REAL ESTATE BROKERAGE MANAGEMENT

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REAL ESTATE BROKERAGEMANAGEMENT

• by
• Gail Lyons,
• ABR, CCIM, C-CREC, CIPS, CRB, CRS, DREI, QSC,
  SRES

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Goal

• To understand and develop an Action Plan for the
  practical operation of a successful real estate
  office

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Overview

• 1. Brokerage basics based on U.S. best
  practices
• Management responsibilities
• The Company Dollar managing firm finances
• Budgeting
• Managing people
• Developing your sales people
• The jobs of management
• Data collection analysis managing your action
  plan

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Class Survey

• Please complete the survey (show of hands)
• Survey Results
• Years in business ___1-, ___2-5, ___6
• Job function ____ Owners, ____Managers, _____
  Sales Person, ____ Not in Real Estate
• Size of Real Estate office __ 5-, __ 6-15, ___
  16-25, ___ 26-50, ___ 50
• Number of branch offices
• What did you do before real estate?

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BROKERAGE BASICS U.S. Best Practices

• Brokers their sales people represent
  clients/principals
• Clients buyers, sellers, tenants, landlords
• Representation an agency relationship, you are
  the agent of your client
• Agency means you owe fiduciary duties to your
  clients
• Sales people represent their brokers

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BROKERAGE BASICSFiduciary Duties

• Loyalty
• Disclosure
• Confidentiality
• Obedience
• Reasonable care diligence
• Accounting

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BROKERAGE BASICSReasonable Skill Diligence

• Competence
• Agents can be held liable to the client for any
  loss caused by lack of care
• Agents cannot escape responsibility for
  negligence or lack of ability by pleading
  ignorance
• Agents are expected to be knowledgeable about the
  market, community and specific properties agents
  give advice clients rely on

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BROKERAGE BASICSCommissions/Fees

• Earned in exchange for duties responsibilities
  owed to clients
• Earned in exchange for agents time
• U.S. Broker collects commission and splits
  with sales people 5050 to 0100!
• U.S. Sellers agent negotiates full commission
  which is then split between sellers broker
  buyers broker usually 5050 to 6040

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BROKERAGE BASICSCUSTOMERS vs. CLIENTS

• Customers are the 3rd party, the party you do
  NOT represent
• U.S. brokers their sales people owe duties to
  customers
• Duties (NOT fiduciary)
• a. Reasonable skill and care
• b. Fair honest treatment

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Workshop A

• Move into small groups (about 4-6 people).
• List all the jobs in a real estate office.
• 1. 7.
• 2. 8.
• 3. 9.
• 4. 10.
• 5. 11.
• 6. 12.

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The Management DecisionShould You or Shouldnt
You?

• Hard work, not as glamorous as it may appear
• Can be agonizing, lonely, emotionally draining
• Not everyone is cut out to be a manager
• Its OK to be a sales person
• Do you really want to manage or do you want to do
  something else?

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MANAGEMENT RESPONSIBILITIES 1 Resources

• Time allocate between must, should, could
  and dont do jobs (handout)
• Systems information records, forms, reports,
  policies
• People seek, select, train retain the best
  sales support staff
• Money personal assets, investors, bankers, lines
  of credit
• Equipment office furniture, machinery, signs

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MANAGEMENT RESPONSIBILITIES2 What jobs does a
manager do?

• A. Planning/Goal Setting
• Define your market find the need
• Establish company goals based on filling the need
• a. Short term (survival) goals
• b. Profit goals
• c. Growth goals when?, where?
• d. Perpetuation/regeneration/continuity goals

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MANAGEMENT RESPONSIBILITIES2. What Jobs Does
a Manager Do?

• B. Organizing People to Produce
• Establish an organizational chart
• a. Everyone should know own accountability
  reporting responsibilities
• b. Everyone should know everyone elses
  accountability reporting responsibilities
• 2. Delegate

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MANAGEMENT RESPNSIBILITIES2 What Jobs Does a
Manager Do?

• C. Keys to Managing Your Time
• Schedule
• Delegate to lowest paid competent staff
• Use your procedures manual
• Pay for good clerical help
• Help sales people solve their own problems
• Upgrade sales staff
• Replace yourself hire assistant manager(s)
• Close your door when youre not MBWA

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MANAGEMENT RESPONSIBILITIES2 What Jobs Does a
Manager Do?

• Staffing
• Selecting the Sales Team
• a. Application
• b. Interview
• Selecting the support team
• Your success in achieving your goals depends
  largely on your ability to motivate the staff on
  both a group and individual level

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MANAGEMENT RSPNSIBILITIESWorkshop B

• Complete the Office Task Analysis Chart (handout)
• If nobody is doing a particular job, leave blank
• If two or more persons are doing/supervising a
  job, note that fact
• Compare these tasks with your list from Workshop
  A what are the differences? Why?

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MANAGEMENT RESPONSIBILITIESWorkshop C

• What are my strengths?
• What are my weaknesses?
• Which jobs am I most skilled at?
• Which jobs am I least skilled at?
• Which jobs should I delegate?

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MEASURING RESULTSYour goals are meaningless
unless you keep score!
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Discussion Review

• Form small groups discuss the resources youll
  need to plan, organize, manage your time staff
  your company
• Appoint a leader to report to the class

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THE COMPANY DOLLAR

• Accounting system a true method of reporting and
  controlling your money
• The funds remaining from gross income after all
  sales listing commissions, including those to
  co-brokerage firms, have been distributed.
• Success measured by gross sales is meaningless
• Number is very useful in mergers acquisitions

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THE COMPANY DOLLARPercentages Variables

• Percentages used are averages of offices surveyed
  by the National Association of REALTORS (NAR)
• Variables include
• size of operation
• high/low periods of business activities
• proximity to large metropolitan area
• efficiency of operations
• expansion of programs
• local customs

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THE COMPANY DOLLARExpense Percentages
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THE COMPANY DOLLARDesk Costs

• Needed to determine minimum production necessary
  from each sales person in order to break even
• Desk cost annual expense of operation
• number of available desks
• exclusive of commissions paid on sales
• whether occupied or not
• Homework Calculate your desk cost, bring to
  class tomorrow

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BUDGETING

• Considers seasonal variations, business cycles,
  growth plans
• Includes all expenses that can be anticipated
  which gross income needed to pay expenses as
  well as desired profit
• Prepare minimum of 1 year in advance
• Primary responsibility of management is
  controlling expenses income

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BUDGETINGEstablishing Your Budget

• Complete handout
• Gross income
• Company dollar
• Company objectives
• Return
• Expenses
• Net profit

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BUDGETINGSuggestions

• Be conservative in forecasting income
• Be realistic in forecasting expenses
• Allow flexibility until you have a track record
• Prepare a contingency budget for a worse or
  better year than expected
• Compare actuals with budget every month
• Let staff help get their suggestions
• Compare your budget with industry standards

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BUDGETINGNet Profit Determination

• Calculate income per transaction
• Calculate expense per transaction
• Net profit happens when 1 is larger than 2!
• Initially do on a monthly basis once net profit
  is achieved, do on a quarterly basis

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MANAGING PEOPLETypes of Personnel

• Employee A person hired to perform services for
  another who is subject to the others
  control.
• U.S. Independent contractor A person who
  contracts to do something for another who is not
  subject to the others control.

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MANAGAING PEOPLENature of Sales Agents

• Character capable of independent thought
  action, aggressive, competitive, creative,
  enterprising, self-confident, self-motivated
• Security irregular hours, no salary guaranty
• Earnings based on individual effort hours
• Other jobs most have had other jobs
• Reality in spite of all the rules brokers set
  up, agents do what they want when they want

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MANAAGING PEOPLEManagement Styles

• Control Style employs rules
  procedures that provide close control over
  subordinates reduces sense of freedom,
  tends to treat people as objects, minimizes
  personal incentives
• Leadership Style management by
  example uses participative decision
  making results in improved morale, high
  production, increased retention

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DEVELOPING YOUR SALES AGENTSGoal Setting

• Sales agents base goals on their needs
• Managers goals are based on agents goals
• Managers role guidance follow-up
• To be effective, goals must be understood,
  accepted, performed by all members of firm
• Goals must be written and be a commitment
• 6. Goals must be realistic, specific, measurable

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DEVELOPNG YOUR SALES AGENTSGoal Setting
Suggestions

• Quarterly one-on-one performance reviews by
  manager
• Bulletin board showing individual and company
  progress toward goals
• Voluntary public commitment by agents to goals
• Encourage agents to relate money goals to number
  of sales, listings, contract necessary to meet
  goals

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The Skills Desires of Good Managers A
Self-Test

• WORKSHOP D (handout)
• Please complete this self-evaluation without
  discussing answers with others
• Move into a small group discuss
• a. What is the easiest thing to do?
• b. What is the hardest thing to do?

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THE JOBS OF MANAGEMENTMatching Your Skills
Desires

• If your skills desires dont match, find
  someone else to manage!
• If your skills desires generally match,
  delegate where you have shortcomings

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THE JOBS OF MANAGEMENTMotivating

• Creating an atmosphere in which agents can
  develop to the limits of their capabilities
• Know each agents needs desires
• Motivators education setting a good
  example fear opportunities reco
  gnition rewards

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THE JOBS OF MANAGEMENTTraining

• Opportunities orientation, regular sales
  meetings, one-on-one
• Include field training a mentor system
• Include role-playing, audio-visual aids
• Include individual counseling at least monthly
• Budget time money for training

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THE JOBS OF MANAGEMENTTraining Subjects

• Listing procedures
• Selling procedures
• Forms systems
• Financing
• Showing techniques
• Open houses
• Closing techniques
• Negotiating

• Presenting the offer
• Ethics
• Disclosure
• Agency duties
• Market analysis
• Staging
• Advertising
• Government regulations

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THE JOBS OF MANAGEMENTKnowing Top Complaints
(U.S)

• Failure to disclose property defects
• Lot size and lot line problems
• Misrepresentation
• Errors in contract language
• Deep pockets!

• Failure to clarify agency relationships
• Failure to explain financing
• Poor communication follow-up
• Property management
• Sewer septic problems

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THE JOBS OF MANAGEMENTTeach Agents Liability
Reduction

• Document statements events
• Watch out for red flags
• Answer specific questions carefully
• Encourage use of other professionals
• Avoid predicting the future

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DATA COLLECTION ANALYSISWhy Do You Need It?

• Determine if how your plans are working
• Show where business is coming from
• Basis for setting goals, plans, budget
• Use for training, guidance, counseling of agents
• Basis for money planning, cash flow projections
• Show growth patterns, strengths, weaknesses
• This months/years actual records become next
  months/years guide to management action

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DATA COLLECTION ANALYSISListing Data

• Market share
• Source of business
• Geographic area of influence/area trends
• Sales price ratio sale price divided by list
  price
• Life of listing in days (listing to contract
  date)
• Number of listings per sales agent
• Percentage of listings sold, expired, withdrawn
• Determine trends by monthly comparisons

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DATA COLLECTION ANALYSISListing Control
Systems

• Competitive Market Analysis (CMA) (handout)
• Form for recording information during initial
  property inspection (handout)
• Complete listing files all notes, forms,
  documents
• Listing follow-up procedure

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DATA COLLECTION ANALYSISAdvertising Control
System

• Record source, time nature of every inquiry
  that results from advertising
• Determine media effectiveness based on 1
• Cost of ad call cost of advertisement
  number of consumer calls
• Conversion rate of consumer calls of
  appointments made
• Use data to increase effectiveness of ads

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DATA COLLECTION ANALYSISSales Data

• Source of buyers
• Buyer profiles
• Average sales price
• Average buyers per sales agent
• Percentage who actually buy
• Market share
• Determine trends by monthly comparisons

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DATA COLLECTION ANALYSISSales Agent Production

• Schedule regular goal review sessions with each
  agent
• Measure results against goals
• Adjust goals as needed
• Workshop E
• What data should be monitored for individual
  sales agents?

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DATA COLLECTION ANALYSISKeeping Records

• Who lowest paid competent staff
• Time reduction use forms
• Management by gut feel may work in exceptional
  markets but its devastating in sophisticated
  markets in which everyone else is using computers!

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Data Collection AnalysisDecisions Based on
Data

• Planning budgets goals
• Where to spend money
• Where to save money
• Directing sales agents
• Sources of business
• Growth patterns trends
• Strengths weaknesses

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A successful real estate company is always based
on good management!
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GOOD MANAGEMENTRequires

• Management leadership skills/competencies
• Desire to be a good manager
• Sufficient resources
• Written, realistic measurable goals
• Accounting systems ( and data) to manage for
  profit
• Marketing statistical reports
• Understanding both sales agents staff

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We hope youve enjoyed this class.We hope it
will increase your success.Ive certainly
enjoyed being with you and have learned from
you.Thank You !Gail Lyons International
Real Property Foundation