REAL ESTATE
BROKERAGE
MANAGEMENT
Prepared for the
Georgia Real Estate Association
by
Gail Lyons,
ABR, CCIM, C-CREC, CIPS, CRB, CRS, DREI, QSC, SRES
Goal
To understand and develop
an Action Plan for the
practical operation of a
real estate office
Overview
1.
2.
3.
4.
5.
6.
7.
8.
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
Class Survey
Please complete the survey (handout #1)
Survey Results
1. Years in business: ___1-, ___2-5, ___6+
2. Job function: ____ Owner, ____Manager,
_____ Sales Person, ____ Not in Real Estate
3. Size of Real Estate office: __ 5-, __ 6-15,
___ 16-25, ___ 26-50, ___ 50+
4. Number of branch offices:
5. What did you do before real estate?
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.
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?
Management Responsibilities:
Necessary Resources
1. Time: allocate between “must”, “should”,
“could” and “don’t” do jobs (handout #2)
2. Systems & information: records, forms,
reports, policies
3. People: seek, select, train & retain the best
sales & support staff
4. Money: personal assets, investors, bankers,
lines of credit
5. Equipment: office furniture, machinery, signs
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
Management Responsibilities:
What Jobs Does a Manager Do?
B. Organizing People to Produce
1. 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
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
Management Responsibilities:
What Jobs Does a Manager Do?
D. Staffing
1. Selecting the Sales Team
a. Application (handout #3)
b. Interviewing Process (handout #4)
2. Selecting the support team (handout #5)
3. Your success in achieving your goals
depends largely on your ability to motivate
the staff on both a group and individual level
Management Responsibilities:
Workshop B
Complete the Office Task Analysis Chart (handout
#6)
1. If nobody is doing a particular job, leave blank
2. If two or more persons are doing/supervising a
job, note that fact
3. Compare these tasks with your list from
Workshop A; what are the differences? Why?
Management Responsibilities:
Workshop C
1.
2.
3.
4.
5.
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?
MEASURING RESULTS
“Your goals are meaningless
unless you keep score!”
Discussion & Review
1. 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
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
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)
Average Expense Percentages
All Commissions Paid
60.4%
Net Return
4.2%
Saleries
6.1%
Advertising
6.4%
Occupancy
7.5%
Sales Managers Salery
3.9%
General Business
Expense
Telephone
5.8%
5.6%
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
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
Real Estate Income:
Common Commission Options
1. Split commissions
a. 50/50, 60/40, … 90/10
b. split between salesperson & company
c. as salesperson earns more, split increases
2. 100% commissions
a. salesperson receives 100%
b. salespeople pay desk cost, most or all of
business expenses
3. Salary or salary plus commission
Establishing Your Budget
A. 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
Establishing Your Budget
D. 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?
Establishing Your Budget
F. 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
Budgeting Suggestions
1.
2.
3.
4.
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
5. Compare actuals with budget every month
6. Let staff help: get their suggestions
7. Compare your budget with “industry standards”
Managing People:
Types Salespeople
1. Employee: A person hired to
perform services for another who is
subject to the other’s control.
2. Independent contractor: A person
who contracts to do something for
another who is not subject to the
other’s control.
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
Managing People:
Management Styles
1. Control
* employs rules & procedures that provide close
control over subordinates
* reduces sense of freedom, tends to treat people
as objects, minimizes personal incentives
2. Leadership
* management by example
* uses participative decision making
* results in improved morale, high production,
increased retention
Developing Your Sales Agents:
GOAL SETTING
1. Sales agents base goals on their needs
2. Manager’s goals are based on agents’
goals
3. Manager’s role: guidance & follow-up
4. Goals must be written and be a
commitment
5. Goals must be realistic, specific,
measurable
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)
The Skills & Desires of
Good Managers: A Self-Test
WORKSHOP D (handout #10)
1. Please complete this self-evaluation
without discussing answers with others
2. Move into a small group; discuss
a. What is the easiest thing to do?
b. What is the hardest thing to do?
Matching Your Skills & Desires
with 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
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
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
The Jobs of Management:
Training Subjects
1.
2.
3.
4.
5.
6.
7.
8.
Listing procedures
Selling procedures
Forms & systems
Financing
Showing techniques
Open houses
Closing techniques
Negotiating
9. Presenting the offer
10. Ethics
11. Disclosure
12. Agency duties
13. Market analysis
14. Staging
15. Advertising
16. Government
regulations
The Jobs of Management:
Knowing Top
Consumer Complaints (U.S)
1. Failure to disclose
property defects
2. Lot size and lot line
problems
3. Misrepresentation
4. Errors in contract
language
5. “Deep pockets”!
6. Failure to clarify
agency relationships
7. Failure to explain
financing
8. Poor communication
& follow-up
9. Property management
10. Sewer & septic
problems
The Jobs of Management:
Teach Agents Liability Reduction
1.
2.
3.
4.
Document statements & events
Watch out for “red flags”
Answer specific questions carefully
Encourage use of other
professionals
5. Avoid predicting the future
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
Data Collection & Analysis:
Listing Data
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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
Data Collection & Analysis:
Listing Control Systems
1. Competitive Market Analysis (CMA)
(handout #11)
2. Form for recording information during
initial property inspection (handout #12)
3. Complete listing files: all notes, forms,
documents
4. Listing follow-up procedure
Data Collection & Analysis:
Advertising Control System
1. Record source, time & nature of every inquiry
that results from advertising
2. Determine media effectiveness based on #1
3. Cost of ad call: cost of advertisement
number of consumer calls
4. Conversion rate: # of consumer calls
# of appointments made
5. Use data to increase effectiveness of ads
Data Collection & Analysis:
Sales Data
1.
2.
3.
4.
5.
6.
7.
Source of buyers
Buyer profiles
Average sales price
Average # buyers per sales agent
Percentage who actually buy
Market share
Determine trends by monthly comparisons
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)
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!
Data Collection & Analysis:
Decisions Based on Data
1.
2.
3.
4.
5.
6.
7.
Planning budgets & goals
Where to spend money
Where to save money
Directing sales agents
Sources of business
Growth patterns & trends
Strengths & weaknesses
A successful real estate
company is always based on
good management!
GOOD MANAGEMENT
Requires:
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•
•
•
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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
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