REAL ESTATE BROKERAGE MANAGEMENT

1. REAL ESTATE BROKERAGEMANAGEMENT Prepared for the Georgia Real Estate Association by Gail Lyons, ABR, CCIM, C-CREC, CIPS, CRB, CRS, DREI, QSC, SRES

2. Goal To understand and develop an Action Plan for the practical operation of a real estate office

3. Overview 1. Definition of management & the management process • Bridging the transition into management • Recognizing management & leadership characteristics • Identifying and utilizing your resources • Designing accounting systems to manage for profit • Understanding your staff • Marketing and statistical reports • Building a successful management plan for your firm

4. Class Survey Please complete the survey (handout #1) Survey Results • Years in business: ___1-, ___2-5, ___6+ • Job function: ____ Owner, ____Manager, _____ 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?

5. 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.

6. The Management Decision:Should You or Shouldn’t 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 • It’s OK to be a sales person • Do you really want to manage?

7. Management Responsibilities:NecessaryResources • Time: allocate between “must”, “should”, “could” and “don’t” do jobs (handout #2) • 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

8. Management Responsibilities: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

9. Management Responsibilities:What Jobs Does a Manager Do? B. Organizing People to Produce • Establish an organizational chart a. Everyone should know his/her own accountability & reporting responsibilities b. Everyone should know everyone else’s accountability & reporting responsibilities 2. Delegate

10. Management Responsibilities:What Jobs Does a Manager Do? C. Keys to Managing Your Time • Schedule yourself (handout #2) • Delegate to lowest paid competent staff • 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 you’re not MBWA

11. Management Responsibilities:What Jobs Does a Manager Do? • Staffing • Selecting the Sales Team a. Application (handout #3) b. Interviewing Process (handout #4) • Selecting the support team (handout #5) • Your success in achieving your goals depends largely on your ability to motivate the staff on both a group and individual level

12. Management Responsibilities:Workshop B Complete the Office Task Analysis Chart (handout #6) • 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?

13. Management Responsibilities:Workshop 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?

14. MEASURING RESULTS“Your goals are meaningless unless you keep score!”

15. Discussion & Review • Form small groups: discuss the resources (see slide #7) you’ll need to a. plan, b. organize, c. manage, d. staff your company 2. Appoint a leader to report to the class

16. Company Income • 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 volume is meaningless • Number is very useful in mergers & acquisitions

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

18. Average Expense Percentages

19. Company Income: “Desk/Associate” 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 • Per associate cost used when some or all salespeople are home officed; divide by # salespeople • Homework: Calculate your desk/associate cost, bring to class tomorrow

20. Budgeting to Manage Company Income • Consider seasonal variations, business cycles, growth plans • Include all expenses that can be anticipated which = gross income needed to pay expenses and desired profit • Prepare budget minimum of 1 year in advance • Primary responsibility of management is controlling expenses & income

21. Real Estate Income:Common Commission Options • Split commissions a. 50/50, 60/40, … 90/10 b. split between salesperson & company c. as salesperson earns more, split increases • 100% commissions a. salesperson receives 100% b. salespeople pay desk cost, most or all of business expenses 3. Salary or salary plus commission

22. Establishing Your Budget • What gross income can you expect? 1. Total of sales associates’ goals (handout #7) adjusted to “reality” 2. Convert to gross commission income (# closings x average price x commission %) B. What commission plan will you use? C. Expenses for a real estate office (handout #8): one time start-up and monthly

23. Establishing Your Budget • What are your company objectives? a. break-even/survival? b. expansion, growth? E. Company income a. If you split commissions, what split will be necessary to break-even? b. If you use 100%, what desk costs will be necessary?

24. Establishing Your Budget • What will your net profit be? (company income – expenses) Is it worth the liabilities? If not, make adjustments: a. cut expenses b. increase productivity c. add sales personnel

25. Budgeting Suggestions • 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”

26. Managing People:Types Salespeople • Employee: A person hired to perform services for another who is subject to the other’s control. • Independent contractor: A person who contracts to do something for another who is not subject to the other’s control.

27. Managing People:Nature 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

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

29. Developing Your Sales Agents:GOAL SETTING • Sales agents base goals on their needs • Manager’s goals are based on agents’ goals • Manager’s role: guidance & follow-up 4. Goals must be written and be a commitment 5. Goals must be realistic, specific, measurable

30. Goal Setting Suggestions • Quarterly one-on-one performance reviews by manager (handout #9) • 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 (use handout #7)

31. The Skills & Desires of Good Managers: A Self-Test WORKSHOP D (handout #10) • 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?

32. Matching Your Skills & Desireswith the Job of Management • If your skills & desires don’t match, find someone else to manage! • If your skills & desires generally match, delegate where you have shortcomings

33. The Jobs of Management:Motivating • Creating an atmosphere in which agents can develop to the limits of their capabilities • Know each agent’s needs & desires • Motivators: education setting a good example fear opportunities recognition & rewards

34. The Jobs of Management:Training • 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

35. 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 The Jobs of Management:Training Subjects

36. 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 The Jobs of Management:Knowing Top Consumer Complaints (U.S)

37. The Jobs of Management:Teach Agents Liability Reduction • Document statements & events • Watch out for “red flags” • Answer specific questions carefully • Encourage use of other professionals • Avoid predicting the future

38. Data Collection & Analysis:Why 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 month’s/year’s actual records become next month’s/year’s guide to management action

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

40. Data Collection & Analysis:Listing Control Systems • Competitive Market Analysis (CMA) (handout #11) • Form for recording information during initial property inspection (handout #12) • Complete listing files: all notes, forms, documents • Listing follow-up procedure

41. Data Collection & Analysis:Advertising 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

42. Data Collection & Analysis:Sales 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

43. Data Collection & Analysis:Sales Agent Production • Schedule quarterly goal review sessions with each agent (use handout #9) • Measure results against goals • Adjust goals as needed • Review Satisfaction Survey results (handout #13)

44. Data Collection & Analysis:Keeping Records • Who: lowest paid competent staff • Time reduction: use forms • Management by “gut” feel may work in exceptional markets but it’s devastating in sophisticated markets in which everyone else is using computers!

45. Data Collection & Analysis:Decisions 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

46. A successful real estate company is always based on good management!

47. 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

48. We hope you’ve enjoyed this class.We hope it will increase your success.I’ve certainly enjoyed being with you and have learned from you.გმადლობ, გმადლობთ !Gail Lyons &International Real Property Foundation