Joseph Luca

For over a year now we have seen that the Trend in Residential Real Estate has been towards smaller homes. Parents have been downsizing because the “Empty Nest” is too much house after children move away, and others are opting to avoid high upkeep and maintenance costs by building houses that are as much as thirty percent smaller. We have also seen ample anecdotal evidence that the same was happening in Commercial Real Estate. Big Law Firms have been laying off attorneys, Insurance Agencies have been downsizing, and Mortgage Companies, if they have survived, are much smaller than they previously were. Well now we have more evidence that “Small is In”. Target announced nine months ago that they were going to experiment with a smaller footprint store in the 60,000 to 100,000square foot range. They have recently disclosed that the first Smaller Target will be in downtown Seattle; a three story 103,000 SF store. While this is not at the smaller end of the range there will surely be some in the 60,000 SF range in the near future. As the expansion opportunities in the suburban markets are exhausted, the Big Box Retailers will need a smaller format to penetrate urban markets where real estate considerations, operational and profitability challenges preclude the larger format stores. Some other examples of Small being In would be Petco, which has been exploring smaller express stores for the urban market, as well as some Fast Food and QS restaurant formats that need to penetrate additional trade areas. So the trend towards bigger houses and properties that started in the 1950’s has finally been replaced by smaller, more efficient houses and properties today. Good Luck and Good Selling.

Jim Helsel, the Treasurer of the National Association of REALTORS® testified before a House Panel on July 29th. He stated that a strong commercial real estate sector is vital to millions of U.S. jobs and helps keep the national economy afloat. Perhaps the esteemed members will listen to testimony "from the trenches" of small business. Tax credits and assistance to hire employees are of little value if there is no capacity to retain them. Businesses need access to capital when cashflow slows to maintain or increase inventories, acquire other businesses, or for new construction. Small business vitality is what would help "prime the pump" of our economy; it needs to grow from the bottom up, not the top down. Lending institutions are relucant to lend because of the presence of "Big Brother" and restrictive regulations.

Congress has acted to help address the situaton; the Small Business Lending Act of 2010 is greatly appreciated but we need more. We are not asking for money, or tax breaks; rather small businesses need access to capital (which is not a "handout" from the government) for QUALIFIED business borrowers. Hopefully they will hear us and respond positively.

Thanks for stopping by.

May you Be Healthy, Wealthy, and WISE.

Commissions - that is how we make our living and pay our bills and it is the first thing that goes on the "chopping block" when monies need to be "saved" in a transaction. Lawyers aren't asked to reduce their fees, and no one ever disputes any other fees it is the Broker who takes "the haircut" in order to "save the deal." So what is a "Fair commission"?

Generally, land deals are a flat ten percent unless the price point is in the millions of dollars, then it will be reduced. For commercial real estate sales I charge six percent; the marketing expenses can be higher, it takes longer to close a deal, and there is a different, more specialized skill set that for which I charge a premium. The only time I will reduce that is when listing multiple properties from the same person/entity or repeat clients. For residential deals I have been listing properties at a five percent commission recently in response to current market forces. However, for properties which require specialized marketing, custom web sites, etc, it is not unreasonable to charge six percent.

Beyond this, some other variables which factor into my commission calculation are the following: how anxious is the Seller? (a higher commission rate will motivate both Listing and Selling Agents;) Does the property have any "challenges" which would impact its marketability? (ie: is it a tough sell due to location, cosmetic/structural condition, or other property-specific issues.)

Generally, I try to guide my Sellers so they don't lose sight of their ultimate goal; to sell the property for the maximum amount the market will bear in the shortest time. Saving 1% on the commission but increasing the time it takes to sell the property, is not prudent. Market values could decline and/or interest rates could increase - thereby reducing the number of qualified potential buyers.

What are your thoughts?

Until next time, be Healthy, Wealthy and Wise:)

The U.S. Senate voted Wednesday to extend the home buyer tax credit closing deadline to Sept. 30, giving an estimated 180,000 buyers who met the contract deadline of April 30 extra time to close the transaction. The extension was added to a bill to pay for jobless benefits. The NATIONAL ASSOCIATION OF REALTORS® estimates that one-third of qualified applicants have been notified that they will be unable to close by the deadline. The Mortgage Bankers Association says delays are caused largely by the volume of transactions. The measure still must be approved by the House.  SO BROKERS BEWARE - it is not yet a Law so it's not a "Done Deal." Call your Congressional Representative and tell them to support this Bill.  Additionally, according to a new study released by the Joint Center for Housing Studies at Harvard University, the Housing Market Recovery could be aided by the jobless rate.  Depending on your perspective and location you may think it could be hampered and NOT aided.  Here in Rhode Island, we have had double digit unemployment for twelve months and only marginal improvements have been realized.  This is largely due to to the unfriendly business climate that our State Legislature has created; and it appears they are unwilling to change course.  So for those of you who reside in states with an improving jobless rate, congratulations and get ready to start making more money. Until next time - Be Healthy, Wealthy and Wise

That has been the story this week for too many Rhode Islanders. The Blackstone and the Pawtuxet Rivers have crested at nine feet over flood stage and could go higher. This is after previous rain storms had saturated the ground, swelling rivers and streams. Many are learning how much of their property and belongings are a "Total loss". A storm of this magnitude has not occurred in over 100 years; so many of these properties were not in the "100 year floodplain" and flood insurance was not required, or necessary. Those that did have a flood insurance policy with FEMA are finding out how the hard way what their policy does not cover. Warwick Mall, a regional retail shopping center anchored by Macy's and JC Penny, has sustaiined damage from four feet of flood water. Sewage treatment plants have shut down due to loss of elecrical power, or being sinply overwhelmed by the quantity of water. Residents have been advised not to flush their toilets, many are without power, sump pumps are burning out due to constant use, retailers quickly sold out of pumps. The elderly have been especially hard hit; many living alone and now without heat and/or electricity. Small businesses face the prospect of being closed indefinitely - after already enduring one of the worst economic downturns in recent memory.

Realtors are facing a multitude of problems, issues and concerns that they have never before had to deal with. Property listings that have flooded basements and the owner is out of the country; Closings scheduled but Lenders are now requiring another appraisal and inspection which could cause the Buyers to lose their Mortgage Committment; Flood Insurance may now be required by Lenders where it was not required previously; Agents have Final Inspections and the Buyer sees all of the neighbors houses with hoses pumping thousands of gallons of water out onto the street or, worse, onto the property of the listing. The "cost" of this rain storm is going to be virtually incalculable. The main reason it is going to be so immense is that it is so un common for this part of the country to receive so much water in such a short period of time. Some areas received 30% of their annual rainfall in two days. Rain that fell on ground that was already saturated from previous rains.

What weather-related horror stories do you have?

Until the next time,

Be Healthy, Wealthy, and DRY.

Joe Luca

Luca Commercial Group

RPL Commercial