Lot Protocol Plan: Invaluable Tool for Developer, Builder, and Sales Team

It may seem an odd topic for a blog, but for those of you that are involved with new construction or sell new homes, the Lot Protocol Plan (LPP) is an invaluable tool. I am further limiting my audience because if you live on the prairie or in Florida and have no topographical issues to deal with other than sea level, this handy-dandy tool will do you no good. But, it won’t hurt you either; we are talking neutral stuff here. Also, if you work in Manhattan or some other totally urban setting, you will see no ROI from this information. This is only applicable in areas that deal with topo variations in single-family applications.

I first became familiar with the Lot Protocol Plan when a builder group insisted I talk with a Land Planner/Architect, Scott Morisey with Reece, Hoopes & Fincher, who was doing some of their site plans in one of our developments. They wanted to make it mandatory that all builders use this planner to site their houses and prepare the individual site plans. And they were willing to foot the bill! That was my first hint that this guy was good – and he was and is. All 20 custom builders approved. What was happening was that the builders were causing each other drainage problems and unexpected costs for retaining walls or other methods to mitigate problems caused by foundation elevations not being preset. It was also taking way too much of my time and theirs in resolving these issues. The Lot Protocol Plan reduced these problems by 90%.

So what is a Lot Protocol Plan? It is a subdivision plat with topo where foot prints for typical houses are overlaid on all lots. The basement, first floor and garage floor elevations are noted. Probable driveway location and grades are shown as well as theoretical retaining walls, sub-walls, sidewalks, and most importantly, how the drainage will be managed.

The optimum time to do the LLP is after the land planner does the initial subdivision/lot layout and before the plans are submitted to the civil engineer. This is the most efficient and cost effective point in the development time line as minor changes can be made. But, it can be done anytime before building starts.

Below is a portion of a LPP to show what is typically included.

Who gets what?

For the developer, the LPP allows for optimizing lot value if done after the land planner's initial layout. By overlaying a typical foot print, the individual building sites can be assessed and improved. Changes from the original land plan are usually fairly minor but in many cases a few feet adjustment between lot lines can vastly improve the building site and therefore increase the potential lot value. This is also a good time to review the lot layout for the house siting to avoid instances where the approach is from the rear of the house which is a killer for sales.

The LPP is also invaluable for lot pricing. You can easily evaluate and factor the lot price for retaining walls, subwalls, driveway grade and length, and drainage. For the same reasons the LPP makes it easy for builders to evaluate the lots prior to buying.

Sales agents may need some instruction and guidance on using the LPP as a sales tool, but if the investment is made, the results will be huge for presales – again, if you are dealing with topo. The buyers will also need to have some ability to understand the LPP but if they are considering building, they may come prepackaged with vision.

Let’s say for example you have a development and are just opening up Phase II. You have some prospects who would like to consider building one of your plans. The on-site sales agent, armed with the LPP, can engage the buyers in initial conversations about the lots that are available based on the buyer's desires and lifestyle.

Mr. Buyer says he wants a lot that will accommodate a pool and play area for the kids. He does not want the house to sit below street grade but does not want a steep uphill driveway either. The agent asks about the backyard preferences. Does Mr. Buyer want a daylight basement opening to rear/backyard or does he want the pool area level with the first floor where the family can easily interact from the living areas.

Well, that’s a good question! Let’s talk about the differences. The agent and the buyers can take the LPP and discuss the various options. “This lot offers a flat driveway and yard but the pool will be on the basement level with steps down from the living area off a deck. Now here is a lot that might work perfectly. The driveway will gradually sweep up, but it is not steep, the pool will be in perfect perspective with the kitchen and family room and you can see here where the daylight will be in the basement. Would you like to go see this lot?” Of course the builder will come on the scene concerning the siting, but at least the agent has a means by which to engage and advance the buyers towards a buying decision. Otherwise the complicated nature of lot selection, where topo is involved, could be a morass out of which few buyers emerge.

Housing CEO's - Gotta Love 'Em

Diana Olick of CNBC published a Realty Check post Tuesday called, “Homebuilder’s New Mantra: Don’t Talk to the Media!” I don’t know for the life of me why she thinks this is a new mantra. She’s at a conference in New York and the housing CEO’s will not give her the time of day, much less an interview or even a fleeting glimpse. Eye contact would mean she exists.

Who can blame Mr. CEO? If he says, “It’s a tough market right now. The cycle is unavoidable but we are managing it by divesting ourselves of excess lots and matching production to absorption.” Then Diana slams Mr. CEO because this is just boring stuff, “Mr. CEO, what do you think about the foreclosure numbers that came out 10 minutes ago that shows a 90% increase? Also Mr. CEO is it true that your compensation package exceeds $100 Million? Do you think you’re worth it when your company is in the tank and the stock value is sinking faster than the Titanic? What about the 1,000 people you just laid off?” Now that’s some good stuff worthy of our TV audience. Good work Diana! Mr. CEO proceeds toward the main auditorium to deliver his keynote speech, not quite the same man he was a short 10 minutes ago.

The relationship between “us” and the media reminds me of “Men are from Mars, Women are from Venus”. Love/hate…Can’t live with them, can’t live without them. Our first instinct is to believe what we read or see in the media. However, when we find our own industry at the center of media attention, we can see the fallacies and the “holes” in the coverage. It’s a national pastime to blame the media for making a bad thing worse but left to our own devices would we be professional ostriches sticking our heads in the sand and deny, deny, deny that anything is wrong. We don’t want to talk about our train wrecks, just everyone else’s. Truth is there was a pretty nice ride with the media during the good years.

Maybe we should take a lesson from our sport’s heroes. A good Dad is going to teach his son that if he strikes out two out of three times, he didn’t mess up; he is Barry Bonds closing in on Hank Aaron’s record. Tiger looses a golf tournament and tells it just like it is. “Not pretty.” What about your favorite pro team loosing by a score of a gazillion to one? The coach responds, “They just outplayed us”. It’s pure, simple, and true. How can you respond to that other than a sage nod of the head?

Maybe Mr. CEO should have just said, “IT STINKS!!” and kept walking to his waiting audience. Maybe that’s not making lemonade out of lemons, but it’s more to the point.

Real Estate Licensure; There Is More Than One Dog In This Debate

Below is a recent blogging debate between myself and Greg Swan of Blood Hound Realty fame. Greg is the Grand Poo-Bah or Big, Bad Dog of real estate blogging, or so I’ve been told. I am pretty new on the scene with my blog, but miles and miles down the real estate road. I love the blogging world's emerging debates and appreciate the fact that differing viewpoints can be heard and acknowledged. The ROI is so worthwhile. If you read Greg’s other postings you will find some really good stuff. On this, however, I had to speak my piece.

This posting is in response to Greg’s blog entitled:
Real estate licensing laws are a criminal conspiracy against the consumer created by and for the benefit of a cartel

And my response, etc. etc. We are both guilty of excess length but read until your eyes glaze over, then read some more.

Greg,

I am an avid reader and fan of your posts and really appreciate the bite of your positions, but I have to say my eyebrows are still up to my hairline on this one. As to this most recent post on licensure I find Disraeli’s words to Gladstone applicable: "You are a sophisticated rhetorician inebriated by the exuberance of your own verbosity."

My first thought was that you were just trying to get a rise out of your audience, which I often enjoy. But then who would write such a long post on Saturday night unless he was really wound up about the subject? Relax. Enjoy life. And wait for the clear light of day before pushing “Publish”.

I'm completely with you though about the huge need for reform. My position about the status quo in real estate is that it needs an explosion to alleviate the toxic gases. But why waste your time on such a foolish argument over eliminating licensure, except as a fruitless mental exercise (oxymoron?)? I just don't fall for your position. It takes on the forcefulness of "often in error, never in doubt."

Since this is your blog and you get to set the rules which were, “if you can dispute this then make your case in cold, clear reason. And if you cannot dispute this argument, a gracious concession would be an unexpected delight.” A gracious concession it will not be. OK, I’m game.

I am not a lawyer and so I am on unprofessional ground, but if a blogger can have an opinion, this is mine. Real estate licensing law protects the public to the extent that the only people who can assist a buyer or seller in a real estate transaction for a fee is an individual who has been licensed by the state (and found not to be a felon wanted for bank robbery) and has been instructed on the terms of these real estate laws and regulations (except for lawyers – are you a lawyer, is that what this is about?) In some cases it is a shortcut to the subject of real estate from general statutory law - transparency, clarification. Otherwise an opinion of real estate law would have to be extrapolated for application to the real estate transaction from the morass of statutory law. Now that is obviously a piece of cake for you, but for the normal practitioner it is quite an unwelcome task and one for which they would probably have to hire legal counsel. Also, I don’t mean to pick on your barber, but I am not comfortable with earnest money being held under the aegis of the red and white barber pole. I am really more comfortable with the FDIC insured escrow account governed under state law.

The state legislators set the real estate law and the state board or commission administers the licensing, complaints and disciplinary actions (which only includes the stockade.) A wronged consumer is protected by the laws only if they pursue recourse by filing a complaint and or/civil suit. What better incentive for law-abiding real estate agents than to be deprived of their livelihood? I agree that just because real estate laws are set forth and our license says we understand them and agree to abide by them or suffer excommunication, does not assure consumer protection as to the competency of a given licensee, or customer satisfaction, or whether a licensee is stupid, dishonest, or insane. Of course a consumer should check the real estate agent he chooses to work with to insure that they have the level of expertise to provide the services requested. Duhhhh! Isn’t that the case with everything we contract for as consumers – it is ultimately our responsibility. As a matter of fact, every contract I’ve ever signed as a broker says to the consumer, “I’m really a dumb ass. You cannot rely on anything I say, do, or represent. You are completely on your own and if you listen to me you are a dumb ass as well!” Or something to that effect.

But back to my point…at least the licensing of real estate agents says to the consumer that the practitioner has had at minimum the vermouth bottle of knowledge waived over the proverbial martini. Is it perfect? Far from it, but it beats the anarchy that would result with no licensing. I can just imagine your harangues if you were truly sharing commissions with the barber! Surely you are not serious when you suggest that “licensing laws exist to artificially limit who can be compensated for introducing buyers and sellers.” Are you saying an introduction is worthy of commission and that agents should pay the barber? For sure, one thing that the absence of real estate licensing law would resolve – the need for you to ever worry about acting in dual agency!

I think there is some muddy water between the state license law and the National Association of Realtors. The NAR is a trade organization and a self proclaimed “Self Regulatory Organization” but for its members only. It has nothing to do with the state licensing requirements (unless you count the world’s largest lobby, but they really like to go after the Fed’s on the big issues like banking). It is the NAR and the associated MLS’ that deserve your ire – and I’m with you! They are the ones that took the system and the laws and manipulated them into a self-serving voracious machine. I’ll bet you dinner with Snoop Dog that you have more clout with your legislators than with the NAR! You can email your legislators but you can’t email NAR. I tried!

You talk about training and again I agree that it is practically non-existent. The classes sponsored by the local Realtor® boards for their designations are a sham. They give you the answers!!! The instructors actually say “you will see this on the exam.” You give them the money you will get your designation unless you are a complete and utter idiot. At least our state licensing exams are for real.

I also beg to differ with your statement that “incompetents with stars in their eyes are the main profit center in many brokerages.” That would be a very, very broken business model. The money for the 100% models is from the producers’ MLS fees via dividends. Don’t worry; anybody banking on making a go from desk rentals won’t be around to rankle us next year.
As far as eliminating the licensing of real estate agents – be careful least you get what you seek…in all its ugly manifestations.

Now I’m really mad. I’ve spent my Sunday evening responding to what I found unworthy of your talent. Who’s the fool here? You got me to respond! Good night and good bye.

Greg’s Response:

Hi, Gerry,

>Disraeli’s words to Gladstone applicable: “You are a sophisticated rhetorician inebriated by the exuberance of your own verbosity.”
That’s the Fallacy Ad Hominem. Disraeli had no answer to make to Gladstone, so he attempted to ridicule him. In that respect, it was an Appeal to the Mob.

>But then who would write such a long post on Saturday night unless he was really wound up about the subject?
I work when I have time to work. I work a lot. I enjoy it a great deal. I am never wound up about anything. None of this matters.

> But why waste your time on such a foolish argument over eliminating licensure, except as a fruitless mental exercise (oxymoron?)?
In order to unearth and explore important principals of reality.

> It takes on the forcefulness of “often in error, never in doubt.”
Fallacy Ad Hominem again. I don’t take it personally.

> A wronged consumer is protected by the laws only if they pursue recourse by filing a complaint and or/civil suit.
As I discussed, there would be nothing different about this in the absence of real estate licensing laws. Your statement is true of any civil action, regardless of the statue law. If anything, statute law impairs the rights of consumers to pursue civil claims — for example, by limiting by fiat the time available to make a complaint.

> Otherwise an opinion of real estate law would have to be extrapolated for application to the real estate transaction from the morass of statutory law.
I think this is the Argument From Convenience: Doing the right thing is onerous, ergo doing the wrong thing is justified. That fails on its own, but working from case law instead of statute law is hardly onerous. You can be sure your E&O provider will be delighted to keep you up to date.

> What better incentive for law-abiding real estate agents than to be deprived of their livelihood?
Except it doesn’t work. Are you now arguing that you would prefer have your electrical appliances inspected by the government but not by the Underwriters Laboratories? Free market solutions work better, for two simple reasons: Success results in profit and failure results in liability. Neither of these motivations is true of government, and for this reason, among many others, we rightly hold government in contempt.

> at least the licensing of real estate agents says to the consumer that the practitioner has had at minimum the vermouth bottle of knowledge waived over the proverbial martini.
I addressed all of this las night. Absent licensing, we would reasonably expect agents to be better trained, more professional, less likely to make stupid mistakes. Their employers would not have the licensing laws to fall back on, and their E&O underwriters, among other professional oversight entities, would have every incentive to police bad behavior.

> Surely you are not serious when you suggest that “licensing laws exist to artificially limit who can be compensated for introducing buyers and sellers.”
You are now disputing clearly established historical fact.

> [The NAR] has nothing to do with the state licensing requirements
The NAR wrote the model legislation upon which state licensing is based.

> Now I’m really mad. I’ve spent my Sunday evening responding to what I found unworthy of your talent. Who’s the fool here? You got me to respond! Good night and good bye.
I’m very sorry you feel you’ve wasted your time. I don’t see that you’ve actually responded to what I wrote. I have addressed some of your concerns, but they are not of the essence. The essential point is this:
[Real estate licensing laws] are a conspiracy arrayed directly against alternative vendors, and indirectly against all consumers, created by and for the benefit of a cartel. They do not protect consumers. They serve instead to induce consumers to be careless about their own interests, even as they encourage licensees to misrepresent their knowledge and experience. Moreover, they prevent the spontaneous creation of truly-viable free-market alternatives to licensing. They not only do not protect consumers, they effectively prohibit the means by which the interests of consumers could be protected.

Your basic argument would seem to be that repealing the real estate licensing laws would result in the total absence of consumer protection. This is not what I said, nor is it a defensible position — although it is a common resort when the subject of repealing any law comes up.

In fact, the true protection of consumer interest at present is not the real estate licensing laws but, first, the due diligence already being effected by consumers, and, when that fails, the civil courts. When we stop trying to pretend that people with no incentive either to pursue success or avoid failure are somehow our fearless protectors, we can open up our minds to better alternatives. The real estate licensing laws not only do not protect the interests of consumers, they serve to prevent the creation of free-market entities that would zealously guard the interests of the real estate buying and selling public.

I would be grateful if you would go back and reread what I wrote, ruminating on the argument point by point. I have no doubt that I am right, but I have nothing whatever to gain by persuading you. Even so, the principal is important, and if you and other people reading here can master the principal behind this argument, you will be that much more secure from the rapine mercies of the state.

Gerry’s Response to Greg’s Response:

Greg,
Thanks for your prompt response. My quote from Disraeli was nothing more than a description of my impression of your blog, not an attack on the mob. Good deflection though. Really, between your conspiracy theory which evokes memories of Hilary’s paranoia and your radical rantings which remind me of McCarthy’s crusade to quell the red threat, I’m beginning to be a bit uncomfortable. I’ve enjoyed the repartee but I’m moving on. I prefer to engage in more applicable debates that have a relevance and resonance to those I would like to engage. Good night and good bye, but unlike Edward R. Murrow, I’ll be back.

To my visitors: As my four year old nephew once said, "Jabber, jabber, jabber." Thanks for listening. I’m sure you’re as exhausted as I am. I’d love to hear from you. Gerry

Suburban Sprawl on a Diet: When is Enough, Enough?

Is it possible that we are facing the skinny of suburban sprawl? Sixty years after suburban flight began in search of the American dream, the tide has turned back to the urban community epicenters, or as I call it “The Mayberry Effect”. Have the number of urban dwellers now outpaced the suburbanites? According to the Urban Land Institute this is the first year that demand for urban-type housing options of higher density with quality public spaces (the live, work, and play formula) outpaced the typical sprawl product. But sprawl continues to eat up the countryside with its voracious appetite. Calling 1-800-Jenny!

The implications of this housing shift is enormous for the real estate industry. Sprawl just because the land is there and available doesn’t seem to apply or appeal to today’s buyer. Let’s take a look at the players:

Baby Boomers (Born 1946 – 1964) (My personal favorite.)
Boomers have been the driving force behind suburban sprawl for decades. The Census Bureau lists them as 42% of all homeowners and the National Association of Realtors estimate they account for 50% of all homeowners. They are not leaving their suburban homes in droves but are rather a continual but moderate reduction in the suburban population. Now between the ages of 43 and 61, they are not adding any significant fuel to the sale of homes in the traditional large-lot subdivisions but they are gradually adding to the resale inventory. (For purposes here large-lot is considered 10,000 square feet or larger.)

Generation X (Born 1965 – 1976)
As seen on Reality TV any day of the week…They are now in their 30’s and 40’s and many are focused on families. By 2001 over 50% of them already owned a home and comprise the substantial move-up market. It is estimated they make up 30% of the labor force. These are the most likely buyers for homes located in the suburban neighborhoods although their housing choices are more varied than their parent’s generation.

Echo Boomers or Generation Y (Born 1977 – 1994)
Many have at least three tattoos and several piercings (and what is that going to look like when they’re 65? As hippies all we had to do was cut our hair and change our clothes.) They start turning 30 this year so the majority is in their twenties today. They are buying homes at a much younger age than previous generations and are not necessarily waiting for marriage before purchasing a home. Much of their buying energy is urban.

Considering these generational cliques it is not surprising that in 2000 traditional families (married with children) made up only 27% of all suburban households. There is also an increase in the home buying activities of the non-traditional family unit which are scattered over the generational categories and they are also more likely to choose housing outside the typical large-lot subdivision setting.

Over the past 60 years the suburban markets have been driven, in my opinion, by the family unit, in other words, driven by the kids. Kids are the social glue of the suburbs and the friendship networks of the parents are most often driven by the connections made through the children, their schools, and their activities. They are the ones out in the street when the moving van pulls up to find out who their next playmate will be. Drive through a large-lot subdivision that is devoid of children and you will see a ghost town. Isolation personified. Compare that to a high density community with work centers nearby and shopping and entertainment opportunities in walking distance or at least in close proximity. The dynamics are exciting and enticing to many different types of buyers. The activity creates a connectedness, a sense of belonging to an active, living community.

Long commute times which have grown more severe over the years add to stress (road rage), a feeling of isolation, and less time to devote to worthwhile activities. Add the rising gas prices for the urban assault vehicles and the strain on sprawl is obvious.

So as a widespread deduction based on the kid factor, if only 30% of our population, Generation X, is in an income producing, child bearing stage normally coupled with suburbia…and only a portion of them are making suburban housing choices, where are the buyers coming from for the traditional homes in large-lot subdivisions? The other two market segments, Baby Boomers and Generation Y, are prime demographic targets for the urban and mixed-use/town center markets. Also the seismic demographic predictions foresee a substantial and continuing increase in the percentage of households without children, anticipated to account for 73% of households by 2030. So if 70% of the market is seeking housing options other than the traditional suburban neighborhoods, and the remaining 30% of homebuyers are diluting the suburban buys, where does that leave those who continue with suburban sprawl as the default development pattern? Get my drift?

We need to be wary least we expect that the demand for suburbia will be back in full force when we recover from the current housing market. Wake up and smell the cold, hard facts. Is suburbia in its vastness still relevant? If the concept is still relevant why are the suburban malls loosing market share at alarming numbers. People are looking for something more interesting that has a sense of distinction, of relevancy. In the end we have to know our customer and give them what they want!

Harvard/MIT Joint Center on Housing notes that “despite the current cool-down, the long-term outlook for housing is bright.” Population growth of 14.6M is estimated for the next 12 years as opposed to 12.6M for the last 12 years. On the strength of this growth alone housing production should set new records. All the road signs are there but we have to follow them to make the right decisions. Status quo sprawl is just not the answer.

Speaking with you from Atlanta, the city that was dubbed the poster child for suburban sprawl, the demise of wholesale blanketing of the countryside with starter castles is quite shocking. I spent many years working with Builders and Developers of large suburban developments and so my interest runs deep in the aspects of its future. But things change. Atlanta has been so busy being the king of metro sprawl that according the New Urban News, we have a substantial unmet demand for walkable neighborhoods. “Only 35 percent of those who would prefer a pedestrian-oriented neighborhood actually live in one.” Would you say we’re not listening? Even in a cold market we continue to produce what may soon be, if not already, white elephant subdivisions.

In the simplest of terms, it boils down to relevancy. Thoughtless building, just like thoughtless eating gets us in trouble! Big trouble! Can’t you just see Kristie and Valerie teaming up with the Home Builders Association on a diet campaign for suburbia? It may be bigger than both of them…I think I’ll call Weight Watchers as well!