After a brief bit of downtown, the Louisville Real Estate blog is now back online and stronger than ever! We missed you all, and missed discussing Louisville Real Estate with the community. Have no fear, we are here!
Westport Village, the $30 million retail complex that is replacing the Camelot Shopping Center at Westport Road and Lyndon Lane, will be open to the public for the first time on Saturday, from 5 to 8 p.m.
Construction on the project is half completed, and the first new tenants — Norton Healthcare, a physician and immediate care operation, and Alter Ego, a women’s clothing boutique — will open in June, according to a press release from the developers, Underhill Associates Inc.
Saturday’s event is a $50-per-person wine-tasting reception, with the proceeds going to benefit the Leukemia and Lymphoma Society. Several hundred guests are expected to attend.
The center has been recreated with a horse park village design, and the developers are trying to attract restaurants, boutiques, health services and specialty retailers, among others. Other tenants are expected to be announced Saturday.
Part of Mercantile Lofts building collapses
A portion of the Mercantile Gallery Lofts condominium development at the corner of Market and Floyd streets collapsed overnight.
The developer is CobaltBravura City Lofts LLC, a strategic alliance formed by two local companies: venture and real estate development firm Cobalt Ventures LLC and architectural firm Bravura Corp. Officials at the companies could not immediately be reached.
The $10 million, five-story development includes 47 single-story condominiums, ranging in size from 700 square feet to 1,500 square feet.
It is being created from four buildings that once were part of the old Brinly Hardy warehouse property. The project is scheduled to be completed by late summer.
California firm to buy historic Starks Building Hertz group pledges to invest ‘at least $10 million’ in repairs
by John R. Karman III
Half-empty and beginning to show its age, downtown Louisville’s historic Starks Building is about to get a new owner who is pledging to make significant investments and add an upscale restaurant in an effort to bring the office tower back to its former glory.
The Hertz Investment Group, a real estate investment firm based in Santa Monica, Calif., has the 14-story building under contract, and officials expect to close on the purchase at the end of the month, according to Judah Hertz, the company’s president and CEO.
Hertz declined to disclose the exact purchase price but said it is “in the $12 million range.”
The seller of the Starks Building, which is located at Fourth Street and Muhammad Ali Boulevard, is Allstate Life Insurance Co. of Northbrook, Ill.
Allstate bought the 346,000-square-foot office property two years ago for $14.3 million. The insurance company does not own the adjoining 701-space Starks Building parking garage. Title to that property is in the name of a New York City holding company, 430 South Third LLC. Allstate officials could not be reached for comment prior to
Hertz said his company will invest “at least $10 million” to make improvements to the Starks Building, which dates to 1913. An assessment of what renovations are needed will be conducted after the firm takes title to the property. Hertz intends to reserve the first two floors of the building for retail and restaurant uses. The remainder of the tower will remain office space.
The Starks Building has struggled to attract and retain tenants in recent years. Still, Hertz is optimistic that his company can restore the property and make it viable for office users of varying sizes.
The Starks Building will be Hertz Investment Group’s first property in Kentucky, and the company CEO said he is “very impressed” with Louisville and the progress of the city’s downtown core. He was particularly complimentary of Fourth Street Live, the entertainment hub located in the same block as the Starks Building, saying that he expects the complex’s presence to drive tenants to his facility.
“I just believe that this building wasn’t really properly managed and leased out in the past, and I think that it should be something that we will do well with in the future,” Hertz said.
The local commercial real estate firm CB Richard Ellis/Louisville has been handling leasing and property management duties at the Starks Building.
It will continue to be the leasing agent under the new ownership but will turn over management responsibilities to Hertz Investment Group, according to David Hardy, managing director/senior vice president and a broker for the Louisville firm.
Hardy said he expects the new ownership to bring new life and new tenants to the aging Starks Building. Currently, the office tower’s largest tenants are the law firm O’Bryan, Brown & Toner PLLC and Atria Senior Living Group.
In particular, Hardy said, Hertz and CB Richard Ellis/Louisville are targeting a “high-end” restaurant to take the first-floor space formerly occupied by Rodes, the apparel retailer that left downtown for a suburban location on Brownsboro Road in 2004.
The broker said discussions are ongoing with several prospects that would bring such a restaurant to the space. He estimated that a deal will be finalized within 120 days.
“We’re optimistic because we now have an owner of the building that is in the business of operating and owning office buildings,” Hardy said. “They will commit the resources to secure an attractive tenant for the first floor, which, we think, will give the building the momentum to attract additional office tenants.”
CB Richard Ellis/Louisville also is marketing second-floor space in the Starks Building, formerly leased by Rodes, for retail or restaurant uses and is looking for a retailer to take space available adjacent to Seng Jewelers LLC, which recently signed a five-year extension on its lease.
Seng owner Lee Davis could not be reached for comment prior to Business First’s press deadline.
Hardy declined to address the future of the basement space that currently is home to the Colonnade Cafeteria. The restaurant’s lease expires at the end of November, and Colonnade owners said they have been asked by Allstate to vacate by Sept. 30.
Chuck Krill, one of the owners of the downtown mainstay, said he has not been contacted by Hertz Investment Group about the pending change in ownership. Colonnade owners continue to look for relocation sites in the central business district, he added.
The Colonnade began operating in 1913 and has been in the Starks Building basement since 1926.
Hertz Investment Group, founded in 1979, has a 10-million-square-foot portfolio that includes office high-rises, retail centers, luxury hotels, theaters and multifamily residential properties. The firm has significant holdings in Los Angeles, New Orleans, Pittsburgh, Miami and Memphis, Tenn. It recently has expanded to St. Louis, Cincinnati, Indianapolis and Kansas City, Mo.
Hertz said buying additional properties in Louisville is part of the company’s strategic plan. “Once we come into a city, we like to expand to at least have over 1 million square feet there,” he said. “From what I can tell, downtown Louisville has a lot to offer.”
Hardy said he is impressed with Hertz and what the firm brings to the table.
“They like (central business district) properties, and they have a significant portfolio and a significant growth strategy,” he added. “They’ll be a great addition to our landlord community here in town.”
Park DuValle nears home stretch, Second model village to open in July
by Sarah Jeffords
As Michael Bauer drove down the tree-lined streets of The Villages of Park DuValle, he proudly pointed out the features of the mixed-use community — housing units at various price points, commercial space, schools, churches, a health facility and recreational areas.
With its carefully manicured lawns and tree-lined parkways, it is hard to imagine that the 125-acre community once was a poverty-stricken public housing complex.
So even though the Southwest Louisville neighborhood still has a way to go before construction is complete, it already has become a “huge success” for the city, said Bauer, president and CEO of Louisville Real Estate Development Co.
The for-profit developer is an affiliate of Louisville Development Bancorp Inc. and focuses on mixed-income housing projects in inner-city neighborhoods.
The company serves as the construction lender for the single-family homes in Park DuValle and oversees development of that component of the project.
Nonprofit group The Community Builders Inc. is the master developer and property manager for the multifamily units and commercial space.
Ripple effects of Park DuValle
The $200 million project’s goal was to fashion a mixed-income community that would be a springboard for additional redevelopment and attract private investment to the area.
The concept is working, Bauer said, referring to nearby senior housing complexes as an example. Called Marian Manor I and II, the 48 affordable housing units were built in the wake of the Park DuValle development.
Immaculate Heart of Mary had long wanted to build senior housing in the area, said Julia Wales, Immaculate Heart office manager and former chairwoman of the Senior Housing Committee that oversaw the Marian Manor projects.
She added that the church had available land adjacent to the Immaculate Heart property, but church officials knew they would be unable to attract residents to the area, considering the reputation of the neighborhood.
“We wanted to make sure it would be a nice environment for our seniors,” Wales said. With the Park DuValle revitalization, that dream became a reality. Now, Wales said, all the units are occupied, and there continues to be a waiting list.
And Park DuValle has had a positive impact on efforts to bring new businesses to the area. “It really changes the perception (of the area) for people who are considering doing business in West Louisville,” said DeVone Holt, West Louisville economic development manager for Greater Louisville Inc., the metro chamber of commerce.
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Holt added that many people unfamiliar with West Louisville don’t realize that communities such as Park DuValle not only exist but are successful. And when they see those type of neighborhood developments flourish, it helps to raise the comfort level of incoming businesses.
Another plus is that the success of Park DuValle, which was funded in part through a Hope VI federal grant program, has led to additional federal housing dollars for Louisville.
Tim Barry, director of the Louisville Metro Housing Authority, said the proven track record with Park DuValle played a part in the city’s ability to secure two additional Hope VI grants, totaling $40 million, for Liberty Green, a similar redevelopment effort that is under way in east downtown Louisville.
And U.S. Department of Housing and Urban Development officials, who administer the Hope VI program, continue to hold up Park DuValle as an example of a project that worked. “It’s been a monumental success,” Barry said.
Final phase under way
But there is still more work to be done. The third and final phase of the project is progressing, Bauer said, with another 100 homes that will be constructed within the Park DuValle footprint and 40 homes that will be constructed off-site, most likely in conjunction with affordable housing agencies.
The development’s second model village is set to debut in July, and incoming residents will have an opportunity to tour the 10 homes and gather ideas they would like to incorporate in their residences.
The 10 homes in the first model village, which were used during Phases I and II, have sold and are occupied.
The 600 rental units also are completed and fully occupied, Barry said, with a waiting list of at least 200 people. One-third of those residents are considered low income, one-third are middle-income and the remaining one-third can afford to pay market-rate rent.
That tenant mix was part of the original goal, Barry said, and the model seems to have worked. In the single-family home component, incomes range from $30,000 to $250,000, he said, and houses are priced accordingly, from $81,000 to $250,000.
To date, Bauer said, 310 single-family homes are occupied, and an average of 30 contract homes are under construction at any given time.
The plans for Park DuValle called for residents to be within walking distance of shops, retail outlets and a variety of business services. But the only commercial tenant currently is Skip’s Shears Plus III barbershop. A Soupy’s restaurant in the development closed a few months ago.
Darnell Jackson, assistant office director for Community Builders, the entity that leases the commercial space, could not be reached for comment prior to Business First’s press deadline.
Additional projects in the works
Despite the sluggish demand for the commercial space, Bauer is excited about the success of the development overall.
Park DuValle has gained national recognition, he said, adding that it’s “truly a win for Louisville.”
His plan is for Louisville Real Estate Development to take what has been accomplished at Park DuValle and replicate the model elsewhere in Louisville. The challenge will be to develop alternative sources of funding, as the Bush administration has proposed phasing out the Hope VI program.
Bauer has been evaluating other funding models, and once the financial resources are in place, he expects Louisville Real Estate Development to tackle new projects.
He declined to disclose details about what might be on the horizon, but he said company officials are eyeing other blighted areas that could benefit from housing redevelopment.
Description: A 125-acre community that includes a mix of housing styles, commercial space, recreational areas, schools, a health facility and a community center
Location: Southwest Louisville, north of Algonquin Parkway inside Interstate 264
Price tag: $200 million
Awards: Honor Awards for Urban Design, American Institute of Architects, 2000; finalist, 2005 Reader’s Choice Awards in the Master-Planned Communities category, “Affordable Housing Finance” magazine
Web site:www.thevillagesofparkduvalle.com
Status, as of 2005 year end:
* Louisville Real Estate Development Co. made $4.32 million in construction loans in 2005 and a total of $30.5 million in loans since the development began in 1998
* 255 homes were completed by the end of 2005, with another 25 homes under construction
* Of those 280 homes, 228 (or 81 percent) went to first-time home buyers
* 55 percent went to households earning less than 80 percent of the area’s median income
Source: Louisville Development Bancorp Inc.’s Annual Mission Report 2005
Cutting sales commission may backfire on home seller
Buyer agents need incentive to show listing
Friday, June 09, 2006
By Robert J. Bruss
A few days ago I received an e-mail from a very smart reader. I know he is smart because his e-mail address says “post.harvard.edu,” which presumably means he graduated from prestigious Harvard University.
He asked if real estate listing agents would reduce their customary sales commission rate for expensive homes. Then he gave an example of a $1 million house sale, which, he says, doesn’t include much more work for the listing agent than selling a less expensive home.
My reply noted some successful realty agents would reduce their sales commissions on expensive homes. But the big drawback of reducing the commission rate, I hastened to add, is many local multiple listing service (MLS) buyer agent members will choose to show a home with a low commission rate last to their prospective buyers.
According to the respected “Real Trends” Web site, the national home sales commission rate is now about 5.1 percent. However, this survey was taken during the recent home-sale boom during which virtually any realistically priced home sold easily. Today, with a glut of new home listings in most communities, the situation is rapidly changing.
WHEN HIGHER SALES COMMISSIONS PAY OFF.
During a recent Midwest trip, I encountered a longtime, very successful real estate sales agent friend. As I usually do, I asked her, “How’s the home sales market?”
She then informed me she currently has too many listings and not enough buyers.
“So I had to increase my sales commission rate,” she said, shocking me.
By that, she meant she now encourages her home sellers to offer 7 percent sales commissions rather than the 6 percent rate, which is customary in her community. The result is, she reports, buyer’s agents show her listings first because of the higher commission.
“When I really get desperate to sell a listing before it expires,” she revealed, she includes an incentive trip to Hawaii for two to the buyer’s agent who sells the home.
“A trip to the Caribbean or Mexico just doesn’t work any more,” she added.
DRAWBACKS OF REDUCING SALES COMMISSIONS.
Except in a very “hot market” where there is a shortage of home-sale listings, most home sellers don’t understand the big drawbacks of getting their listing agent to reduce the sales commission.
Yes, there are a few successful “discount brokers” who offer reduced sales commissions from the customary local sales commission rate. But the big problem for home sellers listing with discount brokers is these lower sales commissions don’t encourage cooperation from buyer’s agents who are often reluctant to show low commission listings unless there is nothing else to show to their buyers.
HOW HOME SALES COMMISSIONS ARE SPLIT.
Most home sellers don’t fully understand how home-sale listing commissions are split. But they think real estate agents are grossly overpaid for very little work, especially if the home sells quickly within a few days because it was realistically listed at its market value.
In a typical home sale, four parties split the sales commission. They are the listing broker, the listing sales agent who works for that broker, the selling broker, and the “buyer’s agent,” who works for that selling broker.
Although each situation is different, depending on the listing terms, each of the four parties will usually receive 25 percent of the gross commission.
For example, suppose a condo sells for $100,000 with a 6 percent sales commission of $6,000. That commission is usually split 50-50 between the listing brokerage and the selling brokerage. However, this split might be 4 percent to the listing agent and 2 percent to the selling agent, or vice versa, depending on local market conditions.
Presuming a 50-50 split, the listing brokerage receives $3,000 and the selling brokerage earns $3,000. Of those amounts, the brokerage then splits its share with the listing or selling agent. The lowest split is half to the listing or selling agent, but often higher. That means the listing or selling agent earns at least $1,500 in this example.
Most home sellers (and buyers) don’t understand their agent might take home as little as 1.5 percent of a typical 6 percent gross sales commission.
THE ONLY TWO TIMES HOME SELLERS SHOULD NEGOTIATE SALES COMMISSIONS.
Based on my 39 years as a real estate broker, there are only two times a home seller should consider negotiating a reduced sales commission from the customary local “going rate.”
The first circumstance occurs when the home’s market value is far above typical home sale prices in the community. To illustrate, if you are selling a $1 million house in a town where the average home sells for $300,000, the successful realty agents you interview about listing your home for sale should offer a reduced sales commission without your even asking.
In other words, the higher the home-sale market value, the more negotiable the sales commission becomes.
The second circumstance occurs after you interview several successful local realty sales agents, and list with the best agent at the asking price suggested by that agent. However, after exposure to the local home sales market at least 30 days, if that agent produces a purchase offer substantially below the recommended asking price, that is the time to discuss a “commission reduction” if you accept the buyer’s offer.
BEWARE OF “ADD-ON ADMINISTRATIVE FEE.” Home sellers should watch out for any unexpected “add-on” fees hidden in the fine print of the listing contract. To raise their net earnings, some real estate brokerages have resorted to adding a $100 to $500 “administrative fee,” “transaction fee” or other unnecessary “junk fee” to their charges.
These add-on fees go to the brokerage, not to the listing agent, so home sellers should be reluctant to agree to such charges unless clearly disclosed at the time of signing the listing contract.
CONCLUSION: Real estate sales commissions are negotiable between the home seller and listing agent. But home sellers who negotiate an up-front, reduced sales commission with their listing agent often cut the vital incentive for buyer’s agents to show and sell their home. For this reason, home sellers should be extremely cautious about reducing buyer’s agent incentives at the time of listing their home for sale.
Is selling for-sale-by-owner worth the risk?
Critics say massive price reduction is inevitable
By Dian Hymer
Most homeowners who attempt to sell without using a real estate agent do so in order to save the commission. In other words, the impetus to sell without an agent is to net more money from the sale. The irony is that the median price of for-sale-by-owner (FSBO) homes in 2004 was 15.4 percent less than the median price for home sales where an agent was involved.
One risk of selling without an agent is that you sell too low. FSBOs tend to attract buyers who are looking for a bargain. Like FSBO sellers, FSBO buyers want to save money by paying less. The FSBO seller hopes to save the cost of the commission; so does the buyer. Unless the asking price is clearly below market value, a FSBO buyer is likely to think he can negotiate an even lower price because there are no agents that need to be paid.
Another factor contributing to the lower sale price of FSBO properties is that many sell before they even hit the market. The National Association of Realtors (NAR) reported that approximately 17 percent of FSBO sellers sold to a relative, friend or neighbor. Nine percent sold to a buyer who contacted the seller directly.
Maximum exposure is the way to ensure that you sell for the best possible price. Multiple offers and higher sale prices are the result of exposing the property to multiple buyers, not simply to a friend or neighbor.
A big problem for FSBO sellers is determining what price to ask. If you don’t know how much to ask, it’s understandable that you might inadvertently leave money on the table by selling too low to the first buyer who expresses serious interest.
HOME SELLER TIP: You may be able to find out what price you should ask by interviewing potential listing agents. However, if you don’t expose the property, you’ll never know if you could have sold for more on the open market.
There are certainly reasons why you might choose not to openly market a property, even though it means accepting less money at closing. One couple sold to a neighbor in a direct sale that netted them approximately $200,000 less that they could have received on the open market. But, health and timing considerations made this an acceptable deal.
Most sellers, however, won’t want to give up a significant profit just to avoid having to pay an agent. In fact, according to the NAR, the number of sellers choosing to sell without an agent has decreased in recent years from 18 percent in 1997 to 14 percent in 2004.
FSBO sellers take on other risks. The cost of a commission could be minimal compared to the risk a seller might take for failing to fulfill disclosure and compliance obligations. Disclosure requirements vary from state to state. If you do decide to sell without using an agent, be sure to hire a knowledgeable real estate attorney to help you abide by mandatory disclosure requirements.
Another risk of selling without an agent is that many direct sale transactions never close. Some deals fall apart because the buyers aren’t properly qualified for financing before they enter into a purchase contract. A good real estate agent will make sure that you don’t accept an offer from a buyer who isn’t qualified. Prequalification and preapproval can be accomplished quickly if you know who to call for assistance and when it’s appropriate to do so.
Another reason why many FSBO deals collapse is that there’s no one with experience working to move the transaction along and resolve problems when they arise. This often involves negotiations.
THE CLOSING: It can be difficult for sellers to negotiate face-to-face with a buyer.
Do home buyers need their own agent?
Beware of dual-agency dilemma
By Robert J. Bruss
During this peak season when more Louisville houses and Louisville condos sell than during any other time of this year, prospective home buyers (especially first-timers) often wonder how to go about purchasing their first Louisville homes.
As I have often suggested, the first step is to get pre-approved in writing by a mortgage lender so buyers will know the maximum mortgage for which they can qualify. With a mortgage lender’s pre-approval letter or certificate (not just a worthless pre-qualification letter where the buyer’s loan application hasn’t been verified), the second step is to start looking at local houses and homes available for sale.
Most buyers begin their quest on the Internet, usually at www.realtor.com, where more than 70 percent of today’s home buyers start their search. At this point, the home search can become murky.
Many prospective home buyers contact the home’s listing agent, either by e-mail or by phone. Although the listing agent is likely to be extremely helpful, few buyers realize that listing agent primarily represents the home seller, not the buyer.
Or another scenario might develop as prospective home buyers scan the weekend newspaper homes-for-sale ads, especially the advertised open houses. No matter how helpful and charming the open house host agent might be, most prospective buyers don’t understand that agent legally represents the home seller, not the buyer.
PROS AND CONS OF “DUAL AGENCY”
In most states, a home’s listing agent can also represent the home buyer. When both buyer and seller fully understand the agent represents both parties, this is called a disclosed “dual agency.”
Some states have statutes allowing the listing agent to represent the home seller while another agent working for the same brokerage, called a “transaction agent,” represents the home buyer. Depending on state law, there are several other possibilities.
But home buyers should be certain they fully understand who represents whom. In a dual-agency situation, the one agent theoretically represents both buyer and seller. Such an agent owes a fiduciary duty of honesty, truthfulness, and full disclosure (with notable exceptions) to the other party.
However, this is an inherent conflict of interest situation for the dual agent.
To prevent misunderstandings, most states now require real estate agents to provide written agency disclosures to home buyers and sellers who they represent in the sale. At this point, smart home buyers ask, “Who really represents me?”
DO HOME BUYERS NEED THEIR OWN BUYER’S AGENTS?
The answer in most situations is probably “yes.” The reason is a buyer’s agent, who is truly looking out for the buyer’s best interests and using the best efforts to find a house or condo meeting the buyer’s needs, will emphasize to the buyer the pros and cons of each residence inspected.
But a “dual agent” representing both home seller and buyer can hardly be expected to do so, especially pointing out the drawbacks of a listed home under consideration by the prospective buyer.
Any Louisville licensed real estate sales agent or broker can be a Louisville buyer’s agent representing the home buyer in the transaction. A typical buyer’s agent can represent any home buyer, but also take listings of local homes forsale.
However, when a Louisville buyer’s agent shows homes listed for sale by that agent, or another agent working for the same brokerage, then the dual agency issue occurs.
WHO PAYS THE SALE COMMISSION DOES NOT DETERMINE AGENCY.
In most buyers’ agent situations, the buyer’s agent receives half of the sales commission paid to the listing agent. This commission split is usually stated in writing in the local Multiple Listing Service (MLS) disclosure between MLS member agents.
Just because the home seller pays the listing commission, which is then split with the buyer’s agent, doesn’t mean the buyer’s agent works for the home seller.
However, when a Louisville buyer’s agent shows a prospective buyer a “for sale by owner” house or condo where there is no listing agent, if the seller refuses to pay the buyer’s agent any sales commission, then it becomes the obligation of the buyer to pay their buyer’s agent a commission. For this reason, many buyers’ agents require their buyers to sign a written buyer’s agency contract, typically for 30 to 60 days.
HOW HOME BUYERS CAN FIND A GOOD Louisville BUYER’S AGENT.
Any real estate agent can be a buyer’s agent to help locate your home purchase. In addition, there are a few exclusive buyers’ agents who represent only home buyers, never accepting listings from home sellers.
The best way to locate a successful Louisville buyer’s agent is to ask friends and business associates who have recently purchased a house or condo for their buyer’s agent recommendations. Because the drawbacks of not having a buyer’s agent can be costly, especially when the same agent represents the home seller, home buyers should spend considerable effort to locate an effective buyer’s agent.
If a buyer’s agent requires a written buyer’s agency contract exceeding 60 days, buyers should be aware they will be “tied up” with that buyer’s agent even if they find a home to purchase on their own. For this reason, unless you have received a superb recommendation to a buyer’s agent from a recent home buyer, it is best not to sign a long-term buyer’s agency contract.
CONCLUSION: Louisville home buyers need their own Louisville buyers’ agents, just as most home sellers hire listing agents to represent their best interests. Likewise, home buyers need a separate buyer’s agent looking out for their best interests. Representation by a “dual agent” who represents both seller and buyer creates an inherent conflict for the home buyer. For more details, please consult a local real estate attorney.
