 · 1:47 pm

Is A REALTOR Worth The Money?

I’m a real estate agent, so you know how this is going to go. But let me see if I can make a compelling case as to why you need professional representation.

People think they are paying their real estate agent to get their house sold. And to a degree they are right. But what is “sold”? When I sit down in my listing appointments and talk with a Seller one of the things that I think is important for them to understand is my general philosophy. I don’t believe I can sell anyone a home. Whether it’s for personal use or to be used as an income property. It’s too big an asset to get sold. People pick and choose their houses carefully based on a very wide variety of criteria. In short, if a Buyer doesn’t like it they can and will move on to the next possibility.

And usually, a home will sell through a co-op agent. Someone else will bring and represent the Buyer. I’m there to market the home in a variety of ways including electronic media, print, word of mouth, signs, mailings, etc. My job is to drive enough people through the house that are ready and able to buy a house to secure a qualified Buyer. And then my work begins.

I tell anyone who will listen a brand new agent can market your home. They can read enough books on how to advertise, hold an open house, etc. But a brand new agent usually will lack the experience necessary to negotiate inspections, hurdle title difficulties, answer an appraiser’s questions, work with mortgage officers and underwriters and their frequent and sometimes unusual demands. Then there are the last minute snafus with the furnace…

In the last month I’ve had several inspections from down under. Massive things wrong and big dollars attached. And not clearly visible without detailed inspections. Keeping the deal together can be daunting and sometimes impossible. But if there is a way, an experienced agent can work it out, get creative, think outside the box. (Are there any other cliches I can throw your way?)

I know many a person who have successfully bought or sold their houses as unrepresented Buyers or Sellers. However, I know many more people who had a contract and the deal fell through. Possibly these two reasons had something to do with it; 1. Lack of experience to know to prepare and/or how to solve the issue. 2. Direct communication between the Buyer & Seller (with their egos involved) may not always be the best path to take. Sometimes, it’s good to have an intermediary.

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Filed under Misc. Real Estate