Download Managing the Manager

A Management Guide
(1)The Challenge of Change
LEARNING OBJECTIVES
After completing this unit, the student should be able to


describe the characteristics of affinity programs;
explain why the one-size-fits-all approach to providing customer services no
longer suits today's knowledgeable consumers; and
distinguish between an Internet Data Exchange (IDX) and a Virtual Office Website
(VOW). ID: RE300781_C0130153
INTRODUCTION
How have the economy, geopolitics, and the behavior of consumers affected the real
estate industry in recent years?
What do you think will change about the way real estate companies do business in the
coming years?
There are no magic answers, guarantees are few, but change is certain. No one has all the
answers when change is the only standard.
The best way to begin the journey into business management is by looking at the big
picture. Think about what were, what are, and what will be the events framed in that
picture that create opportunities and challenges for business owners and their companies'
managers. ID: RE300781_C0130154
THE CHANGING CLIMATE
Before the attacks of 9/11, modern day conflicts had been fought on battlegrounds far
removed from our mainland's shores. Those attacks had a huge impact on America's
sense of security.
This is a time when the bubble has burst in other ways as well. As the stock market
dropped, investors had to face the reality that the bulls do eventually run out of steam. By
some estimates, the average investor lost $60,000 (and many, considerably more) as the
market lost ground and struggled to restore investor confidence.
The important point in all of this is that businesses, including real estate brokerage firms,
are influenced by forces over which they have little control. What separates those who
succeed from those who don't is a keen awareness of the environment and the ability to
adapt as it changes.
ID: RE300781_C0130155
Homeland Security
We have learned that it costs more to run a business when security is a priority. But
security has now become a permanent cost of doing business.
Real estate companies managing large office buildings have found that it is very costly to
install badge-reading systems (which can start at $250,000) and to hire extra security
personnel. Insurance premiums have skyrocketed for many types of policies and
insurance companies have also excluded locations, buildings, and circumstances related
to terrorism that are now deemed high risk and even uninsurable.
Only time will tell how resilient our nation's economy and its businesses will be. The
costs of increased security will ripple through the economy and leave fewer resources
available for revitalizing cities, improving transportation and repairing our infrastructure,
all of which would affect the real estate industry.
ID: RE300781_C0130156
The Marketplace
If you can still see opportunities for your business, then that's very good news. Here are
some possible ways to make the changing environment work for you.
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When stocks and bonds fall out of favor, investors may consider real estate as an
attractive haven. According to the National Association of REALTORS®, prices
have increased 27 percent between 1999 and 2001. The real estate company that is
attuned to the investment market can position itself to serve the changing
priorities of investors.
As lifestyles change, people seek different housing alternatives. The real estate
firm that is attuned to demographic changes, such as empty nesters or changing
economic circumstances of workers, can tailor services to respond.
Low interest rates are good for our business, but interest rates cycle between low
and high. The brokerage firm with a solid plan for enhancing revenue and/or
economizing on expenditures is the one that prospers during periods of high
interest rates.
As consumer confidence peaks and wanes, spending patterns change. The
company that has developed market niches that are less affected by these
changing patterns can withstand the times when consumers reduce spending.
ID: RE300781_C0130157
Recent stock-manipulation scandals have left people disillusioned. The outcome is a
general climate that is more watchful, and less tolerant of questionable dealings. That
scrutiny could be a stimulus, helping the real estate industry improve ethical business
practices to gain greater public respect.
ID: RE300781_C0130158
CHANGING ORGANIZATIONS
The real estate industry has transitioned from a land or brick-and-mortar business to a
service and information business. The industry is changing its business models, changing
its services, and changing how it delivers those services to the consumer.
ID: RE300781_C0130159
Changing Business Models
Because of the changes in the industry, there is no longer one model for a real estate
company. In the attempt to become more profitable, real estate companies merge, divest
themselves of previous affiliations, or enter new alliances that offer complementary
products and services.
While some sales associates believe their broker is getting rich from a 60/40 or 50/50
commission split, the truth is that the bottom line is very lean, often 2 percent or less of
gross income.
A recent “white paper” distributed by industry consultants John Tuccillo and Stefan
Swanepoel suggests that companies (in a record year for real estate transactions) only
made between $47 and $132 pretax profit per transaction in 2002. This is the stimulus
that drives companies to reevaluate their methods of doing business.
ID: RE300781_C0130160
Large brokerage companies are getting bigger, merging with mid-sized companies to
targeted greater market share. Industry outsiders such as Cendant Corporation have
entered the real estate business, owning organizations such as Coldwell Banker, Century
21, and ERA.
While bigger may be better for some, small companies still appeal to customers because
of their smallness and their ability to offer more personalized services.
Regardless of size, organizations must be willing to shed “traditional” ways of doing
business.
Changing Services
For years, the real estate industry employed a supplier model (the supplier controls the
selection of products or services). The defect in this model, however, is that consumers
may want something different than what is offered. Companies that create services or
products that respond to consumer needs will be at the forefront of the business.
Today's consumers are more independent and self-sufficient, wanting to do more for
themselves, and most use the resources of the Internet. They are convenience-driven, and
want “one-stop shopping.” That stop is either in front of their computers or at brokers
who can link them with the services needed to complete a transaction. Those services
may include mortgage financing, closings, moving, housecleaning, yard care, or repair
services.
Today's consumers are also price-and-value conscious, explaining the appeal of crosspurchasing, or affinity programs. Consumers are offered enticements like coupons or
discounts through shoppers' clubs and point programs elsewhere in the marketplace.
However, brokers who must reduce their commissions to participate in affinity programs
often question their cost versus benefit. In addition, some states' licensing laws (but not
Florida's) prohibit commission rebates.
Today's consumers are becoming very discriminating about which services they want to
buy. The one-size-fits-all service package that real estate companies have customarily
provided no longer suits today's knowledgeable consumer.
Real estate firms are being challenged by consumers to shed transaction-based fee
structures and unbundle services. This means offering a menu from which consumers can
choose, paying only for the services they use. While unbundling was rare in the past,
today's companies are far more likely to offer pricing alternatives to suit the consumers'
needs.
Changing Delivery
Today's companies must find ways to connect with a geographically diverse population
of consumers. This means not only tailoring the menu of products and services to the
customer, delivering them in ways that suit today's purchasing patterns. That solution
must include an Internet presence.
Using the Internet, consumers can purchase virtually any commodity available in the
marketplace. Although there is debate about the practicality of electronic real estate
purchases, the Internet is a central resource for information and communication for
completing many parts of a real estate transaction.
CASE IN POINT: Internet commerce in 1998 was a $102 billion revenue producer,
derived from online products, fee and subscription-based companies, online advertising,
and online travel providers, according to NAR's Real Estate and Technology Report. In
2001, 41 percent of homebuyers used the Internet for information (according to NAR's
2002 profile of buyers and sellers), and those numbers are growing yearly. Interestingly,
homebuyers were more focused on property listings, rather than using the Internet to
locate firms or salespeople.
One of the real estate industry's greatest challenges has been finding ways to assert a
presence on the Internet and provide the information today's consumers want, when that
same information has been viewed as the industry's primary and proprietary asset. For the
most part, this means property listings. But because virtually every part of a real estate
transaction can be linked electronically, the industry also must find ways to stay in the
information loop throughout the transaction.
The growing amount of information available electronically has moved the industry into
a new arena of service—to help sift, sort, and interpret all the information that consumers
access. More significant is the kind of information real estate companies themselves are
now providing on the Internet.
Internet Data Exchange
The traditional management and distribution of multiple listing service (MLS) data have
undergone dramatic changes because of technology. Previously, only a brokerage firm's
own listings could be posted on the company Web site. Today, with Internet Data
Exchange (IDX), the central MLS database can be accessed through any MLS member's
Web site that participates in the IDX program. This technology gives a visitor to your site
access not only to your listings but to the listings of your cooperating MLS competitors
as well.
Virtual Office Web Sites
What distinguishes Virtual Office Websites (VOWs) from an IDX is that VOWs require
that visitors establish a client-broker relationship before they can access postings of
property listings. Proponents of VOWs suggest that by requiring visitors to register and
provide pertinent qualifying information, listing searches can be tailored to their needs in
much the same way sales associates qualify buyers face-to-face and consumers who are
willing to register are believed to be more serious prospects.
VOWs, like IDX, raise a number of policy issues. One involves access to property
listings. Because VOWs typically connect registered visitors to the MLS's entire
database, this means that visitors also have access to the listings of brokers who have
opted out of IDX participation. This defeats the purpose of a broker preventing his or her
listings from being displayed on another broker's site.
Another issue involves the relationship created between a registered visitor and the
broker. On one hand, the registration and an acknowledgment process satisfy a host of
agency disclosure, actions required by Florida licensing laws. Thus, only those with
whom a business relationship has been established can access listing data. On the other
hand, visitors must enter into a brokerage relationship to access listing data. That
requirement may chase a visitor to a site where registration is not required.
As these issues are resolved, brokers will profit from the electronic platform that lets
them give information in return for contacts that can be nurtured into closed transactions.
CHANGING OPERATIONS
When organizations change to meet challenges and seize opportunities to better serve
consumers, they must also alter their internal operating structures. As costs of operation
increase, brokerage firms must learn to work smarter, with more cost-efficient structures,
smaller workforces, and better technology. Brokers must evaluate staffing needs,
supervision, and ways to enhance revenues.
Staffing
One of the ways today's real estate organizations become more cost-efficient is by
downsizing the sales staff, hiring a smaller number of people but ones who are highly
productive. Companies can then justify the cost of support personnel and technology.
Another way companies can work smarter is by hiring salespeople as employees rather
than as independent contractors. The appeal is that companies can exercise greater
control over sales activities, and, ultimately, revenue production. Although this strategy
has not yet been widely embraced by residential sales companies, it has become more
prevalent.
The number of available licensees plays a role in staffing decisions. After a decade of
decline, National Association of REALTORS® statistics indicate that the number of
licensees nationally has started to grow again, to approximately 2.3 million licensees in
2002.
Portability of licenses has also increased the talent pool. The industry is state-regulated.
There is not a national license that allows licensees to cross state lines. Florida currently
has agreements with ten states for mutual recognition of education. This allows out-ofstate licensees to qualify for a Florida license by simply taking a 40-question state exam
on state licensing laws.
Sales Associate Efficiency
Sales associates are also striving to work more efficiently. Personal assistants and
transaction coordinators perform nonsales and administrative functions so the sales
associate can focus on revenue-producing activities. Sales teams are collaborative efforts
with other licensees and nonselling personnel that can capitalize on one another's
strengths to provide better customer service.
The real estate company that endorses these activities gains a recruiting edge and
potentially higher revenue. However, the cost of providing nonselling staff creates
financial pressures, which the company must shift to the sales associates. The support
services that attract sales associates are the same services they wind up paying for out of
their commissions.
Supervising
Today's manager must learn new ways to supervise personnel in today's workplace
environment.
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Home officing: Because many sales associates work primarily from home, the
manager now has to find a better way to monitor their activities.
Employees versus independent contractors: As more nonselling staff and perhaps
sales associates are hired as employees, managers have to set aside their
independent contractor mindset and learn how to manage employees.
Sales teams: The manager must supervise the individual salespeople as well as the
collective unit. A team should not be allowed to function as an independent
company because the broker is legally and financially responsible for the
activities of all licensees. The broker is also accountable if unlicensed people
perform activities that require a license.
Professional growth: Brokers must provide opportunities for professional growth
and job enrichment to retain top sales associates.
Enhancing Revenue
The real estate industry is evaluating its fee structure to counter financial pressures and
the consumers' perceptions of value. Providing additional services can generate direct
revenue for the business units and indirectly through referral fees. Unbundling services
and fees may capture business that traditional transaction-based commission fees would
lose.
Many real estate firms employ personnel to facilitate transaction closings, and charge an
additional fee, ranging from $25 to $500, called a transaction fee. Charging such a fee is
a business decision properly made by each brokerage firm, and does not conflict with
Florida law. Federal law, however, may pose a problem.
In October 2001, HUD published a statement of policy that does not automatically make
transaction fees a violation of RESPA, but sets guidelines that must be followed. Brokers
who charge transaction fees should be very cautious. There are now significant
limitations on the amount of such transaction fees as well as a defined test, which must be
satisfied to avoid a violation of RESPA.
The National Association of REALTORS® engaged a prominent RESPA attorney,
Phillip J. Schulman, Esq., to review the HUD Statement of Policy. Mr. Schulman
recommended to members of NAR that brokers who charge a transaction fee adhere to
the following guidelines:
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The fee may not be excessive and must bear a direct relationship to the additional
services or function performed by the real estate broker;
The fee must be for actual services rendered;
A real estate broker MAY NOT charge or collect a transaction fee where such fee
is simply an add-on to the transaction to the consumer and has no direct
relationship to work to be performed. In accordance with HUD's Statement of
Policy, the charging and collection of an administrative fee where no work or
services are provided or where such work or services are nominal in nature or
duplicative is a violation of RESPA; and
The charging and collection of such fees must be fully disclosed to the consumer.
Brokers must consider the possibility that fees of this nature can wind up costing them
business. At what point will consumers revolt and eliminate the broker from the
transaction?
Because brokers are no longer the gatekeepers of information (through MLS), the real
estate industry is searching for ways to keep licensees at the center of a transaction.
Unless a consumer perceives value in a company's services, he or she may turn to the
competition
A FINAL THOUGHT
The real change in the real estate industry, be it a tweak or a dramatic development,
relates to the way the industry has learned to serve real estate over the years. Bottom line
pressures, economic downturns, abundant regulations, and aggressive competition are but
a few of the realities of life for brokerage firms. What separates the survivors from the
victims is the way organizations meet these challenges. Ignoring and hoping they will go
away only makes victims.
CONCLUSION
Now it's time for you to take the next step. Look at your local business environment and
your own organization. Some situations may be similar or you may identify other forces
that influence your business. Change is inescapable. Astute businesspeople see change as
an opportunity. Be open-minded and innovative. No old way is so good that it can't be
improved.
Reading Comprehension Quiz 1
The statement is FALSE. The statement of policy did not make transaction fees an automatic violation of RESPA, but it did set
guidelines. There are now significant limitations on the amount of such transaction fees as well as a defined test, which must be
satisfied to avoid a violation of RESPA.
HUD published a statement of policy that automatically makes transaction fees a
violation of RESPA.
True
Fals
e
ID: RE_31229
The statement is FALSE. As stocks and bonds fall out of favor, many investors see real estate as an attractive haven.
As stocks and bonds fall out of favor, so too does real estate.
True
Fals
e
ID: RE_31221
The statement is TRUE. IDX technology gives a visitor to your site access not only to your listings but to the listings of your cooperating MLS competitors as wel
Through Internet Data Exchange (IDX), the central MLS database can be accessed through any MLS membe
participates in the IDX program.
True
Fals
e
ID: RE_31225
The statement is TRUE. Sales teams are collaborative efforts with other licensees and nonselling personnel that can capitalize on one another’s strengths to provid
Personal assistants and transaction coordinators perform nonsales and administrative functions so the sales a
revenue-producing activities.
True
Fals
e
ID: RE_31228
The statement is TRUE. In addition, industry outsiders such as Cendant Corporation have entered the real estate business, owning organizations such as Coldwell
Large brokerage companies are getting bigger, merging with mid-sized companies to target greater market sh
True
Fals
e
ID: RE_31222
The statement is FALSE. Companies can work smarter by hiring sales associates as employees, rather than independent contractors. They can thus exercise greate
revenue production.
Companies today can work smarter by hiring sales associates as independent contractors, rather than employ
True
Fals
e
ID: RE_31227
The statement is FALSE. Consumers are challenging real estate firms to shed transaction-based fee structures and unbundle services, offering a menu from which
them to pay only for the services they use.
The one-size-fits-all service package that real estate companies provide suits most of today’s knowledgeable
True
Fals
e
ID: RE_31223
The statement is FALSE. VOWs require that visitors establish a client-broker relationship before accessing postings; IDXs do not.
Unlike an Internet Data Exchange, a Virtual Office Website does not require that visitors establish a client-b
accessing postings of property listings.
True
Fals
e
ID: RE_31226
The statement is FALSE. The Internet is a central resource for information and for completing many parts of a real estate transaction.
The Internet is a helpful but not necessary real estate business tool.
True
Fals
e
ID: RE_31224
The statement is FALSE. Security is now a permanent and increased cost of doing business—realized, for example, in skyrocketing insurance premiums on many
While the new global climate has raised security concerns, it has not significantly impacted the cost of runnin
True
Fals
e
ID: RE_31220
Unit Exam 1
The answer is CONSUMER-DRIVEN BUSINESS. The real estate industry has progressed from a land or brick-and-mortar business to one of service and informa
demand.
The real estate business is becoming a
land and building
business.
people business.
consumer-driven
business.
technology business.
ID: RE_31521
The answer is KEEN AWARENESS OF THE ENVIRONMENT AND THE ABILITY TO ADAPT WHEN IT CHANGES. Any business, including a real estate
forces over which it has no control. The challenge is being acutely aware of these forces and adapting whenever necessary.
Of the following, which is most important for any business?
Keen awareness of the environment and the ability to adapt when it changes
Policies and practices that reflect years of experience
Increasing the use of independent contractors who will implement practices to increase
revenue
Hiring more displaced workers who will bring new skills to the real estate model
ID: RE_31529
The answer is USE OF AN INDEPENDENT CONTRACTOR MODEL WHEN HIRING SALES ASSOCIATES. Today’s manager must learn to supervise perso
look beyond the independent contractor model when supervising sales teams, sales associates who work from a home office, and the use of nonlicensed personnel
functions.
All of the following have increased the manager’s supervisory responsibilities EXCEPT:
sales associates working out of a home office.
increased number of collective units called sales teams.
increased use of nonlicensed personnel to perform administrative
functions.
use of an independent contractor model when hiring sales associates.
ID: RE_31525
The answer is LESS TOLERANT OF SELF-SERVING DEALINGS. Consumers are more watchful, less tolerant of self-serving dealings, more demanding for ac
identify, criticize, and scrutinize ethical business practices.
What is the typical attitude of consumers towards the business community in general, and specifically, the re
Less watchful
Less tolerant of self-serving dealings
Less demanding of accountability
Less likely to scrutinize ethical behavioral
practices
ID: RE_31522
The answer is A SALES STAFF THAT LARGELY SETS ITS OWN SCHEDULES AND PRIORITIES. Real estate brokerage is largely dependent on the goals o
contractors, sets their own schedule and productivity. It is similar to other companies in dealing with bottom line pressures, economic downturns, and many, many
Opening a real estate company faces similar challenges to that of any company. One challenge that is unique
bottom line pressures.
economic downturns.
abundant regulations.
a sales staff that largely sets its own schedules and
priorities.
ID: RE_31527
The answer is CAN INCREASE THE REAL ESTATE FIRM’S PROFITABILITY. While the use of personal assistants and transaction coordinators increases bas
firm’s profitability.
The use of personal assistants
defeats the purpose of sales teams.
disturbs the sales associate’s rapport with customers.
can increase the real estate firm’s profitability.
eliminates the broker’s liability for the sales associate’s
actions.
ID: RE_31524
The answer is INCREASED NEED FOR SAFETY AND SECURITY. It is more costly to run a business when owners must spend revenue on security which has
A real estate company recently installed a badge reading system that cost over $250,000. This expense is a re
relating to
loss of stock market investments.
increased need for safety and security.
loss of investor confidence in Wall Street
institutions.
displaced workers scrambling to find new
careers.
ID: RE_31528
The answer is INCREASED USE OF CYBER DELIVERY. Like it or not, many consumers use cyber delivery—the use of the Internet for information or service.
to Internet data exchanges, virtual office Web sites, etc.
In the past, real estate licensees were seen as the “gatekeepers” to real estate information. Which of the follow
this role?
Increased reliance on the Multiple Listing Service
Increasing numbers of displaced workers entering the real estate
market
Increased use of cyber delivery
Fewer virtual office Web sites in favor of plush offices
ID: RE_31530
The answer is SERVICE BUSINESSES MARKET DIFFICULT-TO-MEASURE INTANGIBLE COMMODITIES. Service providers, such as real estate compan
intangibles. Their consumers often have differing views of cost, price, and value of the offered services.
Of the following, which is one of the main differences between service business, such as real estate brokerag
A broker can manipulate production to increase revenue.
Manufacturers cannot control the distribution of its product.
Real estate consumers and brokers have similar views of the cost of the services provided by the
broker.
Service businesses market difficult-to-measure intangible commodities.
ID: RE_31526
The answer is MORE ADMINISTRATIVE PERSONNEL ARE USED TO PERFORM NON SALES-RELATED ACTIVITIES. Both brokers and sales associate
transaction coordinators to perform nonsales and administrative functions so that they can focus on direct, revenue-producing activities.
One major change in the personnel philosophies of real estate organizations is
managers are increasingly dictatorial.
more administrative personnel are used to perform nonsales-related
activities.
sales associates are less involved in collaborative efforts for the
company.
more secretaries are used to perform sales activities.
ID: RE_31523
(2)Leadership
LEARNING OBJECTIVES
After completing this unit, the student should be able to
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describe the characteristics of the dictatorial style of leadership;
describe the characteristics of the autocratic style of leadership;
list at least six characteristics of a leader;
state the most important trait of a leader;
describe the leadership characteristic of accountability;
identify the most important part of the delegation process; and
define the term empathy.
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IN
TR
OD
UC
TI
ON
Who
m
do
you
adm
ire
as a
lead
er?
Why
?
Wha
t do
you
kno
w
abo
ut
your
self
that
wou
ld
help
—or
hind
er—
you
as a
lead
er?
The
repu
tatio
n of
an
orga
niza
tion
as
LEADERSHIP VERSUS MANAGEMENT
Not all managers are leaders. The distinction relates to the ability to influence others and
the contrasting ways leaders and managers approach their jobs in an organization.
We spend much of our lives as members of groups---at work, in the community, in the
family, in the classroom. In the group hierarchy, someone becomes the leader. That
person may be formally appointed, as in the chairman, manager, or teacher. Or that
person may informally rise to the position. Just because a person has the title of boss
doesn't make that person the leader. People accept a person as their leader because of his
or her personal qualities, not because of the title.
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Just because an organization has an established hierarchy doesn't necessarily mean that
people will support their superiors. That simply isn't the case, especially in today's less
dictatorial organizations. While no one can force another person to do anything, a person
can influence people to move in the desired direction.
Managers and leaders are related terms, but also very different. Managers function within
established systems and seek orderly formulas. They see themselves as caretakers, and
monitor the organization to keep it on course.
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Leaders, on the other hand, are the entrepreneurs, the people who “think outside the box.”
They are visionaries who look for creative, inspired ways to do things. To leaders,
innovation (and the extra costs that may be involved) is the way to achieve bottom-line
success.
Organizations need management to keep them on course. But the course set by leadership
is more likely to lead to success.
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UNDERSTANDING YOURSELF
How can a person become not only a manager, but also a leader? This is really a process
that begins with understanding the essence of leadership, evaluating personal strengths,
weaknesses, and values, then using that knowledge to grow. There are several leadership
characteristics that are particularly noteworthy.
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Willingness to learn. The strength of conviction, passion, and vision that leaders possess
comes from learning. Not just that which is gained from a book but from probing, asking
questions, listening, and observing.
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Willingness to take care of others. Leaders distinguish themselves because of their
selflessness rather than self-centeredness. They value people over systems and procedures
and enjoy nurturing and contributing to the lives of others. Leaders rejoice in the
accomplishments of others.
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A positive attitude. Leaders focus on positive rather than negative aspects of life, other
people, and themselves. This does not mean an artificial rah-rah, but a genuine spirit of
optimism.
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Compassion. Compassion means having a healthy appreciation for being human. People
need to feel accepted for their flaws as well as their strengths. Then they can grow and
develop compensating enhancements.
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Open-minded. Being able to see all sides of a story inspires creativity and helps build
consensus, which is important in helping an organization function. Open-minded people
are typically more tolerant of divergent viewpoints, easier to get along with, and better
listeners.
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Ego and empathy.Ego is synonymous with self-esteem. Empathy is the ability to be
sensitive to the thoughts, feelings, and experiences of others. Confidence and self-respect
contribute to the ability to be compassionate and tolerant and to nurture others.
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CHARACTER OF A LEADER
Character is formed by values, morals, and ethics and is revealed by such things as
integrity, honesty, and trustworthiness. Leadership comes from the ability of a person to
engender the faith of others that the person deserves their following. People need to feel
that their leader can be trusted to use the position responsibly.
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Several of the most notable character traits that foster confidence that this risk is worth
taking include the following:
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Integrity: Webster's dictionary says integrity is a firm adherence to a code of
especially moral or artistic values, implying trustworthiness and incorruptibility.
Honesty: Back to Webster, and honesty is found to imply a refusal to lie, steal, or
in any way deceive, an unswerving fidelity to the truth.
Trustworthiness: The essential element is confidence that a person can be trusted,
the faith others have that a person will use the position of trust responsibly and no
harm will come to them.
Loyalty: Webster, again, says loyalty implies a faithfulness that is steadfast in the
face of any temptation to betray.
Respect: This is the high regard for the welfare and rights of others.
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The fundamental trait, which also plays a role in all the others, is integrity. Integrity
comes from a person's intrinsic sense of values or moral order, which are influenced by
the value systems and moral codes formed in a family, society, culture, or organization.
The integrity of the institution, as in the organization, is a reflection of the integrity of its
leaders. When there is a lack of congruity between one person's values and another's or
those of the institution, a moral dilemma results.
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Honesty and integrity are frequently associated because with integrity also comes the
expectation that one does not lie, cheat, steal, or deceive. This is revealed in the way a
person uses knowledge. Trust arises from the confidence that a person will use
knowledge and position responsibly.
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Loyalty arises from the trust that allows one to commit to an individual or a cause. People
will be faithful when they feel their personal needs are being satisfied.
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Respect is gained from the group's positive evaluation of the leader's character.
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Power of a Leader
The very nature of a leadership position confers power. Power is exercised by making
decisions and, in so doing, can dramatically affect other people's lives. The responsible
use of power reflects character. The way others react to that power reflects their
perceived worthiness of a person to hold the position.
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A leader is constantly being scrutinized and will have influence only as long as people
feel that power is being used fairly. If a sales associate, for example, feels that the
manager does not respect that salesperson's needs, expects the salesperson to compromise
his or her ethics, or is willing to compromise the principles or ethics of the company, the
manager can be judged unworthy of the power. The most enduring influence a leader has
is when both the leader and the followers share similar values.
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LEADERSHIP QUALITIES
Leaders emerge not just because of who they are as persons but because they also have
the skills that enable them to effectively influence others. Those leadership skills include
accountability, decisiveness, team building, and delegation.
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Accountability
Leaders must make decisions, and all decisions have consequences. Accountability
means that a person is willing to take responsibility for the outcomes of his or her
decisions. A leader takes charge, learns to be up front and say “oops” if necessary, and
then take corrective action. Accountability means not trying to shift the blame. The “buck
stops here”—that is, with the leader.
In a real estate company, brokers are responsible for the activities of the licensees who
work for them. The Florida Real Estate Commission holds the broker personally
accountable for violations of the law.
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Decisiveness
People in a leadership position are expected to provide direction. Ambiguity or
indecisiveness not only muddles perceptions about who is in charge but also reduces the
organization's ability to achieve its goals. While legitimate decision-making processes
can vary, the important point is that someone must provide decisive direction, including
clearly communicating the decision.
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Team Building
The leader must draw everyone together in common pursuits on behalf of the
organization. Team building is the way organizations mobilize the group's efforts.
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People work to satisfy personal needs. The organization also has needs that have to be
satisfied. The charge for leadership is to muster the personal needs of the individuals into
a unit that then works for the benefit of the organization. Even if the motives are
different, all can work toward similar ends and gain satisfaction.
Working together stimulates ideas, creativity, and initiative, benefiting both the
individual and the organization.
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Delegation
Delegation is difficult for many managers because it involves trusting someone else to
get a job done. The most important part of delegation is conferring authority to command
all aspects of the task that is to be performed. Leadership must be able to trust the person
to use that authority responsibly.
Delegation is a way to get an enormous amount of work done efficiently and help people
feel good about themselves in the process.
Delegation works when:


the right people are identified for the specific tasks. They must have the
experience, knowledge, or skill to carry out the assigned task. They also must be
willing to accept the responsibility for the task's performance.
the delegator lets go. People must be given the authority to perform a task without
interference. Each person may approach a job differently; one way isn't
necessarily the only right way. The point is that the assignment gets completed.
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SOCIAL AWARENESS
Social awareness in the workplace has become one of the business community's top
priorities in recent years. This comes about because of changing demographics in the
workplace and heightened sensitivity to individual lifestyles. The result of that
sensitivity, for example, is flextime and childcare to accommodate working parents and
adult caregivers, gay-friendly and gender-neutral environments, zero tolerance for sexual
harassment, and recognizing multicultural and multireligious systems to accommodate
the broad spectrum of today's population.
Finally, leadership that is personally involved in the community guides an organization to
act in similar fashion, that is, by giving back to the community with volunteer and/or
financial support of community activities and social service projects. Image and
reputation of the company are often measured by the organization's willingness to reach
out for the public good. This is particularly important if the public perceives that an
industry as a whole is self-serving.
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CONCLUSION
Leaders have a powerful influence over a group or organization and its individual
members. The responsible use of that power reflects the leader's character. People expect
their leaders to meet the highest standards of integrity and to use power fairly. Leaders
succeed when they take charge decisively, draw people into collective efforts, delegate
appropriately, and accept responsibility for their actions.
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Reading Comprehension Quiz 2
The statement is FALSE. People have very personal and sometimes very different reasons for working. Some want to simply stay busy and make a living, others a
money.
People typically work for the same reasons.
True
Fals
e
ID: RE_31236
The statement is TRUE. A leader takes charge, learns to be up front and say “oops” if necessary, and then takes corrective action.
Accountability means that a person is willing to take responsibility for the outcomes of his or her decisions.
True
Fals
e
ID: RE_31235
The statement is TRUE. When there is a lack of congruity between one person’s values and another’s or those of the institution, a moral dilemma results.
The integrity of the institution, as in the organization, is a reflection of the integrity of its leaders.
True
Fals
e
ID: RE_31232
The statement is FALSE. Leadership comes from the ability of a person to engender the faith of others that the person deserves their following. People need to fee
the position responsibly.
Leaders have the ability to control others.
True
Fals
e
ID: RE_31231
The statement is FALSE. The charge for leadership is to muster the personal needs of the individuals into a unit that then works for the benefit of the organization.
can work toward similar ends and gain satisfaction.
An effective leader focuses on the personal needs of the organization’s employees.
True
Fals
e
ID: RE_31234
The statement is TRUE. This comes about because of changing demographics in the workplace and heightened sensitivity to individual lifestyles.
Social awareness in the workplace is a priority in the business community today.
True
Fals
e
ID: RE_31238
The statement is FALSE. Delegation is a way to get an enormous amount of work done efficiently and help people feel good about themselves in the process.
Delegating tasks is a way for leaders to lighten their workloads.
True
Fals
e
ID: RE_31237
The statement is FALSE. Image and reputation of the company are often measured by the organization’s willingness to reach out for the public good.
Leaders do not need to be involved in public works and community service.
True
Fals
e
ID: RE_31239
The statement is TRUE. Team building is the way organizations mobilize the group’s efforts.
A leader must draw everyone together in common pursuits on behalf of the organization.
True
Fals
e
ID: RE_31233
The statement is FALSE. Just because an organization has an established hierarchy doesn’t necessarily mean that people will support their superiors People accept
or her personal qualities, not because of the title.
People accept a person as their leader because of titles such a boss or manager.
True
Fals
e
ID: RE_31230
Unit Exam 2
The answer is USE THEIR CONFIDENCE AND SELF-RESPECT FOR THE BENEFIT OF OTHERS. A healthy sense of ego is important for leaders because th
respect for the benefit of others.
Leaders should have a healthy sense of ego because they must be able to
be egomaniacs.
use their egos to build themselves up in the eyes of others.
use their weaknesses to build up themselves in the eyes of
others.
use their confidence and self-respect for the benefit of
others.
ID: RE_31533
The answer is YES, IT STIMULATES IDEAS AND AN APPRECIATION FOR THE REWARDS THAT ARE POSSIBLE IN COLLECTIVE EFFORTS. A bus
a unified force. Collaborative efforts can assist individuals to reach their goals as well as the company goals.
Is there any value in team building in a real estate office?
No, it distracts sales associates from working to satisfy their individual needs.
No, team building cannot be done with independent contractors.
Yes, it stimulates ideas and an appreciation for the rewards that are possible in collective
efforts.
Yes, people love being drawn into activities on behalf of the organization.
ID: RE_31538
The answer is RESOLUTELY STICKING TO ANY DECISION ALREADY MADE. Sometimes a leader must change direction after making a decision. Leaders
others, be compassionate and open-minded.
All of the following characteristics are valuable for a leader EXCEPT
being willing to take care of others.
being compassionate.
being open-minded.
resolutely sticking to any decision already
made.
ID: RE_31532
The answer is DELEGATE RESPONSIBILITES. Leaders must learn to delegate responsibilities. When doing so, they must let go of the details and trust that the p
and will get it done.
In order to accomplish more in less time, good leaders must learn to
delegate responsibilities.
micromanage their subordinates.
describe in detail how each task should be performed.
play favorites and choose their best friends to manage
others.
ID: RE_31540
The answer is CONFERS POWER. The very nature of leadership confers power, which may be used responsibly or irresponsibly.
The very nature of leadership
confers power.
breeds resentment.
permits coercion.
avoids careful scrutiny of
actions.
ID: RE_31535
The answer is READILY ACKNOWLEDGING THEIR ERRORS IN JUDGMENT. Leaders can handle responsibility and accountability by readily acknowledgin
accepting responsibility for their actions.
Leaders can handle responsibility and accountability by
delegating the responsibility for their mistakes to others.
readily acknowledging their errors in judgment.
sitting back rather than admit their responsibilities.
fearing a loss of respect if they acknowledge their errors in
judgment.
ID: RE_31536
The answer is USE WHAT YOU LEARN ABOUT YOURSELF TO GROW. Developing leadership skills is an on-going growth process of evaluating your perso
The real benefit of evaluating your personal strengths, weaknesses, and values is to be able to
be highly critical of yourself.
use what you learn about yourself to
grow.
assess other people and be critical of
them.
concentrate on your weaknesses.
ID: RE_31531
(3)Management Skills
LEARNING OBJECTIVES
After completing this unit, the student should be able to




explain how praising behavior is an important way to reinforce desirable
behavior;
describe the practice of labeling and its effects on personnel behavior;
describe the characteristics of a leader who uses a dictatorial style; and
list two situations that would be best handled by the broker meeting face-to-face
with the sales associate.
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INTRODUCTION
Think about people you've worked for...What do you admire most about the way they
handled the job? What do you admire the least?
What are your strengths as a manager?
In order for leaders to influence behavior in ways that benefit the organization, they need
certain skills. Managing human behavior based solely on gut instinct is difficult to
accomplish successfully. Without formal training, this is the most common approach for
most new managers. Their models are parents, teachers, or previous managers, whether
or not those individuals were good managers. This chapter shows different management
styles and techniques to allow a new manager to make more informed choices.
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Management styles are the various ways leadership provides direction and uses authority
hoping to elicit a certain response from the workers. Some managers believe workers are
to be seen and not heard; others see workers as a valued force in determining an
organization's results. The style of management also has a considerable impact on the
workplace atmosphere.
The styles discussed in this section include dictatorial, autocratic, participatory, and
laissez-faire.
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Dictatorial Style
This is the “Toe the line or get out!” style of management. Employees don't ask questions
nor offer suggestions. The dictatorial manager has absolute and total control, no authority
is delegated, and only orders are issued. The dictatorial manager usually micromanages
the details of every task.
This management style creates an oppressive atmosphere. While it may still exist in some
workplaces, the dictatorial style of management is less common today because workers
have more employment choices. Today, a dictatorial environment is more likely to
prompt a “Who needs this?” reaction and result in resignations or revolt.
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Autocratic Style
Autocratic management is similar to the dictatorial, but is seen as more benevolent. The
autocratic manager still dominates, but in a less intimidating way. The dictatorial
manager gives orders; the autocratic manager gives direction.
An autocratic organization is more respectful and a less threatening or adversarial
environment than a dictatorial organization. As in the dictatorial environment, workers do
not participate in decision-making. While some people respond to autocratic management
because it is similar to their experiences as schoolchildren, the style does not encourage
initiative or creativity.
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Participatory Style
Participatory management is the most democratic style. Management has a more subtle
control. The participatory manager prescribes the required results and the employees are
to determine the best way to accomplish that work. Management delegates some
authority to the worker. This style is the basis for a broker's supervision of independent
contractors.
A participatory environment values people and their individual skills and abilities. In
other words, the individual is seen as a whole person, not just a worker or employee.
Encouraging people to take initiative demonstrates respect for their talents and also
provides an opportunity for them to learn and grow. Managers encourage and even
formally invite participation in problem solving or brainstorming sessions. By giving
people an opportunity to influence decision making, it is also assumed that they will
cooperate in implementing the final decision. Workers may feel deceived, however, if
their suggestions are invited then ignored.
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Laissez-Faire Style
Laissez-faire management is essentially no management, with nonintervention as its
primary characteristic. The designated leaders provide little, if any, guidance and workers
are left to their own devices. Few organizations formally adopt this style of management;
it normally evolves out of a leadership failure. The result is a chaotic environment and an
organization that is incapable of meeting its goals.
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MANAGING PEOPLE
Management's primary job is widely believed to consist of managing human behavior so
that the collective efforts of the group produce desired results.
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Managing Behavior
Brokerage managers are typically promoted to their positions because of their real estate
or business expertise, not because of their formal management education. Trying to
understand “what makes people tick” and then eliciting the desired behavior by appealing
to their inner psyches isn't something an untrained person can do successfully. The result
is often faulty assumptions that result in unjust or inappropriate actions by a manager.
While it may be unproductive trying to understand why a person behaves in a certain
way, managers can learn to observe workers' behavior, and manage in ways that
influence that behavior.
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Assessing Behavior
Behavior is simply a matter of making choices, a function of the alternatives one sees at
the time. Sometimes, it is a conscious and deliberate exercise; other times, it's an
unconscious or reflex action. If there's any fault in the behavior, the cause is usually that
the person doesn't have the intellectual or emotional ability to identify appropriate
alternatives for action.
From a manager's point of view, behavior can be acceptable or unacceptable. Acceptable
behavior is often taken for granted, so managers often respond only to undesirable
behavior. In practice, managers should respond to both.
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Praising Behavior
The most desirable workplace is one in which people are doing the things they are
supposed to be doing. The best way to keep people on that track is to reinforce desirable
behavior with a kind word, a pat on the back, or an award. Behavior that is reinforced is
likely to be repeated.
There's great benefit and very little risk when managers recognize the good people do.
Everyone does something worthy of attention. In real estate companies, a lot of emphasis
is placed on sales and listings. But there are many other ways people contribute to the
organization, the industry, and their own professional development that are worthy of
recognition.
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Two simple rules to keep in mind about praise:


Praise must be genuine. Effusive words of praise for every action sounds
insincere.
Praise must be for the performance, not the performer. It is the behavior that is to
be judged not the person. This allows even an unpleasant person to be praised for
good performance.
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Modifying Behavior
Because change must come from within the person who demonstrated unacceptable
behavior, it is a management function to get workers to want to modify that behavior.
Screaming, and shouting is more likely to anger or frustrate people rather than to modify
their behavior.
A manager must learn that not every mistake deserves attention. People may stop trying
to please when they work in an environment of constant criticism. The wiser course of
action is to decide whether the consequences of the undesirable behavior are serious
enough to warrant attention. If goals of the organization are in jeopardy, intervention is in
order. The manager now must do things that cause the unacceptable behavior to change.
Because the offender may not be aware of the manager's displeasure, the manager must
clearly describe the behavior that is unacceptable (not attacking the person) and
explaining the reasons why. Once the unacceptable behavior is identified, the parties
must agree how the person will prevent a recurrence.
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Managing the Manager
The official position of manager creates a class distinction between the supervisor and the
people being supervised. The very nature of this boss-and-subordinate hierarchy sets up
group dynamics.
The class distinction becomes very apparent when the manager is supervising those who
were once his or her peers, especially in the same organization. A problem may occur if
the sales associates, who previously saw the manager as “one of us,” may feel that their
peer has betrayed them by becoming “one of them.”
Gaining the cooperation of subordinates depends to a large degree on the way the
manager approaches the position. The person with an inflated ego is less likely to be
accepted than the person who demonstrates a genuine respect for the people being
supervised.
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Labeling
Some people pride themselves on being able to “size people up,” making quick
judgments about them and assigning a label. While a label typically identifies a person by
a dominant feature or characteristic, no person can be so neatly categorized as a label
suggests.
Once labeled, people tend to behave in ways that are consistent with the label. A
“successful” label generally enhances self-esteem and causes a person to strive to live up
to the reputation. A “loser” label typically causes a person to lose confidence and feel that
there's no point in trying. In effect, the poor soul has been labeled into failure.
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Some supervisors incorrectly manage the label rather than the person. They may feel that
no oversight is necessary for the “successful” sales associate, and that undesirable
behavior that would not be tolerated in others may be overlooked. The manager may be
more critical of the behavior of a “loser,” even if the criticism isn't justified.
People expect leaders to respect their individual talents and to treat them fairly.
Inconsistent supervision or an appearance of partiality breeds discontent and makes the
manager's job more difficult.
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Diversity and prejudice
Today's manager is very likely to be supervising a person whose profile is different from
his or her own. This requires learning appropriate behaviors from both a cultural and a
legal perspective to properly supervise persons of differing age, race, color, ethnicity, or
gender. This diversity can cause people's underlying stereotypes and prejudices to surface
unless management creates a respectful and tolerant working environment.
Managers must take actions that are related solely to job performance. Dissension may
result if the manager is perceived as being more or less tolerant of behaviors because of
the physical, cultural, religious, or ethnic characteristics of the workers. This is unfair and
illegal. Also, as the manager respects diversity, others in the group have a model to
follow as well.
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Life's unpleasant little tricks
The workplace is a collection of people who may be experiencing disappointment, stress,
anger, sadness, or grief. Management should be sensitive to those temporary emotions
and offer support when appropriate.
When the manager is the one who is experiencing those emotional feelings, the manager
must consider the effect that those feelings may have on the employees. Because people
are ever watchful of a manager's words and actions, the indications of acceptance or
rejection, approval or disapproval may have a significant impact.
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Sometimes employees associate the manager's behavior toward them with something
they've done. The grumbled, quick “hello” as the manager heads back to his or her office
can easily be interpreted as criticism or rejection rather than what it really means, that the
manager is having a disastrous morning. A simple explanation can prevent erroneous
conclusions, the “don't take it personally” kind of words that keep the air clear.
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Stress
Real estate offices are usually charged with high energy, high emotion, and perhaps short
fuses. Managers may also have stressful lives. Companies can reach a point of
diminishing returns when the health and well being of the workforce is jeopardized
because of stress.
Appropriately, one of the hottest topics in workplace training today is stress management.
Manager can reduce stress by setting realistic goals, prioritizing, and developing timemanagement skills. By helping people to reprogram their attitudes and develop healthy
lifestyles, everyone benefits.
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ASSUMING THE POSITION
The common business practice of promoting the best technicians into managerial roles is
also prevalent in the real estate industry. The good sales associates are often made
managers.
Few people achieve these positions with the necessary management skills or even
realistic expectations about the job. This section will discuss the different roles of a
brokerage manager: technical, business management, and sales management.
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Technical Role
A manager needs the specific knowledge and skill that relates to the product or service
that is the organization's business. A manager's credibility is threatened if the sales
associates know more about the technical aspects of real estate than the manager does.
Successful real estate sales associates who become managers usually have good
transaction-based, technical skills. The manager needs to stay current on the latest
industry developments and legal issues.
The sales associate-turned-manager may believe it's easier and quicker to just take over a
transaction rather than trying to tell someone else how to do it. However, being the doer
is not the manager's job and should be avoided.
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Business Management Role
The collective efforts of the members of the organization must be guided in ways that
achieve profitability for the company.
Business management involves planning and setting goals for the organization;
developing systems that help the organization function effectively; and coaching the
personnel within the organization helps achieve goals.
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Small businesses are most likely to fail in their first three years of operation for four
principal reasons:



lack of planning,
undercapitalization,
unrealistic expectations of a company's success in its early years, or

the owner's lack of experience in running a business.
Successfully transitioning into management requires not only good business management
skill but also some realistic expectations about the personal implications of the move.
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Sal
es
Ma
na
ge
me
nt
Ro
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Sale
s
man
ager
s are
resp
onsi
ble
for
the
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vitie
s of
their
sale
s
unit
s or
offi
ces,
func
tioni
ng
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-line
supe
rvis
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mid
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man
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the
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stru
ctur
A manager is most effective by devoting 100 percent of his or her time to management
responsibilities. But when the sales staff is small, it may be possible to both manage and
sell (or provide other professional services).
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Being a full-time manager has its advantages. The job responsibilities are very clear:
supervise the activities of the salespeople, coach them through their problems, and help
them reach their production goals.
Blending management and real estate activities successfully is more challenging. In
addition to criticism that managers no longer have time to devote to their sales associates,
there is the possible resentment that managers grab the best leads to fuel their own
business. Managing and selling are separate and very demanding jobs in their own rights.
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A selling manager can take several steps to reduce problems.





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Prioritize responsibilities. A determination must be made whether one job is
primary and the other is a secondary assignment or whether each has equal
priority.
Determine the amount of time and effort that must be devoted to each role.
Administrative, supervisory, and problem-solving tasks can take up considerable
time.
Prepare contingency plans. Issues will likely arise that demand the manager's
attention on both the management and sales fronts simultaneously. A backup plan
will help ensure that someone is available to take up the slack when necessary.
Protect harmony in the office. Perhaps the most challenging issue to manage is the
competition between selling managers and the salespeople. Managers can reduce
the resentment by restricting their sales activities to previous customers and
personal referrals. In some companies, managers avoid sales entirely and engage
in other real estate activities, such as leasing or property management.
Maximize the use of technology. One of a manager's biggest allies is technology.
Pagers, e-mail, cell phones, and portable computer networks can help the manager
perform tasks more efficiently.
Professional Credentials
A manager's success is directly related to the professional credentials brought to the job.
The manager's technical role can be supported by the expertise and training gained as a
licensed sales associate. A manager must continue his or her education to avoid looking
like a dinosaur to the sales staff.
Unless the newly appointed manager has a degree in business administration, or
corporate experience, it is likely that the business management role will be more difficult.
A general business management course of study, one that does not focus exclusively on
the real estate industry, also provides valuable insight into running a business.
Leadership training can be gained from seminars and books.
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CONCLUSION
A manager who understands human dynamics, has interpersonal skills and business
management skills is better equipped to direct a company's personnel. The style of
management sets the tone for the environment in which people work. That workgroup
must be guided in constructive ways so that the organization achieves its goals.
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Reading Comprehension Quiz 3
The statement is FALSE. Acceptable behavior is often taken for granted, so managers often respond only to undesirable behavior. In practice, managers should res
Managers only need to respond to undesirable behavior.
True
Fals
e
ID: RE_31243
The statement is FALSE. A problem may occur if the sales associates, who previously saw the manager as “one of us,” may feel that their peer has betrayed them
There is less of a class distinction between manager and associates when the manager is supervising those w
peers, especially in the same organization.
True
Fals
e
ID: RE_31246
The statement is TRUE. The wiser course of action is to decide whether the consequences of the undesirable behavior are serious enough to warrant attention.
Managers must learn that not every mistake deserves attention.
True
Fals
e
ID: RE_31245
The statement is FALSE. The autocratic manager gives direction, the workers do not participate in decision-making, and the style does not encourage initiative or
The autocratic manager believes that employees should manage themselves.
True
Fals
e
ID: RE_31240
The statement is TRUE. Manager can reduce stress by setting realistic goals, prioritizing, and developing time-management skills.
Mangers can help employees to manage stress.
True
Fals
e
ID: RE_31248
The statement is TRUE. This allows even an unpleasant person to be praised for good performance.
Praise must be for the performance, not the performer.
True
Fals
e
ID: RE_31244
The statement is TRUE. The participatory manager prescribes the required results and the employees are to determine the best way to accomplish that work.
Participatory management is the most democratic style of management.
True
Fals
e
ID: RE_31241
The statement is FALSE. A “loser” label typically causes a person to lose confidence and feel that there’s no point in trying.
People tend to fight negative labels.
True
Fals
e
ID: RE_31247
The statement is TRUE. Few organizations formally adopt this style of management; it normally evolves out of a leadership failure. The result is a chaotic environ
incapable of meeting its goals.
Laissez-faire style of management evolves when leadership fails.
True
Fals
e
ID: RE_31242
The statement is TRUE. A manager’s credibility is threatened if the sales associates know more about the technical aspects of real estate than the manager does.
A manager needs the specific knowledge and skill that relates to the product or service that is the organizatio
True
Fals
e
ID: RE_31249
Unit Exam 3
The answer is CHANGE ATTITUDES OR THE SITUATIONS THAT CAUSE STRESS. The manager can become a role model in the office by reprogramming
about what can be accomplished, and establishing priorities.
How should a manager deal with stress?
Work longer hours to get everything done
Change attitudes or the situations that cause stress
Take more courses to enhance professional competency
Ignore personal stress and concentrate on the behavior of
others
ID: RE_31549
The answer is LAISSEZ-FAIRE STYLE. Although laissez-faire style of management is the epitome of a self-directed workplace, it is essentially nonmanagement
Eventually, the organization may languish into nonexistence.
The style of management that is characterized by the manager’s nonintervention and hands-off approach is th
autocratic style.
dictatorial style.
laissez-faire
style.
participative
style.
ID: RE_31544
The answer is DICTORIAL STYLE. In a dictatorial environment, the “dictator” speaks and people are expected to respond without questioning the directives.
The style of management in which the manager has absolute control, issues orders, and expects everyone to r
questioning the directives is the
autocratic style.
dictatorial style.
laissez-faire
style.
participative
style.
ID: RE_31541
The answer is AUTOCRATIC STYLE. An autocratic organization is more humanistic, respectful, and less threatening or adversarial.
The style of management in which the manager makes all decisions, shows concern for people, and enables t
autocratic style.
dictatorial style.
laissez-faire
style.
participative
style.
ID: RE_31542
The answer is PRAISE THE BEHAVIOR THAT IS DESIRABLE OR ACCEPTABLE. The manager can reinforce acceptable behavior by offering praise and rec
When evaluating people’s behavior, it’s important for the manager to
ignore desirable behavior because people are doing what they’re supposed to.
praise the behavior that is desirable or acceptable.
criticize the person who has stepped out of line.
yell at a person so it’s clear the manager is displeased about something that was
done.
ID: RE_31547
The answer is PARTICIPATIVE STYLE. Participatory management creates a job-rich environment in which management is still subtly in charge. The manager d
person responsible for doing a job.
The style of management that promotes initiative and recognizes the value of the company’s human resource
autocratic style.
dictatorial style.
laissez-faire
style.
participative
style.
ID: RE_31543
The answer is BUSINESS AND HUMAN RESOURCE MANAGEMENT. Unless the newly appointment manager has collegiate or corporate experience, he or sh
business and human resource management.
The real estate sales associate who has been promoted to management most likely needs additional training i
state rules and regulations.
advanced courses in listing and selling skills.
using the Internet to market properties more
effectively.
business and human resource management.
ID: RE_31550
(4)Communications and Decision Making
LEARNING OBJECTIVES
After completing this unit, the student should be able to







describe the situations in which a written memo would be the most efficient
means of communications;
define the term resource decisions;
define the term follow-through as it relates to classic decision-making;
describe what is meant by institutional decisions;
describe what implementing the decision entails;
list the "do's and don'ts" of holding a staff meeting; and
define the term hook as it applies to making a presentation.
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INTRODUCTION
What is the best way for people to get your attention and give you information? Talk to
you? Send you an e-mail? Write you a memor or a report? Give you a Web site address?
And what do you do with all the information that is swirling around you?
Managers are the center of the organization's communications, gathering and distributing
information between superiors and subordinates. Because one of management's functions
is to monitor performance and correct deviations from the plan, a manager needs
information before making decisions. Sometimes the decision is to take no action, but
often, the manager needs to act.
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THE INFORMATIONAL WORKPLACE
Because email and computers can generate lots of data, sometimes information gets lost
in the shuffle. Separating the good information from the irrelevant or inaccurate is the
challenge of good communications. Sometimes the communications accurately reflect the
intended message, and other times they cause misunderstanding. This depends on the
substance, the forum, and the method by which information is exchanged.
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Gathering Information
The manager's challenge is to gather adequate and relevant information. One way to
gather information is to use powers of observation. Simply watching the people in the
workplace provides clues about whether the organization's systems are functioning well
or problems are brewing. While the people's activities are important to watch, their body
language can tell more about their true feelings than their words.
Understanding the subtle, what's “between the lines,” messages is sometimes more
difficult. Only by truly listening do we get the information that would otherwise go
unnoticed. People may avoid making a direct point using circuitous words to soften the
blow. Or they might unintentionally impart the wrong message, because of carelessly
chosen words.
When using e-mail, senders often click-and-send before carefully reviewing the message.
The carelessly worded message can result in an unexpected reaction.
The point of all this is that a manager needs to take responsibility for gathering accurate,
timely, and relevant information. By sharpening observation and listening skills and
making judicious requests for reports (meaningful quality rather than unnecessary
quantity), managers can gain the facts, figures, and feelings that are necessary to properly
monitor activities and make decisions.
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Disseminating Information
Managers distribute information to their superiors and subordinates in the same ways
they gather it, by nonverbal and verbal communications. Sometimes the message is not
understood. Whether the fault is the ineptness of the sender of the message, the
unwillingness of the receiver, or the distractions that surround the exchange, the fact is
that somewhere along the line what one person thought was said wasn't received by the
other.
Managers need to distribute information clearly, leaving no question about its meaning.
In the case of a potentially unpopular information, some managers try to sugarcoat to
avoid unpleasantness. There may be unintended results that could have been avoided with
a more direct approach.
Some managers fail to share information in a timely manner. With respect to
dissemination of information, a manager can be a conduit, a filter, or a dam. The conduit
is the best approach. Problems aren't likely to go away, so best to share the tale before a
small problem becomes a major one.
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PICK YOUR FORUM
Most likely, everyone has sat through a meeting that seemed a waste of time, when a
memo could have better handled information. Or we've seen unpleasant reactions to
memos that should have been explained face-to-face. The manager should use the
appropriate forum to get the intended effect. This section will discuss the options of oneon-one discussions, written memos, and group meetings.
Say It Face to Face
Personal matters need to be handled one on one. Individual goal-setting exercises and
performance reviews are best handled individually. Performance problems or disciplinary
issues should also be discussed privately While it takes more time to meet with people
individually, in most cases such meetings are more effective.
Private conversations are also useful for disclosing some management decisions. While
group forums are often preferable, a manager may be able to gain insight about a
considered decision before it is announced to the entire organization. One-on-one
discussions also provide opportunity to achieve cooperation or resolve objections to a
management directive.
Of course, when a management decision affects only certain people it is best to tell them individually.
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Put It in Writing
Letters or memos work well for distributing industry and company news and
announcements. The document is also more likely to be remembered and used for future
reference. They are one-way communications and simply send information when no
immediate feedback is expected.
Written memos work well for sending facts, figures, and announcements that people can
read on their own. Using a meeting for the purpose might simply bore the attendees.
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People sometimes ignore memos and letters if they are poorly written or are not relevant.
Nor do most people today want a lot of background information. A written
communication should have a distinctive look and an attention-getting headline. To hook
the mind, consider, “If someone only skims my writing, will they get the point of my
message?” The document should be compelling and to the point.
When you “put it in writing,” consider about how it would be received if someone other
than the intended recipient reads the words. The writer should be careful not to use
comical, critical, or discriminatory remarks, even in the most informal e-mails.
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Hold a Meeting
Meetings let the manager control the way the information is delivered and give the group
an opportunity for feedback and discussion. Feedback comes not only in words but also
in the nonverbal signals that provide clues about people's reactions.
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There are several points that should be considered:





Successfully assemble the group. This may be easier said than done, especially if
the manager's meetings are perceived as wasting time. Don't hold a meeting if
there's no meaningful reason for it. The prospective attendees should be sold on
the benefits or they may fail to attend.
Hold it with the right people. If the subject applies to only a few people, then
others should not have to attend.)
Let them give feedback. Audiences need to feel that there has been ample
opportunity for them to express their viewpoints or get answers to their questions.
Take charge. Begin the meeting at the stated time, get to the subject matter
quickly, and proceed through an orderly, well-thought-out agenda. If the manager
always starts late, people learn that there's little reason to arrive on time. There's
even less point in being present for opening remarks if the manager typically
backs up and repeats the comments for the benefit of late arrivals. And no one
needs to listen to a sermon about attendance and punctuality, especially when the
people who should hear the sermon aren't there to listen to it, anyway. Publicize
an agenda. Distribute materials for participants to review for the meeting.
Advance notice intends to inspire attendance (the benefit-selling exercise) and
help people get into the proper mindset for the planned discussions so that the
meeting can proceed efficiently.
Remember that others may also have an agenda. A disgruntled person or group
may seize the opportunity to air a complaint. Attention-seeking egos or someone
who decides to lead a band of resistance to an issue that is the subject of the
meeting can also disrupt meetings. By anticipating objections and preparing to
politely, but firmly, handle problem personalities, the manager can keep control
and minimize the possibility of alienating people in the process.


Stay on track. Even when the meeting is intended to be a free-flowing exchange
of ideas (a minimally structured agenda), the manager needs to keep the
conversation on track.
End the meeting on time. Future attendance may depend on a timely ending as
much as it does on a timely beginning.
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Speaking in Public
The key to effectiveness in front of a group is good planning. Even sales meetings
deserve more preparation than a panicked hour before the scheduled 9 A.M. meeting,
trying to decide what to do. Just as the purpose of a meeting must be clearly defined, so,
too, must the message be defined, organized, and even rehearsed so the speaker has the
confidence to deliver the message and handle the group dynamics.
One pitfall is thinking that a topic is something people need to hear, but the audience may
disagree. It's best to consider the profile and interests of the audience when planning a
presentation.
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The formula used by public speaking experts and the military is as follows:
1. Tell people what you're going to say (introduction);
2. Say it (body of speech),
3. Tell them what you told them (summary).
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The first step is the “hook” that must capture people's attention and provide the objective
of the program. This helps to focus everyone's minds on the agenda. The second step is to
give the substantive content. The last step is a conclusion or summary, the “close.”
The speaker should develop an effective delivery plan. Simple things, like where the
speaker will stand, how the room will be arranged, and what media will be used
(overhead projectors, PowerPoint presentations, and sound systems) are items that can
make or break a program. When making use of technology, preparing “Plan B” for the
possibility of breakdowns is advisable.
Regardless of the setting, good public speakers learn to use their personality and eye
contact to communicate over and around the barriers of podiums and overhead projectors.
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The speaker should rehearse the presentation to correct timing or improve wording.
Doing it in front of a mirror allows attention to gestures, inflection, and eye contact. The
point is to test drive the presentation so the speaker can deliver a powerful, interesting
message.
The speaker should consider how to handle audience questions. Questions tend to resolve
any confusion before people leave. Some speakers are able to control the presentation
while taking the group's questions along the way; others prefer to hold questions until the
end for better timing. Giving the audience an opportunity for feedback will avoid the
feeling of being “talked at.”
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Because the speaker is in charge of the program, no one else knows the whole plan. This
allows experienced speakers to “go with the flow,” think on their feet. If they make a
mistake, they can acknowledge it in good humor and move on without damaging their
credibility. Sometimes, the best programs result from the speaker's ability to read the
audience and tailor the presentation to suit the participants.
Humor, when used, should fit the speaker's personality and the nature of the subject
matter. Some people are good at telling jokes while others are better at telling lighthearted tales or using humorous examples to make a point. Speakers must remember that
humor can be misinterpreted and inappropriate comments may be offensive to the group.
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DECISION MAKING
The decisions that management makes fall into four general categories.
1. Entrepreneurial or institutional decisions: These involve significant strategic
directions, policies, or fundamental systems within the organization.
2. Corrective decisions: These resolve problems, dilemmas, or crises that require
solutions to keep the organization on track or to maintain order in its systems and
processes.
3. Resource decisions: These involve the allocation of personnel or money.
4. Mediation decisions: These are essentially negotiated solutions, primarily
involving personnel issues and customer service.
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Decision-making processes vary. Decisions are made differently, depending on the
situation. Sometimes a quick decision is appropriate or even a decision to not interfere.
If employees expect direction, and don't get it, the result may be frustration with
management. When people expect a more studied course of action, but they get what they
perceive to be a quick fix, they may be exasperated.
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The communications part of the decision-making
process involves telling people what management has decided in ways that leave no
doubt about what is meant. Giving a thoughtful rationale goes a long way in gaining
cooperation. Even if management has decided that no action is warranted, people deserve
an explanation to that effect.
One of the major failings in some organizations is the lack of follow-through to ensure
that the organization's decisions are implemented.
ID: RE300781_C0430315
Classic Decision Making
Classic decision-making is a deliberate, methodical process. It is somewhat like a
scientific model, involving a set of very rational or logical steps:
1. Define the situation: clearly describe the problem or circumstance and the cause
or causes.
2. Develop alternatives: list all the possible courses of action to solve the problem or
address the situation.
3. Evaluate alternatives: consider the pluses and minuses, feasibility, short- and/or
long-term ramifications, and the perceived acceptance of each option.
4. Select the appropriate alternative: decide on the most desirable course of action,
which then becomes the decision.
5. Implement the decision: inform the appropriate people about the decision and
institute any necessary changes in policies, procedures, or systems that are
affected by the decision.
6. Follow through: monitor the implementation of the decision to ensure that the
new directive has been institutionalized.
7. Evaluate the outcome: decide whether the decision produced the desired results.
Did it do what it was supposed to do? Address the situation or correct the
problem? If the wrong alternative was chosen or the implementation was faulty,
take corrective action.
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Classic decision-making is best used when the decision will significantly affect major
policies, procedures, and systems within the organization. Careful deliberation will
produce a decision that will more likely be successfully implemented.
The classic model is a framework that helps managers to come up with a rational decision
in a relatively short time frame.
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Variables in Decision Making
The quality of a management decision depends on the quality of the information, the
expertise of the decision makers, and, sometimes, the politics of the organization.
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Information
A decision is only as good as the quality of the information on which it is based. If the
information comes from a biased observation, “cooked” books, or stale production
reports the results may be unacceptable. The classic model presumes the information is
complete, accurate, and timely.
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Expertise
The quality of decisions is related to the knowledge, skill, and business sophistication of
the people who make them. The classic model presumes management has the skill and
professional insight to define the situation and evaluate alternatives.
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Human element
Personal agenda, bias, or a quest to protect one's turf or authority in the organization can
color the view of the situation, the alternatives, and even the final decision. When a group
is engaged in the process, participants may favor an alternative that has little to do with
the business merits and more to do with organizational or personnel dynamics.
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Announcing Decisions
Decision-making is little more than an academic exercise if only the people who were
involved know what was decided. The objective of an announcement is to not only
clearly communicate a decision but also enhance the likelihood that it will be
implemented. A decision must be communicated so that it makes sense, because people
are more willing to implement a decision they understand. This is not to say that
management has to justify or defend a decision, but rather it needs to provide a rationale,
the logic behind the thinking, especially if the entire staff does not have a companywide
perspective.
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Any decision must be presented and supported with a unified voice by everyone in all
levels of management. If people sense dissension surrounding a decision, they are less
likely to cooperate with its implementation or may even sabotage it.
When major changes in the organization are contemplated, management should keep it
confidential until it can be announced and explained to the entire staff. Otherwise, the
company grapevine can start an undertow of rumors and half-truths that can undermine
the decision even before people hear the official announcement.
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CONCLUSION
The flow of information in an organization serves many purposes for managers, the
people they supervise, and the people the managers report to. Funneling the volume of
information in ways that reach the intended recipients in a timely, accurate, and efficient
manner is the challenge of good communications. Organizations depend on the fluid
exchange of information to function efficiently so that management can make quality
decisions and its directives can be implemented.
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Reading Comprehension Quiz 4
The statement is FALSE. The speaker should develop an effective delivery plan, including where the speaker will stand, how the room will be arranged, and what
As long as the speaker is to the point, the delivery of the message does not matter.
True
Fals
e
ID: RE_31254
The statement is TRUE. A decision is only as good as the quality of the information on which it is based.
The classic model presumes the information is complete, accurate, and timely.
True
Fals
e
ID: RE_31257
The statement is FALSE. Corrective decisions resolve problems, dilemmas, or crises that require solutions to keep the organization on track or to maintain order in
Entrepreneurial or institutional decisions resolve problems, dilemmas, or crises that require solutions to keep
or to maintain order in its systems and processes.
True
Fals
e
ID: RE_31255
The statement is FALSE. When major changes in the organization are contemplated, management should keep it confidential until it can be announced and explain
Management should consult employees when contemplating major changes.
True
Fals
e
ID: RE_31259
The statement is TRUE. The classic model is a framework that helps managers to come up with a rational decision in a relatively short time frame.
Classic decision-making is a process that uses a set of very rational or logical steps.
True
Fals
e
ID: RE_31256
The statement is FALSE. Observation is one way to gather information; truly listening is a way of gathering information that would otherwise go unnoticed.
Managers gather relevant information through observation alone.
True
Fals
e
ID: RE_31251
The statement is TRUE. Sometimes the communications accurately reflect the intended message, and other times they cause misunderstanding.
Separating good information from the irrelevant or inaccurate is the challenge of good communications.
True
Fals
e
ID: RE_31250
The statement is TRUE. Just as the purpose of a meeting must be clearly defined, so, too, must the message be defined, organized, and even rehearsed so the speak
message and handle the group dynamics.
Good planning is the key to effectiveness in public speaking.
True
Fals
e
ID: RE_31253
The statement is FALSE. Personal matters need to be handled one on one.
Personal matters are best handled in small groups of people.
True
Fals
e
ID: RE_31252
The statement is TRUE. The classic model presumes management has the skill and professional insight to define the situation and evaluate alternatives.
The quality of decisions is related to the knowledge, skill, and business sophistication of the people who mak
True
Fals
e
ID: RE_31258
Unit Exam 4
The answer is SPEAKING OFF THE CUFF. The least effective public speaking is done “off the cuff.” Keys to effective public speaking include good planning, p
approach, and practicing ahead of time.
Which of the following is LEAST likely to deliver an effective message at a business meeting?
Speaking off the cuff
Picking the right
topic
Practicing in advance
Choosing humor
wisely
ID: RE_31557
The answer is ENHANCE THE LIKELIHOOD THAT IT WILL BE IMPLEMENTED. The objective of an effective announcement is to communicate a decision
will be implemented. It should not seek to justify and defend the decision or to reopen the topic for discussion.
An announcement should not only communicate a decision but also
encourage everyone to second guess the
decision.
enhance the likelihood that it will be
implemented.
focus attention on the format of the delivery.
justify and defend the decision.
ID: RE_31560
The answer is A SET OF RATIONAL AND LOGICAL STEPS. Classic decision making is a deliberate, methodical process involving a set of very rational or log
Classic decision making is marked by
putting out fires.
shooting from the hip.
waiting until all the facts are
known.
a set of rational and logical steps.
ID: RE_31558
The answer is WHEN IMPARTING DECISTIONS AFFECTING THE COMPANY. Group forums are usually preferable for transmitting company decisions that
In which of the following situations should the manager schedule a large meeting for everyone to attend?
Individual performance reviews
When imparting decisions affecting the company
When the information affects only a couple of people
Personal problems or disciplinary action affecting certain
individuals
ID: RE_31554
The answer is AVAILABLE FOR FUTURE REFERENCE. One important reason for printed documents is that they are available for future reference. Because th
manager has no way of knowing if they have been read or if the information is understood.
A valuable reason for printed documents is that they are
available for future reference.
one-sided communications, requiring no response on the part of the
receiver.
evidence that the manager is knowledgeable and doing his or her job.
sure to be read, thus ensuring that the information is received and
retained.
ID: RE_31555
The answer is EFFECTIVELY GATHER AND DISSEMINATE INFORMATION. The essence of effective communication is gathering and disseminating inform
in writing, or nonverbal methods.
To engage in effective communication, the manager must
depend on blast faxes, e-mail, and voice mail, in addition to personal
meetings.
effectively gather and disseminate information.
cause the atmosphere to be emotionally charged to make an impression.
engage in verbal dialogue.
ID: RE_31551
The answer is IMPORTANT INFORMATION CAN GET LOST IN THE SHUFFLE. Because of the sheer volume of e-mail, it is easy for important information
What is the primary disadvantage of e-mail?
Fewer opportunities on which to gather
information
Inexpensively and widely disseminate
information
Important information can get lost in the shuffle
Shorter time to process the information
ID: RE_31552
The answer is PUBLICIZE THE AGENDA. Publicizing the meeting agenda can inspire attendance. The manager should not schedule a meeting unless there is a g
and end on time.
One of the ways to encourage attendance at an office meeting is to
regularly and consistently schedule meetings.
schedule the times randomly to keep everyone on their
toes.
publicize the agenda.
regularly run overtime since there are so many topics to
discuss.
ID: RE_31556
The answer is FAIL TO TIMELY SHARE CRUCIAL INFORMATION. Organizations stray from their goals when management fails to act because the managers
manner.
Of the following, one of the reasons that management fails to act is because managers
watch people too closely.
wait to personally know one another before they communicate any
message.
truly listen to discover what is behind the words.
fail to timely share crucial information.
ID: RE_31553
(5)Analyzing the Business Environment
LEARNING OBJECTIVES
After completing this unit, the student should be able to




describe how to evaluate government economic policy by inspecting the spread
between interest rates on long-term bonds and interest rates on short term
securities;
describe the type information to be found in a review of sociological factors;
define the term gross domestic product; and
explain why the job growth rate has a direct effect on the housing market.
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INTRODUCTION
What factors currently have the most effect on the general business climate in your area?
And on real estate companies?
What role will these factors, or others, play in the future?
Today's brokers must successfully navigate a complex maze of circumstances in a variety
of economic and geopolitical factors over which they have little control. In order for
managers to stay in control, they must be analytical observers so that they can take
advantage of opportunities, and also counter any negative influences. This chapter will
discuss economic, political, and sociological factors that planners need to consider.
Planning begins with forecasting. Because it is difficult to accurately forecast events, the
plan should be based on historical trends and the owners' best estimates.
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ECONOMIC FACTORS
Certain economic indicators give clues about the business climate. One of the strongest
indicators of the strength of the economy is the housing market. New housing starts and
home sales reflect consumer demand and also create demand for other household goods.
Some of the best research is available from the National Association of REALTORS®.
Economic indicators are subject to different interpretations. Even the best predictors of
the future can't anticipate such things as a 9/11 event or the corporate scandals that
rocked Wall Street and subsequently affected the entire economy.
Despite the uncertainty, management must make its best estimates of the economic
trends. Those estimates should be periodically reviewed for validity.
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Gross Domestic Product
The gross domestic product (GDP) is the broadest indicator of the strength of the
economy, showing the economic output and growth. Healthy industrial economies have
an average annual increase of about 3 percent. A higher percentage could indicate that the
economy is overheating and may need to be restrained. A sharp decline in the GDP has
historically resulted in stagnant growth. Watching the GDP that is released by the
government each quarter indicates how the economy is faring as the year progresses.
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Inflationary Cycles
A healthy economy should generate a low, stable rate of inflation. During the 1990s the
United States enjoyed slow, steady economic growth, with inflation hovering around 3
percent per year. That trend, along with optimism in the stock market, continued until
2001 when a slowdown occurred, the stock market started to lose ground and
unemployment rates, especially in the manufacturing sector, began to climb.
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An analysis of the spread between short-term interest rates set by the Federal Reserve and
the interest rates on long-term bonds is a good indicator of where we are in the business
cycle.


If the spread is large or getting larger—the government is trying to fuel the
economy by loosening its monetary policy. This encourages people to spend and
grow the economy.
If the spread is small or shrinking—the government is attempting to cool the
economy by tightening the money supply. This discourages people from spending
to guard against another inflationary spiral.
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Inflationary Cycles
In recent years the Federal Reserve has managed inflation with gentle adjustments in
interest rates to keep inflation in check. As a result, inflation during the 1990s did not hit
the extreme peaks and valleys of previous decades. The Federal Reserve has continued its
vigilant management of inflation, and when economic stimulus was needed, particularly
during 2002, it acted to reduce interest rates.
The Federal Reserve, alone, has not been successful in stimulating the economy, because
simply cutting interest rates does not necessarily stimulate GDP growth if consumers face
uncertainty. The housing market, fueled by the lowest mortgage interest rates in 41 years
and investors seeking alternatives to the stock market, has been one of the bright rays in
an otherwise gray time.
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While it's difficult to predict precisely when and how dramatically inflationary cycles
will change, the economy will eventually start the up cycle again. Recent corporate cost
cutting is expected to leave organizations more efficient so that they can begin to grow
again. As corporate profits grow, unemployment drops, people feel more secure in their
work life, investors feel more positive, and the general outlook improves.
It's easier to plan and make the most of opportunities during periods of low inflation,
when economic indicators are more predictable. The virtue of vigilance, perhaps by
revisiting the economic analysis every six months during volatile times, can help
organizations make timely adjustments.
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Consumer Confidence
Two-thirds of our nation's GDP comes from consumer spending. The willingness of
buyers and sellers to enter the marketplace is related to their attitudes about their sense of
financial security, especially when big-ticket purchases, like houses, are involved.
Financial security means a variety of things to different people. For many, it means job
security. For others, it means wages that are high enough to support their costs of living.
A recent Center for Housing Policy study indicates that 67 percent of low- and moderateincome households spent 50 percent or more of their income on housing alone. For
anyone living on a fixed income, including the elderly, security is a function of the cost
of living. For people who rely primarily on investment income, the low interest rates that
are a positive for the housing market can have the opposite effect on them.
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Consumer confidence, cost-of-living indexes, unemployment rates, and investor behavior
are all factors to consider when projecting company revenue. They are also useful for
identifying market segments or services where opportunities or vulnerabilities exist. NAR
statistics about housing purchases versus trends in remodeling and adding on to existing
homes are also helpful.
The government-published job-growth rate is particularly useful to measure consumer
confidence. The ability of a locale to generate new jobs has a direct bearing on the
growth of the local housing market.
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POLITICAL FACTORS
Depending on prevailing political ideologies and priorities, the effect that public
policymakers have on the business environment can vary. Republicans and Democrats
see the role of government differently. The parties also have differing views about budget
matters, tax cuts, entitlement programs, and a host of other issues that directly or
indirectly affect consumers and the corporate community.
Planners must understand that making plans based on the current political ideology can
be risky, because power shifts can occur unexpectedly. The agenda of federal, state, and
local policymakers can affect corporate operations, community development, and the
housing industry, all of which have a direct bearing on a real estate company.
Corporate Development
Business taxes have a significant effect on a company's cost of doing business. The
bottom line is also affected by the administrative costs of complying with state and
federal regulations relating to tax filings, employee benefit and retirement plans.
Some locales are more business-friendly than others. Companies are affected by the role
of business development in the overall economic development plan of a state or local
political division. In some areas incentives are offered to attract and retain businesses and
stimulate job growth, providing business opportunities.
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Economic Growth and Development
The economic growth and development policies in an area can affect a real estate
company in a variety of ways, in addition to the possible incentives for business
development.
The fundamental challenge in economic growth and development efforts is balancing
benefits with costs, not only in terms of money. Preserving the quality of life for a
community's residents, revitalizing aging neighborhoods or enhancing the utility of the
land, and strengthening a community's economic base serve desirable and often critically
necessary purposes.
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Residents sometimes fight growth, because they want to preserve an area in its present
state, to maintain the environment and to reduce stress on existing infrastructure (school,
sewers, water, and road systems). Most residents want to eliminate deteriorating
neighborhoods and the social problems that often accompany them, but frequently
become impatient with the slow process of recovery.
Some policymakers see a greater government role with regulatory intervention and
financial commitment for entitlement programs and economic stimulus packages. Others
want greater engagement by the private sector, believing government intervention is
needed only to the extent that it encourages free enterprise to function.
Sound economic growth and development policies result in a community that is more
attractive to more people and that will benefit real estate. The participation by a
company's leaders in the economic development of an area is worthwhile.
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Environment Issues
As policymakers seek ways to protect public health, safety, and the environment, both the
property owner and the real estate industry have experienced increased regulation.
Business planners cannot overlook environmental issues. They affect the amount of
potential business, the costs of complying with regulations, and can significantly affect
the company's liability exposure and insurance needs.
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Regulating the Industry
The brokerage industry is regulated heavily. The list includes state licensing laws; federal
antitrust laws; consumer protection laws; the Real Estate Settlement Procedures Act
(RESPA); fair housing laws; the Americans with Disabilities Act; and the Truth-inLending Act.
Consumer rights legislation has significantly shaped real estate companies' business
practices. The operative word is disclosure. Agency relationships, property condition,
environmental substances, financing terms are but a few examples of this important
subject. The legislation puts additional liability on the broker, who must be sure to
educate the sales associates.
Laws that foster universal licensure of salespeople will also have a bearing on the
business. Because of the intricacy of the volume of laws, brokers should involve the
company's legal counsel in the planning process.
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SOCIOLOGICAL FACTORS
The social or demographic environment has particular significance to business planners.
This factor affects every aspect of a company, from its workforce to its customers. While
numbers of people is useful information, it is the profile of those people (age, education
level, cultural origin, and the like) that is particularly helpful when making plans.
Click here to view an interesting profile of the population.
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Real estate firms should study population demographics when deciding what service to
deliver, how to market the service, or to which market to target advertising.
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Baby Boomers and Their Offspring
The Baby Boomer generation (those born between 1946 and 1964) has been a driving
force in the marketplace because of its size. Boomers are a force to be reckoned with as
they reach their maximum wage earning years.
“Gen X” or generation X, as the offspring of the Boomers are known, is the first true
technology generation. Many Gen-Xers have never known life without laptops,
microwave ovens, cable television, and cell phones. Born between 1966 and 1980, GenXers have completed their formal education and have entered the workforce. The eldest
of the generation have started their own families, achieved financial independence, and
are parenting their own baby boom, “Generation Y.”
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All these developments affect demand for housing, not just in the number of units, but
also in size and amenities. While Boomers downsize, their children are in the market for
their first or second homes. Generally, the Gen X prefers a newer home that is better
technologically and environmentally appointed than their parents', and the design reflects
today's more active and casual lifestyles.
Consumer-driven companies have begun to shift focus to the 25-to-35-year-old age group
(some even to the 18-to-24-year-olds). By capturing the younger crowd, they are building
a market base for the future. Interestingly, older consumers, especially the 50- and 60somethings, have more spending capacity than younger consumers and are also more
technologically sophisticated than generally believed. Because this is a significant
consumer market, many companies are trying to capitalize on the older consumers'
buying power.
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Maturing Adults
The parents of Baby Boomers are a sizable population that is maturing. Projections by the
U.S. Census Bureau suggest that 64 million citizens (about 22.6 percent) will be 55 or
older in 2004. That number increases to approximately 75 million by 2010.
It's no wonder the real estate industry has made the over-55 population a priority target
market. This is a diverse group, however, not easily stereotyped. There are three general
categories: the under 65-year-olds, the 65-to-75-year-olds and the over-75-year-olds.
Each group has different needs associated with the physical changes that are a natural
part of the aging process. One size doesn't fit all in lifestyles or housing preferences.
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The Boomers' parents have been retired for some time. Their children may find that
financial circumstances require them to work more years than planned.
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Where does the maturing population want to live? A joint survey conducted by Allstate
and Harris Interactive indicates that four out of ten Boomers intend to move during their
retirement years, with nearly one third expecting to downsize. Seventeen percent say they
will move closer to relatives, and 14 percent want to relocate to warmer locales.
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AARP surveys show that 85 percent of the respondents want to stay in their homes as
they age, with four out of five homes being owned mortgage-free. This suggests that
people want to live independently as long as possible and rely on in-home services to
manage medical conditions.
The building boom in assisted living facilities and nursing homes during the early 1990s
offers many options to less physically independent people.
Census Bureau statistics indicate that four percent of the country's households have at
least three generations living together. This also means changing lifestyles. The
grandparents may become the caregivers to the grandchildren. Also, less physically or
financially independent seniors may have moved in so their adult children will provide
care. This trend affects the size and layout of houses.
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Population Shifts
The population in the United States is more mobile than in other advanced industrial
economies. According to the Census Bureau, the average American moves 12 times in a
lifetime.
Population shifts are mostly the result of employment opportunities. Another factor is
that the younger generation is inclined to move to an area for its climate, recreation, or
cultural appeal and find employment later. Some parts of the country have experienced
declining population. Real estate companies in those areas are challenged to find ways to
remain profitable.
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Culturally Diverse Population
As the population grows, so does its cultural diversity. Recent Fannie Mae Foundation
statistics indicate that 31 percent of the nation's overall household growth was from
foreign-born households. Foreign-born owners now account for 20 percent of the new
homeowners.
The National Association of Home Builders anticipates that immigrants will account for
about two-thirds of the market's projected growth during the next ten years. The National
Association of REALTORS® expects that by 2010, more than 50 percent of the first-time
homebuyers will be minorities, with the Hispanic population leading the way.
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Opportunities are significant for real estate companies that are prepared to serve
culturally diverse customers. Only those companies that are sensitive to the cultural
differences and assemble a staff that is familiar with multinational customs and language
can benefit. Businesspersons in the United States are late to develop multilingual and
multicultural understanding. While language is the most obvious hurdle for immigrants
and the businesses that serve them, even among English speakers, differences in customs,
taboos, and business etiquette pose daily challenges.
A resource for preparing a real estate company's sales staff to serve this population is the
cultural diversity training and certificate program that has been jointly developed by the
National Association of REALTORS® and the Department of Housing and Urban
Development (HUD).
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CONCLUSION
Despite the uncertainty associated with the business and political environment, a
company can prosper by analyzing the conditions to better plan for the future.
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Reading Comprehension Quiz 5
The statement is FALSE. A healthy economy should generate a low, stable rate of inflation.
A healthy economy should generate a high rate of inflation.
True
Fals
e
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The statement is FALSE. The gross domestic product (GDP) is the broadest indicator of the strength of the economy, showing the economic output and growth.
The gross domestic product (GDP) is the narrowest indicator of the strength of the economy.
True
Fals
e
ID: RE_31261
The statement is TRUE. This factor affects every aspect of a company, from its workforce to its customers.
The social or demographic environment has particular significance to business planners.
True
Fals
e
ID: RE_31267
The statement is TRUE. Environmental issues affect the amount of potential business, the costs of complying with regulations, and can significantly affect the com
insurance needs.
Business planners cannot overlook environmental issues.
True
Fals
e
ID: RE_31265
The statement is TRUE. Preserving the quality of life for a community’s residents, revitalizing aging neighborhoods or enhancing the utility of the land, and streng
serve desirable and often critically necessary purposes.
The fundamental challenge in economic growth and development efforts is balancing benefits with costs, no
True
Fals
e
ID: RE_31264
The statement is FALSE. The agenda of federal, state, and local policymakers can affect corporate operations, community development, and the housing industry,
real estate company.
Political agendas have little bearing on the real estate industry.
True
Fals
e
ID: RE_31263
The statement is TRUE. New housing starts and home sales reflect consumer demand and also create demand for other household goods.
One of the strongest indicators of the strength of the economy is the housing market.
True
Fals
e
ID: RE_31260
The statement is FALSE. Because this is a significant consumer market, many companies are trying to capitalize on the older consumers’ buying power.
Baby boomers are no longer a concern for business planners.
True
Fals
e
ID: RE_31268
The statement is TRUE. Opportunities are significant for real estate companies that are prepared to serve culturally diverse customers.
Businesses can benefit from assembling staffs that are familiar with multinational customs and languages.
True
Fals
e
ID: RE_31269
The statement is TRUE. Agency relationships, property condition, environmental substances, and financing terms are but a few examples of this important subject
Consumer rights legislation has significantly shaped real estate companies’ business practices.
True
Fals
e
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Unit Exam 5
The answer is REGULATIONS THAT SERVICE THE PUBLIC INTEREST CAN ERODE THE RIGHTS OF PRIVATE OWNER. Regulations that service the p
the private owner. Overly aggressive restrictions impede the fundamental rights of ownership and aggressive controls can discourage development.
How are the interests of the public and the rights of private property owners affected by each other?
Restrictions that protect the public also enhance the private owner’s enjoyment of the real estate.
Restrictions that protect the public also usually result in lower costs when the private owner wants to develop his or her
real estate.
Environmental issues that protect the public usually do not have an adverse financial impact on the private owner.
Regulations that service the public interest can erode the rights of the private owner.
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the answer is GROSS DOMESTIC PRODUCT. The gross domestic product (GDP) is the broadest indicator of the strength of the economy, showing the economic
The broadest indicator(s) of the strength of the economy is (are) the
local employment
statistics.
gross domestic product.
long-term interest rates.
broker’s profits for the
year.
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The answer is EMPLOYMENT STABILITY. Increased consumer confidence is affected to a major extent by employment stability, not convincing real estate adv
increased environmental regulations.
Increased consumer confidence is affected to a major extent by
employment stability.
convincing real estate
advertising.
rising interest rates.
additional environmental
regulations.
ID: RE_31565
The answer is BABY BOOMERS. The baby boomers, those born between 1946 and 1964, are just now reaching their maximum earning potential. They continue
they downsize, relocate, or create multigenerational households.
Which of the following groups has reached its maximum earning potential and remains a driving force in the
Generation X
Generation Y
Baby
boomers
Elderly
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The answer is PLAN ECONOMICALLY AND AESTHETICALLY VIABLE USES OF LAND. The fundamental challenge in economic growth and developmen
aesthetically viable uses of land.
The fundamental challenge in economic growth and development is to
encourage development with additional environmental
restrictions.
increase regulatory intervention to stimulate development.
use land development to eliminate social problems.
plan economically and aesthetically viable uses of land.
ID: RE_31567
The answer is MAJOR EFFECT ON MOST BUSINESS PLANNERS. Environmental issues impact the amount and nature of potential business, costs of complyi
significantly affect the company’s liability exposure and insurance needs.
What is the effect of environmental issues on the real estate community?
Little effect in most parts of the country
Major effect on most business planners
Rarely intersect with private development
Minimal legal liability on real estate
practitioners
ID: RE_31566
The answer is ATTEMPTING TO FUEL THE ECONOMY. A large spread between short-term interest rates and long-term bond rates indicates that the Federal R
economy by loosening its monetary policy, thus encouraging people to spend and grow the economy.
A large spread between short-term interest rates and long-term bond rates indicates that the Federal Reserve
attempting to fuel the economy.
attempting to cool the economy.
discouraging people from
spending.
encouraging an inflationary
spiral.
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The answer is INCREASES INTEREST RATES. Traditionally, in order to curb inflation, the Federal Reserve has increased interest rates, thus discouraging peopl
economy.
Traditionally, in order to curb inflation, the Federal Reserve
lowers interest rates.
increases the money supply.
increases the down payment requirements for
loans.
increases interest rates.
ID: RE_31563
The answer is IMMIGRANTS. According to the estimates by the National Association of Home Builders, immigrants will fuel the housing market over the next te
the market’s projected growth.
Which of the following groups is expected to fuel the housing market over the next ten years?
Baby
boomers
Generation X
Immigrants
Generation Y
ID: RE_31570
The answer is 3 PERCENT. Healthy industrialized economies usually generate a low, stable rate of inflation of about 3 percent annually.
Healthy industrialized economies usually have an average annual increase in the gross domestic product of
1 percent.
3 percent.
6 percent.
10
percent.
ID: RE_31562
(6)Analyzing the Market
LEARNING OBJECTIVES
After completing this unit, the student should be able to





distinguish between a referral network and a relocation network;
describe the situations that make niche marketing an effective strategy;
define the term demographics;
calculate the average sales price of homes given the total volume and the number
of sales; and
calculate the market share of a brokerage firm.
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INTRODUCTION
Who are the consumers of your company's services?
What do they really need a real estate company to do for them?
How well is your company positioned to serve today's consumers now?
And in the future?
After analyzing the general business climate, the next step is a market analysis. This step
studies the consumers of real estate services and answers the questions: Who are they?
Where are they? What services do they need? Where do they get those services?
Management must evaluate the company's internal environment. This will show how well
the company does its job in providing the services the consumer wants. It tells the
company what it should continue to do, do differently, or cease doing entirely.
The cease-entirely decisions are often the most difficult. Companies get comfortable with
the old, familiar activities that were once important to their success. Sometimes, however,
the company must decide to shed some of its “old shoes.” A market analysis can be the
basis for those hard decisions.
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ANALYZING BUSINESS OPPORTUNITIES
Analyzing opportunities means looking at options in the marketplace. While a company
can't take advantage of every business opportunity, it's important to first consider all
possible alternatives. This stimulates creativity and helps an organization make effective
changes rather than being restricted by old business patterns.
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Geographic Markets
There are a variety of ways to look at the marketplace. One is geographically. Today's
geographic market bears little resemblance to the local, neighborhood real estate market
we once knew.
The mobility of today's population means that the once-loyal customer bases that
brokerage companies could count on are moving to other communities. Even where
population numbers remain the same, the shifting population means that customers don't
stay in one place long enough to develop the depth of allegiance to local vendors that is
typical when consumers stay in one community for a lifetime. The result is that most
brokerage companies can no longer survive solely on business generated in a highly
localized geographic market.
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Consumers don't see the market in narrow geographic terms either. The mobile consumer
can feed his or her thirst for knowledge or wanderlust in a variety of convenient ways.
Technology, which affects the way multiple listing services operate and provides endless
opportunities in cyberspace, brings the consumer to the doorstep of a state on the other
side of the country or a country on the other side of the world.
The middle ground, between the most narrow and the broadest views of the market, is a
regional approach. That region can be several communities or several counties,
depending on the density of the population and the diversity of the properties. Although
some real estate companies have branches or affiliated corporations that reach into many
states, they, too, are regional specialists. A regional marketplace enables companies to
foster customer loyalty or the patronage of past customers by serving a wider range of
geographic preferences.
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Multiple listing services
MLSs have traditionally provided listing inventories for narrow geographic areas. MLSs
have increased their geographic markets and scope of services for several reasons:




Mergers have formed large, regional systems to expand the geographic area for
which listing inventory can be accessed.
Large real estate firms have joined together to form listing databases, essentially
structuring their own MLSs.
MLSs have developed more diverse information systems, with mortgage loan
information, competitive market analysis data, sample contracts, worksheets for
qualifying buyers and estimating ownership and closing costs, investment
analysis, online mapping, and tax records.
MLSs are linking their listing inventories with Internet sites (the IDXs and VOWs
that were discussed in the first chapter) to provide a wide geographic range of
property information.
The information in today's MLS databases can be assembled and distributed on the
Internet, providing a much broader range of timely, useful information.
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Technology marketplace
Today's MLS marketplace is less restricted geographically. The Internet has fostered a
new economy, delivering information, products, and services directly to consumers
anywhere in the world. Cable television and satellite networks also deliver information
and provide interactive communications.
A consumer can now take an “electronic walk” through a house in California from the
comfort of his or her home in New Jersey.
Approximately 60 percent of NAR members now have Web sites and that number is
increasing rapidly. The recent proliferation of vendors offering professional Web site
design and other online sales and marketing tools is testimony to the enormous number of
opportunities on the Internet.
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Referral networks
Referral networks facilitate the referral of customers to a broker in another city in return
for part of the commission. They provide a win-win for all parties. The consumer gets
professional assistance, and the broker earns revenue.
Some referral networks are independent while others are connected to a franchise. Some
networks also offer additional services for their members, including training and
advertising programs.
Decisions about joining a referral network should be guided by the answers to the
following questions: How many referrals can be expected? Is there high turnover or a
large transferee market in the area? Will the affiliation help compete with other firms in
the area? Will a national advertising campaign produce significant results? What is the
cost of affiliation compared with the costs of other networks? A broker must determine
whether joining a referral network will do things a company can't do as effectively itself.
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Relocation Networks
The most common type of referral network is a corporate relocation management
company, otherwise known as third-party equity contractors. These companies are
engaged by large corporations to handle employee transfers. The relocation companies
associate with local real estate companies in a community where their clients have an
office.
Brokers sometimes are surprised that the relocation company expects the brokerage firm
to provide services above and beyond those it normally provides.


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For listings, services could include yard care, plumbing (winterizing), supervising
painting and other cosmetic repairs, and providing weekly or monthly status
reports of merchandising efforts.
For buyers, corporations may expect buyer representation (buyer agency) and
perhaps other assistance to help a family relocate to a new community.
The best practice is for the real estate company to appoint a relocation director trained
specifically to supervise these transactions and orchestrate the details associated with the
services the corporate relocation company expects.
Real estate companies sometime develop their own contact network with local
employers, offering services similar to those of the corporate relocation companies. Some
employers provide their own in-house relocation assistance to current and newly hired
employees. Other employers do not provide any organized relocation assistance. Both of
these cases are opportunities for a broker to design programs tailored to meet the needs of
employers and their transferees.
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Any of these relocation arrangements can generate additional income. They also can be
more costly than normal brokerage services, in some cases as much as 40 percent of gross
revenue. Affiliation is worthwhile only if the additional benefits justify the cost. It is also
expensive because third-party equity contractors charge brokerage companies fees for
handling referral transactions.
Brokers dislike the corporate relocation practice of charging “after the fact” fees. These
are charged for servicing a buyer or seller who is the employee of a relocation
corporation's client, even though no formal referral was established or disclosed at the
time the salesperson began working with the individual. The Employee Relocation
Council has begun to address the issue for its members with policies regarding this
practice.
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Service Markets
Another way to look at the marketplace is by services. While there are a number of ways
to segment services, for the purpose of this discussion the focus is services related to
various kinds of property.
Companies must make strategic decisions about whether to offer a broad or a narrow
range of services. In small or rural markets, a company is more likely to be a generalist,
doing all types of property transaction because there is not sufficient demand for any one
service to allow the company to specialize.
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Being a generalist is demanding and requires considerable knowledge about many
aspects of real estate. The broker must work hard to acquire the knowledge to be
competent.
Specialization is appealing when there is sufficient demand for a particular service and
the company has considerable expertise in that area.
Even a residential sales specialty requires that the company decide which transaction
services to provide. Services might be limited to listing and selling homes, but avoiding
property management services.
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Niche marketing
Niche marketing is the targeting of very specific segments of the market with focused
services. Niche marketing satisfies consumers needs for unique expertise and offers
opportunities for the company to distinguish itself from the competition.
By looking at the local demographics, the profile of land uses in the area, and the
competition's target markets, brokers can identify niche opportunities. Another way to
begin serving a niche is by recognizing a staff member's expertise that would appeal to a
specific niche market.
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A market niche could be a specific kind of property, such as luxury homes, vacation, or
waterfront properties. Or the niche could be a specific consumer population, perhaps one
that is underserved or one with whom the broker has a special connection.
The most obvious consumer niches are the populations such as senior citizens, baby
boomers, or international buyers. However, when certain populations are targeted while
others are ignored, the company can inadvertently violate the fair housing laws. Niche
marketing must be done carefully to avoid discriminating against people in the protected
classes.
There are drawbacks to niche marketing. Because it's “Putting all of your eggs in one
basket,” if the market is too specialized, or if there's a market downturn, it may not
provide enough business to be profitable. Niche marketing can be a viable strategy only if
the company has the expertise to gain the customer's confidence.
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Beyond residential brokerage
While the housing side of the real estate market has a high profile on the economic
barometer, other types of property are an important part of the economy. A real estate
company may specialize in investment properties, commercial sales or leasing, industrial
properties, agricultural properties, real estate development, business brokerage or
auctions. These specialties require additional expertise.
For example, working with real estate investors requires knowledge about tax laws as
well as real estate to help people make informed decisions. Counseling is another
specialty that requires analysis of the investor's circumstances and real estate holdings
and then providing expert advice.
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BROKERAGE RELATIONSHIPS
Another way to segment the service market is by the nature of the relationship consumers
want with their broker. Do they want a transaction broker or a single agent, and do they
really understand the differences? Florida law is very specific regarding brokerage
relationships.
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Brokerage Relationship Disclosure Act
The Brokerage Relationship Disclosure Act, specifically prohibits dual agency and is
important to licensees in two principal areas. It describes the type of brokerage
relationship a licensee may have with a customer. This section of the law applies to all
licensees. If the transaction is a residential sales, it also requires disclosure of the
brokerage relationship between licensee and the customer.
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Authorized Brokerage Relationships
It is presumed that all licensees are operating as a transaction broker unless a single agent
or no brokerage relationship is established, in writing, with a customer. A real estate
licensee may be a single agent or a transaction broker. A licensee may also work with a
customer with no brokerage relationship. Nonresidential brokers may appoint designated
sales associates to represent each of the buyer and the seller under certain conditions.
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Serving Sellers
Sellers want their properties sold at the best possible price in the shortest period of time,
with the least inconvenience. Sellers may want the full listing package, with single
agency, MLS and Internet exposure, company advertising, and the broker's involvement
through the transaction to closing. Other sellers may want to pay lower commissions by
agreeing to perform some of the activities and have the real estate company provide only
limited services.
An increasing number of companies have adopted the a-la-carte approach to services. In
some markets, real estate companies have joined forces with sellers to help them by
doing such things as posting their properties in the MLS, helping them with their
advertising, or agreeing to bring prospective buyers to the properties. Agree is the
operative word, because these arrangements must be put in contract form, spelling out the
terms of service the company will provide.
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Not all contracts between brokers and sellers require full representation. Florida
law permits the broker to be a single agent, transaction broker, or have no
brokerage relationship when listing residential properties.
There are several types of listing agreements. MLS rules require the use of an exclusive
agency or an exclusive-right-to-sell agreement before the listing information can be
submitted.
Open listings are rarely satisfactory for either the owner or the broker. They often create
procuring cause commission disputes between the owner and the broker. Open listings
may also mean that the owner misses out on some of the services that would be expected
with an exclusive arrangement. Exclusive agency contracts also have caused
disagreements about who is due a commission. The policies of the competition and
preferences of sellers should guide decisions about the type of listing agreements used.
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Serving buyers
Buyers want maximum service to help them find and purchase the right property and
guide them through the steps of a purchase. Many want an advocate to look out for their
interests, providing advice and counsel.
Because of the Internet, buyers now have far more information about price, property, and
the buying process. While some salespeople feel a little threatened by this development,
many say they can spend more quality and less quantity time with better-informed
buyers.
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In the market analysis, brokers must look at the Internet sites buyers visit and the
services buyers really want from a brokerage company. The analysis should include
a study of the fee structure. Today's consumers are sensitive to brokerage fee
amounts, and are attracted to companies who unbundled services.
Many brokerage companies provide single agent representation to buyers, transitioning to
transaction broker when showing company listings.
Buyer representation agreements come in various written forms, similar to the options
available in listing agreements, with similar advantages and disadvantages. The decision
to use an open buyers' agreement or an exclusive buyers' contract rests with the broker.
RE300781_C0630416
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Demographic data are particularly helpful in the quest for answers. Demographics reveal
age, education level, income and employment, household composition, and whether
people rent or own homes. These data can be very useful for assessing business potential.
The data also can be used to see how a broader or narrower geographic market would
affect business potential.
Demographic information is available from a variety of sources. Although companies can
engage their own study to identify potential markets for products or services, this can be
very expensive. Public domain information, such as census data, can usually serve the
purpose. Local municipalities, school districts, utility companies, public and private
social service agencies, and collegiate institutions also make forecasts that may be useful
for the company's purposes.
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Zoning maps and community development groups provide information that helps analyze
properties in various land-use classifications. The broker should compare this data with
the needs potential customers.
Trends are especially helpful for identifying marketplace potential. The broker should
track changes in the demographics and determine how the land uses accommodate those
changes. If one segment is growing more rapidly than the supply of suitable property, for
example, there will be greater demand than there is supply.
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The county clerk's office, tax appraiser's office, and MLS statistics reveal the number and
sales price of properties that have transferred. By adding the sales prices of the properties
and dividing that total by the number of transactions, a broker can calculate the average
price of a transaction.
For more information, the broker should compare the number, average price, and types of
properties the competition handled. A study of several years' data may help forecast
average prices and numbers of transactions. The figure below shows how to calculate the
average sales price in an area and the firm's market share.
The purpose of working through this process is to help identify target markets with
sufficient business potential. Because the population profile changes over time, it's
important to revisit this process periodically to be sure that the organization is still in tune
with the marketplace.
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ANALYZING THE COMPETITION
Firms try to improve their position in the marketplace, striving to do business a little
better than or a little differently from their competitors. Competition forces companies to
provide consumers with the price and product or service benefits they want. Competition
is also a cleansing process, the survival of the fittest. The survivors have learned from
their competitors' mistakes and how to take advantage of the opportunities their
competitors create for them.
An important piece of a company's market analysis is a look at the competition.
Consumers often see little distinction between the services each real estate company
offers. The absence of a service is often more noticeable than the services that are
offered. On the other hand, the industry sees more differences than similarities. Perhaps
that is because the industry tends to attach more importance to certain aspects of a
company or its services than the consumer does.
The challenge is to differentiate between your company and the competition in ways that
are meaningful to the consumer.
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Market Share
It's conceivable that the market opportunities your company identifies are ones that your
competitors are looking at, too. This suggests that an important part of a market analysis
is a study of not just the opportunities but capacity in those opportunities.
This is why it's called market “share.” A company can't be successful by specializing in
condominiums if there are only a few developments in the area and one broker is already
very competent and successful in that specialty. This is not to suggest that a company
must avoid markets that are already being served. But it's much easier to succeed, at least
initially, by targeting a market in which there are ample opportunities.
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It's also conceivable that a company has identified a unique opportunity because it
matches with a unique talent the company has that the competition does not. In this case,
the company will be the one-and-only serving a particular target market. That may be the
good news, but it may also be a sign that the strategy could be less lucrative or more risky
than it appears.
Analyzing market share is an ongoing activity for most brokerage companies. Tracking
the company's market share provides key pieces of information for gauging company
performance throughout the year. It is not enough to know that your company's sales
were up by nine percent last year. While that's good news, it would not be quite as
pleasurable if you discovered that all of the competitors' sales increased by 20 percent.
That would mean that you lost market share.
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Competitive Edge
Many of the decisions a company makes about how to serve its target markets are
influenced by what the competition does. Should it join a franchise or a referral or
relocation network? Where should sales offices be located? Should the company buy
billboard advertising or television spots?
Should the company do any of these things because the competition does? Or because it
doesn't? When looking at the competition, a broker should pay closest attention to firms
that are similar in size to his company and serve similar target markets. Trying to go
head-to-head with a large company's financial resources is not always feasible for a small
company.
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By attending professional conferences or reading trade publication, you'll find many
marketing and advertising tools, communications devices, and other resources to enhance
your business.
While it's tempting to buy every tool, the cost can outweigh the benefit if the consumer
doesn't respond favorably. Brokers should decide which ones are necessary to stay in the
running and defer those that would be merely nice enhancements until they have greater
resources.
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Affiliations
Begin by looking at your competitors' affiliations. Are the majority connected with
franchises, national corporations, or networks? How many are independent? Is MLS
membership necessary? A company doesn't have to do what everyone else does, but it
should not eliminate options that are needed to stay competitive. Most of these
organizations have production statistics and cost comparisons from other, similar markets
to use in an analysis. Also, talk to brokers who have dropped their affiliations with
organizations you are considering. Their experiences can help to evaluate the services.
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Location
Study the locations of other offices. You should make your office more accessible to the
customers you intend to attract. Is the area saturated with offices, particularly in relation
to the number of potential customers in a targeted market?
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Marketing strategies
Study the advertising and marketing strategies of other firms. Advertising is designed to
promote the company (institutional) and sell property. Just because a competitor has a
billboard doesn't necessarily mean that's the tool for you. It is too costly to try to “buy”
the market, so you have to make wise choices. The services of public relations or
advertising professionals are valuable when assessing marketing strategies.
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Consumer Services
Look at the competition's services, such as home warranty, affinity programs, or closing
cost credits, to name a few. Here again, the point is not to mimic the competition, but to
assess the competitive merits of various services.
A new tip, tool, or process that the competition has not yet introduced may be worth
trying. New ideas are refreshing, but untested. What attracts a consumer in one area could
fizzle in another, so it's important to think about local consumer behavior. If a very
unconventional approach is being considered, think about why no one else is doing it. It
may have been tried before, unsuccessfully. Or maybe it was an idea ahead of its time,
which means the right time could be now.
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Recruiting Advantages
A competitive analysis focuses on the external marketplace. But a company also needs to
think about how its strategies affect the ability to attract and retain sales associates. Sales
associates are the most directly affected by what a company does to beat the competition.
A company should not be run by the sales staff, but the salespeople have considerable
insight and much at stake in the company's decisions. When the competition offers a tool
or process that is especially effective and your company does not, it could affect
recruiting and turnover.
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ANALYZING YOUR ORGANIZATION
Often, the most valuable lessons a company learns about itself are the result of looking at
the consumers and competitive forces in the marketplace. Gathering some consumers and
past customers in a focus group is a good way to analyze the company's programs.
Before a company can convert a market analysis into a meaningful action plan, it should
take an objective and critical look at all of its current structures, systems, and processes.
The result may be a reaffirmation that the company is doing the right things or a warning
that the company is not aligned to do the things the market dictates.
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Ask the following questions:



How do the company's current services align with market needs? Which services
generate profits? What services should be added, eliminated, or altered?
How effective is the organization's structure? How well does each department
function within the organization? What procedures should be enhanced or
eliminated. What changes would be needed as a result of the market analysis?
Is the organization profitable? Is the available cash sufficient to fund operations?





Does the budgeting process work?
Are there personnel changes that should be made to better align talent with
responsibilities?
What is the physical condition of the office and its equipment? What
improvements would increase the efficiency of the company's operation?
Are the sales associates productive? What is the per-person production? What can
the company be doing to enhance their performance?
Has the company gained or lost salespeople? Are the company's recruiting efforts
working?
Has the company met its previously stated objectives? Its production forecasts?
What is the company's market share and is it on target with projections? Has the
company gained or lost ground?
The answers to these questions will be useful as management monitors company
performance.
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CONCLUSION
The market analysis, along with the analysis of the business climate, arms the company
with the information it needs to decide how the organization should respond to the
challenges that lie ahead. The information will guide decisions about target markets and
services and the ways the company will position itself in the market.
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Reading Comprehension Quiz 6
The statement is TRUE. An important part of a market analysis is a study of not just the opportunities but capacity in those opportunities. It’s much easier to succe
market in which there are ample opportunities.
When analyzing a market share, it is important to identify competition that serves that particular market.
True
Fals
e
ID: RE_31278
The statement is TRUE. Niche marketing satisfies consumers needs for unique expertise and offers opportunities for the company to distinguish itself from the com
Niche marketing is the targeting of very specific segments of the market with focused services.
True
Fals
e
ID: RE_31275
The statement is FALSE. In small or rural markets, a company is more likely to be a generalist, doing all types of property transaction because there is not sufficie
the company to specialize.
Specialization is necessary for serving small or rural markets.
True
Fals
e
ID: RE_31274
The statement is TRUE. Trends are especially helpful for identifying marketplace potential. If one segment is growing more rapidly than the supply of suitable pro
greater demand than there is supply.
Brokers should track changes in the demographics of a particular area and determine how the land uses acco
True
Fals
e
ID: RE_31277
The statement is TRUE. Mergers have formed large, regional systems to expand the geographic area for which listing inventory can be accessed; large real estate f
listing databases; MLSs have developed more diverse information systems; and MLSs are linking their listing inventories with Internet sites to provide a wide geo
MLSs today provide listing inventories for much broader geographic markets than in the past.
True
Fals
e
ID: RE_31271
The statement is FALSE. Even where population numbers remain the same, the shifting population means that customers don’t stay in one place long enough to de
vendors that is typical when consumers stay in one community for a lifetime.
Most brokerage companies can survive solely on business generated in a highly localized geographic market
True
Fals
e
ID: RE_31270
The statement is FALSE. This should be done before a meaningful action plan is created. The result may be a reaffirmation that the company is doing the right thin
not aligned to do the things the market dictates.
After converting a market analysis into a meaningful action plan, a company should take an objective and cr
current structures, systems, and processes.
True
Fals
e
ID: RE_31279
The statement is FALSE. Referral networks facilitate the referral of customers to a broker in another city in return for part of the commission. The consumer gets p
earns revenue.
Referral networks facilitate the referral brokers to customers in another city in return for part of the commiss
True
Fals
e
ID: RE_31272
The statement is TRUE. The Brokerage Relationship Disclosure Act describes the type of brokerage relationship a licensee may have with a customer. If the transa
requires disclosure of the brokerage relationship between licensee and the customer.
The Brokerage Relationship Disclosure Act specifically prohibits dual agency and applies to all licensees.
True
Fals
e
ID: RE_31276
The statement is TRUE. The relocation companies, or third-party equity contractors, associate with local real estate companies in a community where their clients
Third-party equity contractors are engaged by large corporations to handle employee transfers.
True
Fals
e
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Unit Exam 6
The answer is IT ELIMINATES CONTROVERSY ABOUT WHETHER THE LISTING BROKER IS ENTITLED TO COMMISSION. The exclusive-right-to-se
others because it eliminates controversy about whether the listing broker is entitled to a commission.
Although each type of listing agreement has advantages and disadvantages, an exclusive-right-to-sell listing
preferable because
the seller can sell the property without being obligated to pay a commission.
only the broker who sells the property earns a commission.
it eliminates controversy about whether the listing broker is entitled to commission.
the seller does not have to pay a commission if a buyer’s representative sells the
property.
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The answer is BROADER INFORMATION SYSTEMS. Multiple listing services (MLSs) have merged to form large, regional systems of vast amounts of data tha
geographic markets and expanded scope of services.
Multiple listing services are becoming
obsolete in today’s practice.
more useful to buyers than sellers.
broader information systems.
more regulated by the state’s licensing
authority.
ID: RE_31572
The answer is PUTTING ALL OF YOUR EGGS IN ONE BASKET. A major drawback to specializing in a niche market is putting all of your eggs in one basket.
the company out of business!
One of the drawbacks to concentrating on a specialized market niche is
the potential volume of business that is
possible.
the specialized skill needed to serve the
market.
the markets the competition serves.
putting all of your eggs in one basket.
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The answer is IDENTIFY THE POTENTIAL FOR BUSINESS FOR A COMPANY AND ITS SERVICES. The broker should study the demographics of the pop
types of properties to identify the potential for business for a company and its services.
One of the major reasons for studying the demographics of the population and the number of various types o
to
identify the potential for business for a company and its
services.
criticize the competition.
qualify for affiliation with a relocation company.
guarantee business when recruiting sales associates.
ID: RE_31579
The answer is AN AFFILIATION WITH REFERRAL NETWORKS. One method to expand the broker’s geographical base is to become affiliated with referral a
One way that a brokerage firm can expand the geographic scope of its services is to incorporate
niche marketing.
buyer-brokerage.
an affiliation with referral
networks.
cost-of-living comparisons.
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The answer is EXPECTATION OF PROVIDING A MYRIAD OF NONTRADITIONAL SERVICES FOR A CORPORATION AND ITS TRANSFEREES. A di
referral network could be the expectation of providing additional services not traditionally provided by the real estate company.
A disadvantage of joining an intercity referral network could be the
potential for increased clientele.
benefit of name recognition.
competitive advantage in the local market.
expectation of providing a myriad of nontraditional services for a corporation and its
transferees.
ID: RE_31574
The answer is HELPS ENSURE THAT YOU ARE PROVIDING SERVICES THAT CONSUMERS WANT. A market-driven approach for a company’s operatio
providing the services that consumers want.
Using a market-driven approach for a company’s operations
helps ensure that you are providing services that consumers
want.
is an outdated business philosophy.
is costly in relation to the benefits the company derives.
ignores the needs of the customers.
ID: RE_31571
The answer is IT’S DIFFICULT TO DEVELOP REALISTIC PLANS WITHOUT KNOWING ABOUT THE COMPANY’S OPERATIONS. Often, the most valu
objective and critical look at all of its current structures, systems, and processes and then applying that knowledge to better meet the needs of the marketplace.
Scrutinizing the current status of your company is most useful when planning its future because
the competition knows more about the company than you do.
it’s difficult to develop realistic plans without knowing about the company’s
operations.
it will probably be necessary to restructure the organization.
this minimizes resentment by the sales associates.
ID: RE_31580
(7)Developing a Plan
LEARNING OBJECTIVES
After completing this unit, the student should be able to




describe the characteristics of general objectives;
list the important requirements for setting goals;
explain what is meant by a company's strategies; and
describe why it is necessary to include a contingency plan as part of a company's
business plan.
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INTRODUCTION
In what way, if any, will the mission of your organization change in the coming years?
What should be the company's priorities or principal efforts?
How should those be reflected in a business plan?
While business planners can form some notions about what the company should be doing
after analyzing the business climate, notions don't provide sufficient guidance for a
company. It's like embarking on a trip without a map to get you there. A plan identifies a
specific destination for the company and the path to that destination.
Some companies short-circuit the planning process for reasons related to time, money,
and talent. Those who do allocate the necessary resources often fail to establish the
procedures needed to make the plan a living document.
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INTRODUCTION
Actually, the amount of company time and money devoted to planning is relatively small
in comparison with the benefits. Even companies hanging on by a thread should spend
money for a sound business plan to get back on track.
Sound business planning requires skill, but that's not to say that the company can't do it
in-house. Many companies have individuals who can develop good plans.
If that talent isn't available, the company must seek the help of a business-savvy
associate, a professional planning consultant, or a resource from an association of
business professionals. Often, the perspective of an outsider can very beneficial.
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PLANNING RATIONALE
Several general concepts about planning are important to keep in mind. They affect the
way plans are developed as well as the way plans are used.







The purpose of a plan is to direct the organization's financial and human resources
to those selected activities that will yield the greatest return on investment. A plan
tells the organization how to “work smart.”
A properly constructed plan tells the organization what it wants to accomplish and
provides a general framework for how the organization intends to do this. Plans
turn aspirations into concrete expectations. Plans contain specific goals, which are
measurable, and provide directions. Timeframes set benchmarks so the
organization can determine whether it's accomplishing the goal.
A plan helps the organization be resilient. Organizations must be responsive, but
they also must resist abandoning course when changes occur. By anticipating
changes and restructuring activities, the organization can stay on course during
turbulent times.
The foundation of a plan is an analysis of the past, present, and future. A plan is
only as good as the information gathering and filtering processes.
Underestimating the competition and overstating the company's abilities are
common pitfalls.
Planning must be done at all levels of the organization. After top management
defines the long-range plan, lower levels of management plan activities around the
goals for which they are responsible. All units of the organization must work in
concert.
Planning requires commitment from everyone in the organization. This means
people must “buy into” the plan. People are more likely to be committed when
they see that the plan evolved from a deliberate, logical process. Involving people
from various levels in the organization not only provides multiple perspectives but
also gives people a sense of ownership, enhancing commitment.
A plan must be implemented, because an organization cannot afford to squander
resources on projects that are not utilized.


Planning is the most fundamental management activity. From this flows virtually
every business decision. Plans also build credibility with lenders and business
affiliates who are impressed with a thoughtfully prepared business plan.
A business plan should not stifle enthusiasm or creativity. A good plan should
have a positive effect on the organization. If a plan doesn't have the results
expected during the first year, don't give up. If the plan is reviewed periodically,
the company can make adjustments, setting more realistic goals.
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YOUR BUSINESS PLAN
When preparing the plan, the broker must consider the







business environment,
marketplace (consumers and competitors),
company's services and compatibility with demand,
strengths and weaknesses of the company's sales and marketing activities,
company's human resources,
organization of the company's operating structure and technology systems, and
company's financial position.
The first step is preparation of a long-range master plan for the organization. The plan is
called a general, or strategic plan.
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Some organizations don't plan farther out than one or two years. But that's typically not a
long enough period to implement a plan and gauge performance. At least three and up to
five years is preferred.
Without a long-range plan, the temptation is to shift course quickly when instant results
do not materialize. Valuable human and financial resources can be expended in one
direction, only to be diverted in another direction. Although organizations must be
responsive to change, changes must be deliberate and thoughtful.
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The figure below provides the outline of the components of a plan.
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Mission
The development of the long-range plan begins with the answers to several important
questions.



What is the company's purpose for being in business?
What specifically does the business do?
Where should the company be in the future that is different from where it is
today?
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The answers define the mission, the organization's fundamental purpose for existing. This
is the foundation on which the business enterprise is built. Defining the mission is an
exercise that involves a critical assessment of the organization. Done right, it will validate
the organization's reason for being and give a vision of its reason for existing in the
future.
These thoughts are then crystallized into one or several sentences that become the
mission statement. These words tell what the organization is about. Everything it does
must support the mission, and if something doesn't, then the organization shouldn't be
doing it. The mission statement is a critical first step in developing a plan because
everything else that follows must support the mission.
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General Objectives
Identifying general objectives, also called initiatives or competencies expands the
mission statement. They show what the organization needs to focus on to accomplish its
mission. General objectives become the organization's priorities.
The number of general objectives is a function of the size and complexity of the
organization. For a small organization, two or three general objectives are feasible.
Larger organizations typically don't set more than four. Sometimes even a very large
organization will choose only one or two objectives for greater focus.
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To demonstrate what general objectives or initiatives look like, consider this:
Analysis: The situational analysis reveals that one of the most critical issues is the role of
technology in everything the company does. The analysis also reveals that the company,
which had been a leader in the first-time homebuyer market, has been losing market
share. Yet, that population has been growing and with the low interest rates and
proliferation of incentives for first-time homebuyers, this target market has great
potential.
General objective:“Fully integrate the use of the latest technology throughout the
organization.”
General objective:“make homeownership a reality for first-time buyers throughout the
metropolitan area.”
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Notice that these particular objectives affect the entire organization. Even the one that
focuses on a target market suggests that the company's public relations messages,
marketing and advertising themes, mortgage department activities, and perhaps other
parts of the company, in addition to the individual sales offices, will have a role to play.
Although these illustrations have companywide impact, the organization can establish
objectives that are less broad, in which case a particular department or group of sales
offices becomes a priority.
The mission statement and general objectives tell what the company aspires to do. But
they do not provide specific direction to tell the organization how to accomplish that.
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Think about planning the same way you would describe a sports game. First, you identify
the game and the general theme of the game (the mission statement and general
objectives). Now, you have to tell people what the object of the game is; these are the
company's goals. Then, describe the series of plays that will get the team to the goal;
these are the strategies the company will use to reach its goals. And finally, lay out the
sequence of steps that will be needed to execute plays; these are the tactics that
implement the plan.
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Goals
The next step is to spell out the goals of the “game.” Each general objective is supported
by a number of specific goals. These are the end results the organization wants to
achieve. They break down the general objectives into manageable accomplishments and
show how the organization intends to achieve its objectives.
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Goals must be translated into specific words that tell precisely how to focus the
organization's resources. They have four characteristics:
1.
2.
3.
4.
Specific or identifiable
Measurable
Attainable
Framed in time
Words like increase, maximize, decrease, or minimize, with nothing more specific or
measurable, do not provide any way to determine whether the organization is on target.
Specific goals like “increase by 100 transactions,”“increase by 25 percent,” or “$500,000
in gross commissions,” commit to measurable results.
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f you want to increase your activity in a particular service by 100 transactions, do you
mean in one year, two years, or six months? A timeframe is the benchmark for
determining achievements. An accomplishment that is significant enough to be a goal
must be achieved in a timely fashion.
Goals must be attainable. Unrealistic expectations will frustrate people and set them up to
fail. Goals must be properly aligned with the capacity of the organization's financial and
human resources. Or a part of the plan must be devoted to enhancing resources or
systems to accomplish a goal. The best way to set realistic goals is with the information
gained from the situational analysis. The business environment, the marketplace, and the
company's past performance all affect future accomplishments.
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Before setting a goal related to revenue or number of transactions, the broker must
evaluate past production figures before deciding how much gross commissions revenue is
achievable. The number of transactions needed is calculated by dividing the average
commission into the gross commissions goal. Next, the broker would distribute the gross
commissions into listings and sales.
Other goals should be calculated, such as the percentage of the market share, the volume
of business generated by various types of properties, or the volume of business generated
from rentals and sales or other services.
With verifiable, measurable goals the organization has data with which to assess the
organization's success. If the goals were unrealistic or changes have occurred, the
company may have to revise the goals. But don't change the numbers in the plan just to
make the organization look better. The reality may be that the organization is really
straying off course. Face the facts and do something about it.
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Strategies
After setting goals, the next step is developing supporting strategies. These prescribe the
methodology for accomplishing each goal. Remember the game analogy: people need to
know what steps to take to “score.” Strategies provide those directions.
Strategies are the hard decisions needed to convert goals into game-winning
accomplishments. A look at what the organization does may help decide what it needs to
start doing, continue doing, or stop doing.
The strategy part of a plan is also where the phase-out of an activity that is no longer
suitable is addressed. If certain activities no longer contribute to the achievement of an
objective, they should be discontinued.
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The figure below shows how goals and strategies support a general objective. If you have
decided that one of the company's niche markets is vacation properties and second
homes, for example, a portion of your business plan could be developed following this
format.
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Contingency Plans
Planning involves forecasting. The more futuristic the forecast, the fewer variables there
are that can be predicted with great certainty. While most situations in the business
environment, the marketplace, or within the company don't occur without some warning,
a surprise event could require a company to adjust.
A company can be better prepared to make such adjustments by developing contingency
plans. Not all master plans have this component. Companies develop contingency plans
when a change in circumstances is a distinct possibility but not yet certain to be
incorporated in the plan.
Contingency plans are simply alternative goals and strategies that will be implemented in
the event they are needed. Contingency planning is a proactive measure that prevents the
organization from taking hasty actions that could divert resources.
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Putting All the Pieces Together
A business plan is unique for each organization. Plans are not “packaged programs” that
someone else has developed. Nor can you “borrow” another organization's plan and make
it yours.
A major benefit of planning is the process itself, that is, the discussions that ensue as
various viewpoints, creative ideas, and possible solutions are shared. A plan is not a
document that the broker prepares while sitting alone in the office. Planning is a
participatory exercise that fosters teamwork and engages people who have a stake in the
outcomes.
The players in the process certainly include senior management and perhaps a cross
section of representatives from other levels in the organization, including sales staff. In a
small brokerage company, the broker and perhaps a sales manager or selected salespeople
are involved. The leader of the project could be a designated member of senior
management or an outside consultant.
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While the design of the actual planning meetings can vary, generally they consist of
gathering the research in the situational analysis. This preparation is key to the program.
It forms the basis of initial discussions as people react to the information and reach
consensus. This becomes the basis of the general objectives. Because they go hand-inhand with the mission, the mission statement must be reviewed to decide whether it is
still viable. Then goals and strategies can be developed.
This can be a very efficient exercise, and can be accomplished perhaps in a two-day
retreat. Once the situational discussion concludes and mission and general objectives are
written, the goal and strategy parts come together quickly, building on the ideas from the
earlier discussion. Planning meetings should be conducted so that discussions flow freely,
but stay on point, and achieve consensus.
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The entire plan is written and a draft is circulated to all the participants to be sure it says
what was agreed, then it's ready to go. The planning document generally includes the






table of contents;
executive summary;
summary of the situational analysis, the key factors that show the rationale behind
the plan;
mission statement;
general objectives/initiatives/competencies; and
goals and their respective strategies.
The executive summary is written after the planning document is assembled. This is a
condensed version of the plan. The summary is the part of the document that lenders and
investors typically see, so it must capture the essence of the plan. The summary includes
a brief history of the company; its current activities; its services and position in the
marketplace; and important factors about its financial position. Key risks and
opportunities are also included, along with objectives and goals to indicate what the
company intends to do about them.
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IMPLEMENTING A PLAN
The written document is only the beginning. The plan must be converted into action. This
brings the plan to life by defining activities and charging people with the responsibility
for accomplishing them. Then an annual plan is developed and management monitors the
company's performance.
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Tactical Planning
Using the game analogy again, tactics tells the team how to execute the plays of the
game. Tactical or activity planning directs the workflow under the strategies.
In the strategies illustrated again in the figure above, there is still more the company
needs to know about what to do. In the training strategy, what is the plan for developing
and implementing the training? In the strategy relating to marketing and advertising, what
specific marketing and promotional activities are needed? If a new business unit is to be
created, what must be done to assemble the necessary money and personnel and define
the work for the department?
When do any of these things have to be accomplished? Are the necessary resources and
talent readily available in-house or are there activities that need to be outsourced?
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Tactical Planning
Tactical planning answers these questions by breaking the plan into a manageable size so
the task doesn't seem overwhelming. This phase of planning also identifies
responsibilities. Normally, the work units that are affected by the strategies are
responsible for the tactical or activity planning. They're most familiar with the work, and
because they are accountable for accomplishment, they need to be involved in the
process. A sales office responsible for achieving production quotas should decide how to
reach it. The manager is ultimately responsible for the outcomes, which includes seeing
that resources are not diverted to non-targeted activities.
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The Business Plan
A business plan is the company's work plan for the year. It is an extrapolation of the
goals and strategies that were benchmarked for completion that year, perhaps with some
refinements, making them priorities. A business plan can also include new strategies that
may be needed to address situations that can threaten the attainment of goals in the
master plan.
Dollars, and timeframes prepared a year ago may need to be revised. Because there are
more “knowns” than estimates since the first planning sessions, the next 12-month period
will be easier to forecast. Projections may be revised downward because of developments
in the business climate but it's also permissible to revise projections upward. If the
company is ahead in the game, keep it winning.
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The business plan typically becomes the working document that managers at all levels in
the organization use to monitor operations during the year. Many of the goals can be
arranged by month or by quarter. It's easier to manage by quarters than it is to figure out
how to make up for lost time late in the year. Management can also identify activities that
should be restructured or new strategies that could be recommended for the next year.
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Back to the Long-Range Plan
Even the most comprehensive planning processes typically build on the previous plan. By
reviewing the long-range plan when the business plan is prepared each year, management
can gauge the company's progress and the validity of the long-range plan. In so doing,
management can determine whether the company is still on the right course or needs to
revise the plan to respond to changes within the organization, the marketplace, or the
business climate.
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The long-range plan can be easily updated with each year's review, essentially recasting
the plan for three years by adding the last year of the plan. This does not mean that the
company keeps changing courses or moving the goalposts farther away. It means that the
current plan is used to build the next one, providing continuity.
Look at the assumptions from the situational analysis and evaluate which ones are still
valid and those that need to be revised. From that, the rest of the components of the plan
can be considered and adjusted. As goals or strategies are accomplished, they can be
replaced with new ones as appropriate. This way a company can be flexible, continue to
grow, and respond to change without getting off course.
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CONCLUSION
With some thoughtful design and practice, planning can become as routine as any other
business activity. A sound long-range plan becomes the foundation for the company's
operations. Other phases of planning simply bring the plan to life by defining activities
needed to implement the plan and giving the company's “marching orders” for the
coming year. An annual review of the long-range plan forms the basis for the next plan.
This way management is constantly providing the vision for the organization to help it
prosper in the future.
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Reading Comprehension Quiz 7
The statement is TRUE. By reviewing the long-range plan when the business plan is prepared each year, management can gauge the
company’s progress and the validity of the long-range plan.
The long-term plan should be reviewed when the business plan is prepared each year.
True
Fals
e
ID: RE_31289
The statement is TRUE. The summary is the part of the document that lenders and investors typically see, so it must capture the
essence of the plan.
The executive summary is written after the planning document is assembled.
True
Fals
e
ID: RE_31287
The statement is TRUE. Strategies are the hard decisions needed to convert goals into game-winning accomplishments and also where
the phase-out of an activity that is no longer suitable is addressed.
Strategies describe what action needs to be taken in order to achieve goals, including
phasing out activities that are no longer suitable to the organization’s goals.
True
Fals
e
ID: RE_31284
The statement is TRUE. This phase of planning also identifies responsibilities.
Tactical planning breaks the plan into a manageable size so the task doesn’t seem
overwhelming.
True
Fals
e
ID: RE_31288
The statement is FALSE. The best way to set realistic goals is with the information gained from the situational analysis. The business
environment, the marketplace, and the company’s past performance all affect future accomplishments.
The capacity of the organization’s financial and human resources is not important when
setting goals.
True
Fals
e
ID: RE_31283
The statement is FALSE. A business plan is unique for each organization. Plans are not “packaged programs” that someone else has
developed. Nor can you “borrow” another organization’s plan and make it yours.
It is acceptable practice to use or borrow another company’s business plan.
True
Fals
e
ID: RE_31286
The statement is FALSE. Contingency planning is a proactive measure that prevents the organization from taking hasty actions that
could divert resources. Contingency plans are simply alternative goals and strategies that will be implemented in the event they are
needed.
Businesses never really need to use contingency plans.
True
Fals
e
ID: RE_31285
The statement is TRUE. This is the foundation on which the business enterprise is built.
The organization’s fundamental purpose for existing is called the mission.
True
Fals
e
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The statement is TRUE. Virtually every business decision flows from the business plan.
Planning is the most fundamental management activity.
True
False
ID: RE_31280
The statement is FALSE. General objectives become the organization’s priorities. They expand the mission statement by showing
what the organization needs to focus on to accomplish its mission. A mission statement tells what the organization is about.
The mission statement becomes the organization’s priorities.
True
Fals
e
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Unit Exam 7
The answer is SAYS THAT BUSINESS HOPES TO SURVIVE, BUT SAYS LITTLE MORE. This mission statement, “the company
is in business to be successful” does little more than hope that the business survives. The goal is not specific, measurable, attainable,
or framed in time.
An organization’s mission states “the company is in business to be successful.” This
mission statement
says exactly what the business expects to do.
states where the business expects to be in the
future.
states the purpose for the business to exist.
says that business hopes to survive, but says little
more.
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The answer is EXECUTIVE SUMMARY. The executive summary is usually placed right after the table of contents in the formal
document, although it is usually written last. It is often a several-page summary that outsiders (lenders and investors) typically see,
and as such, captures the essence of the plan.
Which of the following is usually written last but included first in the formal document?
Mission statement
Executive
summary
General strategies
Long-term goals
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The answer is VAGUE. The goal “increase sales” is vague. There is no way to identify when the company reaches this goal or how
many sales actually need to be completed.
A goal that states the organization will “increase sales,” is
vague.
identifiable
.
measurable
.
definite.
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The answer is CONTINGENCY PLANNING. Contingency plans provide alternatives for the organization in the case of unforeseen
events that impact the long range goals.
The kind of planning that provides alternatives for the organization in the case of certain
events is
short-range
planning.
contingency
planning.
activity planning.
confidential
planning.
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The answer is UNPREDICTABLE VARIABLES THERE ARE TO IMPACT AN ORGANIZATION. The more futuristic a plan the
more unpredictable variables there are to impact the organization and its plan.
The more futuristic a plan is, the more
unpredictable variables there are to impact an
organization.
valid the plan is.
confined an organization is to past practices.
objectives an organization can accomplish.
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The answer is MISSION STATEMENT. The mission statement defines the organization’s fundamental purpose for existing and the
foundation on which the business is built.
The organization’s fundamental purpose for existing is a brief statement called the
general
objectives.
overall goals.
strategies.
mission
statement.
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The answer is DIRECT THE COMPANY’S HUMAN AND FINANCIAL RESOURCES PROPERLY. The purpose of planning is to
better direct the company’s human and financial resources properly.
What is the purpose of planning?
Satisfy the state’s licensing authority
Do what management books tell you to do
Protect traditional activities of the organization
Direct the company’s human and financial resources
properly
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The answer is HAS SPECIFIC GUIDANCE ABOUT WHAT TO DO AND HOW TO DO IT. Proper planning ensures that the
organization has specific guidance about what to do and how to do it.
Planning ensures that the organization
has specific guidance about what to do and how to
do it.
has a “road map” from which it cannot deviate.
models its operations to be the same as the
competition.
operates the same as it did in the past.
ID: RE_31582
The answer is TACTICAL PLANNING. Tactical planning is required to bring the plan to life by defining those activities that are most
important and charging people with the responsibility for accomplishing them.
Which of the following should be included if the plan is to be successfully implemented?
Contingency
plans
Tactical planning
Executive
summary
General
objectives
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The answer is SHOULD BE IMPLEMENTED THROUGHOUT THE ORGANIZATION. Planning activities must be integrated
throughout the organization in order to get people to “buy into” the resulting plan.
After development, the company plan
can be ignored once it is written.
can be ignored once circumstances change that make it
unworkable.
should be implemented throughout the organization.
should be implemented from the top down.
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(8)Structuring the Organization
LEARNING OBJECTIVES
After completing this unit, the student should be able to


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


list the IRS requirements for an S corporation;
list the principal characteristics of an S corporation;
list the principal disadvantage of straight corporations;
describe the characteristics of a limited partnership;
describe the characteristics of a general partnership;
define the term local affiliation of brokers;
describe the benefits of purchasing a franchise;
distinguish between a monolithic organization and a decentralized organization;
distinguish between staff authority and line authority; and
define the term containment as it relates to corporate mergers.
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INTRODUCTION
How are the real estate companies in your area structured? Their ownership, affiliations,
staffing, departmental systems, and the scope of authority of their sales managers?
What has changed in recent years? Why?
The structure of an organization is the framework for a company's operations. The legal
form of ownership, professional affiliations, organizational chart, all provide structure so
that the organization can function.
The operating structure will vary, depending on the kind and scope of work the company
does and the company's stage of its life cycle. The start-up company is in the birth stage.
It typically has a tight budget so that it can get on its feet.
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After surviving during the early years, the company can become more ambitious. This is
known as the growth stage. The company expands the services and/or stretches into new
markets or endeavors. This is the most energetic time in an organization's life. Depending
on the nature of the work it does, how well it's tailored to the marketplace, and the
aggressiveness of its leadership, this stage can be short lived or endure for five or ten
years. A crisis is more likely to arise during a company's most aggressive years (the
growth stage), when making the right decisions at the right time can be most challenging.
Organizations also have a midlife. This is the point when the company has a very solid
market position, which can still be enhanced with the addition of a new venture.
Eventually, most companies reach stability (neutral growth).
ID: RE300781_C0830510
And then there's the maturity stage, which is characterized by long-term stability.
Companies can succeed and be profitable during their midlife and mature years, but they
can be vulnerable if they become complacent. These are the companies that struggle most
with the “That's the way we always did it, and it worked” attitude. Midlife and maturity
should suggest that the company has the experience to be smart about doing business in
whatever the prevailing environment. If a company uses that to its advantage, it can
endure. Otherwise, it will discover the last step in maturity: decline.
The framework or operating structure of a company changes as the organization cycles
through the various stages of life. Ownership may be changed, adding new owners or
severing relationships with current ones. Business affiliations may change as new
alliances are adopted or existing ones are discontinued. Operations may expand to
include new business sectors or scale back to reduce the number of services. In essence,
operating strategies must empower the organization to function.
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LEGAL OWNERSHIP
One of the most fundamental decisions is the “who” and the “how” with respect to the
company's ownership.
The broker may be the sole owner of the business or join forces with other owners. The
sales associate may have an ownership position in the company, an increasingly more
common practice. The lone owner may feel comfortable being a sole proprietor, but other
forms of ownership may be preferable.
Because these decisions have complex legal and tax implications, the advice of
professional counsel is strongly advised.
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Sole Proprietorship
In a sole proprietorship, the broker is the sole owner. The broker personally reaps all of
the rewards of being in business, and has personal liability for its debts. The sole
proprietor has exclusive command over the business, so the success or failure of the
enterprise is attributable to that person.
There is significant liability because a sole proprietorship does not offer any shield
against lawsuits, meaning that the owner's assets are on the line for the business.
ID: RE300781_C0830513
The longevity of the enterprise depends on the owner. If the owner becomes incapacitated
or dies, the business is terminated.
Sole proprietors sometimes believe their businesses are valued legacies for family
members. Without the technical expertise or commitment to continue the enterprise,
however, the business may not endure. Deloitte & Touche statistics indicate that only 35
percent of family businesses survive under the second generation.
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Corporations
A corporation is a sole legal entity created under state laws. Although it is an association
of one or more persons (as stockholders), a corporation is regarded as having an existence
and personality of its own. It is treated as a single individual that has legal capacity to
contract and otherwise conduct its affairs as prescribed by the articles of incorporation.
A corporation may be closely held, meaning that relatively few people own the shares of
stock. Or the corporation may be publicly owned, meaning that the corporate shares are
publicly traded in accordance with securities and exchange laws.
ID: RE300781_C0830515
Corporate structures are appealing for several reasons.

Limited liability. Liability incurred by the corporation becomes an obligation of
the corporation, not of the individual owners. Unless a shareholder has signed a
personal guarantee for the corporation's obligations, actions for damages,
judgments, or bankruptcies will not affect the person's assets. Only the amount of
the stockholder's investment in the corporation is at risk.




Perpetual existence. Because a corporation is a legal entity that exists indefinitely
(until and unless it is properly dissolved), it technically never dies. Any officer
who dies, retires, or resigns can be replaced.
Centralized management. The stockholders elect a board of directors that, in turn,
elects a slate of officers. The officers are responsible for the general affairs of the
corporation. At least one of the officers, the broker, is directly responsible for the
real estate brokerage activities under Florida law.
Transferability. The corporate stock may be transferred freely from one
stockholder to another.
Lack of income limitations. A corporation may have an unlimited number of
stockholders and is permitted to earn an unlimited amount of income.
ID: RE300781_C0830516
A disadvantage of a corporation is that profits are taxed twice: the corporation pays taxes
on net profit and the stockholders pay taxes when they receive dividends. Salaries paid to
the officers are a deductible business expense, so they are taxable only to the individuals
who receive them. Losses may not be passed on to the stockholders, but may be applied
against the corporation's future earnings. Capital gains realized by the corporation are
taxed, and then stockholders pay taxes on the dividends received.
Some brokers have taken their corporations public. This provides money to the
corporation for expansion and unlocks the broker's shares so he or she can sell shares for
a profit.
An accountant and/or an attorney should be consulted when setting up a corporation.
ID: RE300781_C0830517
S Corporation
The S corporation is organized the same way as a straight corporation, but the owners
make an election with the IRS to be taxed as a small business corporation. It has the same
advantages of a corporation, but overcomes one of the major disadvantages, double
taxation. The corporation simply makes up an information return and allocates net
income to the stockholders based on their ownership. The stockholders pay taxes on their
share of the income. Dividends are not taxable.
ID: RE300781_C0830518
There are restrictions on an S corporation. The number of shareholders is limited to no
more than 100 owners. Not more than 25 percent of the income may be generated from
passive investments, such as stock dividends, rental of investment properties, and interest
from money deposits. If the S corporation is engaged primarily in real estate brokerage
activities, these restrictions may not be burdensome. Professional advice prevents
mistakes that might jeopardize the S corporation status.
The Department of Business and Professional Regulation will register sales associates
who organize as professional corporations. This is for tax strategies only, and the sales
associate must be registered under a broker.
ID: RE300781_C0830519
General Partnership
A partnership is an organization formed under a state's Uniform Partnership Act in which
two or more owners engage in business for a profit. All of the owners are general partners
and share full personal liability for the debts or other obligations of the partnership. The
partnership itself does not pay taxes, although it does file an information return, reporting
the income attributable to each partner. The partners must pay their own individual taxes.
Losses or capital gains also are passed along to the partners.
DBPR will register a Florida brokerage partnership, provided each partner who is
engaged in the real estate business is also a licensed broker. Other, nonselling partners
must register with the Department. The partnership does not have a life of its own. The
death, withdrawal, bankruptcy, or legal disability of any of the general partners will
dissolve the partnership. It is advisable to seek counsel before forming a general
partnership.
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Limited Partnership
A limited partnership is a venture in which one person (or a group of people), known as
the general partner(s), organizes and operates a partnership. General partners have
unlimited liability. The limited partners are investors, do not have any voice in the
direction or operation of the partnership and are liable for losses only to the extent of
their investment.
ID: RE300781_C0830521
Limited Liability Companies
Personal liability and corporate income taxes are the two most persuasive issues that
affect the broker's choice of ownership structure. Florida brokers may be registered as
limited liability companies (LLCs) or limited liability partnerships (LLPs). The investors
are members, rather than partners or shareholders, holding membership interests (rather
than stock) in the company.
These entities are an appealing alternative to S corporations and limited partnerships.
Some of the restrictions that are imposed on an S corporation can be avoided. An LLC
partially limits the liability that otherwise exists in a limited partnership.
ID: RE300781_C0830522
MODE OF OPERATION
Once the form of ownership is determined, the next issue to consider is the mode of
operation. That is, whether the company is going to be independent or affiliated in some
fashion with other organizations. The competitive advantage or disadvantage and the
benefits and drawbacks for the company influence this decision.
ID: RE300781_C0830523
Independent
An independent business appeals both to owners, who want total control, and to
consumers, who often want to do business with people who own their own company. In
this mode of operation, the business enterprise is totally self-reliant and success is due to
its efforts alone.
ID: RE300781_C0830524
Franchise
A franchise is a packaged program for a business, with a formula that provides a tested
product or service with market acceptance. The owner of the franchise sells franchises
with the expectation that the franchisees will make money for themselves and for the
owner of the franchise.
ID: RE300781_C0830525
Franchisees are independent business owners who become affiliated with other
companies that are part of the franchise's network. The most common reason real estate
companies choose affiliation is it provides them more impact in the marketplace than an
independent company could achieve alone. Companies choose franchises based on the
principal focus of the franchise.



Marketing and advertising: Brand identity is the primary focus of many
franchises. The appeal is their professional marketing programs. National
franchises have the purchasing power to assemble discount programs and other
affinity programs.
Target market services: These franchises' primary focus is specific consumer
services, such as counseling owners who want to sell their properties themselves
or services associated with buyer agency. The primary advantage of consumerservice-oriented franchises is the technical expertise they offer to the franchisees.
These franchises appeal to companies whose business focus is similar to the
franchise's focus.
Business operations: These are the franchises that provide operating structures,
such as the 100 percent commission companies and the pyramid ownership plans.
The appeal of these franchises is that they offer greater financial benefits to the
sales associates than are customary in other kinds of organizations.
ID: RE300781_C0830526
Brand-name recognition is an important benefit of a franchise, but this can also be a
disadvantage. Consumers tend to remember the name of the franchise rather than the
name of the individual firm. Some franchises grant exclusive areas or limit the number of
franchisees in geographic areas, so a company may not achieve the power in the
marketplace that was expected.
A franchise's power in the marketplace depends on the success or failure of the individual
franchisees. Franchises often provide business development expertise to protect the
reputation of the brand and franchise revenue. Frequently, there are also training
programs for the sales associates and management programs for the brokers.
ID: RE300781_C0830527
Franchise affiliation provides a logical connection for referrals with other franchisees
around the country, but this association can also backfire. If consumers have had
unsatisfactory experiences with one franchisee, they may resist referrals to others. The
broker should investigate other franchisees to decide whether this is the right franchise.
A disadvantage of affiliation can be the franchised service or product itself. Not all
franchises are successful everywhere. The brand may not have the power in a particular
marketplace that it commands elsewhere or it may have a bad history in the area.
ID: RE300781_C0830528
Franchises are expensive. Franchise companies are formed with a profit motive, not out
of a sense of generosity. These must be analyzed in relation to the benefits.
When evaluating costs and benefits, consider the initial franchise fees and the ongoing
fees. Ongoing fees are usually based on transaction activity, collected from each
transaction.
The company pays the initial fee but ongoing costs of affiliation may be shared with the
sales associates, who may resent the financial obligation unless they feel the franchise
affiliation benefits their production.
ID: RE300781_C0830529
National Corporations
A number of national corporations have been attracted to the real estate business in recent
years. The ability to link the products and services of these enterprises in cross-marketing
programs is an additional enticement.
National corporations typically purchase existing real estate firms based on size or market
share. The terms of the agreement determine how the company will be operated after the
purchase, and the degree of financial independence (or dependence) the company will
have.
Once the business is sold to a national corporation, the broker/owner essentially becomes
a manager. While this means relinquishing authority, the attraction may be the power of
the corporate name along with advertising and promotional programs and strategies to
enhance the company's internal operations. The company may receive an infusion of cash
with which to enhance its brokerage activities.
ID: RE300781_C0830530
Local Affiliations
To strengthen their competitive advantage and achieve cost efficiencies, local brokerage
firms often form associations and pool financial resources for training, marketing,
advertising and accounting services. They can also pool expertise, as professional sales
teams, to offer complementary services such as land development, commercial leasing,
and property management. Because each of these ventures is structured individually,
there is no standard financial arrangement.
Collectively, brokers can increase their power in the market by capitalizing on the market
share of each firm and creating local name recognition for new affiliates. But companies
need to consider the image and success of the associated firms. The growing company
may be providing greater benefits to the weaker firms than it will receive from the
relationship.
ID: RE300781_C0830531
Affiliated Business Arrangements
An affiliated business arrangement (AfBA) is a network of interrelated companies owned
by one holding corporation offering services related to real estate transactions. Examples
would include the mortgage lending, title insurance , and property inspections.
AfBAs may be the solution to brokers' continuing search for ways to offer seamless
transaction services consumers want. The linkage of services through AfBAs also links
sources of revenue.
Brokers need significant capital to set up separate companies, and no one should venture
into these arrangements without considerable legal help to avoid antitrust problems and
Real Estate Settlement Procedures Act violations.
ID: RE300781_C0830532
Multiple Listing Services
Regardless of whether a residential real estate company is independent, a franchisee, or
part of a national corporation, MLS membership may be important not only for serving
consumers but also for the company's competitive position in the marketplace.
ID: RE300781_C0830533
MERGERS AND ACQUISITIONS
The distinction between a merger and an acquisition is more academic than real. The
intended gain is efficiency and/or effectiveness for the organizations. The goal of a
merger is to combine forces in ways that are a “win-win” for both organizations as they
become one.
For the company being pursued, being acquired may provide additional financial
resources with which to pursue company objectives, or may result in greater power in the
marketplace. Depending on the role the broker/owner would have, this could be an
opportunity to relinquish some management responsibilities and concentrate on other
activities. It could also be a suitable way to phase into retirement.
For the acquiring company, joining forces with another may be the best way to expand
operations or gain managerial or staff talent or other assets to strengthen the organization
or its position in the marketplace. If a company's business plan calls for adding new
products or services or expanding geographic territory, purchasing an existing company
with those features is one way to accomplish those goals.
ID: RE300781_C0830534
Although a company could expand by opening a new office or starting a new division,
acquiring another business could accomplish the same purpose more efficiently. An
existing business has an established presence in the marketplace, experienced personnel,
a physical office site complete with furnishings and equipment, and possibly a franchise
affiliation. All of these assets take time and money to establish.
Even though an acquisition eliminates some of the unpredictable variables associated
with starting a new enterprise or opening a branch office, this strategy is not without risk.
Often, the motive for buying a real estate business is to get its sales talent. However, the
market position of the acquired business can quickly deteriorate if that talent is lost,
making this a very costly recruiting exercise. This situation is often seen as a prime
opportunity for others to recruit the company's personnel.
ID: RE300781_C0830535
Evaluating a Business
A merger or acquisition requires that the company principals do their homework. The
company being acquired may simply be unloading problems. But the venture would not
be beneficial for the company that purchases worn-out equipment, a poor staff, a
franchise affiliation that is more costly than beneficial, an office location that is no longer
viable, or more debt or other liability than was anticipated.
ID: RE300781_C0830536
The broker should ask:





Why is the business for sale? Are the current owners just ready to retire or are
they bailing out because they can't make a go of the business any longer?
What are the business's primary assets (or appeal)? What are its liabilities?
How much is the business really worth? Is the profit overstated or understated?
Has the owner deferred expenditures that should have been made? Or is the
business incurring expenses that should be trimmed?
What is the reputation of the business in the marketplace? In the case of a merger
in which both companies will retain some identity, will the association portray a
positive message?
How well is the company managed? Is it a well-run organization that just needs
the power in the marketplace that can be achieved with affiliation? Or is it a
lingering organization that can be made better with more astute oversight?
ID: RE300781_C0830537
Appraising a business is a difficult task. The validity of the evaluation is a function of the
quality of the available information. Not all business owners provide accurate records for
inspection. The value and the price of a business may differ, depending on the
motivations of the parties.
Frequently, real estate brokers have the expertise to evaluate a business. However,
because their view of the venture may be less than objective when they are directly
involved in the merger or acquisition, the advice of an accountant or business appraiser
who can expertly assess the company's financial statements is recommended.
ID: RE300781_C0830538
Return on investment (ROI) is the most widely accepted valuation approach. While
working through the analysis, also consider that the business being analyzed may not
continue to be the same business, so any of its assets could be worth either more or less
after the acquisition.
The broker must determine the value of that which is being purchased—the name, current
listings, pending sales, all or some of the company's services, equipment, employees and
salespeople, contracts, or office location. Sometimes, all a purchaser wants is the sales
staff, leaving the seller with the rest of the business assets and liabilities.
ID: RE300781_C0830539
Goodwill
The length of time the company has been in business and the way it's integrated into the
new organization will affect the value of the company's name and goodwill. The quality
of listings and volume of sales transactions may improve or decrease. Because the
salespeople have a significant bearing on these aspects of the business, an exodus can
seriously jeopardize the value of goodwill and the quality of the listings and sales.
ID: RE300781_C0830540
Organizational Culture
Because business cultures and management philosophies differ, the effect of new
leadership on the overall operation of the current firm must be considered, including the






planning philosophy,
organizational structure and business systems,
staffing or personnel assignments and supervisory responsibilities,
training and professional development programs,
allocation of financial resources and financial management systems, and
management styles.
ID: RE300781_C0830541
Transition
The merger or acquisition may change little, other than the name of the acquired
company. Or the change may be more dramatic, with closure of the acquired company's
offices and the assignment of personnel to other offices. It's possible the newly blended
organization may be a fully integrated merger of leadership, systems, and personnel, all
doing business as a new entity under a blend of the previous companies' names or one
that reflects a fresh start for both companies.
The companies need a transition plan. The outward things people see, like the company
name, are a minor part of the story. The companies need to ensure that business runs
smoothly so that the venture proves to be profitable as soon as possible.
ID: RE300781_C0830543
A transition plan needs to address several things.

Containment: Even before the legal documents are signed, rumors start
circulating. Rumors often thrive in a negative way, which can threaten
relationships with staff, customers, and others in the business community.
Companies need a plan to contain the news until the formal announcement in order to
retain staff and business relationships.

Organization: A smooth transition requires a well-thought-out plan for leadership
and assignment of responsibilities, operating policies and procedures, business
systems, and the allocation of personnel.
The managers must establish an efficient operating structure during the transition period
that enables the organization to get up and running.

Launch: Two audiences are carefully watching the merger or acquisition: the
workforce and the external community. The company needs to convey the
message of its new identity to these two audiences. Advanced planning will help
the organization to obtain signs and promotional materials and prepare for the
public announcement.
The announcement is a fast-paced, high-energy time, often beginning with an exciting
event for company staff that is followed with announcements to current and past
customers and finally, the community at large.
ID: RE300781_C0830544
Once the company is prepared for the fanfare and has a road map to get business
underway, the hard work begins. During the first two weeks after the announcement, the
company needs to familiarize the staff with the company's services and business policies
and procedures. Much of the success of the new venture depends on the way leadership,
especially of the acquiring company, conducts itself. People are often skeptical or feel
insecure, and they will resent being steamrollered. The more respectful and patient
leadership is and the stronger the partnership between management and staff, the
smoother the transition will be.
Duplicate systems, redundant personnel, and divergent business philosophies mean that
some people may not retain their jobs. Marginal salespeople may be terminated. Some
people may leave rather than wait for management to decide their fate. Management must
have a plan for retention, so the organization keeps the right people.
ID: RE300781_C0830545
INTERNAL STRUCTURE
An internal operating structure is how work is organized. In a single-person organization,
the structure is very simple—one person is the organization and is responsible for its
operations. As the company grows, the structure of the organization becomes more
complex. The process of structuring work involves a series of steps.
1. Begin by identifying all the work required by the company's business plan.
2. Group interrelated tasks associated with that work.
3. Assign those collected tasks to work groups. Groups generally have certain
primary functions that relate to administrative, operating, and product or service
activities.
4. Convert that work into job positions.
5. Determine the roles and responsibilities associated with each position. This
becomes a job description for the position.
6. Identify the skill sets or talent needed to perform each job and discharge the
responsibilities of the position.
ID: RE300781_C0830546
INTERNAL STRUCTURE
The process arranges work in a logical scheme; it tells the company what needs to be
done and who should do it. A real estate company's work may be grouped by property
type (residential, commercial, etc.) or by services (brokerage, property management,
appraising, etc.). There may also be personnel that provide administrative support and
manage the information systems. As the organization grows larger or more decentralized,
its efficiency becomes more dependent on these work groups. Organizations revisit the
process periodically to ensure that work is arranged efficiently and the human resources
are properly aligned.
ID: RE300781_C0830547
One-Person Organization
If you are a one-person business, you are the broker, salesperson, and manager. A oneperson organization is a self-directed enterprise. This is a small enterprise that operates at
the will of one person, who can work as much or as hard as he or she chooses, and is
dependent solely on the revenue that can be generated by one person.
Although the organization structure is simplistic, that does not mean that the work is.
Although there are no other people to supervise, the owner has all the responsibilities of
the business, from managing its financial affairs and advertising activities to delivering
the core services of the business. The owner needs many skills and must either make time
for each task or hire professionals.
ID: RE300781_C0830548
One- to Ten-Agent Organization
A one- to ten-agent organization is a small, centralized operation. (See the figure below)
The broker/owner role now includes supervisory responsibilities. This means that skill
sets are required to supervise the organization's human resources in addition to those
required for the other business management responsibilities.
ID: RE300781_C0830550
When more people are employed, the capacity of the organization expands. More work
can be accomplished and the company generate a steadier stream of revenue than when
the company is totally dependent on one person's efforts.
With growth, costs increase and the organization becomes more complex. Facilities,
information systems, and other support services can be expensive per person until the
organization grows to the eight- to ten-agent size, unless the sales associates are highly
productive. Nonselling staff and other clerical support will be needed to assist with
administration functions.
As soon as one salesperson is hired, the broker becomes a sales manager. Typically, onetenth of the broker's time is devoted to this activity. With each additional salesperson,
another tenth of the broker's time is added to sales management activities. As the sales
staff grows, the broker has less time to devote to sales activities and may eventually
become a full-time sales manager, unless one is hired.
ID: RE300781_C0830551
Monolithic Organization
A monolithic organization is a highly centralized operation, functioning as a single unit,
with work flowing from one source of authority at the top of the organization. The one-
person and one- to ten-agent organizations are monolithic in the sense that one person at
the top of the organization (the broker/owner) is the chief in charge of the entire scope of
the organization's work.
As human and financial resources permit, the scope of work expands, with departments
or divisions responsible for accomplishing the business plan. Some are directly
responsible for delivering the company's core services, and others are responsible for
administrative functions that support the salespeople and the internal operation of the
company. (See below.)
ID: RE300781_C0830553
The distinguishing characteristic of a monolithic organization is that work is highly
controlled by the top of the organization. This is normally the broker/owner or president.
Authority flows from this position to the next level of senior management, then from
senior management to department or division managers. The managers at each level are
responsible for directing their work groups, but they do so only within the limits
authorized by the immediate superior. Decision-making is controlled by one or only a
few individuals in upper management, leaving subordinate positions with little authority.
The skills required for each position reflects work that is assigned to those positions.
Because the work becomes more focused in lower position on the organization chart,
skills become more task-oriented. A training director in a monolithic organization has
little influence over other aspects of the company's administration, so this position is
likely to require only very specific training skills. Broader business management skills
would be required of the top three positions.
It is efficient to have the company's operations in one location, reducing the occupancy
cost per person, and enhancing the coordination of activities among departments. It's
easier for senior management to supervise activities.
ID: RE300781_C0830554
Decentralized Organization
A decentralized organization consists of a number of work groups or departments, but,
unlike a monolithic organization, there are fewer layers of management at the top of the
organization. As shown in below, authority is delegated from the top of the organization
to the next management level. The managers or directors of those work groups have the
authority to direct their groups' activities, operating essentially as individual business
units.
ID: RE300781_C0830556
Decentralized operations are usually more efficient. With fewer levels of management,
organizations can be more responsive. Managers or directors direct the work for which
they are responsible.
Frequently, a work group is structured as an individual profit center. This means that each
unit functions on its own financial platform and is expected to produce an income.
Typically, administrative functions are centralized. Setting up accounting and
information management, marketing, and training departments for the entire organization,
rather than duplicating these activities in each location, saves money and standardizes the
activities that are necessary for the organization to run smoothly.
The challenge in a decentralized organization is to achieve the proper balance between
autonomy and control. Each work group functions independently, but all units must
function as a unified organization.
ID: RE300781_C0830557
CHAIN OF COMMAND
People must know the work for which they are accountable. People also need to know
who their superiors are so they can take direction. By establishing a formal hierarchy, an
organization sets the chain of command to provide an orderly process for making
decisions.
ID: RE300781_C0830558
In real estate organizations there are typically two types of authority.


Staff authority, which is given to the people who are responsible for support
services, the work groups providing administrative support. These groups
contribute indirectly to the achievement of the company's objectives. They
provide services such as accounting, marketing and advertising, training,
purchasing, and maintenance.
Line authority, which is given to the people who are responsible for contributing
directly to the achievement of the company's objectives. These include work
groups such as the sales offices or the property management, leasing, or new
construction departments.
ID: RE300781_C0830559
The organization chart shows very clearly how each position functions within the context
of all other positions in the organization. Positions that are connected by direct lines of
authority must directly work with one another. Positions outside those direct lines have
no authority to direct other department's activities. A sales office manager often works
with accounting and marketing departments, but has no authority to direct process or
policy in those departments.
ID: RE300781_C0830560
Job Descriptions
The way to state how positions function is with job descriptions. A job description
describes the responsibilities of the position. The description also shows how the person
in the position is to work with superiors, subordinates, and others in the organization.
A job description tells people where they fit into the company: to whom they are to
report; the positions that report to them; and exactly what their responsibilities are. A
properly written job describes the activities for which a person is accountable. This tells
people what the critical elements of their jobs are within the organization and provides a
basis for assessing performance.
ID: RE300781_C0830561
Don't assume people know what a job entails. In the case of salespeople, it's tempting to
say, “They already know what to do . . . get sales and listings.” But that's not a suitable
job description. Are they responsible for meeting production goals or complying with the
law or company policies? Furthermore, it's not appropriate to chastise a person for failing
to properly discharge responsibilities if he or she hasn't been explicitly told what they are.
Job descriptions provide a tool with which to identify skills required for the positions.
Basically, “what does a person need to be able to do to handle the responsibilities for
which he or she is accountable?” Typically, the larger the scope of responsibility, the
more diverse the skill sets are. Job descriptions are also used to periodically evaluate the
assignment of responsibilities within the organization and identify more efficient
assignments if necessary.
ID: RE300781_C0830562
Informal Organization
Regardless of the way positions appear on a chart, most organizations have an informal
structure. This is because work overlaps and doesn't always fit neatly into a chart. Often,
this means that systems or processes are needed to facilitate the flow of work outside the
formal chart so that the organization can function as an efficient enterprise.
ID: RE300781_C0830563
Case in Point: According to the formal organization, the manager of a sales office is
responsible for managing that office's advertising budget, and the salespeople in that
office operate under the manager's directives with respect to listing advertising. That's
straightforward.
Then, along comes a listing that is assigned to one of those salespeople by the manager of
the relocation department, who is responsible for all aspects of a listing, including its
advertising, that comes through the relocation network. Now, there are two separate
authorities for managing listing advertising and two separate bosses the salesperson has
to follow, depending on the source of the listing.
This is a prime example of the way work doesn't always fit neatly into a chart. Obviously,
the goal is to get the listings advertised. But authority must be clearly delineated so that
the office manager maintains control over the aspects of advertising for which that
position is responsible, while also facilitating the work for which the relocation director is
responsible. Most importantly, the salespeople need to know which boss's directives to
follow in which situations.
ID: RE300781_C0830564
he major challenge in managing the informal structure of an organization is maintaining
order. The formal structure typically provides direct lines of reporting, with one boss and
one person's directives to follow. The order of the organization in this case is very clear.
Order can begin to unravel when lines of authority become blurred or people have
multiple bosses.
Systems are needed to provide for cases in which people are permitted to work outside
the formal structure and the authority bosses have in those situations. Otherwise, people
will create their own informal structure. Sometimes they do this anyway, regardless of
the company's formal or sanctioned informal structure.
ID: RE300781_C0830565
People shop for decisions, seeking the answers they want to hear, regardless of whether
the person they seek out is the boss or has the authority to make the decision. In these
cases, all people want is someone to concur with a course of action they wanted to take.




Some people want to exercise more authority than they've been granted, so they
manage work or decide matters that are beyond their scope of authority. While
people sometimes take on more responsibility than they've been authorized for
laudable reasons, the disruptive influences are those who do so with some selfserving purpose or agenda.
When people don't agree with a company policy or procedure, they may give
directions or make decisions that are beyond their scope of authority primarily for
the purpose of countermanding or derailing company procedures.
When management fails to provide decisive leadership, people leapfrog over the
immediate supervisor and go to the next higher-up or take it on themselves to
decide a course of action. These are cases in which management has failed to do
its job or hasn't responded in a timely enough manner for people to do their jobs.
When company processes or procedures are inefficient or impractical, people will
ignore them or find their own, better ways of doing things. A supervisor's
approval or authorization from another department's supervisor that seems
unnecessary or unduly restricts the flow of work will be circumvented.
People work outside the formal organization structure for a variety of reasons, any of
which should be management's wake-up call that work is not properly organized, that the
wrong people are in positions of authority, or that the people in positions of authority are
not fulfilling their responsibilities.
ID: RE300781_C0830566
Case in Point: As the broker of a small company, you hire a sales manager who, among
other things, is responsible for assigning referrals. A salesperson approaches you directly
with a plea for a referral, feeling that you'll be receptive because the two of you have
previously had a close working relationship.
If you intervene, you undermine the authority of the sales manager. This can also be
interpreted by the salesperson as your public acknowledgment that the manager has not
properly done his or her job. Ultimately, the chain of command unravels because you've
authorized the salesperson to ignore it. To preserve order,


you could ask the salesperson to raise the issue with the manager (and if the
salesperson doesn't, it could be that the salesperson was seeking preferential
treatment from you), or . . .
you could approach the manager along with the salesperson and inquire about the
status of referral assignments.
Either approach demonstrates to both the sales manager and the salesperson that you
respect the manager's authority. Your intervention also demonstrates that you are
responsive by addressing an issue that, if ignored, could mushroom into a major problem.
A disgruntled salesperson could turn other salespeople against the company's referral
system. (Repeated queries about referrals, however, could indicate a more serious
problem that should be addressed with the manager.)
ID: RE300781_C0830567
CONCLUSION
Giving structure to an organization gives it the ability to execute the business plan. The
broker must decide the most appropriate form of legal ownership and appropriate
business affiliations. These involve decisions about the degree of independence the
company and its principals will have.
As the scope of work grows and becomes more complex, the company needs an internal
structure that groups work in a logical manner and a chain of command that clearly
defines the path of decision-making authority. Job descriptions tell people what they are
expected to do. Just as the business plan provides a blueprint around which the company
is organized, the structure of the organization provides the framework for assembling the
tools for the business and allocating its resources.
ID: RE300781_C0830568
Reading Comprehension Quiz 8
The statement is TRUE. The broker personally reaps all of the rewards of being in business, and has personal liability for its debts.
In a sole proprietorship, the broker is the sole owner.
True
Fals
e
ID:RE_31291
The statement is FALSE. A monolithic organization is a highly centralized operation, functioning as a single unit, with work flowing
from one source of authority at the top of the organization.
The distinguishing characteristic of a monolithic organization is that various employees
throughout the organization control the flow of work.
True
Fals
e
ID: RE_31298
The statement is TRUE. For the acquiring company, joining forces with another may be the best way to expand operations or gain
managerial or staff talent or other assets to strengthen the organization or its position in the marketplace.
If a company’s business plan calls for adding new products or services or expanding
geographic territory, purchasing an existing company with those features is one way to
accomplish those goals.
True
Fals
e
ID: RE_31297
The statement is TRUE. Franchises often provide business development expertise to protect the reputation of the brand and franchise
revenue.
A franchise’s power in the marketplace depends on the success or failure of the
individual franchisees.
True
Fals
e
ID: RE_31295
The statement is TRUE. In this mode of operation, the business enterprise is totally self-reliant and success is due to its efforts alone.
An independent business appeals both to owners, who want total control, and to
consumers, who often want to do business with people who own their own company.
True
Fals
e
ID: RE_31294
The statement is FALSE. Staff authority is given to the people who are responsible for support services (i.e., accounting, marketing
and advertising). Line authority is given to the people who are responsible for contributing directly to the achievement of the
company’s objectives (i.e., sales offices or the property management department).
Line authority is given to the people who are responsible for support services and who
contribute indirectly to the achievement of the company’s objectives.
True
Fals
e
ID: RE_31299
The statement is FALSE. Unless a shareholder has signed a personal guarantee for the corporation’s obligations, actions for damages,
judgments, or bankruptcies will not affect the person’s assets. Only the amount of the stockholder’s investment in the corporation is at
risk.
Liability incurred by the corporation becomes an obligation of the individual owners, not
of the corporation.
True
Fals
e
ID: RE_31293
The statement is FALSE. This is known as the growth stage. After surviving during the early years, the company can become more
ambitious.
The midlife stage of a company is usually where it becomes more ambitious, expanding
services and/or stretching into new markets or endeavors.
True
Fals
e
ID: RE_31290
The statement it FALSE. An affiliated business arrangement (AfBA) is a network of interrelated companies owned by one holding
corporation offering services related to real estate transactions.
An affiliated business arrangement (AfBA) is a network of interrelated companies owned
by many holding corporations offering services related to real estate transactions.
True
Fals
e
ID: RE_31296
The statement is TRUE. A corporation may be closely held, meaning that relatively few people own the shares of stock, or the
corporation may be publicly owned, meaning that the corporate shares are publicly traded in accordance with securities and exchange
laws.
A corporation may be either closely held or publicly owned.
True
Fals
e
ID: RE_31292
Unit Exam 8
The answer is CORPORATION. A corporation is a sole legal entity created under state laws, has perpetual existence, and limits
liability of the individual owners.
An organization that functions as a sole legal entity and has perpetual existence and
unlimited owners is a
limited
partnership.
sole
proprietorship.
corporation.
S corporation.
ID: RE_31592
The answer is APPRAISING ITS VALUE. One of the most difficult tasks when acquiring another company is determining the value
of that company. Not all records may be available and some are not accurate.
One of the most difficult tasks when selecting an existing business to purchase is
evaluating its managers.
appraising its value.
assessing the condition of its office
equipment.
avoiding rumors.
ID: RE_31595
The answer is BECOME A FRANCHISEE. Real estate brokers choose to enter into a franchise for brand recognition, technical
expertise, and exposure to more clients while still retaining ownership.
A relatively risk-free way to start up a business, provide name recognition, and supply the
freedom to be an independent owner with a proven product or service is to
become a franchisee.
join the multiple listing service.
join a national corporation.
form a controlled business
arrangement.
ID: RE_31593
The answer is DECENTRALIZED. A decentralized organization consists of a number of work groups or department with fewer layers
of management at the top of the organization. They are often viewed as more functionally efficient.
Many organizations today streamline their operations by forming a number of work
groups or departments utilizing fewer layers of management. These organizations are
called
independent.
monolithic.
decentralize
d.
informal.
ID: RE_31598
The answer is MONOLITHIC ORGANIZATION. A monolithic organization is a highly centralized operation, functioning as a single
(mono) unit with the work structured to flow from one source of authority at the top of the organization.
A multi-department organization in which authority is tightly controlled by one or only a
few individuals is a
one- to ten-agent organization.
monolithic organization.
decentralized organization.
controlled business
arrangement.
ID: RE_31597
The answer is ACQUIRE ANOTHER REAL ESTATE COMPANY. One of the riskiest ways to recruit experienced sales associates is
to acquire another real estate company. Many times, sales associates may defect to another company.
One of the riskiest ways to recruit experienced sales associates is to
affiliate with a multiple listing
service.
join a franchise.
acquire another real estate
company.
affiliate with a multiple listing
service.
ID: RE_31594
The answer is CHAIN OF COMMAND. The chain of command establishes a formal hierarchy and an orderly process for making
decisions.
The order in which authority travels in an organization is known as the
chain of command.
line of authority.
informal
organization.
staff of authority.
ID: RE_31599
The answer is LIMITED LIABILITY COMPANY. LLCs are appealing alternatives to S corporations and limited partnerships since
they limit personal liability while sheltering the company’s profits from taxes.
One of the ways to limit the personal liability of the primary owner of the business as
well as insulate the company’s profits from taxes is to form a
sole proprietorship.
corporation.
general partnership.
limited liability
company.
ID: RE_31591
The answer is WAY THE WORK OF THE BUSINESS IS ORGANIZED. An internal operating structure is essentially the
organization of work performed in that company.
An organization’s internal structure reflects the
complexity of the company.
profitability of the company.
way the work of the business is
organized.
productivity of the company.
ID: RE_31596
The answer is DEVELOP JOB DESCRIPTIONS FOR EACH POSITION. Job descriptions state how positions function and convert
the scope of authority. They describe the activities for which the person is accountable.
The best way to ensure that workers know exactly what to do in the company is to
give them a chart of the organization.
give them authority to make decisions.
allow them to be creative.
develop job descriptions for each
position.
ID: RE_31600
(9)Structuring Business Systems
LEARNING OBJECTIVES
After completing this unit, the student should be able to



state the minimum number of square feet needed by a sales associate in the
brokerage office;
explain why a broker need less office space today than in the past; and
define the term hotelling.
ID: RE300781_C0930590
INTRODUCTION
Where should the office be located?
How will it be designed?
What technology is needed to support the work that people do?
Just as people need housing, a company needs a facility that projects an image of the
company that instills consumer feelings that this is a good place to do business.
Office technology plays a major role in how people do their jobs, how companies manage
their information, and how companies communicate with the public. The company
should create an environment that fosters efficiency and makes the best use of its
financial resources. As a company grows, the facilities will change as well. While a new
office site or updated décor, furnishings, or equipment might look tempting, the broker
should select only those that support the organization's plan. And get the best value
possible.
ID: RE300781_C0930591
YOUR OFFICE
Picking the right location, size, and furnishings and equipment is a critical management
function. The office space should be flexible and accommodate change. The cheapest
choice at the outset could be more expensive in the long run.
The form and function of an office has changed significantly in recent years. Instead of
being the place people go to work, the office is a place that supports them wherever they
work. Because of technology, the company's office is often not the sales associate's
primary workspace. The location, site, size, and design are all affected as more sales
associates use the company's office less frequently.
ID: RE300781_C0930593
Location
The market analysis will help in the decision about where to locate the office. The
following questions should be considered:
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Where are the company's target markets located?
Should the office be within the normal traffic patterns?
Is “walk-in” business likely?
As companies expand their geographic market area, the neighborhood sales office has
become less important than the company's ability to communicate electronically with
consumers. The Internet results in fewer reasons for consumers to actually visit
company's buildings, so a longer travel distance may not be a disadvantage.
ID: RE300781_C0930594
A company may fear that if it does not have an office where the competition is located,
the company will lose business. If there's not enough business to support everyone, it
may be better to chart new territory. A concentration of brokerage firms in an area, could
signal an area with great potential.
If the broker wants to open a branch office, the company's name recognition in the area
should be considered. If it's not well known, the company must budget a marketing
program into the cost.
If an office is primarily administrative in nature, one that supports the operation of the
company's branch offices, an expensive prime location would not be necessary.
ID: RE300781_C0930595
Site
Visibility of a sales office is important to generate consumer traffic. The office should be
where consumers can find it easily. While a free-standing building may provide the most
visible office and signage, higher density sites such as shopping centers and office centers
may suffice.
The broker who searches for office space doesn't always see the same things that a
consumer sees, particularly if the broker is familiar with the area. The barrier in the
middle of a four-lane highway without easy access from the opposite side of the road
may go unnoticed. An out-of-the-way location that is difficult for anyone who's
unfamiliar with the area can be a problem for the person who has to give directions.
A commercial brokerage company located in a central business district can frustrate
consumers when parking can't be easily located. Parking in malls and office complexes
can be equally frustrating. Before signing a lease or purchasing a building, the broker
should inspect the site at various times and days.
ID: RE300781_C0930596
The changed use of today's brokerage office has an effect on the office size. The first
consideration is the nature of the work it has to support: people, equipment, and public
image.
A real estate sales office must accommodate management and support staff and their
equipment. Because this office is typically the only place where the consumer actually
“meets” the company, an attractive reception area and comfortable conference rooms are
important.
ID: RE300781_C0930597
With more sales associates working from home, there is less reason for the broker to
provide desk space for everyone. Many companies provide several workstations for the
sales associates who occasionally come to the office. The challenge is to match space
available with the need, or the space may be empty on some days or people are clogging
hallways at other times.
ID: RE300781_C0930598
One strategy for managing workstations is known as hotelling. As its name implies, it's a
reservation system, without the fee and allows the sales associates to reserve a
workstation for the desired time.
If most of the sales staff works in the office, significantly more space is required.
Approximately 100 square feet of floor space is needed per salesperson. Partitioning
single offices will require more space than an open or bull pen arrangement.
ID: RE300781_C0930599
Public areas, such as reception areas, conference rooms, restroom facilities, and
refreshment centers should be considered carefully. The back office space (staff,
equipment, and supplies) should create a pleasant environment that promotes maximum
efficiency.
When selecting office space, the broker should consider how training programs and sales
meetings will be accommodated. Presentation equipment and video conferencing
equipment should be considered. If meeting space will be used infrequently, renting
outside space when necessary may be more cost-efficient.
A professional space planner may help design the most cost-efficient space, identify areas
that can be used for multiple purposes, and plan flexibility for future expansion.
ID: RE300781_C0930600
Legal issues
Several legal issues must be considered when leasing or buying property. In most
jurisdictions, the facility must be inspected before the office can be opened for business.
Local zoning ordinances must also be checked to be sure the intended use is in
compliance and that signage and parking requirements are satisfied. Any necessary
occupancy permits must also be obtained.
The office must comply with the Americans with Disabilities Act (ADA). Because a real
estate company provides services to the public, the office must be accessible to persons
with disabilities. The company also has accessibility obligations to its employees.
ID: RE300781_C0930601
The broker should understand the ADA before committing to the office space rather than
after moving in. Some sites may be readily accessible; others may require costly
remodeling. An architect or someone versed in the law can review the facility and
recommend the most suitable ways to comply with ADA. Architectural or structural
barriers pose the greatest challenge. ADA provides acceptable alternatives in the event
that altering the structure to overcome barriers is an undue hardship.
Entry barriers (which can be overcome with a ramp or call button at a suitable height for
a person using a wheelchair) are not the only considerations. If the public is customarily
given access to rest rooms, refreshments, and other comforts in the office, these, too,
must be accessible by people with disabilities.
ID: RE300781_C0930602
Design and Décor
Most companies use similar floor plans and décor, including the company's signature
color scheme, in all of their offices to reinforce their image and provide added efficiency
for people who have occasion to work in several office locations. The figure below offers
some initial ideas for office layout.
ID: RE300781_C0930604
Public Areas
Customers form their first impression (“curb appeal”) of the company when they enter
the reception area. A calm, inviting atmosphere creates a professional welcome.
Comfortable furniture and informative or promotional reading material will be
appreciated. The figure below offers additional ideas for office layout.
ID: RE300781_C0930606
Conference rooms should be similarly comfortable. The public should not have to walk
through staff work areas to get to conference rooms, nor should sales associates have to
work with customers at their desks. The broker should equip conference rooms with
telephones and a computer, if possible.
The office should be designed with safety in mind. The pretty but slippery-when-wet
ceramic-tiled floors, or the curled floor mats that can be a tripping hazard can result in a
lawsuit. The other issue is the floor covering's ability to withstand heavy traffic, abuse,
and repeated cleaning.
ID: RE300781_C0930607
Work Areas
Work areas should be separate from the public areas and support an efficient flow of
work and the interaction of people and systems. The sales support staff and the sales
associates can be in the same area, while the administrative support staff should be near
the manager. Equipment and supplies should be conveniently located. The manager's
office, kitchen, and restrooms serve both public and private purposes and should be
accessible from the reception area.
ID: RE300781_C0930608
A trend in office design, including in the corporate world, is the open office, and has been
used years in the real estate industry. Without walls, people can more freely interact with
one another, inspiring creative thinking and problem-solving. The environment can be
helpful for fostering teamwork and camaraderie. Less floor space per person is needed
and the space can easily be redesigned. Private or confidential work is done in small
conference rooms.
Critics of the open office object to the distraction and lack of privacy that can reduce
confidentiality. The communal environment also may hinder recruitment and retention of
top sales associates.
ID: RE300781_C0930609
Equipment and Furnishings
Wiring for the technology systems should be designed after the furniture and equipment
locations are set. Otherwise, wires become a tripping hazard or the power source for the
copy machine is across the room.
Furniture comes in a variety of qualities at a variety of prices. Sometimes good quality
used furniture is cheaper than new inferior furniture. Small desks are usually
unsatisfactory if the work surface is occupied by a phone set and a large computer.
ID: RE300781_C0930610
COMMUNICATIONS AND INFORMATION SYSTEMS
A major expense in business systems is communications and information technology. A
professional who is familiar with the broad range of available options can help avoid
inefficient or overpriced options. In many cases, spending more initially offers savings in
the long run.
Today's communications and information systems can be seamlessly “connected.” A fax
document can be converted to e-mail. Computers can send text to a pager or cellular
phone and vice versa. The integration of systems contributes to efficient operations.
ID: RE300781_C0930611
Computer System
The core of a company's communication and information management system is its
computer. Today's offices are information centers. Companies must assemble, manage,
retrieve, and store large amounts of data. Computers have eliminated paper in the office,
but in some cases paper tasks have been electronically replaced.
The scope of information that is available isn't limited by the capacity of a company's
database. With external resources, via the Internet, any user can be linked to a world of
information. The company must have its own Internet presence (Web site) so that it is
part of the cyberspace network.
ID: RE300781_C0930612
Software
Before making a hardware decision, the broker must first decide what the company wants
the system to do. A consultant can help evaluate information management and
communication needs so that suitable software can be selected. Talk to other users of
software being considered because they might see products differently from the way an
experienced computer person does.
ID: RE300781_C0930613
Internal applications
Accounting, word processing, publisher programs, and spreadsheets are all software
applications that should be part of a brokerage firm. The purchaser of a copyrighted
program (the company) is the only authorized user. Company personnel should not be
allowed to copy such programs for their personal use, or the company could face legal
liability.
ID: RE300781_C0930614
External applications
The link to the Internet is a critical component of a broker's technology system. Today,
there are many options for connection. The choice is based the cost time and the ease of
access. Once on-line, an Internet browser, such as Netscape or Internet Explorer, is used
to see the Internet content. A browser is generally part of the computer's basic operating
system.
For a company to establish its own Internet presence, it needs a Web site. Because a site's
design is so important, a professional resource with Internet marketing expertise is
helpful. Once a site has been designed, the company must update the content links with
other sites.
ID: RE300781_C0930615
The company's system is vulnerable to disruption. Staff members or outsiders may be
able to alter data. Incoming communications can contain viruses that delete data or totally
disable the system.
The broker should set up a firewall for security and subscribe to a virus protection
program. Customer information and sensitive company operations data must be
protected. These programs are not totally safe, however. The broker must diligently
update virus definitions and routinely scan the system to make the programs effective.
ID: RE300781_C0930616
Hardware
The hardware decisions fall into place fairly easily after the software investigation. That's
also when the users will be identified and where they are located. Decisions must also be
made about which computer equipment is available to the sales staff.
Connectivity also becomes a hardware systems issue. The number of company sites, the
number of people at each site, and the capacity of the various Internet connection services
will affect hardware and wiring requirements. DSL and cable connections are preferable
to regular phone modems because they have much faster access to Internet sites and large
email documents.
ID: RE300781_C0930617
Preserving data
As advantageous as it is to store all the company's data and documents on a computer,
that database is vulnerable if there's a hardware or software failure. An essential part of
managing the system is a routine plan for backing up or preserving data and storing the
backups in a different location.
ID: RE300781_C0930618
Voice Messaging
Automated answering systems with voice messaging are now standard operating
equipment in most businesses. These systems are efficient, allowing calls to be relayed
without human intervention. Messages and phone numbers don't have to be written, so
the recipient hears exactly what the caller said.
Overly long or improperly designed menu options can lose business. Another problem
can be staff members who sit at a desk, ignore the ringing phone and let voicemail
answer the calls.
ID: RE300781_C0930619
Facsimile Machines
A fax is faster, easier, and cheaper than the mail. When a printed document with a
personal signature (like a contract) is essential, fax is a suitable medium. While the fax
machine won't likely be replaced by new technology anytime soon, it has taken on more
of a support role. Faxes can be transmitted via computer, or documents scanned into a
computer can be faxed. By connecting fax machines with voice messaging systems, the
company can set up a “fax-back” system. This is a totally electronic cycle of information,
initiated by a caller's request for descriptions of listings or other information (using codes
on a Touch-Tone phone). The computer responds with a fax of the requested information
to the caller's fax.
Plain-paper faxes are preferable to thermal paper because the document is better quality,
eliminating the need to photocopy thermal-paper faxes. Multifunction machines,
combining telephone, fax modem, computer printers, and scanners in one machine, may
be considered for their economy of space and efficiency in linking multiple
communications through one unit.
ID: RE300781_C0930620
Multilingual Communications
As our population becomes increasingly diverse, multilingual services become
increasingly important. While Spanish language documents are becoming more common,
more can be done to enhance multilingual communications. Multilingual members of the
company staff, translators at a local college or university, and multilingual materials on
the Internet are all resources to help a company serve diverse clientele.
ID: RE300781_C0930621
FACILITIES MANAGEMENT
Keep it clean; keep it safe; keep it well maintained; keep its costs under control. A very
short, perhaps overly simplistic, way of saying what managing facilities is about.
Depending on company philosophy, the clean-safe-maintenance-cost exercises may have
different priorities. But cost-containment should not mean that the work environment is
uncomfortable, unpleasant, or jeopardizes people's welfare. The company must follow
rules established by the Office of Health and Safety Administration (OSHA). The OSHA
poster should also be displayed in the workplace.
ID: RE300781_C0930622
Security in the Office
The broker must take steps to protect the facilities, staff, and customers. If a collection of
keys to the company's listings, including the addresses, is readily accessible to the staff,
that means that keys also are readily accessible to burglars.
The building, the parking lot, and all entrances should be well-lighted. Shrubbery should
be trimmed to eliminate hiding places. Exterior doors should be metal or thick wood and
have double-side keyed dead bolt locks. Change the locks or alarm codes periodically to
protect against lost keys and unauthorized entry. Code the addresses on keys and lock
them securely. Keep track of lockboxes so that you know where they are installed.
ID: RE300781_C0930623
Establish security procedures to keep the staff safe by using sign-out sheets and call-in
systems. Establish a code or warning system so that a person can summon help and alert
others to a danger. Identify a secure location in the office where personnel can go, and
plan an escape route so they can get out in case of a problem.
Sales associates can guard the amount of personal information they distribute in
promotional materials and be alert when scheduling appointments. An increasing number
of companies are requiring personal identification from customers and clients before
sales associates leave the office with them.
ID: RE300781_C0930624
Provide a safe environment for staff and the public. Their safety is not just a matter of
legal liability but a practical consideration as well. Take steps to prevent accidents and
prepare to respond to a fire or medical emergency.
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Program phones with emergency numbers and be sure everyone knows how to use
them.
Install smoke detectors. If the building has a sprinkler system, be sure it works
properly.
Purchase a first-aid kit and fire extinguishers, particularly for the workroom.
Instruct everyone about how these items should be used so that people don't create
more problems than they solve.
Familiarize people with safety procedures. More injuries and loss of life occur
when people ignore the alarms that were intended to protect them. Conduct fire
and disaster drills (don't overlook weather-related emergencies as well).
Secure handrails and clear walks and stairways of obstacles.
Make certain the electrical service is adequate to accommodate the computers and
other office equipment and appliances.
Familiarize yourself with the labor laws in your state to be sure you comply with
any safety requirements.
ID: RE300781_C0930625
CONCLUSION
The broker should select an office in a good location with the equipment and systems the
company needs to function efficiently. While all of this can be a significant part of a
company's initial investment and continuing operating budget, it is a good investment if it
enhances the company's image and the environment in which its people work. The
company's communications and information management systems are just as important
as its office building.
ID: RE300781_C0930626
Reading Comprehension Quiz 9
The statement is FALSE. DSL and cable connections are preferable to regular phone modems because they have much faster access to
Internet sites and large email documents.
Regular phone modems are generally preferable to DSL and cable connections.
True
Fals
e
ID: RE_31305
The statement is TRUE. The office must comply with the Americans with Disabilities Act (ADA). Some sites may be readily
accessible for customers and employees with disabilities while others may require costly remodeling.
The American with Disabilities Act should be understood and considered prior to
selecting an office location.
True
Fals
e
ID: RE_31302
The statement is TRUE. Today’s offices are information centers. Companies must assemble, manage, retrieve, and store large amounts
of data.
Communications and information systems are a priority in today’s offices.
True
Fals
e
ID: RE_31304
The statement is FALSE. Instead of being the place people go to work, the office is a place that supports them wherever they work.
An office is simply the place where people go to work.
True
Fals
e
ID: RE_31300
The statement is FALSE. Databases are vulnerable if there’s a hardware or software failure. An essential part of managing the system
is a routine plan for backing up or preserving data and storing the backups in a different location.
Saving data in the company’s database is sufficient.
True
Fals
e
ID: RE_31307
The statement is TRUE. The company must follow rules established by the Office of Health and Safety Administration (OSHA).
An OSHA poster should be displayed in the workplace.
True
Fals
e
ID: RE_31308
The statement is FALSE. Customer information and sensitive company operations data must be protected.
Most real estate company websites do not need firewalls.
True
Fals
e
ID: RE_31306
The statement is TRUE. As its name implies, it’s a reservation system, without the fee and allows the sales associates to reserve a
workstation for the desired time.
Hotelling is a strategy for managing workstations.
True
Fals
e
ID: RE_31301
The statement is FALSE. Without walls, people can more freely interact with one another, inspiring creative thinking and problem
solving. The environment can be helpful for fostering teamwork and camaraderie.
The open office is rarely a good design for a real estate office.
True
Fals
e
ID: RE_31303
The statement is TRUE. If a collection of keys to the company’s listings, including the addresses, is readily accessible to the staff, that
means that keys also are readily accessible to burglars.
A good security practice is to code the addresses on keys and lock them securely.
True
Fals
e
ID: RE_31309
Unit Exam 9
The answer is HOME OFFICING. With more people working at home, there is less and less need for large brokerage offices.
One of the trends that has a significant impact on the size of the office space a brokerage
firm needs is
image of the industry.
increased training
needs.
home officing.
buyer brokerage.
ID: RE_31604
The answer is AMERICANS WITH DISABILITIES ACT. Inasmuch as the office provides services to the public, the office must
comply with the Americans with Disabilities Act. Consider ADA before selecting the space, not after.
Which of the following legal issues should be considered when selecting an office site
and designing the space?
The fair housing laws
Americans with Disabilities Act
The Real Estate Settlement Procedures
Act
The Do Not Call Telephone Solicitation
Act
ID: RE_31605
The answer is RECEPTION AREA OF AN OFFICE. The reception area is where the public forms its first impressions of the
company.
The image of a company’s operations is most readily identified by the
reception area of an office.
work area of an office.
fact that sales associates have individual
offices.
training facilities in an office.
ID: RE_31606
The answer is THE SOFTWARE DETERMINES WHAT HARDWARE CAPABILITY IS NEEDED. It is advisable to select the
computer software you intend to use before selecting the hardware because the software often determines what hardware capability is
needed.
It is advisable to select the computer software you intend to use before selecting the
hardware because
software is quickly outdated.
it’s costly to move wiring for computers after they’re
installed.
automation is invaluable in today’s office.
the software determines what hardware capability is
needed.
ID: RE_31610
The answer is MESSAGES AND PHONE NUMBERS DON’T HAVE TO BE WRITTEN. One of the primary advantages of using a
voice messaging system is that messages and phone numbers don’t have to be transcribed, thus saving time and increasing accuracy.
One of the primary advantages of using a voice messaging system is
messages and phone numbers don’t have to be
written.
managers don’t have to answer phones.
sales associates can avoid callers.
brokers can monitor the sales associates’ callers.
ID: RE_31609
The answer is THE PUBLIC AND WORK AREAS ARE INSULATED FROM ONE ANOTHER. Work space should be separate
from the public areas and support an efficient flow of work and the interaction of people and systems.
The layout of an office should be planned so that
sales associates can share desk space.
sales associates can work with customers at their
desks.
the public and work areas are insulated from one
another.
the largest number of small desks will fit.
ID: RE_31607
The answer is ALL OF THE ABOVE. In order to protect the safety of workers and customers, the organization should make sure that
the parking lot and entrances are well lighted, addresses on keys are coded and locked in a secure place, and all phones are
programmed with emergency numbers.
You can protect the safety of your workers and customers by
making sure the parking lot and entrances are well lighted.
coding the addresses on keys and locking them in a secure
place.
programming your phones with emergency numbers.
All of the above
ID: RE_31608
(10)Structuring the Finances
LEARNING OBJECTIVES
After completing this unit, the student should be able to
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list the classifications of accounts in a balance sheet;
calculate the total assets on a balance sheet given the amounts of liabilities and
capital;
explain the differences between cash accounting and accrual accounting;
calculate the company dollar based on the percentage increase in the prior year
budget;
list at least three expenses that would be considered variable expenses;
calculate the net income of a brokerage firm given gross income, fixed expenses,
and the percentage of variable expenses; and
state the minimum amount of capital needed by a broker forming a new company.
ID: RE300781_C1030645
INTRODUCTION
How much money do you need to start a business? To keep it running?
What do you need to keep the company on a healthy financial track?
Business plans and financial plans go hand in hand. If a company intends to open a new
office, upgrade its computer system, increase its promotion to retain position in the
marketplace, or implement a more competitive sales commission plan, the company
needs a financial plan to make these things happen, while also keeping existing systems
and services operating. Financing and budgets are part of that financial planning.
ID: RE300781_C1030646
THE FINANCIALS
All managers should understand financial statements, because they provide a picture of
an organization's fiscal condition and the results of its operations. Business planners,
lenders, and investors look to the financial statements for evaluation of the company.
Financials are prepared using double entry bookkeeping. This is a system of capturing
debits and credits, each offsetting the other, to result in an equal balance. Accounting
knowledge is necessary to properly categorize and interpret the data. New business
owners and managers especially can benefit from courses in finance or a professional's
explanation of these reports.
ID: RE300781_C1030647
Balance Sheet
A balance sheet reports the organization's assets, liabilities, and owner equity. It is a
“snapshot” of the organization's financial position on a certain date.
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Assets are what the company owns. Current assets are cash or assets that can be
converted to cash within one year.
Liabilities are what the company owes, including accounts payable, taxes payable
and notes payable. Current liabilities are those which must be paid within one
year.
Owner equity is the net worth of the business, the difference between assets and
liabilities.
By definition a balance sheet must balance. Total assets must equal liabilities plus owner
equity. The most useful observations of the balance sheet are made by comparing balance
sheets over several years' time.
ID: RE300781_C1030648
Income Statement
An income statement, sometimes known as a profit and loss statement presents the results
of an organization's performance during a particular period of time. Net income (profit) is
the difference between gross income and expenses. If expenses exceed income, the
bottom line shows a negative number.
Several accounting methods can be used to report income and expense. The cash method
reports transactions in the period they were paid or received. For instance, if a sale is
made in February, but the commission is not received until April, it would show up as
revenue in April. The accrual method reports entries in the period the sale occurred. The
February sale would be counted as February revenue. Most small companies use the cash
method of accounting for simplicity. The accountant can best advise which method is
most suitable for the company. Regardless of the method used, however, the method must
be applied consistently to both income and expenses. Generally, a taxpayer must get
permission from the Internal Revenue Service before changing accounting methods.
ID: RE300781_C1030649
Income
A real estate company's income is usually derived from
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brokerage fees: the commissions that are generated by the sales associates and
those received from cooperating brokers.
additional service fees: activities such as appraising or property management or
fees for referrals, generated by referring customers to other brokerage companies.
transaction fees: administrative service fees intended to offset salaries for support
staff.
ID: RE300781_C1030650
Expense
Operating expenses fall into two categories:
1. Fixed expenses: rent, dues and fees, salaries, taxes and license fees, insurance, and
depreciation (funding for depreciation on equipment, buildings, and automobiles
the company owns). Fixed expenses do not vary in direct proportion to income.
2. Variable expenses: advertising and promotion, utilities, equipment and supplies,
and cost of sales. Variable expenses increase or decrease based on gross income
levels.
Cost of sales includes commissions paid to the licensees, overrides paid to the sales
manager, and fees from referrals. Cost of sales is a variable expense because
commissions fluctuate with production volume.
ID: RE300781_C1030651
Cash Flow Statement
A cash flow statement reports the sources of cash and how it has been used during the
period.
The purpose of cash flow statements is to show the organization how much cash it has for
day-to-day operations. This is critical information because if the company does not have
sufficient cash, it has to get funds from outside the organization. That could mean
borrowing money or finding investors to keep the company running. Correcting the
problem often requires time and involves additional costs that should be approached
methodically, not in a crisis mode.
ID: RE300781_C1030652
FINANCIAL RESOURCES
A new company must have financing to open its doors. The two financing resources are
1. Debt financing: loans
2. Equity financing: ownership interests
Planning and managing the use of resources is a critical part of management's financial
oversight. Each resource has advantages and disadvantages. Timing can be important.
Too much money too soon is expensive, either in interest payments or in diluted
ownership positions. Too little money too late restricts operations and can result in
missed business opportunities or less prudent decisions in the chase for money. Just-intime money can be the most expensive.
ID: RE300781_C1030653
Financial Projections
The key to the wise use of financial resources is forecasting. Analyzing financial
statements, particularly cash flow patterns, provides a basis for projecting future need.
Financial projections must also accommodate any new strategic initiatives outlined in the
business plan. The manager must anticipate the company's needs so that the necessary
money is available on time.
Start-up companies are challenged because they have no history on which to base
financial projections. New business owners often underestimate the competition and the
cost of doing business. In addition to the capital needed to open the business, companies
need money to operate during their startup period until they at least break even.
ID: RE300781_C1030654
Basic necessities typically include
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legal fees (establish the business),
accounting fees (advice and to set up books),
telecommunications and computerization (equipment and installation),
initial fees for affiliations (MLS, franchise, etc.) and professional associations,
office space (buy or rent, remodeling),
office equipment (facsimile machines, duplicating equipment, desks, chairs, file
cabinets, etc.),
office supplies;
personnel (payroll and Social Security, workers' comp, unemployment, income
tax withholding),
graphics (logo, signs, stationery),
promotion and advertising (initial entry into the marketplace), and
signage (office and yard signs).
ID: RE300781_C1030655
Depending on how the total cost of these items compares with the amount of money on
hand and able to be borrowed, the broker may have to find more cost-efficient ways to
start up. Short-term leasing versus purchasing items such as office space, telephone
systems, or duplicating equipment may help reduce the cash drain.
Undercapitalization is a major cause of business failures. Start-up companies are most
vulnerable when they lack the capital needed to operate until they break even. Be
conservative when estimating income and generous when estimating expenses. A threeto-five-year period to the break-even point is not uncommon.
Cash flow must also be planned for start-up capital requirements. A considerable amount
of cash goes out before cash flows in. The first year is the most treacherous, and a
company should expect to be totally capital-dependent for at least the first six months.
ID: RE300781_C1030656
Procuring Financing
The first step in getting financing is to engage an attorney and an accountant and make
them an integral part of the decision-making process. They are also good resources to
network with potential lenders or investors and make the necessary introductions. The
local branch of the Service Core of Retired Executives (SCORE) may also have expertise
that can help work through some of these decisions as well.
The decision-making process includes evaluating financial projections and determining
the appropriateness of debit or equity financing. The type will depend on the amount,
urgency and duration of the need, the tax effects, and the creditworthiness of the
company.
ID: RE300781_C1030657
Equity financing gives investors the opportunity share the profits in an enterprise they
feel has attractive strong earnings potential, rather than acting as lenders and receiving
fixed interest payments. Equity financing is most often desirable for capital expansion or
improvements, rather than to cover temporary cash-flow requirements. Because equity
financing involves changing ownership and possibly business operations (if the investors
are going to have an active role in the organization), these are more complicated and
time-consuming ventures to arrange and aren't suitable for quick responses to financial
need.
Debit financing is preferable when the company's principals don't want to give an
ownership position, and interest payments are tax-deductible. Debt financing is more
versatile, serving both long-term and short-term needs. Financing can often be arranged
more quickly than equity financing if the business has good credit.
ID: RE300781_C1030658
Financing Portfolio
Regardless of the chosen resource, the company has to “package a worthy pitch,” that is,
a financing portfolio. This is especially true for the start-up company, which has to
convince a lender or an investor to invest in a company that doesn't yet exist, has no
assets (collateral), and no proven track record.
Unless debt financing can be arranged privately (family, friends, or business associates),
the logical place to go is an institutional lender. Banks and the Small Business
Administration are good sources, as are government incentive programs for emerging
companies and, if applicable, programs for minority-owned businesses.
ID: RE300781_C1030659
It may be more difficult to borrow money if the business owner has no established
professional reputation or personal banking relationship with the institution. A known
entity is more likely to be successful, but if that connection does not exist, the
introduction by other business owners (or the company's attorney or accountant) often
opens the door.
A company that has a previously established relationship with the lender and is seeking a
relatively small sum of money may be asked to simply complete a loan application that
the lender can then process through a credit scoring system to evaluate the request.
Otherwise, a comprehensive financing portfolio will be required so that the request can
be scrutinized in detail and considered by a lending committee or potential investors. The
portfolio should be easy to read, concise, and attractive. It begins with an introduction of
the company and the request in a three-paragraph summary.
ID: RE300781_C1030660
The balance of the portfolio substantiates the request by




educating the potential lender or investor about the business's industry and the
marketplace;
demonstrating the industry and business management expertise of the company's
principals and that they have good character (personal resumés and a list of
references are typically part of this);
describing the company's business and its operations, including a business plan,
the financial statements, and budgets; and
demonstrating that the company has a sound plan for using and repaying the
money that is requested.
ID: RE300781_C1030661
Ultimately, lenders and investors are concerned about their risk in the venture. They will
not fund a venture in which their risk is greater than the owners' risk. This means that the
company (or its principals, if they must personally guarantee the loan) must be willing to
place a significant amount of capital or collateral on the line. For the principals, this
means risking personal assets, which can have significantly more financial implications
than simply funding their business.
Once the company gets the money, the relationship with the lender must be nurtured.
Good communications affects not only future borrowing power but also becomes a
valuable safety net in the event all does not go as the company planned. Business owners
are far too inclined to prematurely boast the good news about the company and drag their
feet with the bad, but it's far better to tell the tales in reverse. Lenders respect a heads-up
warning and a realistic assessment of the value of a company's accomplishments.
ID: RE300781_C1030662
GENERAL OPERATING BUDGET
A general operating budget is an essential part of a company's financial planning. A
budget is a financial road map of how the company will allocate financial resources to
support the company's business plan.
Budgets are useful if the projections are realistic. They need to be based on internal and
external factors that affect income and cost of operations. Overly optimistic revenue or
conservative expense estimates make the profit forecast look good, but doesn't give
management the key indicators needed to monitor the organization.
A company must live within its means. If a large expenditure is required to accomplish a
goal, the company has to find extra revenue to make this happen. The alternative is to
construct a deficit budget, which says that the company expects to spend more than it
makes. A deficit can be tolerated on occasion if an expenditure has high probability of
enhancing revenue in coming years. But a company can't tolerate many years of deficit
spending before reserves have been depleted or debt exceeds the value of the business.
A general operating budget resembles an income statement to the extent that the line
items are similar. This helps the company measure actual income and expense entries
against those that are budgeted. Companies commonly also prepare a variety of other,
more specific, budgets to guide departments or functional activities.
ID: RE300781_C1030663
Gross Income
The information gathered during the situational analysis can serve as the basis for
developing realistic revenue projections. These targets may also have been benchmarked
in the company's business plan. For budgeting purposes, the exercise is simply one of
mathematically converting services to revenue. Transaction revenue can be determined
by first multiplying the average sale price of a property by the number of transactions
expected. The result is gross sales volume. Then, calculate the amount of income that can
be expected from the gross sales.
ID: RE300781_C1030664
Price-Setting decisions
The company must decide how much to charge for its services. Price-setting decisions are
important and should be given the attention they deserve. While any pricing decision
affects the income statement, a simple change in price may not have the desired effect if
the price changes result in fewer transactions. You can't just put a bigger price tag on
services and expect the bottom line to turn out better.
Pricing decisions are made based on what the market will bear and at what point a price
increase will reduce volume or revenue. Price may be increased until it has a negative
effect. Other variables affecting pricing decisions are competitive factors, the type of
consumer, the power of the company name, and the perceived value of its services.
Pricing decisions must consider the commission versus fee-for-service programs. An
increasing number of real estate companies are including a-la-carte menus in their
services. Brokers must consider how much to charge for each service and whether special
prices should be offered for “packages” of services.
There are also the alternatives of charging either hourly or contingency fees, similar to
the way other professionals charge for their services. An hourly charge could be capped
at some amount for a month's service. A contingency fee could be collected when an
agency agreement is signed, and a performance clause could provide for the return of the
initial fee if the company is unable to perform the stated service within a certain time
period. The company could also ask for expense reimbursement.
Pricing decisions must be legal. A company cannot violate antitrust laws or Florida
licensing laws like the requirement that at least 75% of advance fees be placed into a
special advance fee escrow account.
ID: RE300781_C1030665
Operating Expenses
Forecasting fixed operating expenses (rent, salaries, insurance, and the like) is easier,
because they are already known. Variable expenses are more difficult to forecast and
control.
Operating expenses reflect expenditures needed to implement the plan. Typical expenses
that must be budgeted fall into the categories described below.
ID: RE300781_C1030666
Cost of Sales, or Transaction Expense.
These are direct transaction or service payments like commissions, referral, and franchise
fees. This category of expense is one of the largest for most companies.
Formerly, real estate companies used company dollar to determine the amount of money
available for operating expenses. Company dollar is the gross revenue that remains after
cost of sales has been deducted. Now more companies show these costs as operating
expenses.
ID: RE300781_C1030667
Marketing and advertising expenses
These include costs of marketing and advertising. This includes classified advertising,
signs, television, and telephone directory listings. Web site design and maintenance may
either be categorized as marketing or communications expense.
ID: RE300781_C1030668
Occupancy
These are the “housing costs,” including rent, utilities, janitorial services, and trash
removal. If the company owns its office building, mortgage payments, even though not
considered a pure expense, must be budgeted.
ID: RE300781_C1030669
Equipment and supplies
These include the rental or maintenance of computers, duplicating equipment, and fax
machines. This category also sometimes includes postage (including overnight delivery)
and packaging, shipping, bulk-mail permits, printing, office supplies, lockboxes, and
kitchen and restroom supplies.
ID: RE300781_C1030670
Dues and publications
These include the broker's and the company's dues in professional and industry
organizations, MLS and franchise fees; subscriptions.
ID: RE300781_C1030671
Services and fees
These expenses include accounting and bookkeeping services, insurance, legal services,
credit reports, computer consultant, and communications services, including basic, local
and long-distance telephone service, fax and computer lines, Internet services, and paging
services.
ID: RE300781_C1030672
Salaries
These are salaries for the broker (unless the broker doesn't take one), managers,
secretarial and clerical personnel, and other employees, including the training director,
relocation director, and transaction coordinator. Also included are employee-related costs
such as medical and dental insurance and other fringe benefits.
ID: RE300781_C1030673
Taxes and licenses
This includes real estate licenses for the broker and the company, business licenses, and
taxes, including payroll taxes (income taxes, Social Security, and unemployment taxes).
ID: RE300781_C1030674
Miscellaneous expenses
These include awards, incentives and contests, education, conferences, conventions,
travel and entertainment, auto expenses, and petty cash.
ID: RE300781_C1030675
Bank charges
This includes payments on debt and service charges on bank accounts and credit card
services.
ID: RE300781_C1030676
Repairs and replacements
These include the repair and replacement of equipment the company owns, which are
expenses that must be budgeted for even though, in strict accounting terms, they are asset
expenditures that are depreciated.
ID: RE300781_C1030677
Reserve for contingencies
Companies should assume that things might not go according to plan. The most fiscally
sound way to do this is to budget for contingencies. For example, the broker may be
aware that a major employer may leave the area causing many residents to lose their jobs.
A contingency plan might be devised to change projections if that eventuality comes to
pass. Prudent financial management suggests this is an important safety net.
Although it's common in most areas for sales associates to share in some operating
expenses, if a company's compensation and expense structure is seriously out of line with
the competition, the sales associates will go elsewhere to work.
ID: RE300781_C1030678
Profit Centers
The general operating budget can be broken down into more detailed budgets for each
department or sales office. When companies set up these work units as profit centers,
each unit is charged with the responsibility for generating the income it needs to
contribute to the profit for the company as a whole.
ID: RE300781_C1030679
Variable Expense Budgets
Variable expense budgets are needed to identify individual expenditures within those
categories. These more specific budgets are particularly helpful for monitoring
expenditures throughout the year. For example, an amount designated for advertising is
broken down into various advertising activities with one person responsible for staying
on budget.
ID: RE300781_C1030680
Monthly Operating Budgets
Monthly operating budgets are typically one-twelfth of the year's projections for each
budgeted line item. The actual income and expenses are compared with the budget
throughout the year to monitor performance. The broker then “manages by exception.”
For items that are within the budget, no action is necessary. If a category is significantly
different than the budget, an explanation should be found and appropriate action taken.
ID: RE300781_C1030681
ACCOUNTING
Financial management also means keeping the books and records of the company.
Because of the critical nature of this information, companies need specific procedures for
collecting, posting, maintaining, and verifying financial data. Management must be able
to rely on data systems that are structured according to generally accepted accounting
principles.
ID: RE300781_C1030682
Electronic Data Management
Most companies have streamlined their bookkeeping with computer software like
Quickbooks. Rather than the broker relying solely on the software, an accountant should
be involved in setting up the books and helping staff when necessary.
The electronic data makes generating the company's balance sheet, income statement, and
cash flow statement much easier. When it's time to file tax returns or do a general audit of
the company's books, the data is readily available.
ID: RE300781_C1030683
License Law Requirements
Florida law allows brokers to use financial software for escrow accounting, but the broker
must ensure that the software is capable of leaving a clear audit trail and can print a hard
copy of the data for inspection in case of audit. Separate accounts must be established for
escrow money so that it is never commingled with the company's general operating
funds. See below for a sample trust/escrow ledger.
ID: RE300781_C1030685
Security
“Protect the money and the money data.” This simple statement says much about the
systems and procedures a company needs to ensure that the company's assets and its
records are secure.
Electronic data management systems are vulnerable to loss unless steps are taken to
protect the data. This is especially important when the computer system is networked
throughout the company. Files should be password-protected and firewalls set up to
prevent tampering with the data by unauthorized persons either within or outside the
organization. Only management and the accountant should be able to access the
company's financial records.
Money is normally secured with internal systems of checks and balances. Selective
access to checkbooks, inventory of company assets (including equipment and serial
numbers), and records management procedures to keep track of funds are necessary.
They provide safeguards against misappropriation, theft, or embezzlement. Reducing the
number of people who handle money results in fewer opportunities for funds to be
diverted.
In a real estate company, one of the greatest concerns is protecting the escrow money.
Procedures are needed to track funds from the time they are received to the time they are
deposited and then disbursed. Florida law is very specific about procedures for handling
escrow money properly. The company should have zero tolerance for mishandling funds
and develop specific termination policies for people who do.
ID: RE300781_C1030686
CONCLUSION
Structuring a company's finances helps to align its resources to efficiently accomplish the
company's business plan. A budget is a useful tool, allowing management to monitor the
company's financial performance of the organization and takes the necessary steps to
achieve the company's plan.
ID: RE300781_C1030687
Reading Comprehension Quiz 10
The statement is FALSE. Financials are prepared using double entry bookkeeping. This is a system of capturing debits and credits,
each offsetting the other, to result in an equal balance.
Financials are prepared using single entry bookkeeping.
True
Fals
e
ID: RE_31310
The statement is FALSE. Procedures are needed to track funds from the time they are received to the time they are deposited and then
disbursed.
Escrow funds only need to be accounted for when they are deposited.
True
Fals
e
ID: RE_31318
The statement is FALSE. A balance sheet reports the organization’s assets, liabilities, and owner equity.
A balance sheet reports the organization’s assets and owner equity only.
True
Fals
e
ID: RE_31311
The statement is TRUE. A budget is a financial road map of how the company will allocate financial resources to support the
company’s business plan.
Budgets need to be based on both internal and external factors that affect income and cost
of operations.
True
Fals
e
ID: RE_31315
The statement is TRUE. Operating expenses reflect expenditures needed to implement the plan for business.
Advertising is considered to be an operating expense.
True
Fals
e
ID: RE_31316
The statement is TRUE. The manager must anticipate the company’s needs so that the necessary money is available on time.
Forecasting helps companies to project future financing needs.
True
Fals
e
ID:RE_31314
The statement is FALSE. Only management and the accountant should be able to access the company’s financial records.
Any employee should be able to access the company’s financial records.
True
Fals
e
ID: RE_31319
The statement is TRUE. Cost of sales is a variable expense because commissions fluctuate with production volume.
Cost of sales is a variable expense.
True
Fals
e
ID: RE_31313
The statement is FALSE. The cash method reports transactions in the period they were paid or received; the accrual method reports
entries in the period the sale occurred.
The accrual method reports transactions in the period they were paid or received.
True
Fals
e
ID: RE_31312
The statement is TRUE. Prudent financial management suggests this is an important safety net.
Budgeting for contingencies is a fiscally sound way to prepare for changes in market
conditions.
True
Fals
e
ID: RE_31317
Unit Exam 10
The answer is FLORIDA LICENSING LAW. Florida license law most influences the accounting procedures for escrow accounts.
Which of the following most influences the accounting procedures for escrow accounts?
Company’s auditor
Computer software
program
Floriding licensing law
Company’s broker
ID: RE_31618
The answer is ALL OF THE TRANSACTION EXPENSES. The cost of sales includes all the service payments made to assist a
transaction to settlement. For most offices, this is one of the largest expenses.
Cost of sales is
listed as income on the profit and loss
statement.
a fixed expense on the profit and loss
statement.
the same as company dollar.
all of the transaction expenses.
ID: RE_31616
The answer is A PROFIT CENTER. A profit center is created when a work unit is charged with the responsibility for generating a
portion of the net income in the general operating budget.
Charging a work unit with the responsibility for generating a portion of the net income in
the general operating budget is known as
a profit center.
a sales office.
a variable
budget.
company dollar.
ID: RE_31617
The answer is FINANCIALS. The financials are statements that provide a picture of an organization’s fiscal condition.
The statements that provide a picture of an organization’s fiscal condition are called the
balance sheets.
profit and loss statements.
income and expense
statements.
financials.
ID: RE_31611
The answer is A BUSINESS PLAN. A business plan should be included in any loan application portfolio, as well as a letter of
introduction, a personal financial statement, and a budget.
A loan application portfolio normally includes a letter of introduction, a personal
financial statement, a budget, and
the company’s logo.
a floor plan of the office.
evidence of franchise
membership.
a business plan.
ID: RE_31613
The answer is BROKER OF THE FIRM. The broker or owner of the company must decide what to charge consumers based on the
cost of providing services, not what other brokers charge.
The person who is responsible for determining how the company charges for its services
is the
sales associate negotiating with the
client.
manager of the sales office.
broker of the firm.
judge in antitrust cases.
ID: RE_31615
The answer is MULTIPLYING THE GROSS SALES VOLUME BY YOUR COMMISSION RATE. To calculate gross income,
multiply the gross sales volume by your commission rate.
When forecasting income for the year, begin by multiplying the average home sale price
by the number of anticipated transactions. Then calculate gross sales income by
multiplying the gross sales volume by your commission rate.
dividing the gross sales volume by the average home sale
price.
dividing the gross sales volume by the number of sales
associates.
multiplying the gross sales volume by your commission split.
ID: RE_31614
(11)Business Policies and Procedures
LEARNING OBJECTIVES
After completing this unit, the student should be able to



define the term anti-trust;
describe the differences between employees and independent contractors as they
relate to company policies; and
identify a policy manual statement that would best describe equal opportunity.
ID: RE300781_C1130706
INTRODUCTION
What are your company's ethical policies?
What business policies and procedures has your company adopted?
How effective are they? How are they communicated?
In a business organization, the staff must understand the company's policies and
procedures. The purpose of a company's “rulebook” is to support the systems the
organization creates. A policies and procedures manual sets forth the company's
philosophy for doing business, rules of ethical conduct, as well as describing how work is
to be done.
Written authoritative guidance prevents misunderstandings, provides consistency, and
reduces time spent on directing work, solving problems, and resolving controversy.
ID: RE300781_C1130707
The company's written rules are generally provided in:



a policy and procedures manual, the general operations manual that spells out the
rules and processes that govern all of the company's operations;
a personnel procedures manual, the human resource procedures governing
employment and employee relations; and
an employee handbook that prescribes rules of conduct.
The company's rules must also provide penalties so people understand the consequences
for serious violations.
ID: RE300781_C1130708
Several guidelines for formulating policies:






The owners and senior management are responsible for setting the business
philosophy, ethical codes, and policies and procedures.
Policies and procedures manuals, personnel procedure manuals, and employee
handbooks are documents specifically designed for the company. Management
must ensure that the policies are appropriate
Policies should be reviewed by the company attorney to ensure they don't violate
the law or cause litigation.
Policies, once adopted, should be followed. In the event of litigation, both the
rules and the actual conduct are scrutinized. Despite what is written, the
organization may be defenseless if its conduct is inconsistent with the words. The
broker should give a manual to each sales associate and obtain a written
acknowledgment.
Policies should be reviewed periodically to reflect changes in laws and
procedures. This means that the printed manuals must be updated. Loose-leaf
binders work best for this purpose.
Developing a policy manual may not be as overwhelming as one might think.
Some policies and procedures are in practice, and just need to be written.
Management should try to address the things that it spends most of its time
directing or resolving.
ID: RE300781_C1130709
BUSINESS ETHICS
A code of conduct sets forth the company's ethics, describing the right way to do
business.
Ethics is a set of beliefs that guides actions and defines behavior.
Although there is no one universal value system, it is not true that different sets of values
can govern our personal lives and business actions. One ethical standard must govern all
areas of our lives. The base is the Golden Rule, “Do unto others as you would have others
do unto you.”
ID: RE300781_C1130710
The Heart of Ethics
When Wall Street commits scandals, students cheat on college campuses, government
officials are forced to resign, some people say, “Don't these people know any better?”
Others might say, “I'd do the same thing they did,” Not everyone sizes up situations the
same way.
The reason they don't arises from their personal value systems. Whatever a person values
most becomes the priority that guides his or her behavior.
ID: RE300781_C1130711
The challenge is to bring people with divergent value systems together. Society does this
with rules. These rules fall into two general categories: laws, which are the rules
established by government, and ethics, which are driven by personal values. A person's
conduct can be described as legal or illegal, ethical or unethical. Because some laws do
not prohibit acts that appear to be unethical, ethics generally impose a higher standard for
conduct.
Management establishes the standards for ethical behavior, which guides the way the
company does business.
While state licensing law regulates the conduct of licensees, a company must also
articulate the value system that governs its business practices. That system forms the
basis for the company's code of ethics. Committing a code to writing helps ensure that
people practice what the company preaches.
ID: RE300781_C1130712
Code of Ethics
The National Association of REALTORS® publishes the Code of Ethics, guiding its
members' behavior. If the company subscribes to an industry code of ethics, then the
company incorporate it into its own code. Generally, the Code covers the company's
relationships with its customers, to the public, and to other Realtors®.
ID: RE300781_C1130713
Institutionalizing Ethics
Institutionalizing ethics means integrating ethics throughout the organization. The broker
should (1) Clearly state the ethical conduct that is expected. (2) Establish systems within
the organization to ensure that the behavior is consistent with the words. (3) Provide
penalties for people who deviate from the code of ethics.
Once the company adopts a code of ethics, the organization must be committed to
following it. The ethical code becomes meaningless if senior management tolerates or
ignores behavior that is contrary to the values it has established. A commitment to ethical
conduct is one of a company's most valuable assets. Doing what's right is not always the
easiest course of action, nor does it always produce immediate financial rewards, but
there is simply no right way to do the wrong thing.
ID: RE300781_C1130714
A company can institutionalize its code of ethics in several ways.


Put the code of ethics in writing. Written statements leave no room for ambiguity,
and provide evidence for enforcement. A code of ethics that is too vague is merely
window dressing.
Communicate the code of ethics. Everyone in the organization needs to be told



what the code of conduct is. This can be done through training and orientation
programs, and pamphlets. The actual behavior of the company's people makes the
most powerful public statement.
Demonstrate that the code of ethics is important. Management must lead by
example to gain commitment from others in the organization. There cannot be
different standards for management and for those being managed.
Enforce the code of ethics. Confront violations. Unethical behavior persists when
organizations fail to enforce standards.
Reinforce the code of ethics. Ethics should be a subject of company workshops by
incorporating the subject wherever appropriate. Some sales training sessions
ignore ethical behavior when covering sales skills. Training should prepare people
for the ethical dilemmas they might encounter and develop solutions.
Some managers choose to simply ignore ethics, but because some unethical conduct is
also illegal, the company's legal liability is significantly increased and the FREC could
take disciplinary action.
ID: RE300781_C1130715
POLICIES AND PROCEDURES
Policies and procedures are especially valuable for




providing answers for problems people face during the course of daily operations,
setting rules of behavior,
helping resolve conflicts before they arise, and
providing risk-management for both the company and its staff.
Written policies must be carefully worded. Litigation and employment disputes can arise
out of accusations that policies created contracts and interpretations that policy
statements are promises that the company failed to fulfill. The manual should state that
management can make changes at its discretion, and has the right to interpret and
administer policies.
ID: RE300781_C1130716
Like ethics, company policies must be institutionalized. Everyone should have a copy.
The manual should be used in orientation programs for new staff. Managers must enforce
the policies consistently
A manual has legal implications, and must be legal. Antitrust, employment, and civil
rights laws are areas for special attention. If the company employs independent
contractors it must follow IRS guidelines to ensure that status is not jeopardized.
ID: RE300781_C1130717
General Business Policies
General business policies include the mission statement, a brief history of the
organization, and a description of its target markets. This is also where the company's
general philosophy of doing business is explained.
The organization chart is part of the introduction. If managers have an open door policy,
the accessibility to the broker should be described.
Aside from the need to provide direction on job performance, the company should expect
that all workers, including independent contractors, conduct themselves in a legal and
ethical manner.
ID: RE300781_C1130718
Brokerage relationships
The broker must clearly define the company's policy regarding law of agency
relationships. The policy must state whether the firm represents buyers/tenants,
sellers/landlords, or both as single agents or as transaction brokers. Detailed procedures,
especially those that preserve confidentiality and loyalty, are essential, particularly if the
company is practicing single agency.
ID: RE300781_C1130719
Antitrust
A company's policies must address the prohibited acts of price fixing, group boycotting,
territorial assignments, and tying agreements. Policies should explain the business
rationale for the company's fees and its various fee structures. Equally important are
procedures that tell sales associates what they need to do and say in their representations
of the company's fees to protect the company from antitrust violations.
ID: RE300781_C1130720
Equal opportunity
The company should express its philosophical commitment to equal opportunity in
housing and employment. It must establish specific policies to ensure that everyone
serves all customers properly under fair housing laws. Personnel policies must ensure that
practices conform to applicable employment and disability laws.
The company could also participate in affirmative action programs. An example is the
Fair Housing Partnership Agreement that the National Association of REALTORS® and
the Department of Housing and Urban Development have jointly signed. This is a
voluntary program in which participants can further equal opportunity in housing by
engaging in certain advertising practices and community outreach programs.
ID: RE300781_C1130721
Real estate licensing laws and regulations
All activities must comply with Florida's licensing laws. Procedures should address what
unlicensed people can and cannot do so there is no violation of the law.
A section on personal assistants, both licensed or unlicensed, should describe the specific
activities they are permitted to perform.
ID: RE300781_C1130722
General Workplace Policies and Procedures
Rules for the workplace tell people about the day-to-day life in the organization. These
apply to everyone, regardless of their position in the company whether they are
independent contractors or employees. Suggested topics include:
-Equal employment opportunity
-Nonharassment, including sexual harassment
-Drug and alcohol use/abuse
-Smoking and nonsmoking
-Violence in the workplace, personal safety and security issues
-Standards of conduct (including issues such as theft, conflict of interest, and violations
of laws, ethics, and policies)
-Job enrichment and professional growth
-Confidentiality (company matters as well as client confidences)
-Public relations
-Actions on behalf of the organization
-No solicitation policy to stop disruption in the workplace
-Use of company property and equipment
-Computer, Internet, and e-mail usage. Issues to address include
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hardware systems (physical security of equipment);
user accounts, passwords, and protected files;
copyrighted software (permissible use and legal issues);
handling attachments and forwarding messages (e-mail);
computer viruses (defenses of company system, including scanning attachments
and user CDs and disks);
use of secure sites when transmitting personal data, credit information, and the
like to protect against identity theft;
prohibited activities (frivolous and personal use of internal network and Internet,
including harassing and offensive content);
intellectual property-rights protection and Internet downloads (typically
prohibited);
company monitoring of computer and Internet usage (including user waiver of
right of privacy);
directions for handling system failures
-Emergencies
-Termination (independent contractors and employees)
-About the work day:
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

Office hours
Holidays
Personal phone calls
Dress policy
ID: RE300781_C1130723
General Workplace Policies and Procedures
Rules for the workplace tell people about the day-to-day life in the organization. These
apply to everyone, regardless of their position in the company whether they are
independent contractors or employees. Suggested topics include:
-Equal employment opportunity
-Nonharassment, including sexual harassment
-Drug and alcohol use/abuse
-Smoking and nonsmoking
-Violence in the workplace, personal safety and security issues
-Standards of conduct (including issues such as theft, conflict of interest, and violations
of laws, ethics, and policies)
-Job enrichment and professional growth
-Confidentiality (company matters as well as client confidences)
-Public relations
-Actions on behalf of the organization
-No solicitation policy to stop disruption in the workplace
-Use of company property and equipment
-Computer, Internet, and e-mail usage. Issues to address include










hardware systems (physical security of equipment);
user accounts, passwords, and protected files;
copyrighted software (permissible use and legal issues);
handling attachments and forwarding messages (e-mail);
computer viruses (defenses of company system, including scanning attachments
and user CDs and disks);
use of secure sites when transmitting personal data, credit information, and the
like to protect against identity theft;
prohibited activities (frivolous and personal use of internal network and Internet,
including harassing and offensive content);
intellectual property-rights protection and Internet downloads (typically
prohibited);
company monitoring of computer and Internet usage (including user waiver of
right of privacy);
directions for handling system failures
-Emergencies
-Termination (independent contractors and employees)
-About the work day:




Office hours
Holidays
Personal phone calls
Dress policy
ID: RE300781_C1130723
Procedures for Independent Contractor/Sales Associates
-Policies relating to independent contractors should address the following subjects:
-Sales teams (the way they are accommodated in the company, including notification to
management about how the team has structured its relationship)
-Part-time agents, full-time agents, and home officing (including definitions, hiring
policies, and the way they work)
-Referrals (procedures for distributing in-house leads and referrals between sales
associates and referrals to other companies)
-Cooperation among sales associates (including sharing customers and clients)
-Standards for servicing customers and clients (listings, sales, and other applicable
services)
-Open house procedures (including sales procedures and safety precautions)
-Transactions:
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Listing and buyer agency agreements (types, situations in which each is used,
policy on written versus oral agreements)
Forms and contracts (written vs. oral contracts, written disclosures; contingency
forms, transmittal to company files and to contract signatories; record keeping)
Escrow money (tracking procedures, deposits and withdrawals, cooperating
broker procedures, disputes)
Litigation and legal expenses
Settlement or escrow procedures
Brokerage relationship disclosure
-Commission programs
-Insurance (coinsurance on autos, errors and omissions)
-Dues and fees (professional association, MLS, franchise)
-Education and designations
-Advertising and marketing procedures (who pays for what, which publications are used,
frequency, content and approval of copy even when salesperson is paying the bill,
solicitation)
-Internet advertising (requirements of license law, copyright and trademark infringement,
defamation, sexual harassment, racial discrimination, wire fraud)
-Telephone solicitation (including do-not-call-list rules)
-Telephone procedures (personal and business calls, phone log, who gets the lead on an
inquiry, expectations for returning messages)
-Dissemination of information (about the company and its listings, including the nature of
information to be discussed on the phone and who is permitted to disseminate what
information)
-Lockboxes and signs (inventory control procedures, who pays)
-Postage, printing, and direct mail (who pays, limits, review of copy)
-Attendance (recommendations for floor time, sales meetings, training sessions)
-Parking
-Sales associates selling and purchasing real estate for themselves
ID: RE300781_C1130725
Procedures for Independent Contractor/Sales Associates
-Handling disputes (between sales associates, with customers and clients, with licensees
in other firms)
-Termination (disposition of listings, leads, pending closings)
ID: RE300781_C1130726
CONCLUSION
Many systems and processes need to come together so that an organization can function.
The company's policies and procedures describe those systems. Policies tell how the
company does business and provide orderly processes so that the company can function
efficiently. Not only are manuals of policies and procedures good reference materials to
help people self-direct their work but they also provide a framework within which
management can manage the daily affairs of the organization.
ID: RE300781_C1130727
Reading Comprehension Quiz 11
The statement is FALSE. Although there is no one universal value system, one ethical standard must govern all areas of our lives. The
base is the Golden Rule, “Do unto others as you would have others do unto you.”
Because there is no one universal value system, different sets of values can govern our
personal lives and business actions.
True
Fals
e
ID: RE_31320
The statement is TRUE. The policy must state whether the firm represents buyers/tenants, sellers/landlords, or both as single agents or
as transaction brokers. Detailed procedures, especially those that preserve confidentiality and loyalty, are essential, particularly if the
company is practicing single agency.
The broker must clearly define the company’s policy regarding law of agency
relationships.
True
Fals
e
ID: RE_31325
The statement is FALSE. Because some laws do not prohibit acts that appear to be unethical, ethics generally impose a higher
standard for conduct.
Laws generally impose a higher standard for conduct than ethics.
True
Fals
e
ID: RE_31321
The statement is FALSE. Written statements leave no room for ambiguity, and provide evidence for enforcement.
As long as employees understand the company’s code of ethics, there is no need to write
it down.
True
Fals
e
ID: RE_31322
The statement is FALSE. A number of state and federal laws exist to protect employees and working conditions. The distinction
between employees and independent contractors may not necessarily be relevant in these laws.
Policies relating to employees do not apply to independent contractors.
True
Fals
e
ID: RE_31329
The statement is FALSE. This is a voluntary program in which participants can further equal opportunity in housing by engaging in
certain advertising practices and community outreach programs.
The Fair Housing Partnership Agreement that the National Association of Realtors® and
the Department of Housing and Urban Development have jointly signed is a mandatory
program.
True
Fals
e
ID: RE_31327
The statement is TRUE. Equally important are procedures that tell sales associates what they need to do and
representations of the company’s fees to protect the company from antitrust violations.
Policies should explain the business rationale for the company’s fees and its various fee structures.
True
Fals
e
ID: RE_31326
The statement is TRUE. Rules for the workplace tell people about the day-to-day life in the organization.
Rules for the workplace might include such topics as smoking and nonsmoking, Internet
and e-mail usage, and dress policy.
True
Fals
e
ID: RE_31328
The statement is TRUE. Some sales training sessions ignore ethical behavior when covering sales skills. Training should prepare
people for the ethical dilemmas they might encounter and develop solutions.
It is worthwhile to incorporate the subject of ethics in company workshops wherever
appropriate.
True
Fals
e
ID: RE_31323
The statement is FALSE. Written policies must be carefully worded. The manual should state that management can make changes at
its discretion, and has the right to interpret and administer policies.
In order to keep the code of ethics clear and familiar to employees, management must not
make changes to it.
True
Fals
e
ID: RE_31324
Unit Exam 11
The answer is NOT BE COMPATIBLE WITH YOUR ORGANIZATION’S PHILOSOPHY OR BUSINESS. Policies and procedures
manuals are highly individualized documents, each unique to the business organization that wrote it.
The primary reason a policy and procedures manual developed by another company is
not useful for your company is that it may
be outdated.
be unethical.
not be compatible with your organization’s philosophy or
business.
not anticipate all of the situations that need to be addressed.
ID: RE_31622
The answer is FLORIDA’S LICENSING LAWS. The company policy should state that all of the activities in the organization must
comply with Florida’s license laws.
A real estate brokerage company has the right to expect that all people who work for it,
regardless of whether they are independent contractors or employees, comply with
Florida’s labor laws.
Florida’s licensing laws.
local trade association’s code of
ethics.
local zoning ordinances.
ID: RE_31626
The answer is FLEXIBLE AND CHANGE AS THE ORGANIZATION CHANGES. Although the rules, once formulated, must be
followed by all concerned, they should be revisited from time to time to ensure that they support the organization as it changes and to
address issues as they emerge and as laws change.
A company’s policies and procedures should be
oral rather than written.
flexible and change as the organization
changes.
protected as confidential information.
followed only by management.
ID: RE_31630
When a company stipulates procedures that apply to independent contractors, these
policies
eliminate the need for independent contractor agreements.
guarantee that their independent contractor status will not be challenged by the IRS.
will include recommendations rather than requirements that certain procedures are
followed.
need not be followed by the independent contractors.
ID: RE_31627
The answer is IT IS PREPARED AND ADOPTED AFTER REVIEW BY THE COMPANY’S LEGAL COUNSEL. To avoid legal
liability, the policies and procedures manual should be carefully reviewed by legal counsel to ensure that the policies are in
compliance with state and federal laws, and that everyone consistently follows the stated guidelines.
A policy and procedures manual can shield a company from legal liability when
the company does not practice within its established procedures.
procedures that affect independent contractors are written as if they are
employees.
it is prepared and adopted after review by the company’s legal counsel.
it is rarely, if ever, updated to reflect changes in the law.
ID: RE_31625
The answer is THE ORGANIZATION PERMITS BEHAVIOR CONTRARY TO THE VALUES IT HAS ESTABLISHED. The
ethical code becomes meaningless if senior management tolerates or ignores behavior that is contrary to the values it has established.
A code of ethics in a company becomes meaningless when
it is inconsistent with the code of other companies.
it is inconsistent with the code adopted by a trade association.
the organization permits behavior contrary to the values it has
established.
legal conduct is unethical.
ID: RE_31624
The answer is HOLIDAY TIME-OFF. Holiday time-off applies only to employees, since by and large, independent contractors set
their own work time frames.
Of the following general policies, which affect only employees and not independent
contractors?
Nonharassment policies
Substance abuse
policies
Holiday time-off
Grievance and
termination
ID: RE_31629
The answer is EQUAL EMPLOYMENT POLICIES. Equal opportunity policies apply to both employees as well as independent
contractors.
Of the following general policies, which affect both employees and independent
contractors?
Equal employment
policies
Vacation and sick leave
Attendance requirements
Expense accounts
ID: RE_31628
The answer is BROKER OR OWNER. The owner(s) and senior management are responsible for business philosophy, ethical codes,
and policies and procedures, hopefully including input from lower levels of the organization.
The person responsible for determining the business philosophy for a company is the
office manager.
broker or owner.
individuals who work there.
president of the local trade
association.
ID: RE_31621
(12)Marketing and Advertising
LEARNING OBJECTIVES
After completing this unit, the student should be able to

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define what is meant by a company's signature;
describe the characteristics of a company marketing plan;
list the three parts of a real estate ad that are necessary to get the most responses;
identify real estate ads that do not conform to state or federal laws; and
describe the most common opinion of real estate professionals about open houses.
ID: RE300781_C1230748
INTRODUCTION
What media attracts today's consumers?
What tools can you use to promote your company? Your services or your listings?
The company needs a skillfully designed marketing and advertising program if it is to
meet the service-related goals in its business plan.
There are many advertising tools to get attention, make an impression, and cause people
to act. Traditionally, real estate companies have advertised their listings to entice the
consumer. Because the success of that method depends on the quality of the listings, the
next thing to do was expand the message, for example, the company's affiliation with
MLS or its professional staff.
And so it evolved that companies learned that who they are, the services they provide,
and especially the people who work for them are the features the company must promote.
Consumers want to know the benefits of working with the firm.
ID: RE300781_C1230749
MARKET IDENTITY
Market identity is its brand. The words, colors and graphics designed to stick in the
customers' minds becomes the company's signature. The signature should be
everywhere—the sign on the office, yard signs, business cards, letterhead, brochures, and
Web home pages.
ID: RE300781_C1230750
What's in a Name?
Some brokers feel they can communicate a more personal touch by using their own
names for the company name. If the broker has a high profile in the community, name
recognition can be a powerful draw.
A fictitious name can powerful, too. It may relate to a specialty, a geographic area, or
other special characteristic that distinguishes the company from the competition. A name
that sounds too frivolous can be a negative influence.
A broker must register a fictitious name with the DBPR. If the firm is a corporation or
LLC, the name must be registered with the Secretary of State. Names that are already in
use will not be accepted.
ID: RE300781_C1230751
What's in the Signature?
A signature creates brand-name recognition. Some are readily recognized by their color
schemes (like real estate franchises). Others have catchy slogans or logos, like the golden
arches that are recognized worldwide.
Think “signature that sizzles.” Sizzle is the attention-grabbing, impression-making
characteristic of a signature. Even the most conservative institution (like a bank) needs a
sizzling signature. This is the art of creative design that professionals know best, that
matches the signature of the company with the consumers the company wants to attract.
ID: RE300781_C1230752
The design must also look smart in a variety of formats. One that looks good on a
billboard may not look so fine when it's scaled down for a classified ad or a business
card. Striking colors or screened backgrounds work for color print and a Web page, but
may lose the punch in a black-and-white newspaper. A professional can craft a design
that suits the media that are most likely to be used.
As a company grows and times change, a new face may appeal more to the contemporary
consumer. After the merger of two firms, the new signature may combine some
recognizable feature of the previous two companies or cast an entirely new image. It
could be a new swoosh, a stylish color, or a great slogan. To retain the firm's identity,
something recognizable from the old signature is incorporated in the new.
ID: RE300781_C1230753
THE COMPANY'S MARKETING PLAN
Now that the company has a signature, the next step is to develop a plan for selling the
brand. A marketing plan identifies the goals and the ways to accomplish them. Typically,
the focus relates to a priority in the company's business plan, which then becomes the
theme for the marketing plan.
Knowing who the target markets are, where they're located, and the consumers' behavior,
tells the company how to match the right advertising tools with the targeted populations.
The lessons learned in the market analysis about the competition should also be
considered.
ID: RE300781_C1230754
Think “purpose, population, and price.” Some media work best for institutional ads
(promoting the company) and others for promoting services or listings. Some reach broad
audiences and others target more specific ones. The goal of purpose-price-and-population
is to pick the media that reaches the desired population for the best price.
A marketing plan is a coordinated program, with each advertising activity supporting the
others. This improves the cost/benefit equation. A basic rule in marketing is repetition,
“hit often.” A short but intense campaign, rather than a longer, drawn-out one with less
frequent appearances, provides greater benefit for the same amount of money.
ID: RE300781_C1230755
Internet
The Internet is today's high-tech mass-marketing tool. Graphics and attention-grabbing
animation promote a company's signature. The Internet also serves more specific
purposes, through the poster's Web site.
A recent study says that the number of homebuyers searching for properties on the Web
surged from 2 percent in 1995 to 50 percent in 2001. These online shoppers spend about
two weeks working with a licensee before purchasing, as opposed to an average of six
weeks for those who haven't done online research.
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The broker must decide what he or she wants that Internet presence to do. Most
companies attract visitors to their sites with listing information. Because visitors
have no brand loyalty at this point, the ease with which they can use and navigate
the site is the key to telling their computers to bookmark it as a “favorite.” To get
the visitor to the site, the broker should:
Help the search engine locate your site by using key words on your Web pages
that attract people who are searching for that information.
Place your key words or phrases on your page where the search engines are likely
to find them (in the first several words on the page title). Don't lead off with a
person's or a company's name, copyright notice, or welcome message. The general
viewer won't find you.
Provide descriptive information, or metatags, to describe the site in a search
engine's index. The viewer of the page won't see these, but they help the search
engines respond to the viewer.
Register the site with the search engine's index and consider ways to link the site
with others (with their permission) to maximize your exposure.
ID: RE300781_C1230756
While there are many software programs to help design a site, most non-tech brokers
should get help from a professional. In addition to the ease with which people can
navigate the site, visitors want meaningful information. Newsletters to educate the visitor
can also be used on the site. The site must offer a strong benefit to the visitor, or it will be
ignored.
The broker must monitor the Web site. Informative messages can look out-of-date when
interest rates or tax laws change. Property listings are time-sensitive. The company must
constantly review the inventory to remove sold or expired listings. The virtue of IDX is
being able to tie into the MLS database, which is presumably up-to-date.
ID: RE300781_C1230757
f the site is interactive and does not have automated response features, management has
to be reading that “mail” so that people receive prompt responses. Someone must also
keep track of “hits” so that the company can gauge visitor traffic to the site.
Not all information on the Internet is in the public domain. Domain names and site
content are intellectual property protected by copyright and trademark. This is a two-way
street: the company must be sure that it does not use the protected property of others
(unless permission is given) and the company must be sure to protect its property with
copyrights and trademarks. Listings are proprietary information and should be posted
only according to the rules of the MLS.
ID: RE300781_C1230758
Mass Media
The conventional view of mass media has been television, radio, and newspapers. The
Internet should be added to that list.
ID: RE300781_C1230759
Broadcast media
Radio and television are major sources of information. The ad must capture attention in
30 seconds and then reinforce the message elsewhere. Professional media consultants
help tailor a radio or TV message to capture that attention. Because broadcast media can
be expensive, the message needs to make a strong impact in a short time.
The broker should select radio and television stations whose audiences match the
company's target market. Stations compile audience profiles, useful for matching stations
with target markets and also identifying the number of consumers that can be reached.
Cable TV stations are typically more localized, but they help reach specific target
markets.
ID: RE300781_C1230760
A real estate company violates fair housing laws if it selects a station whose primary
audience is not a cross-section of the population. This is not to say that the station should
be avoided, but the marketing program should also include media that reach the general
population.
The cost of airtime is a good indicator of the size of the audience and its value as
consumers. Radio is generally less expensive than commercial TV. Some broadcast
stations offer packaged time slots that include preferred time as well as off hours.
A company could also sponsor an interactive TV or radio program. These are ambitious
projects because someone in the company has to be responsible for planning and hosting
the weekly program. Arranging for and interviewing guests can be fun, but the fun can
wear thin after several months if you creative ideas become scarce. A public relations
consultant who has experience with these projects is an invaluable production adviser.
ID: RE300781_C1230761
Print Media
Print media have been a staple in real estate advertising for years, though that scene is
starting to shift as greater numbers of people turn to the Internet. NAR reports that the
Internet and the newspaper are about equal draws. This suggests that print media must be
evaluated carefully.
Using circulation data and reader profiles, the print selection can be matched with target
markets. Print options include local shopper papers, and daily newspapers. Compare costs
and circulation to your target markets. Publications that are free to the reader have wide
distribution but they are also readily discarded. Investigate the actual results of other
advertisers in these publications.
Display ads are used to promote the company. These can be expensive, so the ad should
be professionally developed. A paid advertisement, appearing as an editorial column, can
provide timely and informative news the consumer can use. A commercial message is
permissible because the company prepares the content. Even classified listing advertising
is also institutional advertising.
ID: RE300781_C1230762
Newsletters
A newsletter is an ideal way to inform with articles about real estate trends, law changes,
and recent court cases.
Be sure of the facts, and if legal interpretations are presented, include a disclaimer.
Editorial comments should be clearly identified. Be careful with opinions that could
alienate some readers.
It takes time to write the newsletter. It may be tempting to reprint an article that appeared
elsewhere, but this could violate copyright laws. Be sure to get the author's and/or
publisher's permission to use a work. Also monitor newsletters the sales associates may
be circulating to be sure they are observing the same rules.
Copyright the newsletter and then put it on the Web site, make it available for e-mailing,
or offer it to a local newspaper or magazine.
ID: RE300781_C1230763
Press Releases
Press releases are informative and can be very beneficial public relations. But what a
company thinks is worthwhile may be seen as an attempt to get unpaid advertising by a
newspaper. The media can also spot a commercial disguised as a press release, and major
media in most markets will not use the story. Newspapers will publish stories they think
will capture readers' attention. Because real estate touches people's lives in many ways,
there are many stories a company can tell that will capture media and public attention.
They may use a story that announces a major company event (a merger or new office
opening) or a public information seminar. A change in company leadership or the
election of a company staff member as president of a professional association is worth
media attention. The press release should be directed to the business editor. Announce the
professional accomplishments of sales associates in local newspapers as well.
ID: RE300781_C1230764
Brochures
The printed brochure has been a staple in the business world. A brochure endures, unlike
the fleeting exposure of broadcast media and gives a more complete message to the
consumer.
A brochure tells the company story, its business philosophy the company's services. A
brochure could be designed to focus on a particular company service, or promote the
company as a good career choice.
Brochures must be visually appealing. Outstanding designs, layouts, and graphics are
available with desktop publishing programs. A great brochure also has to have equally
sharp content. The message has to be well constructed and well written.
ID: RE300781_C1230765
Consumers don't want to read things that are not relevant to them. Everything should be
couched in how it will benefit the consumer. Don't make promises that can't be kept, and
be sure that all content complies with state law.
Try to estimate the usage and prepare copy that does not go out of date too quickly. Once
the initial design and layout are done, minor copy or photo changes are relatively
inexpensive to make (especially if an in-house desktop program is used).
If brochures are being delivered to neighborhoods, be sure distribution does not violate
postal service rules. Personally delivered materials cannot be placed in a mailbox or other
receptacle intended for U.S. Postal Service use.
ID: RE300781_C1230766
High-Tech “Brochures”
Electronic brochures can be delivered by video, CD, email or Web site download. Digital
photographs make the process even easier.
High-tech marketing tools put sizzle on a story. High-impact visuals and/or captivating
audio make storytelling a sensory experience, and make a stronger impression. A 10minute video can carry more punch and say much more than a print brochure.
ID: RE300781_C1230767
Telephone Directories
The real estate section of the Yellow Pages is one of the most used sections. Nearly 50
percent of the customers use this publication to locate a broker. Although a business
listing or display ad in a telephone directory should not be overlooked as a business
generator. Because some directories are not published frequently (and many of us do not
replace old editions), avoid information that could date the listing, particularly in display
ads.
ID: RE300781_C1230768
Outdoor Advertising
Yard signs, billboards; and signs on taxicabs, and buses usually provide long-term
exposure. These tools reinforce the company's signature, but because people must be able
to grasp what the message says in about four seconds, long messages don't work.
ID: RE300781_C1230769
Novelties
There are hundreds of items available for company imprints from combs and sponges to
calendars, balloons, rulers, and bottle caps. These are useful items for recruiting programs
or public seminars or for the sales associates to use as handouts.
ID: RE300781_C1230770
Solicitation
One of the most effective marketing tools is personal contact. While general solicitation
can also be beneficial, the company image can suffer if the solicitors are not careful about
the manner in which such activities are conducted. Any solicitation on behalf of the
company must be done in ways that are not offensive. The calls must comply with the
laws that govern these activities.
Realtors may not disrupt a brokerage relationship that a person has with another Realtor
member. A Realtor should not engage in discussions about future agency relationships
unless invited to do so. General solicitations to a geographic area or group, which may
include individuals who are already clients of other firms, are not unethical. But it is not
good for relationships with other brokers to contact another broker's customer.
ID: RE300781_C1230771
Telephone Consumer Protection Act
The Federal Communications Commission has issued regulations relating to the
Telephone Consumer Protection Act of 1991 governing the use of telephone lines for
commercial solicitation.
The legislation is intended to protect telephone subscribers who do not wish to receive
unsolicited live “cold called,” autodialed, prerecorded, or artificial voice messages and
fax machine solicitations. Contacts with 911, health care facility, physicians, poison
control, and fire or law enforcement emergency lines are prohibited. Also prohibited are
contacts with telephone lines in hospitals, health care facilities, and retirement home
guest or patient rooms as well as paging services, cellular telephones, or any other service
for which the consumer is charged a fee.
ID: RE300781_C1230772
According to the procedures in the regulations, the soliciting company







may not telephone a residence before 8 A.M. or after 9 P.M.;
must identify the business name and telephone number and the name of the person
making the call;
must adopt a written policy and maintain a “do-not-call list” of residences
requesting that they not be called;
must advise and train all personnel and independent contractors engaged in any
aspect of telephone solicitation regarding the “do-not-call list” maintenance and
procedures;
must share the “do-not-call list” with an affiliated entity (one that a consumer
reasonably would expect to be affiliated with the soliciting company based on the
company's name);
may not use an automatic telephone dialing system in such a way that two or more
telephone lines of a multiple-line business are engaged simultaneously; and
may not use a telephone, computer, or other electronic/mechanical fax machine
device to send unsolicited advertisements to another telephone, computer, or
electronic/mechanical receiver.
ID: RE300781_C1230773
Company solicitors can be sued for up to $500 in damages for violations. If the company
has established written policies regarding these procedures, they may be used for
defending alleged violations. Note that these rules apply when the caller has no prior
business relationship with or permission or invitation from the consumer to make contact.
Be sure that the company and sales staff faithfully observe the provisions of recent
federal “do-not-call list” legislation.
ID: RE300781_C1230774
Harassment
Sales associates must use common sense about how aggressively they pursue prospective
customers to avoid alienating them. Unfavorable comments spread faster than the
favorable ones, so if one potential customer has been turned off so have many others.
ID: RE300781_C1230775
Blockbusting/Panic selling
Any discussion of solicitation would be incomplete without a mention of blockbusting or
panic selling. This consists of frequent efforts to list real estate in a neighborhood by
generating fear that people in protected classes are moving into a neighborhood.
Blockbusting includes representations that real estate values are declining because of
these transactions. Blockbusting or panic selling violates the fair housing laws.
ID: RE300781_C1230776
MARKETING PROPERTIES
Marketing listings is a significant part of a company's promotional activities and one that
the sellers expect the company to skillfully perform.
A National Association of REALTORS® survey showed that the most frequent concern
of sellers was getting a sales price high enough to recover what they put into the property.
The marketing plan for listings involves as much common sense as advertising skill. If
this were my property, how would I want to see it showcased? The listed property should
be ready for show, have a realistic listing price, and be marketed well.
ID: RE300781_C1230777
Pictures
The “a picture is worth a thousand words” notion takes on new meaning for a company's
advertising budget. The company should invest in good equipment, and have a talented
photographer.
Digital photography produces outstanding results. Photographs can be attached to emails, uploaded onto the Internet, and compiled on video. They can also be used for
interactive videos and virtual tours on the Internet.
Photos can tell a powerful story for the property owner's benefit. Owners like to see how
their property will be marketed. Pictures also make nice memory gifts at closing or
postcards that can be used for marketing purposes.
ID: RE300781_C1230778
Advertising Copy
Regardless of where the words about the property appear (classified advertising, a Web
site, or a script for a TV promotion), the price the company pays for exposure is
worthwhile only if the ad copy is effective. While the listing sales associate is most
familiar with the property and, therefore, presumed to be the best person to write the ad,
but he or she may need assistance.
Sales associates, not ads, sell properties. But the copy still has to generate attention,
interest, desire, and action (AIDA). The copy must communicate a message about a
property or create a word picture. The three most important parts of an ad are the
neighborhood (location), the size of the property, and the price. Ads that don't include
that information are less likely to be read.
Good ad copy increases the chances that the ad will capture the right buyer. But even
readers who decide that the copy does not describe the property they want to see can be
sufficiently impressed by the company's professional marketing skill.
ID: RE300781_C1230779
Legal Issues
The broker is legally responsible for all advertising, whether the ad is paid for by the
company or the company's sales associate. The broker should monitor both company and
sales associates' Web sites.
The owner's position must be accurately represented. This means publishing only the
price authorized by the owner and not publishing information that could compromise the
owner's negotiating position, such as “owner anxious,” unless authorized by the owner.
ID: RE300781_C1230780
Florida's license law regulates advertising. The ad must include the firm name. If a
licensee wants his or her name in the ad, at least the last name must be shown. When
advertising on the Internet, the company's name must be shown immediately adjacent to
any point of contact information such as a phone number or email link.
While financing terms may be appealing, the representations must comply with the truthin-lending laws. General expressions, such as “owner will finance” or “liberal terms
available,” are permissible. But “only $1,000 down” is requires that the specific loan
terms be included (the amount of the loan, amount of the down payment, amount of the
monthly payments, and length of the term).
ID: RE300781_C1230781
The fair housing laws prohibit making, printing, or publishing any statement that
indicates any preference, limitation, or discrimination based on race, color, religion, sex,
familial status, handicap, or national origin.
For example, language such as whites only, Hispanic neighborhood, Christian home,
adults only, adults preferred or older neighborhood, singles, no children, walking
distance to the synagogue, one block from the Italian club, and good parish schools are
considered discriminatory.
ID: RE300781_C1230782
Classified Advertising
Classified advertising serves dual purposes. It promotes the listing to possible buyers or
tenants and is institutional advertising for the company. Many property owners, however,
see classifieds as their right of entitlement for listing the property and expect the ad to
contribute directly to an eventual sale.
One of the owners' most common criticisms involves the amount of advertising devoted
to their listings. The company's advertising policy needs to be explained to the owner at
the outset. Periodic reports (including copies of ads that were run) should be provided to
the owner.
ID: RE300781_C1230783
Brochures and Fliers
Property brochures and flyers can be very effective marketing tools. Management should
review the content of brochures and fliers to ensure they do not violate any laws.
ID: RE300781_C1230784
Open Houses
Open houses appeal to people's natural curiosity. Some owners don't want open houses,
while others see an open house as just one more way that could possibly produce a buyer.
Some owners sometimes measure the effectiveness of sales associates by their
willingness to conduct open houses.
Sales associates have mixed views on the subject. A survey by Texas A & M University's
Real Estate Center revealed that 59 percent of the responding real estate practitioners
didn't think open houses helped to locate buyers for the properties. Forty-one percent of
the respondents hold open houses to appease sellers.
ID: RE300781_C1230785
Safety of the sales associate
Unfortunately, real estate sales associates have been victims of violent crimes while on
the job. The company should require sales associates to observe some basic personal
safety rules so that their whereabouts are always known, that they have the ability to
summon help (a cellphone or pager), and that they have an escape plan at the property.
Sign-in/sign-out registers, although not foolproof for identifying those with questionable
motives, just might encourage such a person to leave.
ID: RE300781_C1230786
Safety of the Seller
No one should be allowed to freely wander through a property unattended. Sellers should
be told to tuck valuables out of sight, but this does not guarantee that the owner's
belongings are secure. The sales associates must be vigilant observers and be guided by
proper procedures to safely handle suspicious situations.
ID: RE300781_C1230787
Open houses can create liability for the company and the seller because people attend as
invitees of the owner and of the brokerage firm. Sales associates must be alert to
conditions that could jeopardize visitors. Sales associates should inspect properties for
hazards and take precautionary steps (posting signs or colored tape or verbally warning
visitors). ID: RE300781_C1230788
Yard Signs
Yard signs are site-specific ads as well as institutional advertising for the company. Yard
signs come in a variety of styles and design, some also with “take-one” boxes for flyers.
ID: RE300781_C1230789
PROTECTING THE COMPANY'S IMAGE
Companies enhance their community stature by doing things like underwriting charity
fundraisers and youth sports teams to volunteering to fix up or repair someone's home.
Within their own institutions, companies enhance their reputations with their
attentiveness to customer satisfaction. This is a major reason that many business
enterprises have customer service departments. ID: RE300781_C1230790
Brokers should consider the following points when advertising:
Use care when making comparisons between you and the competition.
Be truthful and realistic in your claims.
Unauthorized use of association emblems or designations violate Florida law.
Promote the company's equal opportunity service and display the equal opportunity
slogan and logo in all printed material and publications.
Publications whose audience profile is a population protected by the fair housing laws
can be used only as long as publications that have general circulation are also used. ID:
RE300781_C1230791
CONCLUSION
Marketing is a total program. The most powerful marketing tool a company has is the
people who work for it, from the sales associates to the receptionist. They are the ones
who provide the services and really contribute to the image of a company. ID:
RE300781_C1230792
Reading Comprehension Quiz 12
The statement is FALSE. NAR reports that the Internet and the newspaper are about equal draws. This suggests that print media must
be evaluated carefully.
Due to the recent surge in popularity of the Internet, print media is no longer an effective
way to reach potential customers.
True
Fals
e
ID: RE_31334
The statement is TRUE. Ads that don’t include that information are less likely to be read.
The three most important parts of an ad are the neighborhood (location), the size of the
property, and the price.
True
Fals
e
ID: RE_31337
The statement is FALSE. As a company grows and times change, a new face may appeal
more to the contemporary consumer. To retain the firm’s identity, something
recognizable from the old signature is incorporated in the new.
Existing and recognized companies should not create new signatures because they will
confuse consumers and lose the benefits of name and logo recognition.
True
Fals
e
ID: RE_31330
The statement is FALSE. As a company grows and times change, a new face may appeal more to the contemporary consumer. To
retain the firm’s identity, something recognizable from the old signature is incorporated in the new.
Existing and recognized companies should not create new signatures because they will
confuse consumers and lose the benefits of name and logo recognition.
True
Fals
e
ID: RE_31330
The statement is TRUE. Some media work best for institutional ads (promoting the company) and others for promoting services or
listings. Some reach broad audiences and others target more specific ones.
The goal of purpose-price-and-population is to pick the media that reaches the desired
population for the best price.
True
Fals
e
ID: RE_31331
The statement is FALSE. A real estate company violates fair housing laws if it selects a station whose primary audience is not a crosssection of the population. This is not to say that the station should be avoided, but the marketing program should also include media
that reach the general population.
A real estate company may select any station on which it wishes to broadcast its ads,
regardless of who the primary audience of the station is.
True
Fals
e
ID: RE_31333
The statement is TRUE. Blockbusting includes representations that real estate values are declining because of these transactions.
Blockbusting or panic selling violates the fair housing laws.
Blockbusting consists of frequent efforts to list real estate in a neighborhood by
generating fear that people in protected classes are moving into a neighborhood.
True
Fals
e
ID: RE_31336
The statement is FALSE. The owner’s position must be accurately represented. This means publishing only the price authorized by the
owner and not publishing information that could compromise the owner’s negotiating position, such as “owner anxious,” unless
authorized by the owner.
Sales associates are more knowledgeable about effective real estate ads than their
customers, so they may print any information that would help sell a property without
consulting the owner.
True
Fals
e
ID: RE_31338
The statement is FALSE. The legislation is intended to protect telephone subscribers who do not wish to receive unsolicited live “cold
called,” autodialed, prerecorded, or artificial voice messages and fax machine solicitations. The company must share the “do-not-call
list” with an affiliated entity.
Under the recently issued regulations relating to the Telephone Consumer Protection Act
of 1991, a company is not obligated to share its “do-not-call list” with an affiliated entity
(one that a consumer reasonably would expect to be affiliated with the soliciting
company based on the company’s name).
True
Fals
e
ID: RE_31335
The statement is TRUE. Further, because visitors have no brand loyalty at this point, the ease with which they can use and navigate
the site is the key to telling their computers to bookmark it as a “favorite.”
One of the most effective ways of attracting visitors to a company’s site is to feature
listing information.
True
Fals
e
ID: RE_31332
The statement is TRUE. Companies enhance their community stature by doing these things. Within their own institutions, companies
enhance their reputations with their attentiveness to customer satisfaction. This is a major reason that many business enterprises have
customer service departments.
It may be worthwhile for a company to underwrite charity fundraisers and youth sports
teams or volunteer to fix up or repair someone’s home.
True
Fals
e
ID: RE_31339
Unit Exam 12
The answer is BASED ON ITS AUDIENCE PROFILE. The real estate company should select radio and tele
audiences match the company’s target market(s).
One of the best ways to ensure that your company’s message on TV will reach the desired audience is to cho
whose audience is a cross-section of the general
population.
recommended by your public relations counsel.
with the most expensive time slots.
based on its audience profile.
ID: RE_31634
The answer is INTERNET WEB SITES. Apparently more than 50 percent of buyers are researching propert
Internet several weeks before contacting a real estate licensee.
Which of the following media is drawing the attention of more buyers than ever before?
Television ads
Newspaper pull-out
sections
Internet Web sites
Neighborhood newsletters
ID: RE_31635
The answer is VIOLATES THE FAIR HOUSING LAWS. The ad violates fair housing laws in two ways: “i
the synagogue.”
An ad that says “a two bedroom house that is ideal for adults, in a mature neighborhood, near the synagogue
it
violates the fair housing laws.
is very descriptive about the house and the
neighborhood.
doesn’t include a price.
doesn’t use abbreviations that would be cheaper.
ID: RE_31640
The answer is WORDS, GRAPHICS, AND COLORS THAT GIVE IT IDENTITY. The company’s signatur
recognition consists of words, colors, and graphics that stick in people’s minds.
The company’s signature consists of
words, graphics, and colors that give it
identity.
the sales associates who work for it.
the broker’s reputation.
the advertising tools it uses.
ID: RE_31631
The answer is NAME REGISTERED IN THE STATE FOR THE BUSINIESS. A fictitious business name (
in the state and approved before it can be used.
What is a fictitious business name?
Broker’s personal legal name
Company and the franchise name
Name registered in the state for the
business
Illegal name for the business
ID: RE_31632
The answer is THE ANTITRUST LAWS. Antitrust laws do not affect solicitation issues. Any solicitation on
must be done in ways that are not offensive and must comply with the “Do Not Call” lists, fair housing laws
Personal solicitation must be conducted in ways that are not offensive or illegal. All of the following laws af
the fair housing laws.
the Telephone Consumer Protection
Act.
local ordinances.
the antitrust laws.
ID: RE_31638
The answer is PROVIDE USEFUL INFORMATION. A newsletter is most useful to consumers when it prov
information.
From the public’s point of view, a newsletter is an ideal vehicle for you to
provide useful
information.
express your personal
views.
promote your company.
distribute coupons.
ID: RE_31636
The answer is BROKER IN CHARGE OF THE OFFICE. Ultimately, the responsibility for the accuracy and
the broker’s regardless of who paid for it.
Who is ultimately responsible for the accuracy and legality of any company advertising—in print or on the In
Owner of the listing
Real estate licensee who wrote the
ad
Broker in charge of the office
Whoever paid for the ad
ID: RE_31639
The answer is PROVIDE INFORMATION THAT IS USEFUL FOR THE PUBLIC. A press release must pr
useful for the public before the media will consider publishing it.
When preparing a press release, in order to maximize its usefulness by the media, the press release should
editorialize and present your personal
views.
present a commercial for your company.
include the company’s signature.
provide information that is useful for the
public.
ID: RE_31637
The answer is MARKETING PLAN. A marketing plan is similar to a business plan in that it should identify
using the signature to sell the brand and the company’s messages.
An integrated strategy for using advertising tools is known as a
business plan.
marketing plan.
financial plan.
public relations
plan.
ID: RE_31633
(13)The Practical and Legal Realities of Staffing
LEARNING OBJECTIVES
After completing this unit, the student should be able to



describe the most likely results when a company pays much lower rates or much
higher rates of commissions to sales associates;
list at least five employment interview discussions that could result in violations
of the law; and
calculate the desk cost for a brokerage office. ID: RE300781_C1330814
INTRODUCTION
Whom do you need to hire?
What qualifications do they need? And what do they get paid?
Building a professional sales force is a broker's most important staffing activity, but the
broker must also hire administrative, secretarial, and clerical employees. The company
should employ the best people it can afford. ID: RE300781_C1330815
PERSONNEL POSITIONS
Clerical and Administrative Support Positions
Receptionists, secretaries, transaction coordinators, computer-support personnel, and
bookkeepers provide support for the sales staff.
The receptionist makes the first impression for the company. Secretaries work for the
broker, and the broker should decide how much work, if any, the secretary should do for
individual sales associates.
Transaction coordinators handle all closing details from the time a sales contract is
signed. This person relieves sales associates from those tasks and assures that
transactions will close smoothly.
Bookkeepers handle the company's financial data, and they may also be responsible for
other clerical functions. ID: RE300781_C1330816
Unlicensed Personal Assistants
Unlicensed personal assistants handle nonselling tasks for the sales associates.
Management has to consider some of the following questions about these assistants.





Does the assistant work for the sales associate or the company?
What are the specific tasks an assistant will perform?
Who pays the assistant, and who is responsible for withholding income tax and
Social Security and paying statutory benefits such as workers' compensation and
unemployment compensation for an employee?
Who is responsible if the assistant violates the law?
Who is liable if the assistant is injured at the company's workplace or while
performing duties off-site? ID: RE300781_C1330817
The answers to these questions will guide company policy concerning personal assistants.
Even if the sales associate employs the personal assistant, the broker may have legal
liability for the assistant's conduct. The company needs to determine how a sales
associate's employee is permitted to use office space, supplies, and equipment. The
company must also set policies concerning what is permissible activity of an assistant.
The Florida Real Estate Commission has established a list of activities that an unlicensed
personal assistant can perform. (See the next page). ID: RE300781_C1330818
ID: RE300781_C1330820
Licensed personal assistants can do much more, including all selling activities permitted
for any sales associate. While the employing sales associate may pay the assistant for
administrative work, only the broker is permitted to pay commissions to the assistant.
The broker is legally liable for the activities of the assistant, and should monitor the
assistant's selling activities even though a sales associate employs the assistant. ID:
RE300781_C1330821
Managerial Positions
In large companies, a separate manager may be used in the sales, training, advertising,
recruiting, and accounting sections. Sales managers are typically employees rather than
independent contractors. ID: RE300781_C1330822
Sales Force
Recruiting a productive sales staff involves several basic employment decisions:




How many sales associates does the company need?
Are they to be full-time or part-time personnel?
Are the sales associates experienced or newly licensed?
Are they employees or independent contractors? ID: RE300781_C1330823
The Size of a sales force
Some companies recruit as many licensees as possible, believing the larger the staff gets,
the greater the market share the company will get. Other brokers select a small, highly
skilled staff because it will be more professional, cost-efficient, and more easily
supervised.
The broker must calculate what a sales associate costs the company, both in direct
compensation and in costs of managerial time, training, telephone, and advertising. A
new associate, at best, will be at break-even for some time. ID: RE300781_C1330824
The full-time versus part-time decision
Many companies refer to their independent contractors as being full-time or part-time.
This is not an employment issue but a production issue. A company can establish its own
definitions, perhaps that a full-time sales associate is one who has no other employment
or outside commitments. But these definitions don't accommodate the sales associates
who are good producers but have other careers, or the ones who fall within the full-time
definition, but produce little.
Many brokers believe full-time people are more professional, knowledgeable, and
committed and that part-time people are less so. However, some companies view parttime people as a unique asset because of their network of contacts in business and the
community.
Sales associates may need their current jobs to survive financially, for a period of time
after they join the firm. Most managers feel that it's better to jump in with both feet, but
this could discourage an otherwise suitable sales associate. ID: RE300781_C1330826
Experienced versus newly licensed sales force
Experienced sales associates have a customer base and the skills to produce income
immediately, but often want higher commissions and other amenities in the workplace.
ID: RE300781_C1330827
Experienced versus newly licensed sales force
New licensees don't begin producing for several months, and require indoctrination,
training, and supervision to get them started. It may take several years for them to
become established and up to five years to be a top producer. The figure below provides
some interesting insight into gross earnings, relative to length of time in the business.
Click here for another interesting graphic related to this topic.
ID: RE300781_C1330829
There are advantages to employing new licensees:


They've not acquired any habits in the real estate business;
It's relatively easy to train a newly licensed sales associate in the company's way
of doing business, which is more difficult for experienced people.
Firms that hire experienced associates sometimes trade personnel problems with the other
firms. Not every sales associate is suitable. The one who blames the company for lack of
success is not likely to do any better in another company. But sometimes a different work
environment, management style, and business philosophy change old habits.
Regardless of how attractive and competitive, the company is not likely to attract top
producers who are content in their current position. ID: RE300781_C1330830
Employee versus independent contractor (IC)
In the corporate business model, where the sales associates are employees, the company
assigns territories and quotas. Compensation is salary, commission, and/or bonus. The
company withholds taxes and pays workers' compensation premiums. Employees also
receive other benefits and are reimbursed travel, entertainment, communications, and
business expenses. The employee model gives the company more control to specific tasks
and hold salespersons accountable. The presumed payback to the company is higher
production and better quality service.
Sales associates who work as independent contractors, on the other hand, earn
commissions according to their contract and are responsible for all of his or her business
expenses, which often include sharing some of the company's expenses. They can work
whenever and how they choose, within the requirements of license law. The broker may
require certain levels of production. The company does not pay payroll taxes, worker's
compensation insurance or other benefits.
The IC model is common in the real estate industry, originally because of the cost benefit
to the company and the notion that the sales staff would work harder as independent
business people. ID: RE300781_C1330831
A way out of the full-time/part-time dilemma
Florida law prohibits the payment of a referral fee to anyone who does not have a real
estate license. Some real estate companies have subsidiary companies called license-inreferral organizations (LIFROs). These are licensed brokerage firms that hire licensed
sales associates, but who cannot engage in any sales activities. The sales associate usually
pays an annual fee. They provide referrals that the LIFRO then refers to the affiliated
brokerage firm. LIFROs are a way to generate extra referral business. ID:
RE300781_C1330832
PERSONNEL POSITIONS
Job Qualifications
Before hiring administrative employees, managers should develop job descriptions and
the qualifications for the position. Managers can use a job analysis, which is a process of
analyzing all of the activities the job entails and determining what a person needs to
know or to be able to do. A job analysis serves as a benchmark to match work and
qualifications, a strictly job-performance-based exercise.
Managers who study whom the company needs to hire can more efficiently screen
candidates. Generally, the first cut is based on the minimum qualifications. ID:
RE300781_C1330833
COMPENSATION MANAGEMENT
Pay is a significant factor in a company's ability to recruit, motivate, and retain personnel.
People's perception that the company's pay is inappropriate can seriously compromise a
company's staffing efforts. People should be fairly compensated for their efforts and must
also be able to earn a decent living, and the company needs affordable compensation to
stay in business. These are not necessarily opposing desires, but they are certainly ones
that require some careful planning to satisfy.
Compensation plans reflect a company's philosophy about pay. The entitlement
philosophy says that pay should increase with length of service to the company; the
performance philosophy says that pay is solely a function of a person's outcomes or
performance ID: RE300781_C133083
The point of a good compensation plan is to reward people for their value to the
company. Many employees are worth more than the company can afford to pay, but as
long as people feel they are being fairly rewarded and have a good working environment,
they are happy. Most companies use a traditional compensation model to convert value to
pay.
The process involves
1. analyzing the importance of job positions in the company, the level of
responsibility, and the sophistication of expertise.
2. analyzing the pay structures of other similar organizations for similar jobs.
3. developing a pay structure for the organization, using job evaluation and survey
data to classify jobs and ranges of pay.
4. developing pay structures for individual positions, including a process to use
performance appraisals to evaluate individuals.
5. institutionalizing the company's compensation program with communication,
implementation, and monitoring.
The goal of this process is to align pay with the work people do, and align the company's
pay with the marketplace. ID: RE300781_C1330835
Pay Plans
Wages are hourly rates of pay; salaries are characterized as annual rates of compensation;
and variable pay plans are combinations of base salary, and bonuses.
Pay practices need to ensure that equal work gets equal pay in compliance with
employment laws. Pay attention to provisions regarding the employment of minors,
minimum wage laws, and rules for overtime pay. Generally, full-time hourly workers are
considered to work 40-hours per week. Additional hours are considered overtime and
must be compensated at one-and-a-half times the hourly rate for each hour of overtime.
Under the FLSA salaried workers may or may not fall within minimum wage and
overtime requirements. Generally salaried executives, managers, and administrative and
outside sales personnel are exempt. In other words, work is performed for the stated
salary regardless of the number of hours or workdays devoted to the job. Nonexempt
salaried workers, like clerical personnel and laborers, are not exempt from overtime and
must be compensated accordingly.
Variable pay plans link compensation with performance. These plans are suitable for
sales associates and executives, managers, or other professionals where individual
performance or production can be measured.
The theory behind variable pay is that people are motivated by money, which means that
bonuses, overrides, and higher commission splits are suitable incentives. Companies can
also demonstrate worth with benefits like expense accounts, profit sharing or stockpurchasing programs, and pension plans. ID: RE300781_C1330836
Equity
Equity is the perceived fairness of what a person gets paid in relation to what a person
does. People measure fairness in comparison with what others in the organization do and
get paid (internal equity) and what people in other companies do and get paid (external
equity). This is a function of perception as well as fact.
Sales associates can be expected to shop for the best deal, and if a company can't provide
that deal, in terms of money and work environment, then the company is not in a strong
position to recruit or retain personnel. Industry surveys, particularly those that are
separated by region and firm size, provide a starting point for evaluating market pay. ID:
RE300781_C1330837
A company can fix its pay levels to fall at the bottom, middle, or highest range in
comparison with other companies.



The bottom range says that 75 percent of the companies pay more. A company
may choose this strategy when it is short of funds or the labor market is flush, but
the likelihood is that the company will experience greater turnover.
The highest range says that the company is near the top 25 percent compared with
other companies. This is an aggressive strategy that is very attractive for
recruiting and retaining top personnel and increasing productivity. But the
company must be very selective in its hiring and vigilant about monitoring
personnel performance so as to gain maximum financial benefit.
The middle range pegs the company in the mid-market, with 50 percent of the
companies paying more and 50 percent paying less. This is a moderate strategy
that has neither enormous competitive advantage nor disadvantage, but it keeps
the company in the running and is the strategy many companies use, particularly
because it is more affordable than the highest sector.
Internal equity means that all people who work in the same class of jobs are compensated
at the same pay scale. Managerial positions are especially vulnerable to the equity
comparison in this respect. ID: RE300781_C1330838
Justice
Justice arises from the perception that people are being treated fairly, that the rules are
being equally applied to each person in the same class of jobs.
Pay is usually adjusted annually, though a new employee's pay may be reviewed after an
initial three- or six-month period. Performance reviews are the typically stated platform
for assessing personnel. Company procedures need to state how performance will be
evaluated so people know what is expected of them ahead of time.
Management should not favor some personnel over others with similar experience or
production, or bend the rules for recruiting purposes. While the favored party may be
happy, the rest of the company's workforce will become resentful. Furthermore, the
company is ripe for accusations that equal employment laws have been violated. ID:
RE300781_C1330839
Sales Compensation
The rationale behind the real estate industry's traditional straight-commission model is
the expectation that sales associates will be motivated to work harder because they can
make more money. A graduated commission split gives a larger share of the gross
commission to the sales associate. This is clearly performance-based, but it works only if
money is the principal motivator. That's not necessarily the case. Often, workplace
conditions and benefits like health care insurance, retirement, or profit-sharing plans
mean more. Unless the sales associates are employees, fringe benefits must be structured
meticulously to preserve the IC status. ID: RE300781_C1330840
Managerial Compensation
Structuring appropriate compensation for supervisory and managerial personnel, senior
management, and even executives is more challenging. Their activities contribute
indirectly to the productivity of the organization. It is sometimes harder to quantify the
relationship between managerial effectiveness and company performance.
The way companies settle this quandary is by holding management accountable for
certain performance objectives within the company and compensating based on the
results. The higher the position, the greater the responsibility, the higher the pay.
Companies pay managers for using good judgment as they make decisions and administer
the functions for which they are accountable. The expectation is that good managers'
value to the company is worth the pay.
A flaw in compensation plans for managers in lower levels of the organization is that
they have less or little control over all the variables that affect the performance of the
department they supervise. ID: RE300781_C1330841
A sales office manager depends on the abilities of others and has no direct control over
revenue, but yet is made accountable for the office's performance. Real estate sales
managers look at equity and justice in pay the same way any other worker does, so pay
policies for sales managers must be devised following the process described earlier.
These are best designed as employee positions because of the level of control and
accountability that accompanies these supervisory roles.
Sales managers can be paid straight salary or a variable pay like a base salary plus an
override. The debate over full-time managers and selling managers arises again when it
comes to devising pay plans. There may be some financial realities that require a
manager to also sell, but this should not reduce fair compensation for the supervisory job
the company expects the manager to do. ID: RE300781_C1330842
LEGALITIES OF EMPLOYMENT
The way companies recruit, select and hire, promote, and terminate people and the social
and physical environment in which they work are all subject to federal and state law. The
laws don't distinguish between ICs and employees. ID: RE300781_C1330843
Equal Employment Practices
A number of employment laws are designed to protect against discrimination in the
workplace. Among these are Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1991, the Age Discrimination in Employment Act, and the Americans with
Disabilities Act (ADA). In addition, there is the Equal Pay Act of 1963, the Pregnancy
Discrimination Act of 1978, and the Family and Medical Leave Act of 1993. Most states
and some cities or municipalities have their own employment laws as well, some of
which are similar to and others more restrictive than federal law.
The best advice is not to devise any employment policy or procedure until all of the laws
are investigated. The purpose of equal employment laws is to prevent the employer from
basing employment decisions on factors that are unrelated to the actual performance of a
job. Every human resource management activity must scrupulously guard against any
conduct that treats people differently because of their race, color, religion, sex or gender,
national origin, age, marital status, or disability.
The selection and hiring procedures, training, advancement, pay, and termination of
employment are all potential areas for discrimination lawsuits. Like complaints of
discrimination in housing, allegations of employment discrimination are time-consuming
and costly. The public relations fallout in an industry that supports equal housing
opportunities can also be damaging. ID: RE300781_C1330844
A manager needs information to manage personnel, but there is certain information that is
irrelevant and should not in any way be requested in application forms, job interviews, or
personnel records.
Avoid all inquiries that discriminate and discussions that could be construed to tread into
those areas, such as







citizenship and origin of name or maiden name;
physical abilities, or limitations or disabilities;
education and experience that are not a requirement for the job (arbitrary
qualifications could effectively be discriminatory);
family matters (spouse, marriage or pending prospect, and children or pregnancy
can lead to gender discrimination; ages of children can reveal worker's age);
feelings about working with people (either in the workplace or consumers) who
are older/younger, or another gender, race, nationality, etc.;
availability to work on Saturday or Sunday (can be a religious issue); and
childhood background (place where grew up and the like; can reveal nationality,
race, etc.). ID: RE300781_C1330845
Antiharassment Policies
Cultural diversity in the workplace plus growing intolerance of certain gender-related
conduct creates an environment in which management must manage not only
uncomfortable and offensive but also illegal behavior. In addition to the equal
employment laws previously referenced, there are at least 11 states and more than 100
municipalities that have laws prohibiting discrimination based on sexual orientation.
Management should publish an antiharassment policy that clearly defines behavior that is
not tolerated and establish a nonthreatening, open-door policy so that an offended person
can bring the matter to management's attention without fear of reprisal. A company is
defenseless without good records in the event of future misconduct. Typically, companies
adopt procedures for warnings, followed by periods of mandatory leave and then
dismissal for repeat offenders. ID: RE300781_C1330846
Safety in the Workplace
The company has valuable human resources that need to be protected. People also
deserve as healthful working conditions as possible. The Occupational Safety and Health
Act of 1970 says so, too. The issues that the law covers are varied, including ergonomics,
lighting, and equipment layout. This law also addresses exposure to hazardous
substances, substance abuse, and workplace air quality. The practical matter is that the
more pleasant the working conditions, the better people perform for the company. ID:
RE300781_C1330847
CONCLUSION
The foundation of the staffing function is the company's personnel policies and
procedures. These guide actions in human resource management. The discussions relating
to personnel positions, requirements for jobs, compensation management, and the legal
issues that surround all of these topics provide a platform on which to further develop
lawful and practical policies and procedures for recruiting, selecting, hiring, and
supervising personnel. ID: RE300781_C1330848
Reading Comprehension Quiz 13
The statement is FALSE. New licensees don’t begin producing for several months, and require indoctrination, training, and
supervision to get them started. It may take several years for them to become established and up to five years to be a top producer.
New licensees are often very productive and generate significant profits right away.
True
Fals
e
ID: RE_31342
The statement is FALSE. The entitlement philosophy says that pay should increase with length of service to the company; the
performance philosophy says that pay is solely a function of a person’s outcomes or performance.
The entitlement philosophy of compensation says that pay is solely a function of a
person’s outcomes or performance.
True
Fals
e
ID: RE_31344
The statement is TRUE. People measure fairness in comparison with what others in the organization do and get paid (internal equity)
and what people in other companies do and get paid (external equity).
Equity is the perceived fairness of what a person gets paid in relation to what a person
does.
True
Fals
e
ID: RE_31345
The statement is FALSE. In addition to national equal employment laws, there are at least 11 states and more than 100 municipalities
that have laws prohibiting discrimination based on sexual orientation
There are no laws prohibiting discrimination based on sexual orientation.
True
Fals
e
ID: RE_31349
The statement is FALSE. Even if a sales associate rather than the company employs a personal assistant, the company needs to set
policies concerning what is permissible activity of an assistant.
If a sales associate employs a personal assistant, the broker does not have legal liability
for the assistant’s conduct.
True
Fals
e
ID: RE_31340
The statement is FALSE. While the favored party may be happy, the rest of the company’s workforce will become resentful.
Furthermore, the company is ripe for accusations that equal employment laws have been violated.
If special circumstances arise, sometimes management may need to favor some personnel
over others with similar experience or production, or bend the rules for recruiting
purposes.
True
Fals
e
ID: RE_31346
The statement is TRUE. However, some companies view part-time people as a unique asset because of their network of contacts in
business and the community.
Many brokers believe full-time people are more professional, knowledgeable, and
committed and that part-time people are less so.
True
Fals
e
ID: RE_31341
The statement is TRUE. Because managers’ activities contribute indirectly to the productivity of the organization, it is sometimes
harder to quantify the relationship between managerial effectiveness and company performance. The way companies settle this
quandary is by holding management accountable for certain performance objectives within the company and compensating based on
the results.
A flaw in compensation plans for managers in lower levels of the organization is that
they have less or little control over all the variables that affect the performance of the
department they supervise.
True
Fals
e
ID: RE_31347
The statement is TRUE. Every human resource management activity must scrupulously guard against any conduct that treats people
differently because of their race, color, religion, sex or gender, national origin, age, marital status, or disability.
The purpose of equal employment laws is to prevent the employer from basing
employment decisions on factors that are unrelated to the actual performance of a job.
True
Fals
e
ID: RE_31348
The statement is FALSE. Sales associates who work as independent contractors earn commissions according to their contracts. The
company does not pay payroll taxes, worker’s compensation insurance or other benefits.
The company pays payroll taxes, worker’s compensation insurance or other benefits for
both employees and independent contractors.
True
Fals
e
ID: RE_31343
Unit Exam 13
The answer is GAINING GREATER CONTROL OVER SALES ACTIVITIES. From a company’s point of view, the employee
model for the sales staff has a number of advantages, most importantly giving the company control over production and better quality
service.
One of the strongest reasons for brokers to consider the employee model when hiring
sales associates is
gaining greater control over sales activities.
it is easier to pay withholding taxes and social security.
reaping the majority of income benefit.
the broker is less likely to be charged with wage
discrimination.
ID: RE_31648
The answer is EXPECT THAT THEY COMPLY WITH LAWS THAT AFFECT YOUR BUSINESS. When supervising independent
contractors, you can expect that they comply with laws that affect your business.
When supervising independent contractors, you can
require that they attend sales meetings.
determine their vacation schedules.
expect that they comply with laws that affect your
business.
restrict the territory in which they can list properties.
ID: RE_31645
The answer is HIRING AND EMPLOYEMNT DECISIONS FOR BOTH EMPLOYEES AND INDEPENDENT CONTRACTORS.
The equal employment laws apply to hiring and employment decisions for both employees and independent contractors.
The equal employment laws apply to
employees and not independent contractors.
employers who hire over 50 employees.
hiring rather than recruiting practices.
hiring and employment decisions for both employees and independent
contractors.
ID: RE_31643
The answer is TRANSACTION COORDINATORS. Companies hire transaction coordinators to take the burden of tracking
transactions from the sales associates in order to provide the company with some assurance that transactions will proceed smoothly
and within the law to settlement.
Some companies are dealing with the risks involved in getting to closing by hiring
personal assistants.
extra secretaries.
transaction coordinators.
risk management
consultants.
The answer is REFERENCES. When designing employment applications and interview questions, it is appropriate to ask about
references, but not availability to work on weekends (could be a religious issue) or family matters.
When designing employment applications and interview questions, it is appropriate to ask
about
references.
marital status.
number of children.
availability to work on
weekends.
ID: RE_31644
(14)Recruiting, Selecting, and Hiring the Staff
LEARNING OBJECTIVES
After completing this unit, the student should be able to


define the employment term called prescreening; and
list the steps in an employment interview. ID: RE300781_C1430865
NTRODUCTION
How do you select the best personnel for the company?
What can you do to recruit sales associates?
It takes time and money to recruit, select, and hire good personnel. More is invested in
training, supervision, pay, and benefits, so the broker needs to pick the right people and
keep them.
Management cannot invest wisely in new personnel until it knows why people leave. The
company may need to get its house in order first, rather than open the revolving door to
new hires again, who will also leave.
The object is to be the employer of choice. Competitive compensation and referrals and
marketing budgets for sales associates are only part of the attraction. People want a
positive work environment, with career development opportunities and strong,
accountable leadership in the managerial ranks. People want to be associated with a wellrun company that has a respected brand name, not only with consumers but also in the
company's industry. ID: RE300781_C1430866
EMPLOYMENT PROCESS
Each position needs to be filled by a methodical process that complies with the law.
Regardless of the position, a series of steps must be taken to help management make
intelligent hiring decisions. Some of those steps are more involved when the job position
involves greater responsibility, specialized skills, and the core of a service business, the
sales force.
The employment process consists of recruiting, prescreening, formal interview and
selection, and hiring.
Each step is a filtering process, with the object being to narrow the field of contenders
and identify the most suitable candidate for the position. For a description of each step,
see the figure below.
ID: RE300781_C1430868
Recruiting
Recruiting is the process of assembling a pool of candidates or applicants for
consideration. The company's business reputation and its workplace environment play a
vital role in attracting the best people to that pool.
Staff members within the company may know someone who would be suitable, or may
wish to apply for a promotion to the new position. A managerial position may be just the
opportunity a real estate sales associate has been waiting for.
Some companies post career opportunities on their Web sites. An employment or
temporary placement agency may be used, or the company can use classified ads.
Advertising should include a brief description of the key credentials the company is
looking for. ID: RE300781_C1430869
Prescreening
The company must establish a prescreening process to find out whether an applicant
meets the minimum requirements for the position. Prescreening can be done with an
application form, a telephone conversation or a visit.
An application gathers basic personal information, former employers, license
information, and references. A preliminary interview or conversation helps the broker
learn more about the applicant. Although the setting is informal, the broker must stay
focused on topics of conversation that are clearly job-related, avoiding discussion that
may violate employment laws.
If every candidate is expected to complete an application form or converse personally
with someone in the company, then that's the rule, and all applicants must have an equal
opportunity to be considered before the first cut is made. ID: RE300781_C1430870
Formal Interviews
The formal interview is the most important information-gathering part of the process.
Formal interviews are not the time to sell the company to the candidate. It's time to get
information to determine how the candidate might perform on the job. For an interview to
be productive, the interviewer needs a plan.
A formal interview is also the forum for the candidate to learn what the job involves. The
company needs to present a realistic description of the job, and should not to send any
message that could be construed to be a commitment. ID: RE300781_C1430871
Prepare the Interview
After reviewing the applications and notes from preliminary interviews, the broker should
prepare a script covering topics for further discussion. A script keeps the interview on
job-related subjects, and provides a uniform basis for evaluating each one. It also helps
the interviewer run a professional interview (which impresses candidates) and
concentrate on responses instead of thinking about what to ask next. The script also keeps
the discussion within equal employment laws. ID: RE300781_C1430872
The interview generally consists of the following elements:



Introduction—The icebreaker time to put the candidate at ease. Then set the stage
for what follows by saying, “Certainly it's in your interest as well as ours to get to
know one another. First, I'd like to get information about you, then I'll be happy to
answer any questions you have about the company and the job position.” Then
tackle the list of scripted topics that relate to the items below.
Work experience—This is a time to explore: “What have you done best? What
were your major accomplishments? In what ways are you most effective with
people? Why have you changed jobs (if this is applicable)? What are you looking
for in a career, and what are your goals and aspirations?” These reveal skill and
competence, motivation, attitude about work and employers, interpersonal skills,
initiative, and problem-solving ability.
Education—Explore: “What were your special accomplishments? How did you
choose the course of study? What would you like to study next?” These questions


reveal professional interests, and potential for growth and development
Job-related skills and professional assets—The time to explain the job and for the
candidate to sell himself or herself with answers to, “What do you think are your
major assets or best qualities for the job? Why are you a good person for this
company to hire? What qualities do you want to develop further? What training or
additional experience do you need or would you like for the job?” These reveal
not only a candidate's job skills but also professional development issues.
Closing—At the conclusion of the interview, the interviewer summarizes the
discussion and says, “I've enjoyed talking to you and you've given me a lot of
valuable information to help make a decision. Before you leave, are there any
questions about the job, or our company?” This indicates what the interviewer has
learned and because candidates are narrowing the field as well, this gives them an
opportunity to ask any questions about issues that have not been explored. ID:
RE300781_C1430873
Conducting Interviews
Information is best gathered in a structured interview when people feel at ease and can be
candid. The use of first names, comfortable seating, and a private setting that is free of
interruptions create an atmosphere for open conversation. ID: RE300781_C1430874
Work through the script in a conversational way, and keep the following in mind:






Don't talk too much and ask open-ended questions to encourage the candidate to
talk.
Don't give a sales pitch on the company
Play down any unfavorable information. Don't disagree, or the applicant may
retreat and say what he or she thinks the interviewer wants to hear.
Don't telegraph the desired answer with a statement such as “We are looking for
highly motivated people. How would you describe yourself?”
Watch, listen, and take notes. The interviewer should be able to learn what is
needed in about 45 minutes.
Avoid questions or topics of conversation that could violate employment laws. ID:
RE300781_C1430875
Tell the applicant what happens next before ending the interview. “Thank you. We'll
contact you in (a time period) with our decision” will suffice. If appropriate, tell the
candidate that people will be invited for second interviews. The formal interview is the
last information-gathering step and usually does not end with a job offer. There may be
circumstances, however, when such an offer is appropriate. ID: RE300781_C1430876
Selection
The purpose of the process is to select the best match for the job and the organization.
Selection should not be a rush-to-judgment exercise, but the final filtering step of the
employment process.
Those criteria can be specific knowledge, skills and abilities related to the job analysis,
and more generalized characteristics that are predictors of job performance. The company
can use industry profiles for certain jobs, such as the attributes of successful real estate
sales associate. ID: RE300781_C1430877
The point is that criteria related to the job and the organization must be established and
become the platform for evaluating each candidate. One way to evaluate is with a rating
system in which each candidate is scored, perhaps on a scale of five to one (one being
least favorable).
Try to estimate the kind of training and supervision the person would need. A bad
selection will not be fixed with training and will make the job of supervising all the more
difficult. It's far better to be very selective than to try to press-fit a new hire into a job. ID:
RE300781_C1430878
Some companies use knowledge- and skill-oriented tests (perhaps computer skills) or
personality tests. The assessment must be job-skill related or verified as a reliable
predictor of performance so as not to be construed as an unfair or unlawful way to
eliminate job applicants.
Companies should check references on the application form. If the application does not
include the most recent employer, this is an issue to ask the candidate about. ID:
RE300781_C1430879
Hiring
The company's compensation plan and work rules should be described before he or she
accepts employment. If there is a three- or six-month probationary period, that should be
clarified as well. Each new hire should be given (and sign a receipt for) copies of the
employee handbook and the company's procedural manual.
For the most part, the actual hiring process is an administrative and paperwork exercise.
A variety of forms, including W-4 forms for employees or W-9 forms for others. If the
new hire is a sales associate, the appropriate license forms must also be completed. ID:
RE300781_C1430880
The process assembles a personnel file, which includes a variety of other information the
company attorney may recommend, along with the original employment application.
Because the hiring decision has already been made, certain personal information can be
gathered, though it becomes part of a confidential file and cannot be used in
management's later decision making. Examples include closest family members for
contact in an emergency, a copy of a driver's license, and citizenship information so that
the company has proof the new hire is authorized to work in the United States.
If a real estate sales associate is an independent contractor, the IC and the company must
enter into an agreement that specifically proclaims that this is the nature of the
relationship. Federal tax laws require that the sales associate must be a properly licensed
practitioner, that the gross income must be based on production rather than on the number
of hours worked, and that the work must be done pursuant to a written agreement.
Because the IRS scrutinizes claims of independent contractor status, it is essential to meet
at least these three requirements. ID: RE300781_C1430881
RECRUITING SALES ASSOCIATES
Brokerage companies all compete to recruit licensed sales associates. A company is
recruiting, and the sales associates are selecting. The company reputation is very
important when recruiting sales associates.
Associates want a workplace with maximum support. They want good clerical and tech
support and appealing marketing and commission programs, an energizing environment.
The responsibility for creating that environment falls squarely on the shoulders of the
managers. ID: RE300781_C1430882
Even though recruiting sales associates is highly competitive, a company must qualify the
people it selects. Recruiting sales associates is like prospecting for customers, meaning
that the sales manager will make many contacts before making a contract, or in this case,
selecting the right person to hire—the “hire quality, not quota” philosophy.
Management should look at the annual rate of attrition to determine the number of people
that have to be hired each year just to maintain the sales staff.
Some managers see recruiting as something to do when they have time. Or they embark
on an aggressive campaign only after they lose a number of sales associates. A company's
cash flow and profitability cannot withstand long periods of low production between
departure and rehire. Recruiting must be an ongoing activity. ID: RE300781_C1430883
Recruiting Experienced Talent
The place to find experienced talent is the competition. Before sending recruiting letters
to another company's office, be certain that you understand that there could be very
negative reactions from other brokers. ID: RE300781_C1430884
Recruit a manager
Because good sales managers can develop a loyal following of sales associates, some
companies see recruiting a manager as a good way to also attract experienced sales talent.
This strategy may not work as intended if the manager's contract prohibits soliciting or
recruiting sales associates from the former company for a period of time after the
manager departs. ID: RE300781_C1430885
Network the industry
The best way to get experienced sales associates is for them to initiate the contact. The
visibility and professional stature of the manager are strong draws for that contact. A
presence where sales associates gather, meet, or do business creates opportunities for
them to become acquainted with the manager and for the manager to converse with them.
ID: RE300781_C1430886
Recruiting Experienced Talent
Mobilize Ambassadors
Current sales associates are also great recruiters. Good sales associates like to work with
others who are just as dedicated and professional as they are. Sales associates are strong
competitors who also frequently cooperate with one another. They can identify those who
would be an asset to the company. Some companies offer bonuses to sales associates who
recruit others to join the firm. ID: RE300781_C1430887
Recruiting Unlicensed Talent
One of the most pressing questions for prospective licensees is “How do I select the right
broker.” Frequently, they are advised to interview with a variety of companies and attend
career nights; talk to friends in the business to get the perspectives on various companies;
and talk to people who recently have done business with real estate companies to find out
what they have to say about various firms. ID: RE300781_C1430888
Advertising
A variety of media can be used (radio, TV, newspapers, and Web sites) to attract new
sales associates. Traditionally, advertising in the help-wanted section of the newspaper
has been a popular way to post sales jobs. A recruiting tag on other promotional
messages, though, may be less expensive.
When advertising for recruitment, identify the target audience and promote the message
where that audience is likely to see it. Advertise consistently enough to be effective. One
ad on the same day of each week for a period of time will be more effective than one that
appears only sporadically. If the target is newly licensed sales associates, time an
advertising campaign to coincide with peak times that real estate classes are scheduled.
Also, monitor the competition's recruiting ads. ID: RE300781_C1430889
Be sure that the language in the ad is not discriminatory. Phrases such as “equal
employment opportunity,”“previous training not necessary,” or “experienced or
inexperienced invited” make a public statement that the company provides hiring
opportunities to everyone. A sample recruiting ad appears below.
ID: RE300781_C1430891
Recruiting Brochures
A recruiting brochure is intended to make an impression on people who contemplate
working for the company in the same way sales brochures make impressions on
consumers. A recruiting brochure (print or perhaps CD) is a tangible memory minder that
is also an important companion to other recruiting strategies. Content should include
answers to the typical questions people have about the industry and a brokerage
company. ID: RE300781_C1430892
Career Seminars
Career seminars give a company an opportunity to explain the real estate business and
showcase the company in the process. The expectation is that the program will cause
some attendees to pursue a career with the company. ID: RE300781_C1430893
Career seminars are conducted for a variety of reasons as well.


Local educational institutions may sponsor seminars so that their students can
explore career options.
Educational institutions may use seminars to stimulate interest in the industry as a
way to get people enrolled in their classes.


A franchise may conduct a seminar to promote the franchise's advantages for the
sales associates.
A company may sponsor its own seminar. ID: RE300781_C1430894
A program billed as a career seminar should deliver what is promised. Explain real estate
careers, presenting an objective discussion of the options. Then explain how the company
fits into the picture. If the intent is to conduct a recruiting seminar, plan and promote an
opportunity for people to learn why the company is a superior place to work.
One of the major criticisms of these seminars is that people feel they weren't given
realistic information about how much money they will make and the amount of effort
(and length of time) it takes to turn a fledgling job into a very profitable career. The
figure below provides a realistic idea of gross incomes.
ID: RE300781_C1430896
The goal of career programs is to generate a pool of people to interview. Because the
percentage of people attending a seminar who have the desire or ability to become real
estate sales associates may be small, the audience needs to be large enough to justify the
preparation time and expense.








Select a central location that is convenient for the people the company wants to
attract. If the purpose of the program is to recruit for the company, the office
showcases the actual work site, but this is appropriate only if there is a suitable
professional conference or meeting room. An off-site facility is better for a true
career program.
Select a facility that can accommodate a range of group sizes. Hotels and
conference centers provide a professional atmosphere and the flexibility to adjust
seating as reservations or attendance requires.
Promote the career night with flyers press releases, advertising, and Web site
postings to announce the event at least seven days in advance. Request
reservations and provide a telephone number or e-mail address. Designate a
person to handle contacts, distribute tickets, and follow up contacts a day or two
before the program to verify attendance.
Confirm the room arrangements. The virtue of reservations is they help gauge the
number of people attending. Add 10 percent to accommodate people without
reservations, but be prepared for no-shows as well. Don't get a room that is too
large or people get the feeling that the event is not well attended.
Arrange for projectors, screens, easels, sound systems, registration tables, and a
podium. Also be sure the atmosphere is comfortable; minimize distracting noise
and erratic temperatures.
Plan refreshments. A beverage and light snack create an opportunity to mingle
with the attendees before and after the program.
Prepare literature. A packet for each guest should include general information
about real estate careers and specific information about the company, including its
career brochure.
Plan and conduct the program. In a recruiting seminar, showcase the company's
services for consumers and services for the sales staff. Invite a few people from
the company to speak about their special areas of responsibility or expertise. A
career seminar should also include a brief discussion of real estate ownership, its



economic importance, and interesting market statistics.
End with a question-and-answer period and an invitation for attendees to contact
the company's recruiter or a sales manager.
Follow up with thank-you letters or telephone calls to attendees.
Plan the next career seminar. When these events are conducted on a regular basis,
the company gets more mileage out of advertising and planning expenses. School
directors and previous attendees also know when to expect the event and can refer
others to a program. ID: RE300781_C1430897
Licensing Courses
Brokerage companies and franchises often operate real estate schools as a way to recruit
sales associates for their companies. But the students pay to be educated, not recruited.
FREC rules prohibit solicitation of licensees during class hours. Before deciding to open
a real estate school, investigate state laws and procedures for operating a proprietary
school. Providing quality education requires specialized expertise, and running a school
may be a more significant (and expensive) undertaking than is warranted just to create a
pool of recruits. ID: RE300781_C1430898
Trial Training Sessions
Because training and professional development are important to recruits, give them a
preview of what the company does with a trial training session. This can be promoted in a
newspaper ad or direct mail. The audience will likely include members of the public who
are curious about the business as well as people in various stages of licensure. ID:
RE300781_C1430899
Scholarships
Scholarship programs for prelicense or degree courses benefit deserving students and
provide considerable public relations benefit to the company. The company should not be
directly involved in actually selecting the recipients. The company can commit the
funding and also set guidelines for the award. Then the educational institution should take
over and screen applicants and determine the recipients. In return for the company's
generosity, the recipient may consider it for possible employment. ID:
RE300781_C1430900
Direct Mail
Direct mail can be a useful way to distribute a recruiting brochure or flyer. Mass mailings
generally produce about a 2 percent response rate. This is expensive advertising, but if it
produces one qualified prospect to interview for every ten respondents, then it is useful.
ID: RE300781_C1430901
SELECTING SALES ASSOCIATES
The process of prescreening candidates, conducting formal interviews, and then selecting
sales staff is no different than it is for any other personnel position. Several additional
points to keep in mind when selecting sales staff include:



Prelicense courses are designed as education courses and doe not build skills.
Post-licensing course are designed to develop successful business and selling
skills. Hiring people who are suitable for the business and providing professional
training is the course to success.
One of the attractions for IC sales associates is the ability to control their daily
work processes as well as their income. This freedom can also contribute to
failure. Some people rely on others to create structure, or they have to make a
conscientious effort to create it for themselves. Unless people can plan, prioritize,
and manage their time and activities well, they will not succeed in an unstructured
environment.
Sales associates must be able to withstand pressure while maintaining their
composure, cope with rejection, and empathize with their customers and clients.
ID: RE300781_C1430902
People with different personalities may match the profiles that are commonly suggested
for sales associates. Typically, companies look for traits that other successful people
possess. But those may not be so significant, given differences in individual personalities.
What is important is how well people can adapt their personal skills to the situation.
Selection is a judgment call, and no one always make a perfect selections. Every
manager, on occasion, has been surprised that the least likely person turns out to be a
superstar and the most likely person to succeed falls by the wayside. ID:
RE300781_C1430903
CONCLUSION
The future of the company rests in the hands of the people it hires. The manager must
make the right personnel choices, from identifying the skills and attributes that are
needed for a position to developing a pool of talent from which to make the right
selection. Selecting a new sales associate involves more than just spending 20 minutes
with anyone who is interested in selling real estate and then making a job offer. A
methodical selection process provides the information needed to make appropriate
choices, which benefits both the company and the candidates. ID: RE300781_C1430904
Reading Comprehension Quiz 14
The statement is TRUE. The company’s business reputation and its workplace environment play a vital role in attracting the best
people to that pool.
Recruiting is the process of assembling a pool of candidates or applicants for
consideration.
True
Fals
e
ID: RE_31357
The statement is TRUE. However, FREC rules prohibit solicitation of licensees during class hours. Before deciding to open a real
estate school, state laws and procedures for operating a proprietary school should be investigated.
Brokerage companies and franchises often operate real estate schools as a way to recruit
sales associates for their companies.
True
Fals
e
ID: RE_31355
The statement is FALSE. The company’s compensation plan and work rules should be described before a candidate accepts
employment. If there is a three- or six-month probationary period, that should be clarified as well.
The company’s compensation plan and work rules should be described after a candidate
accepts employment.
True
Fals
e
ID: RE_31358
The statement is FALSE. The formal interview is the most important information-gathering part of the employment process; it is the
time to get information to determine how the candidate might perform on the job.
The prescreening process is the most important information gathering part of the
employment process.
True
Fals
e
ID: RE_31351
The statement is TRUE. Federal tax laws require that the sales associate must be a properly licensed practitioner, that the gross income
must be based on production rather than on the number of hours worked, and that the work must be done pursuant to a written
agreement.
If a real estate sales associate is an independent contractor, the IC and the company must
enter into an agreement that specifically proclaims that this is the nature of the
relationship.
True
Fals
e
ID: RE_31353
The statement is FALSE. A company’s cash flow and profitability cannot withstand long periods of low production between departure
and rehire; recruiting must be an ongoing activity.
Managers should recruit at their convenience; it is not necessary to make recruiting an
ongoing activity.
True
Fals
e
ID: RE_31354
The statement is TRUE. Each step is a filtering process, with the object being to narrow the field of contenders and identify the most
suitable candidate for the position.
The employment process consists of five steps: recruiting, prescreening, formal
interview, selection, and hiring.
True
Fals
e
ID: RE_31350
The statement is FALSE. Career seminars may be conducted by educational institutions, but seminars may also be conducted by
companies, franchises, and other groups. Career seminars give a company an opportunity to explain the real estate business and
showcase the company in the process. The expectation is that the program will cause some attendees to pursue a career with the
company.
Career seminars should not be conducted by a company, but rather by an educational
institution.
True
Fals
e
ID: RE_31359
The statement is FALSE. Direct mail can be a useful way to distribute a recruiting brochure or flyer, even with the low response rate.
It is expensive advertising, but if it produces one qualified prospect to interview for every ten respondents, then it is useful.
Direct mail is not a useful way to distribute a recruiting brochure or flyer due to a
response rate of only 2 percent.
True
Fals
e
ID: RE_31356
Unit Exam 14
The answer is SETTING GUIDELINES FOR THE SCHOLARSHIP AWARD. The company can commit the funding and set the
guidelines for an award, based on merit or financial need. The company should allow the educational institution to screen applicants
and to determine the recipients.
If your brokerage company decides to set up a scholarship program, the company should
be involved in the program by
screening the applicants.
determining the scholarship recipient.
setting guidelines for the scholarship award.
hiring applicants who are not awarded the
scholarship.
ID: RE_31655
The answer is PRESCREEN THE APPLICANTS. The employment process consists of the following steps, in this order: recruiting,
prescreening, formal interview, selection, and hiring.
After the broker initiates a recruiting campaign for more sales associates, the next step is
to
hire the applicants.
prescreen the applicants.
conduct a one-on-one interview.
bring the applicants in for an office
tour.
ID: RE_31651
The answer is GATHER BASIC INFORMATION TO DECIDE WHETHER TO PURSUE APPLICANTS. The primary purpose of
application forms and preliminary interviews is to gather basic information to decide whether an applicant meets the minimum
requirements for the position.
The primary purpose of preliminary interviews and application forms is to
determine the physical ability of applicants to perform a
job.
gather basic information to decide whether to pursue
applicants.
establish preliminary criteria for reviewing applicants.
show that the manager is meeting recruiting quotas.
ID: RE_31658
The answer is CONSISTENT. The most important part of the hiring process, including the prescreening, is that the company be
consistent, ensuring that every inquiry is treated in the same way.
One of the most important issues with the prescreening process is that it be
consistent.
brief.
different depending on the
applicant.
be supervised by a manager.
ID: RE_31660
The answer is INCREASING THEIR VISIBILITY IN THE INDUSTRY. The company’s business reputation and its workplace
environment play a vital role in attracting the best people out of the potential candidates.
One of the most effective ways for managers to recruit is by concentrating on
recruiting when there is high turnover in their
offices.
recruiting at every closing or open house.
increasing their commission splits.
increasing their visibility in the industry.
ID: RE_31653
The answer is PAYMENT FOR THE PRELICENSE SCHOOL. Sales associates want competitive compensation, clerical support, and
a positive work environment in an ethical, recognized firm.
Generally, which of the following is NOT a primary consideration when sales associates
are selecting a brokerage firm?
Ethics of the firm
Payment for the prelicense
school
Clerical support for the agents
Firm’s name recognition
ID: RE_31652
The answer is ENCOURAGE YOUR CURRENT SALES ASSOCIATES TO IDENTIFY OTHERS WHO WOULD BE AN ASSET
TO YOUR COMPANY. Although the best sales associates are highly competitive, your current staff may be your best ambassadors,
and they are in a position to identify those in other companies who would be an asset in yours.
Which of the following is the best source of recruiting experienced sales associates from
other companies?
Recruiting a manager to bring his or her sales associates over
Mention changing companies at every closing
Knock the competition at closings and open houses
Encourage your current sales associates to identify others who would be an asset to your
company
ID: RE_31656
The answer is RACIAL IDENTIFICATION. At no time is it appropriate to record racial, religious, or national origin information.
After the person is hired, certain information may be part of the confidential file, and may not be used in management’s later decision
making.
All of the following information should be contained in the personnel file EXCEPT
who to contact in the event of an
emergency.
copy of a driver’s license.
racial identification.
authorization to work in the United
States.
ID: RE_31657
The answer is CONCENTRATE ON LISTENING RATHER THAN TALKING. When conducting a formal employment interview, it
is important to concentrate on listening rather than talking.
When conducting a formal employment interview, it is important to
concentrate on unfavorable information about the
candidate.
sell the company to the candidate.
keep the atmosphere formal.
concentrate on listening rather than talking.
ID: RE_31659
The answer is STUDENTS EXPECT TO BE EDUCATED AND NOT RECRUITED. People attend prelicense class for the primary
purpose of education, not recruitment.
One of the reasons FREC does not permit solicitation of students during class hours is
it disrupts the ability of the instructors to recruit for their
firms.
students expect to be educated and not recruited.
this disrupts the institutions’ ability to hire instructors.
the institutions want to select the firms that the students
interview.
ID: RE_31654
(15)Professional Competency
LEARNING OBJECTIVES
After completing this unit, the student should be able to



distinguish between education and training;
describe the characteristics of a problem identification meeting; and
describe the characteristics of a brainstorming meeting. ID: RE300781_C1530926
INTRODUCTION
What should a company do to orient new people to the organization?
What can a company do to nurture the professional skills of the people who work for it?
Once people are hired, the manager's ability to provide leadership, cultivate talent, and
create a favorable workplace environment is tested. The manager's focus is to direct the
professional efforts of the people who do the organization's work.
Management indoctrinates people into the company's business and provides the training
and personal development needed to help them do their jobs. The end result is
competency for the organization and professional growth for its workforce. ID:
RE300781_C1530927
Each person on staff has different needs at different times to grow professionally. This is
where management's ability to properly assess needs is important. One occasion may
require half an hour of the manager's time to help someone solve a problem. Other
occasions may require more in-depth discussions or formally structured forums, typically
where a group of people could benefit from an exchange of information or the
development of specific knowledge or skill sets. ID: RE300781_C153
ORIENTATION PROGRAMS
Regardless of how enthused people are about coming to work for the company, they may
feel some twinge of apprehension and strangeness. Management must now help them
move comfortably into the organization to become an integral part of the team.
The first way in which a company invests in its personnel is by orienting them to the
organization. The introduction people get during the selection and hiring process is
basically a brief overview. People can't help the organization accomplish its goals unless
they know who the organization is, what it intends to do, and how it functions internally.
An orientation program serves this purpose and creates a sense of belonging. ID:
RE300781_C1530929
Orientation programs can be conducted in a group setting, or one-on-one, depending on
how many new personnel are available. Regardless of the format, the substance is
essentially the same.



An introduction to the company. This includes a brief history of the company, its
philosophy of doing business, and a general outline of the work that the company
does.
How to work in the organization is covered with an explanation of the company's
policies and procedures, daily office procedures, benefit and compensation
programs, and professional development opportunities.
The specific procedures that apply to the person's job. The sales associates are
shown how to serve the company's customers and the procedures for handling a
real estate transaction.
For all other positions, the broker will give similar information tailored to the specific
responsibilities of those jobs. ID: RE300781_C1530930
Orientation programs avoid the “I was never told that” kind of problems that could arise
later on. Managers must patiently coach people through the learning period until they are
more familiar with the company's way of doing business.
Orientation should include an introduction to all the managers, who should make at least
a cameo appearance. Orientation is often one of the few occasions that people, especially
in large organizations, see senior management. ID: RE300781_C1530931
BUSINESS PLANS AND NEW HIRES
Assessing New Hires
Management needs to learn more about the new hire with whom the manager will be
working. A preemployment interview is a meeting with the immediate supervisor before
the first official day on the job.
Some companies assess after a person has been hired, rather than during the selection
process, because of concerns that assessments may create legal liability.
Once a person is hired, however, a variety of assessments can help identify talent and the
education and training needed. Because of cultural or verbal bias or the lack of
correlation between what is tested and a person's potential for success in the job, some
assessment instruments are more valid than others. ID: RE300781_C1530932
Business Plans for Sales Associates
Orientation for sales associates should include the development of a personal business
plan. This helps develop sales goals and a plan of activities to promote their association
with the company. Some companies provide announcements that can be mailed to the
sales associate's network of contacts, which are then followed up with items such as the
company's brochure, newsletter, or giveaway novelty. Sales associates may also develop
their own self-promotion material as well. ID: RE300781_C1530933
TRAINING PROGRAMS
Training is different from education. Training develops skills, while education builds
knowledge. The courses required before a person gets a license are knowledge-based
(education). They do not take this knowledge to the next level, developing the skills
needed to use the information in a practical way.
Brokers understand that sales associates need a wide range of both knowledge and skill to
be successful. Most companies conduct educational sessions as well as training, but
training is the necessary step that gives the skills to do the job. ID: RE300781_C1530934
Training intends to cause people to behave in certain ways. That happens when people
 become motivated to adopt the behavior;
 learn to process information and experiences;
 develop knowledge, skills, values and attitudes, or creative ideas; and
 transfer learning into application. ID: RE300781_C1530935
The obvious benefit is that enhanced skill results in greater productivity. Training can be
delivered in a formal training session, an office sales meeting, or one-on-one with a sales
associate. The beginning of a training program comes from deciding who needs to be
trained, what subjects should be covered, and how the training should be delivered. ID:
RE300781_C1530936
Whom To Train
Some training topics, like the new computer system and organizational topics, benefit
everyone in the organization, while other topics are focused on specific jobs. Some
associates may need remedial training such as reviewing the listing-presentation or
qualifying buyers. Others are ready for training related to a new company service or
recent legal developments. ID: RE300781_C1530937
Managers
Managers also need training to develop their business skills. Unless the company has a
large enough management corps to warrant conducting these programs, managers can
attend seminars conducted by professional organizations.
Sales managers also should attend the sales-training program from time to time.
Managers must know what's being taught or they can't reinforce the training. The
manager also needs to be on the “same page” as the instructor, giving sales associates
directions that don't conflict with what they're learning. Student critiques may help the
instructor tailor the content or presentation to suit the training needs of the staff. ID:
RE300781_C1530938
Experienced sales associates
A company's training must not neglect the needs of experienced sales associates. Because
their skill levels are different from those of newly licensed sales associates, one size does
not fit all. Training for the veterans can sharpen stale or outdated skills and keep them
current on laws and trends. ID: RE300781_C1530939
New Associates
Newly licensed sales associates may feel ill equipped for their new jobs, or they may try
to transact business before they know what they're doing. The solution for both is to give
them the tools they need and groom them as valuable professionals. ID:
RE300781_C1530940
Administrative staff
Secretaries, clerks, and other administrative personnel also should be involved in training
programs. Any information about the inner workings of the organization, as well as tools
to help them in their specific jobs, can be the subject of various training sessions. ID:
RE300781_C1530941
What To Teach
Effective training is based on a job-skills analysis, so that the company makes the best
use of training money and time. Because business methods change, companies reanalyze
jobs from time to time to see how skill requirements may have changed. The companies
identify skills that deserve training attention.
No training program, regardless of its quality, will fix every problem in the organization.
Training has one specific focus: to affect behavior in people so they perform their jobs
more effectively. Training will not correct problems that are rooted in defective company
policies or procedures, inefficient systems, negligent management, or misaligned
financial resources. ID: RE300781_C1530942
Keys to Effective Sales Training
For years, sales training used the modeling approach, the “just give them the words”
scripts of what people should say in various sales situations. Modeling presumes that the
script is fail-safe, can be delivered by anyone, sound natural, and that there's a canned
answer for every situation. People become dependent on the memorized lines and don't
learn to listen, size up situations, and think on their feet. While this training strategy may
give the novice a few comebacks to get started, he or she hasn't learned much else. The
broker should probably avoid the modeling approach to training. ID:
RE300781_C1530943
Sales training is most effective for the trainees when:






Training develops professional, ethical, and legal behavior.
Sales associates learn how to relate to people as individuals, and deliver
personalized services. Success in sales is about building relationships.
Sales associates are encouraged to develop their personal strengths and
professional expertise. Not everyone is good at both listing and selling, and people
should do what they do best.
Training is institutionalized, which means that the supervisors support and
reinforces what is learned.
Training appeals to what the sales associates think they need to hear. The
company needs to sell benefits of training so that people feel their time is well
spent.
Program objectives are clearly defined, along with specific behavior the trainees
are expected to adopt. This tells how the program should be designed. ID:
RE300781_C1530944
The content of sales-training programs falls into several general areas.






Basic real estate information, including economic trends, changes in
demographics and lifestyles, environmental issues, and construction and
development
Sales and listing strategies
Company policy issues, including new programs, services, sales tools, or issues
seem to recur
Legal and risk-reduction issues, including recent litigation and changes in federal,
state, and local laws and ordinances
Motivational subjects, including kickoff campaigns for new programs and the new
year's objectives
Personal development, including time management, personal business plans, goal
setting, and technology skills ID: RE300781_C1530945
How To Deliver Training
Delivering training has three components:
1. developing the curriculum (content),
2. conducting the program, and
3. evaluating the training's effectiveness.
One person may develop the curriculum, and someone else may conduct the program, or
the same resource may do both. Decisions about how to deliver training will be
influenced by the nature of the subject matter, the expertise required to design the
program, the financial resources that are available, and the number of people to be
trained. ID: RE300781_C1530946
Outsourcing
The company can purchase a prepared program, and then have someone in-house conduct
the program. Or the company can rely totally on outside talent. This method is relatively
simple: schedule the classes, arrange the facilities, and bring the talent to you. Or send the
people to the talent in regularly scheduled classes. These approaches work when the
company does not have the expertise to develop a curriculum or when there's an
outstanding program put on by someone else.
The disadvantage of using prepackaged programs is that trainees do not get the benefit of
seeing the company's sales tools, business philosophy, and procedures in their training. If
the presenter is from out of town, that person may be unfamiliar with local laws or
practices. While these problems are not insurmountable, they can cause conflicts and
contradictions that distract from the program. ID: RE300781_C1530947
Sending people to outside talent may be the only practical way to do comprehensive
training for one or a small number of people, however. It's important not to make new
licensees wait too long for training until the company gets a class together. If necessary,
he manager can do some one-on-one training with the new licensee so the person can
perform certain activities until the next formal program is available. ID:
RE300781_C1530948
In-house
A company that does training in-house has more control. The broker must understand that
a training department is a major commitment of time and money. In addition to the
materials and facilities costs, the company needs the in-house professional talent to
develop sound curricula and presentation materials and to conduct the program. Excellent
trainers command higher salaries.
With today's technology, trainees can easily be networked with outside resources through
audio and video conferencing. For programs that deserve extra punch or prominence,
outside “experts” can make a greater impact or generate greater credibility than in-house
staff people would. It's also effective to go outside the organization for inspirational
speakers. ID: RE300781_C1530949
Classroom instruction
People are accustomed to learning in the classroom. Classroom instruction offers a
structured agenda with a leader who can keep the group focused and the discussions on
track. Information is normally introduced in a lecture format, particularly for beginners.
Once this is done, though, learning really occurs when people are engaged in both
thinking and doing.
A group of trainees can participate in learning exercises such as skits, role-play,
brainstorming, and problem solving. These are worthwhile exercises only when they suit
the profile of the audience and are carefully planned. If people feel embarrassed or
ridiculed, the exercises may do more harm than good. ID: RE300781_C1530950
Location
Sales associates want professional programs conducted in professional settings. Even an
office's conference room can be distracting unless interruptions for phone calls or other
business matters are restricted. Pagers and cellular phones must be turned off.
A training or conference room should provide comfortable seating, adequate work
surface, comfortable temperature, and sufficient space to accommodate breakout groups
or other learning exercises. Teaching aids such as flip charts, overhead projectors,
PowerPoint™ presentations, VCRs make for more professional presentations.
Accommodations must be available for speakers and attendees who have disabilities. ID:
RE300781_C1530951
Trainers
The key to successful classroom training is the trainer. The trainer must establish
credibility, keep discussions on track, and maximize the learning experience for each
participant. The trainer should use examples effectively without subjecting the audience
to an endless stream of personal war stories. Participants should not be allowed to
monopolize the class. See the figure below for some practical rules for trainers to follow.
ID: RE300781_C1530953
Trainers must carefully prepare for each session. Simple things like organizing notes,
focusing on the objectives, managing time effectively, and assembling exhibits result in a
more professional program.
Handouts are useful for the students, particularly when they include exercises for them to
complete. Handouts can implement the classroom subjects in daily practice and represent
a reference resource that can be used outside the classroom. ID: RE300781_C1530954
Twenty-first century learning
Traditionally, classroom instructors have conducted all training. Today, people can
engage in totally independent computer-based learning, working at their own pace and at
times that are convenient. These methods are known as distance learning, and can
supplement classroom programs or be stand-alone sessions. This is an especially
attractive alternative when only one person is being trained. ID: RE300781_C1530955
One-on-one training
One-on-one sessions between manager and sales associate are a feasible way to train one
person. This training can follow content and presentation similar to that of a formal group
program, with a specific agenda and sessions scheduled with the manager.
There's a difference between one-on-one training and on-the-job training, however. Onthe-job training involves the sales associate and the manager working together in the
field. Sales associates appreciate the manager's support, rather than going it alone, and it's
instructive to see the manager handle real-life challenges. ID: RE300781_C1530956
Sometimes, the lessons are disjointed, and if the manager has limited expertise or is out
of step with the times, the training is not helpful. For these and other reasons, on-the-job
training is not as effective as formal classroom training.
A form of one-on-one training involves partners or mentors. Team a newly licensed sales
associate with an experienced one. The new associate benefits from the support of a
mentor and the opportunity to learn from a voice of experience. The manager should
carefully select the individual who will act as a mentor. Look also for a mentor who is
willing to assume this role. A mentor agreement with clearly specified duties and
obligations and the time period for the assignment is important. The company should
provide a shared commission arrangement so that the mentor doesn't feel used. That's
also an incentive for the mentor to be attentive to the assignment. ID:
RE300781_C1530957
Adult learning
Adult education and the process by which adults learn, or andragogy, is a specialty of its
own and deserves a separate book. Regardless of whether the manager is leading
classroom instruction, conducting educational business meetings, or working one-on-one
with people, there are several rules to remember.






Adults are very time- and benefit-oriented. They want their time to be respected
(begin and end punctually) and the content to be substantive and worthwhile.
They grow impatient quickly with disorganization and long-windedness.
Most adults are not accustomed to being in a classroom or subordinate to an
instructor.
It's possible to “teach an old dog new tricks,” but the older the adult, the slower
the adjustment to change.
Adults, especially those over age 50, experience changes in visual, auditory, and
motor skills. And some of those changes are different for men and women. The
trainer must make certain the level of lighting, size of print-type, speech volume is
satisfactory.
Adults are less likely to accept statements as facts without explanation and
rationale. They are more inclined to question and screen information.
Adults have many life experiences from which to draw. They integrate new
information by relating it to their experiences and finding correlation. Stimulating
them to recall experiences helps them as well as others in the group to learn. ID:
RE300781_C1530958
Evaluating Training
Because of the time and money invested in training, companies need to evaluate the
effectiveness of the program. Asking participants to complete surveys at the conclusion
of a session or program, surveying changes in attitudes, or giving final examinations are
common evaluation methods. The most obvious indicator is reflected in changes in the
company's operation, the volume of transactions, or the bottom line.
The caveat in focusing on the bottom line, however, is that training intends to affect
behavior. And behavior rarely changes immediately. Companies must be patient and give
people an opportunity to blossom. The manager can be a tremendous asset by reinforcing
the new skills that were introduced in training sessions and recognizing people's efforts
rather than focusing immediately on results. ID: RE300781_C1530959
Reinforcing Training
Like a motivational program, training doesn't have a lasting effect unless it is reinforced.
The manager is responsible for reinforcement, and must be familiar with the training
curriculum. By coaching the sales associates one-on-one, conducting follow-up sessions,
or devoting a sales meeting to a subject, the manager reinforces the training curriculum.
In the case of training programs for newly licensed sales associates, the trainer should not
overload them with too much information. Until new sales associates have had some field
experience, much of the information they're exposed to has no relevance. It's more
effective to develop some very specific skills that they can practice. Then bring them
back into the training room and go to the next level. ID: RE300781_C1530960
BUSINESS MEETINGS
Conducting meetings is also one of a manager's most common activities. Meetings serve
many purposes. They may be informational forums or opportunities for people to
influence decision-making or contribute ideas for the benefit of the organization.
Meetings are also opportunities to recognize accomplishments and foster teamwork. ID:
RE300781_C1530961
Education and Information
The meeting could also be an extension of the company's training programs or address
common weaknesses.
When planning these meetings, consider these questions:




Do the sales associates need this information to be more effective and efficient? If
they do, then the meeting is a valuable use of their time.
If you don't provide this forum, can you be sure the sales associates will get the
information otherwise?
Are the meetings repetitious? If the agenda is the same old thing, the meetings
grow stale after awhile. Ask the sales associates for suggestions.
Are there in-house procedures or office systems that, if discussed, could benefit
all personnel? ID: RE300781_C1530962
The manager doesn't always have to conduct the meeting. The training or marketing
director, the broker, a sales associate, a representative from the company that's installed
the new computer system, or a representative from local government are examples of
speakers who may provide good information.
Don't let the discussions get into dangerous legal territory. Discussing company listings is
permissible as long as information that compromises the principals' positions is not
divulged. Jokes about sexual orientation, religion, or race can result in lawsuits. ID:
RE300781_C1530963
Attitude and Recognition
While most companies have programs to award production, other accomplishments like
obtaining a broker's license, a professional designation, a chairmanship or an office in a
professional association, or participation in a community service organization are worthy
of recognition.
Presenting individual awards in a public forum gives the achievements the recognition
they deserve. Management needs to think about ways to recognize worthy
accomplishments by people who aren't always the top producers. ID:
RE300781_C1530964
Organizations benefit from team building. Companywide events build camaraderie and
foster commitment to the company. Remember that all of the staff (management, support,
and administrative personnel, as well as sales associates) play on the same team and
should be included in these events.
Meetings of this nature should be upbeat and if the event is worthy of grand celebration,
should be held offsite with great fanfare. The informal, social time before and after the
program is an important part of the affair. In large organizations, this is one of the few
times everyone gets to “rub elbows” with senior management. ID: RE300781_C1530965
Problem Identification
Any number of things can cause dissatisfaction in the workplace. Problem identification
meetings give people an opportunity to air their concerns about the company, the office,
or the business in general. These are opportunities for management to gather information
and should be held several times during the year.
The purpose of a problem-identification meeting is to create a forum so people can speak
up. Announce its purpose and ask people to come prepared with issues they want to raise.
The manager can set parameters, like office procedures, the company's advertising
program, or a particular service the company offers. ID: RE300781_C1530966
This type of a meeting sometimes intimidates managers, fearing that it will become an
unruly gripe session or a shouting match. But these meetings can be very constructive
when conducted properly. The following guidelines should be given to the participants:




Everyone will be given an opportunity to speak.
Speakers have a limited time to talk.
No evaluations, solutions, long-winded examples, or illustrations are permitted.
Announce the length of the meeting at the outset. ID: RE300781_C1530967
The manager's job is to create a welcoming, risk-free setting and then sit back, listen, take
notes, and maintain order. The manager must maintain a nonjudgmental climate and
respect people's viewpoints. Generally, people feel freer to express themselves in a group
(as opposed to one-on-one with the manager). If it's likely that people will be hesitant
about speaking up publicly, take written submissions. Then, write them anonymously on
a flipchart or whiteboard for the group to see.
The final step before the meeting concludes is to prioritize the issues and gain consensus
about which ones should be addressed first. It's not uncommon that many of the issues
are interrelated, so major problems are relatively easy to identify. ID:
RE300781_C1530968
Perhaps the most important part of a problem-solving meeting is what happens after it's
over. People welcome the opportunity to speak up, but they do so because they expect to
get someone's attention. Don't brush them off. In other words, if you aren't interested in
doing something about people's concerns, then don't ask what they are. Issues that fall
under the manager's responsibility are ones the manager must do something about. Other
issues must be communicated to the appropriate people in the organization. In either case,
people deserve feedback or status reports, especially if they're not going to participate in
developing solutions. ID: RE300781_C1530969
Brainstorming
Brainstorming meetings give people an opportunity to generate new ideas or suggest
solutions to a specific problem. Brainstorming meetings can be very energizing and
enjoyable. Define the issue and then just let the creative energies flow. While it's
particularly valuable to have the people who are affected by or most familiar with the
subject to be involved, some others who aren't as close to the subject can offer a fresh
perspective. One person's idea spurs others, with variations and refinements. The quality
and creativity of the dialogue can be impressive.
The manager's job is to list the possible solutions on a flipchart or board and keep the
group focused on the most important rule: no criticism of the solutions is permitted. Keep
the group moving at a fast pace. When they've exhausted all the possibilities, take a
break, or close the meeting. If that's the end of the exercise, the participants need to be
told what management intends to do with all the suggestions and who will make a
decision (and when). ID: RE300781_C1530970
Decision Making
Decision-making meetings may be called to present a problem or may be the result of a
brainstorming meeting. It's important to clearly state what will happen with the end
product of the meeting.
Generally, these meetings follow the classic decision-making model, with no more than
15 participants. Depending on the nature of the issue, the manager can act as an impartial
moderator or participate in the discussions as an equal with the others. The manager has
to guard against dominating the process. The manager must keep the group focused on
the outcome—a decision or recommendation.
The meeting ends with everyone reaching a conclusion they can live with, even if
everyone doesn't fully agree. The goal is to arrive at consensus, not make decisions by
majority vote. Often, the course of action that has the fewest undesirable consequences is
the one the group chooses. ID: RE300781_C1530971
RETREATS
A retreat is a forum for engaging people professionally and socially away from the office.
While these require planning and expense on the part of the company and commitment of
time on the part of the people who attend, they offer benefits far beyond the program
agenda.
One of the reasons people enjoy professional meetings and education courses is the
opportunity to brainstorm with other real estate professionals. When conducting a retreat,
the company is creating such an opportunity within its own organization. ID:
RE300781_C1530972
There are a variety of purposes that a retreat can serve. Wrap up last year and kick off the
new year; develop a strategic plan; strategize the design of a new system, service, or
department in the organization; develop a business plan for the year; or conduct
management or sales training.
The purpose of the retreat will determine who attends and the length of the time for the
program. The entire organization can be assembled for an educational forum or
motivational rally (a miniconvention for the company), or assemble only management or
certain department personnel. ID: RE300781_C1530973
PERSONAL INTERACTION
Although group forums offer many advantages, they are not a substitute for personal
contact between the manager and an individual sales associate or other staff member.
One-on-one interaction is an important part of professional development. Each person has
individual needs, problems, and aspirations. The manager should be accessible and
attentive when called on. Seek out staff members periodically for personal consultation.
ID: RE300781_C1530974
ADDITIONAL OPPORTUNITIES
There are many opportunities outside the organization for people to enhance their
competency. A company that is committed to professional development encourages
people to take advantage of these opportunities and often gives paid leave and subsidizes
tuition costs for employees.
People gain as much from associating with other professionals with similar interests as
they do from the actual education and training that can be gained. ID:
RE300781_C1530975
The obvious forums for furthering education and training include colleges, universities,
real estate schools, and professional organizations, but there are also self-training
opportunities available online and through distance learning courses. Professional
organizations conduct seminars, training programs, and more intense courses related to
their members' activities, including designation programs. ID: RE300781_C1530976
CONCLUSION
When people feel satisfied with their jobs, the place where they work, and their career
progress, they can be more productive for the company. Professional competency is about
creating opportunities for people to enhance skills and to influence their quality of life at
work. The company that supports continuous learning opportunities is able to retain good
talent. Exposing the company's personnel to a broad range of business education and
professional associations adds a dimension to the organization as well as to the individual
jobs people do. ID: RE300781_C1530977
Reading Comprehension Quiz 15
The statement is TRUE. The company that supports continuous learning opportunities is able to retain good talent. Exposing the
company’s personnel to a broad range of business education and professional associations adds a dimension to the organization as
well as to the individual jobs people do
Professional competency is about creating opportunities for people to enhance skills and
to influence their quality of life at work.
True
Fals
e
ID: RE_31369
The statement is TRUE. People can’t help the organization accomplish its goals unless they know who the organization is, what it
intends to do, and how it functions internally. An orientation program serves this purpose and crates a sense of belonging.
The first way in which a company invests in its personnel is by orienting them to the
organization.
True
Fals
e
ID: RE_31361
The statement is FALSE. A training program is important for all members of an organization, including managers, experienced sales
associates, new associates, and administrative staff. Training must be tailored to the specific needs of each group in order to be
effective.
Training is only important for new sales associates.
True
Fals
e
ID: RE_31364
The statement is FALSE. Training is different from education. Training develops skills, while education builds knowledge. Sales
associates need a wide range of both knowledge and skill to be successful.
Training and education are synonymous; therefore, a licensed sales associate does not
need training.
True
Fals
e
ID: RE_31363
The statement is FALSE. The most important rule of brainstorming meetings is: no criticism of the solutions is permitted.
Brainstorming meetings give people an opportunity to generate new ideas or suggest solutions to a specific problem.
In a brainstorming meeting, it is important to criticize solutions that are not feasible for
the company.
True
Fals
e
ID: RE_31368
The statement is TRUE. The manager is responsible for reinforcement, and must be familiar with the training curriculum. By coaching
the sales associates one-on-one, conducting follow-up sessions, or devoting a sales meeting to a subject, the manager reinforces the
training curriculum.
Training does not have a lasting effect unless it is reinforced.
True
Fals
e
ID: RE_31366
The statement is TRUE. Problem identification meetings give people an opportunity to air their concerns about the company, the
office, or the business in general. These are opportunities for management to gather information and should be held several times
during the year.
The purpose of a problem identification meeting is to create a forum so people can speak
up.
True
Fals
e
ID: RE_31367
The statement is TRUE. Training intends to cause people to behave in certain ways. However, no training program, regardless of its
quality, will fix every problem in the organization. Training will not correct problems that are rooted in defective company policies or
procedures, inefficient systems, negligent management, or misaligned financial resources.
Training has one specific focus: to affect behavior in people so they perform their jobs
more effectively.
True
Fals
e
ID: RE_31360
The statement is FALSE. Orientation for sales associates should include the development of a personal business plan. This helps
develop sales goals and a plan of activities to promote their association with the company.
Orientation for sales associates should not include the development of a personal business
plan.
True
Fals
e
ID: RE_31362
The statement is FALSE. Delivering training has three components: developing the curriculum (content), conducting the program, and
evaluating the training’s effectiveness. Because of the time and money invested in training, companies need to evaluate the
effectiveness of the program to conclude the process.
Delivering training has two components: developing the curriculum (content) and
conducting the program.
True
Fals
e
ID: RE_31365
Unit Exam 15
The answer is TEACHES A SCRIPT RATHER THAN PREPARING PEOPLE TO THINK. One of the problems with the modeling
approach is that it presumes that the script is fail-safe, and it fails to teach the sales associate to listen, analyze, and to think on his or
her feet.
What is one of the problems with the modeling approach to sales training?
Not suitable for inexperienced sales associates
Teaches a script rather than preparing people to think
Assumes that all sales associates will be proficient at both sales and
listings
Motivational rather than teaching sales strategies
ID: RE_31664
The answer is BRAINSTORMING. Brainstorming meetings give people an opportunity to tackle a specific problem, tapping into the
company’s wealth of talent.
Twice each year, the manager announces a meeting for the sales staff to discuss ways the
company can improve its marketing and advertising program. What kind of meeting is
this?
Sales training
Decision making
Problem
identification
Brainstorming
ID: RE_31669
The answer is PERMIT NO CRITICISIM OF THE SOLUTIONS. The primary rule during a brainstorming session is to permit no
criticism of any suggestion. The leader should list possible solutions without analysis and encourage as many people as possible to
contribute as many ideas as possible.
What is the primary rule during a brainstorming session?
Analyze each suggestion as it is
offered
Permit no criticism of the solutions
Limit the suggestions
Allow one person to dominate
ID: RE_31670
The answer is DEVELOP SKILLS PEOPLE NEED TO DO THEIR JOBS. The primary purpose of training programs is to develop
the skills people need to do their jobs.
The primary purpose of training programs is to
provide insight into the personalities of the
attendees.
develop skills people need to do their jobs.
identify job-skill weaknesses.
provide a way to evaluate the performance of
workers.
ID: RE_31662
The answer is DISCUSSION OF LISTINGS THAT VEER INTO DIVULGING CONFIDENTIAL INFORMATION. Certain
discussions should be avoided during sales and business meetings, such as disclosing any information that could compromise the
principal’s negotiating positions and any activity that could be construed as price fixing.
Which of the following should be avoided during a sales or business meeting?
Discussion of listings that veer into divulging confidential
information
Uniform handout material that can be documented
Exposing attendees to the same educational updates
Acknowledge company achievements and individual
contributions
ID: RE_31668
The answer is TRAINING DEVELOPS SKILLS AND EDUCATION BUILDS KNOWLEDGE. Education builds knowledge;
training develops skill by converting that knowledge into action.
What is the difference between education and training?
Training develops skill and education builds
knowledge
Training develops skills and education builds
knowledge
Training should precede education
There really is no difference
ID: RE_31661
The answer is ARE LIKELY TO HAVE EXPERIENCED PHYSICAL CHANGES THAT SHOULD BE CONSIDERED. Adults are
more likely to experience changes in visual, auditory, and motor skills that should be considered by the trainer. They are not likely to
accept facts without explanation and are not used to being in the classroom. Of course, many adults and children are anxious in a
learning situation and both seek to avoid embarrassment.
When teaching adults, it is important to remember that adults
will accept facts without explanation.
are accustomed to being in a classroom.
are less likely to be anxious or easily embarrassed.
are likely to have experienced physical changes that should be
considered.
ID: RE_31666
The answer is MORE LIKELY TO USE PROFESSIONAL TRAINERS. Often, a professional organization or franchise is able to
deliver effective training because it can utilize the skills of a professional trainer in a cost effective manner. The downside is that the
trainer will not be presenting your company’s sales tools, business philosophy, and procedures.
When deciding how to deliver training, you can send people to programs conducted by
professional associations, franchises, or local educational institutions. One of the
advantages to this approach is that such programs are
more likely to use professional trainers.
normally more expensive than an in-house training department.
not normally tailored to your company’s philosophies and
procedures.
not using professionally developed curriculum.
ID: RE_31665
The answer is ARE EFFECTIVE AT HELPING PEOPLE TRANSFER LEARNING INTO APPLICATION. Good, professional
trainers are effective in helping people transfer learning into application.
Good, professional trainers are effective at training because they
are good “showmen” who liven up the classroom with jokes.
are effective at helping people transfer learning into application.
can effectively translate their personal war stories into practical
application.
have years of experience and can talk off the tops of their heads.
ID: RE_31667
(16)Coaching Performance
LEARNING OBJECTIVES
After completing this unit, the student should be able to


describe the level of control that brokers have over their independent contractors;
and
calculate the minimum annual production (MAP) for sales associates in a
brokerage firm. ID: RE300781_C1630998
INTRODUCTION
How does the manager contribute to performance? And evaluate performance?
How does the manager affect the retention of personnel?
A company flourishes when its managers “coach” individuals on their staffs, like an
athletic coach or personal trainer. The feedback helps people develop their strengths and
correct their weaknesses. Coaching is an effective way to deliver training and foster
professional development.
The coaching role also requires a manager to be a leader, counselor, negotiator, and
arbitrator. This is the part of the job that's characterized as “people are a lot of work.” But
it's a very necessary part of management's function, all to the end of the company's goals.
ID: RE300781_C1630999
The company needs a team that pulls together, but the team members also need to feel a
sense of accomplishment in the process. Managers who respect and value the people they
supervise build trust and loyalty, which contributes greatly to the company being able to
retain its valued resource.
While feedback is one of the most constructive ways to reward hard work, increase job
satisfaction, and minimize turnover, management sometimes takes actions that are
counterproductive. Different rules for different people, new rules for everyone because of
the failings of a few, treating people as though they can't be trusted, are but a few of the
ways to upset the workplace. ID: RE300781_C1631000
MANAGING EMPLOYEES AND INDEPENDENT CONTRACTORS
It's important to understand that the difference between supervising employees and
supervising independent contractors is the degree of control that the company can
exercise over activities.
Supervision of employees includes directing the working hours, meal times, vacation
periods, required meetings, and how they are expected to perform their jobs. ID:
RE300781_C1631001
Independent contractors work in a much less structured environment. An IC agreement is
a service-for-hire contract in which the company engages the IC to achieve certain
outcomes or objectives. The independent contractor determines the methods used to
accomplish these objectives. A written contract is used to define the responsibilities of
the IC and the company, but the contract cannot direct the independent contractor's
methods. ID: RE300781_C1631002
Management cannot impose but can recommend, suggest, or encourage certain behavior.
The IC controls vacation schedules, daily activities (the number of sales calls, listing
presentations, or open houses), and the properties and buyers the IC services. ID:
RE300781_C1631003
The company can't have life both ways. That is, it can't enjoy the financial benefits of
hiring ICs while managing them as employees. A company jeopardizes the IC status if it
pressures sales associates to do business with (or refer business to) the company's
affiliated business enterprise.
In most industries, IC implies that workers are temporary organizational outsiders, on
board only as long as the contracts are in force. In real estate companies, however, ICs
conduct business on the company's behalf and get support services the same way
employees do.
The key is an effective manager, who coaches the sales force and fosters their
professional growth. Managing ICs requires the very astute people-management skills.
ID: RE300781_C1631004
PERFORMANCE MANAGEMENT
Performance management consists of identifying performance criteria and then using that
criteria to encourage, improve, evaluate, and reward performance. Performance is a twoway street. The company must uphold its end of the bargain by providing the leadership
and a supportive, energized work environment. The workforce is to do their jobs.
The company has ultimate responsibility for workforce performance. The company must
remove barriers like inefficient company procedures, conflicts among workers,
unacceptable performance, or ineffective leadership. One of the major barriers is the
failure to state exactly what that performance should be. ID: RE300781_C1631005
Performance Criteria
Performance criteria generally have results-oriented and behavior-related components
that are tied to a position's job description and the company's priorities. Companies
prepare business plans to direct company performance. The company's personnel need
similar direction. Their jobs need to be broken down, much like a business plan, into
specific criteria so the person knows the standards for satisfactory performance. ID:
RE300781_C1631006
Performance standards must be developed for everyone in the organization, from the
maintenance staff to the top executives. The written standards should be developed from
one-on-one discussions between worker and supervisor. ID: RE300781_C1631007
There are several things to keep in mind about the process:



Discussion of past performance is an opportunity to praise, listen to frustrations,
and identify enhancement of skill or competency that can be incorporated in the
coming year's performance standards.
Targets for future performance must be realistic. Arbitrary or overstated outcomes
set up a person for failure. Targets must be tailored to the capacity of each person
and that individual's experience and skill level.
The process of developing standards together is likely to result in the worker's
support of the plan. Often, people have valuable insights or suggestions for
performance that the supervisor may have overlooked as well.
During the development of performance standards, several things will become evident
about the people the manager supervises. Some are overachievers while others just want
basic food and shelter. Some workers hesitate to set goals out of fear of failure, feeling
any performance is a plus. The manager must see that collective individual performances
achieve the company's goals. ID: RE300781_C1631008
Personal Business Plans
A personal business plan incorporates job performance standards and professional
accomplishments. Goals are made specific and measurable, and the plan includes
strategies and timeframes. Personal business plans are powerful self-directing tools for
sales associates and help management coach performance.
Personal plans are developed as a team effort with the manager providing guidance. If the
sales associate is an IC, mutual agreement over performance standards is essential. The
manager can identify what needs to be done based on the company's business plans and
budgets. Click here for an example of annual office production goals. As you see, the
total amount of revenue the office expects for the year is $350,500. Notice that for two
quarters of the year, the example shows actual production in the previous year and the
goals that ten sales associates are expected to reach in the coming year as the
responsibility for the $350,500 is distributed. ID: RE300781_C1631009
Personal plans convert these production goals into individual accomplishments. Any
number of other goals can also be developed in a sales associate's plan, ranging from
improving the transaction fall-through rate to obtaining an industry designation. Plans
help people manage their time by focusing on those activities that directly relate to
achieving their goals. The manager's role is to support the implementation of a person's
plan. ID: RE300781_C1631010
Performance Feedback
Providing feedback is management's coaching job. Perhaps the most important time a
manager devotes to his or her job is the hour spent each quarter during the year with
each person he or she supervises.
Performance reviews give feedback, using the performance standards to gauge how
people are doing and ways to adjust so the individual and the company will meet the
goals. The manager cannot wait until the end of the year to talk to people about what they
should have been doing all year. ID: RE300781_C1631011
Performance Incentives
Incentives are ways for companies to recognize performance and encourage people to
keep going. Because people's motives for working and responses to recognition differ,
companies should employ a variety of incentives to reward and contribute to the quality
of life in the workplace. The downside of some incentives is that they can have the
opposite effect. ID: RE300781_C1631012
Status
The purpose of status incentives is to reward or inspire initiative. The company can do
this in a variety of ways, such as by:





Assigning a sales associate with exceptional skills to be a mentor or partner for a
newly licensed sales associate
Asking a person with good writing skills to edit of the company's newsletter.
Assigning someone to assist the staff in the manager's absence.
Inviting someone to make a presentation at a company meeting.
Assigning a person to chair a special project task force or a problem-solving
project. ID: RE300781_C1631013
Incentives are an effective way to foster professional growth, and management should try
to make such incentives part of the company workplace routine. Management must also
guard against violating equal employment laws when selecting people for these
opportunities.
Some special assignments deserve compensation. Status incentives are intended to
encourage people to take initiative and develop recognition-worthy talents. The shining
persons who are singled out as well as others the company is trying to inspire won't be
flattered by the opportunity if they feel they are being used.
Pick people wisely. Some people will help themselves to more than the company
intended once given the opportunity. Be very clear about the details of the assignment
and the limits of authority. ID: RE300781_C1631014
Contests
Contests intend to increase production with valuable recognition or reward to the victors.
Not all companies agree on the value of sales contests, and indeed, there are some ways
that contests can backfire.
Good-natured, spirited competition can turn into a nightmare for management if people
are inclined to try winning at any cost. Unless the contest is structured properly, the
contest can result in controversy over sales leads, an increased number of disgruntled
sellers or buyers, or more overpriced listings than the company wants to advertise. ID:
RE300781_C1631015
Production contests usually are structured in ways that result in the top producers
winning. Others may feel there's little reason trying to compete. Contests must be
structured so that people with differing levels of experience or expertise can compete
fairly.
Some brokers debate about whether the prize or the recognition is the incentive. Winning
is recognition. A prize needs to be valuable, but it may not be appealing to everyone
unless the company is willing to trade for equivalent value (the Caribbean or Hawaiian
vacation for cash). An inexpensive or unique prize (the pressure cooker) has humorous
value, and while fun is good for reducing tension and building camaraderie, that's a
different goal than is intended for a true sales contest. ID: RE300781_C1631016
Awards
Awards to the listing leader, the sales leader, or the outstanding customer-service person
are often a nameplate added to a plaque in the reception area or a trophy that moves from
desk to desk each month. While these are useful ways to recognize accomplishments,
awards are so common that they are little incentive unless they are also showcased in
company marketing or backed up with a monetary award.
Award programs can polarize the sales force into two groups: the “outstandings” and the
“also-rans.” The “outstandings” compete with one another, trading a trophy back and
forth. The “also-rans” don't even bother trying. Eventually awards can become
meaningless, or even embarrassing to the person who constantly wins. ID:
RE300781_C1631017
Job-performance-based pay
One of the options when the company develops its compensation policies is a variable
pay plan. This type plan is designed to reward for past performance and be an incentive
to perform well in the future.
When it's time to administer performance-based pay, the company must ensure that the
pay is properly benchmarked to performance. The company must have defensible
evidence to justify pay decisions to avoid violations of equal employment laws.
Incentive pay must be based on the performance standards. Performance results based on
revenue production, is relatively easy to measure. Defects in the performance
assessments can be avoided by developing clear numerical performance criteria and
careful record keeping. ID: RE300781_C1631018
Negative incentives
Negative incentives do more harm than good, working only momentarily, if at all. Some
managers incorrectly believe fear, embarrassment, reprimand, and criticism are incentives
for people to change behavior. Yelling in front of the entire staff at the sales associate
who hasn't had a listing in three months is embarrassing and also insulting. Relationships
suffer and create an antagonistic atmosphere. This does not provide the quality of life in
the workplace and the respected leadership people want. ID: RE300781_C1631019
PERFORMANCE APPRAISALS
Performance appraisals, also known by various other names like performance evaluations
and performance reviews, are a two-step process of rating individuals' performances and
communicating the information. Quarterly performance reviews help management coach
performance during the year and to make monitor company performance and take
necessary corrective actions. Because of the quarterly reviews, there should be no great
surprises from the year-end appraisal. ID: RE300781_C1631020
Performance evaluations are based on the performance standards that were developed.
Legally, evaluations must be clearly based on job-performance, not personality or
character assessments, and must be fairly and equitably administered for each person. ID:
RE300781_C1631021
Evaluations provide much useful information for






merit or performance adjustments in wages, salaries, and commissions;
identifying candidates for promotion or for termination;
identifying situations in which a person's skills are better suited for a different job
in the company;
determining whether management's expectations of people are unrealistic, which
will be obvious if everyone is performing poorly in certain areas;
determining job descriptions that may need to be revised; and
determining the effectiveness of training programs, hiring procedures, and
company policies and procedures. ID: RE300781_C1631022
Rating Performance
Rating evaluates performance based on to the standards. One way to evaluate is with a
rating scale, which is a process of determining numerical values for various levels of
performance. A scale of 1 to 5, for example, would mean that a 3 is satisfactory and a 5 is
the highest.
An alternative is to rate performance as “below expectations,”“meeting
expectations,”“exceeding expectations,” and “outstanding.” This rating process is easy
for people to understand and for managers to use. Managers must avoid subjective factors
that can influence ratings and result in the manager being more critical of some people
and more lenient with others. ID: RE300781_C1631023
Often, economic conditions or dramatic changes within the company are beyond the
worker's control. Management might say that a true professional should overcome these
situations, but that's unrealistic and unfair. ID: RE300781_C1631024
One of the most interesting ways to evaluate performance is to ask people to do selfevaluations using one of the rating systems previously described. Sometimes people are
far more critical of their performance than the manager might be. Self-evaluations also
reveal what matters most to people about their performance and provides insight that
management may not have about what people are doing. ID: RE300781_C1631025
Performance Interviews
Performance interviews help the manager and the worker to discuss the performance
evaluation, whether one the manager prepared ahead of time or the person's selfevaluation. The outcome of the meeting is mutual understanding of the evaluation results
and a plan for the coming year. These are not confrontational interrogation sessions. The
manager must set an objective tone for the meetings and put people at ease.






Follow the performance standards “script.” It is essential to keep these interviews
on track to make efficient use of time. These meetings generally take about an
hour.
As each of the performance criteria is addressed, compare the assessments and
learn from different perspectives.
Don't dominate the meeting. It's the other person's forum to speak his or her mind
as much as it is the manager's.
Don't criticize! If the meeting is seen as the manager's opportunity to beat up on
the interviewee, there won't be any constructive two-way exchange. The person
will just bluff through the meeting until it's over.
Don't dwell on faults. This is the time to praise accomplishments and develop
solutions when someone is straying off track.
Take notes and stay focused on information that is relevant to a person's job
description so as not to stray into topics that could cause legal problems. ID:
RE300781_C1631026
RETENTION
Presumably, the company's work environment that attracts recruits is the environment
that will also retain them. But management should try to learn reasons from the people
who do leave.
The keys to retention, regardless of the personnel position, are




realistic job previews,
good hiring selections,
positive employer/employee relations, and
opportunities for career enhancement.
People resent being lured by attractive promises, only to find out later that they've been
deceived. Although no one can fully anticipate what the working relationship will be,
managers need to be honest and realistic when hiring people and provide a supportive
work environment. ID: RE300781_C1631027
Employee Relations
Employee relations is about quality of life with the company—the “keep them happy and
they will work” mantra.
One relatively simple thing management can do to enhance employee relations is to
periodically do an employee survey. ID: RE300781_C1631028
A survey requires careful planning in order to get useful information, but it helps
management learn what people think about


compensation policies,
workplace environment and morale,





business ethics,
potential for advancement,
fairness in the way management treats people,
opportunities for professional development, and
general satisfaction with the company, management, and their careers. ID:
RE300781_C1631029
Surveys are essentially management's report cards. Even if there are things that the
company may not be able to afford, there may be things that management needs to do and
say to improve the work environment. ID: RE300781_C1631030
Problem Solving
Managers in any real estate office spend most of their time solving problems. They may
be issues between the manager and a person he or she supervises or they may be disputes
between workers. In either case, management's objective is to resolve the situation in a
mutually satisfactory manner. ID: RE300781_C1631031
Management's problem
The most common problems involve real estate transactions and breaches of company
policies. But there are also morale issues (jealousy, commission disputes, personality
conflicts, and cliques) that can turn a once positive, energized environment into an
unpleasant place to work. The result can be turnover, and the litigation over employee
discrimination and harassment. ID: RE300781_C1631032
Case in Point: The morning you discover that a sales associate has lost an earnest money
check begins by hauling the person into your office. You slam the door and wave the
company's policy and procedures manual under the person's nose. You vent: “Don't you
know any better than to be so careless? See what the manual says you're supposed to do
with the check. Don't you know how much trouble we can all be in? What if the buyer
backs out and we don't have the deposit in our account? I'll take that money out of your
next commission check! Now, get out of my office and don't ever let that happen again!”
Okay! Problem identified; problem solved.
In this scenario, the manager identified what happened (the check got lost) and some of
the difficulties that could result, but was the problem identified? Maybe the check was
simply filed incorrectly by the secretary. Since there was no discussion, the manager
doesn't really know what happened. The poor sales associate didn't get in a word
edgewise (which may have been better than getting into a shouting match). The manager
presented a solution, but it certainly was an ill-conceived one. This encounter missed the
mark in a number of ways. ID: RE300781_C1631033
Identifying problem behavior is a necessary part of a manager's job. But managers need
to approach this task with a purposeful, constructive plan. Serving notice to a person that
he or she has conducted himself or herself in an unacceptable manner is only part of the
process. The manager needs a solution or a course of action that corrects the situation and
prevents it from occurring again. That solution must be acceptable to both the manager
and the “offender,” and if several people are offenders, each one must commit to the
resolution. ID: RE300781_C1631034
Disciplinary meetings
An effective disciplinary meeting develops as follows:














Identify the problem before scheduling a meeting. It's obvious that something
happened, but the first step is to determine exactly what and identify the
appropriate person with whom to address the problem.
Study the problem before confronting the person. This slows you down long
enough to gather the facts and describe the situation correctly.
Describe the problem for the person from your point of view. (“As I understand it
. . .”) Presenting the problem in a descriptive fashion helps the person understand
exactly the behavior that is observed. Don't be judgmental or accusatory or try to
speculate why. Just provide a factual description.
Gather information from the person. Ask questions. There may be information
that you don't know. The meeting may end at this point if you learn that you
misinterpreted the event. Be fair and give the person a chance to share some
observations.
Keep the meeting objective. This sounds difficult, but the purpose of the meeting
is not to prove who's right or wrong, to pass judgment on a person's character, or
to clobber a person's self-esteem. Minimize tension and defensiveness.
Don't sugarcoat the problem. This is not a meeting to praise and then sneak the
problem into the agenda. The person needs to know precisely the point of the
problem.
Agree that a problem exists. The manager may be the only one who thinks there's
a problem. Before the issue can be resolved, the “offender” must agree that this is
an issue that needs attention.
Develop mutually acceptable alternatives as possible solutions. The person must
participate in this process. The manager is asking the person to change behavior,
which means that a solution that is acceptable to the person is more likely to work.
However, the manager has the right to veto alternatives that are unacceptable from
the company's point of view.
Agree on a course of action and the time frame within which the correction will
occur. Both of you must select the same course of action from the list of
alternative solutions.
Agree on a follow-up meeting at the end of the time frame to be sure that the
problem is resolved.
Conclude the meeting once you have agreement. Don't drag it out and cloud the
issue.
Focus on one problem at a time. It's tempting to unload on a person and find fault
with everything he or she does. But this is not a gripe session. It's a problemsolving meeting.
Acknowledge the change. A manager's job is to praise as much as it is to correct
problems, so don't ignore the steps the person takes to correct the problem.
Document the proceedings. A disciplinary meeting may be a prelude to more
demonstrative discipline or eventual termination. Documentation is critical for the
company to defend its actions. ID: RE300781_C1631035
The employee's problem
The manager may be gliding through the day, feeling that everything in the office is
under control. It may not be readily apparent that trouble is brewing, but it's best to be
watchful of group dynamics.



Do people hush as you stroll through the office?
Is there a clique that huddled together over lunch, particularly after you
announced a new office procedure?
Is there a heated exchange in the back room or by the water cooler? ID:
RE300781_C1631036
People must feel free to raise their concerns and the sooner the better. They may need a
little encouragement like, “I notice that you seem to be . . . Would you like to talk?” or
“How can I help?” And the manager has to be willing to listen and accept the fact that he
or she may be the cause of a problem.
Give the person an opportunity to describe the problem without interfering or getting
defensive. This can be a very emotional or delicate conversation for the person. If the
problem is you, don't argue. If the problem is someone else in the office, don't take sides,
make excuses, or defend the other person. If the problem is outside the office (with
someone in another office, a customer, or the person's private life), listen. ID:
RE300781_C1631037
If the manager is the source of the problem, the manager is responsible for the solution.
The conversation needs to end with a description of what the manager intends to do to
handle the situation and a commitment to that course of action. The manager only makes
matters worse if the person feels that frustrations have fallen on deaf ears. ID:
RE300781_C1631038
If the problem is someone other than the manager, the decision is whether to intervene or
to help the person find ways to deal with the situation. It's possible that all the person
wants to do is vent frustrations or use the manager as a sounding board and does not
expect the manager to take any action. Or the person may be asking for help, and if so,
then the manager needs to be clear about what help is being requested. ID:
RE300781_C1631039
If person A asks the manager to intervene in a problem with person B, remember that
there are at least two sides to the story. Rather than risk the manager's relationship with
both people, it's best to help A find a solution first. Depending on the nature of the
problem, the manager may decide to have a conversation with B to investigate whether
there are also other problems that need to be addressed. B has to be approached
objectively so that B doesn't feel that she or he has been the target of A's anger or
ridicule. Don't betray confidences. If it's appropriate for the manager to be the negotiator
and arbitrator, this means that the manager has to get out of the middle and help A and B
find a solution that is acceptable to both of them. ID: RE300781_C1631040
RESIGNATION AND TERMINATION
A common law doctrine of employment is employment-at-will (EAW). This says that
employers have the right to hire, fire, demote, and promote whomever they choose, and
that employees have the right to quit whenever they want.
However, at-will is not nearly as simple as it sounds. At-will carries with it a covenant of
fairness and good faith between the employer and the at-will employee, which means that
if the employer breaches the covenant with unreasonable behavior, the employee can
seek legal recourse. Employment is established by either express or implied contract,
which arises from an employee doing the job. ID: RE300781_C1631041
Independent contractor agreements are typically at-will. Generally, very clearly stated
language is included to proclaim the fact that the contract is at-will. This attempts to
insulate the employer from claims of wrongful discharge.
The bottom line is that the company door is not as free-swinging as at-will implies,
though the scales are tipped in the employee's favor (a result of years of employer abuse).
Plus there are equal employment laws to consider, which are also founded on the
principle of fairness. ID: RE300781_C1631042
Resignation
Once an employee has decided to leave, it's probably too late to convince him or her to
stay. That's not to say that the manager shouldn't explore the person's reason for leaving
and where he or she is going, however.


If the person wants to change specialties or positions, consider finding a new role
for the person in the company if that's someone management wants to retain.
If the person wants to change companies, determine whether there's an internal
problem or whether your company is losing its competitive edge over other
employers. ID: RE300781_C1631043
Sales associates are more likely to leave because they are dissatisfied with the company's
management than because of the company's commission split. According to a study
conducted by Abelson & Co., 55 percent of the top producers were dissatisfied because
low producers are not terminated, 35 percent cited conflicts with others in the office, and
18 percent cited conflicts with the manager. ID: RE300781_C1631044
To determine if a sales associate is producing a profit, establish the minimum average
production (MAP) needed from each person. Begin with the desk cost and add a
percentage that represents the minimum profit. Divide that figure by the number of sales
associates. The result is the MAP, which can then be compared with actual production.
Some people consistently fall below the MAP, some are average or above, and others
exceed the MAP by a wide margin. The average real estate sales associate earns
approximately $30,000 after expenses (according to industry consultants Swanepoel and
Tuccillo), which suggests that “average” is not especially lucrative and also suggests that
companies may need to be looking more closely at MAP. ID: RE300781_C1631045
Sometimes, the person does management a favor by volunteering to leave. If this is the
office malcontent or poorest performer, the manager is off the hook for not doing
something about that problem sooner. If a person is truly miserable, do that person a
favor and let him or her go. Sometimes, people are just discouraged for the day. Rather
than accepting a hasty decision, help the person over the hurdle before taking action.
Finally, graciously send the person on the way. The company that is truly compassionate
and committed to professional development supports people's decisions to move on to
new job opportunities. ID: RE300781_C1631046
Termination
Termination represents failure. Even if the employee failed, the company is still
responsible, whether by failure to properly hire, train, or coach. Some managers would
rather sweep people out of the office instead of investing time in their professional
development. But terminating a person because of the company's failure won't fix the
problem.
Common reasons for showing people to the door include lack of productivity, violation of
laws, violation of the company's ethics and policies and procedures, or because the
employee is a serious personnel problem. The employee should not be surprised at the
termination. Performance interviews and prior disciplinary discussions should have given
prior notice. ID: RE300781_C1631047
Termination is the final step of the disciplinary process. The rules for discipline and
termination are company policies and procedures. EAW case law provides considerable
guidance for developing defensible policies and procedures, but even the practical matter
of fairness says that people deserve some warning. ID: RE300781_C1631048
Disciplinary and termination procedures generally provide the following steps:








Investigate and document evidence of the behavior. A performance appraisal is a
start. Because a manager can misinterpret behavior, further evidence is needed to
verify whether accusations are justified. Investigation must be a fair and impartial
inquiry, and all subsequent actions must be applied even-handedly.
Communicate concerns to the person and describe the behavior. Also inform the
person that the situation is serious enough to warrant termination. This is known
as a warning.
Develop a plan for corrective action, document the plan, and provide the support
and assistance that is necessary to help the person correct the situation. The
documentation should be retained so that if subsequent behavior warrants more
serious action, the company has defensible evidence.
Depending on the employment laws that govern the company the company may
be required to accept a rebuttal or explanation of the event from the employee and
make it part of the personnel file.
Subsequent behavior is handled following the same procedure as in the first event
and may be disposed of with a second warning or perhaps a suspension for several
days.
Behavior that finally warrants termination should be communicated to the person
along with the decision to terminate. This should be done privately and
confidentially with a clear description of the reason for termination.
Resolve the details for departure, including the date of departure and the way
pending business is to be handled. Sometimes companies usher people out the
door immediately, though that's not practical, humane, or necessary unless the
person's job position is such that the company is vulnerable to theft or sabotage.
Protect the firm. Secure the facilities by changing locks, and systems by changing
computer access passwords. ID: RE300781_C1631049
Terminations create liability for the company. The point cannot be repeated often enough
about the importance of just cause, due process, and documentation. Without warnings
(documented), evidence of the conduct (documented), and fair and even-handed
application of rules and penalties, the company is particularly vulnerable. ID:
RE300781_C1631050
Exit Interviews
An exit interview is a debriefing session to bring closure to the relationship. Regardless
of whether the person resigns or is terminated, there are likely to be loose ends of
business to tie up, but most of all, the session provides an opportunity for the manager to
listen to what the person has to say. This meeting is usually conducted several days after
the employee's last day of work, by which time some of the stress of decision day has
worn off.
The exit interview is the time to listen to what the person has to say about the manager,
the company, and the way the resignation or termination was handled. This also gives the
manager a hint of what the person will be telling the community about the company.
Don't argue or be defensive, since that's not likely to change anyone's opinion at this
point. Even when people have been asked to leave, they often just want to end the
relationship as professionally as possible. ID: RE300781_C1631051
CONCLUSION
Despite all of the difficult personnel decisions management has to make and all the legal
issues that are part of the process, the most rewarding part of a manager's job is watching
people thrive under the manager's coaching. While some of those directions come in the
form of formal performance criteria and are faced in performance reviews, the coach,
teacher, and counselor part of the job can be as energizing for the manager as it is for the
people being supervised. ID: RE300781_C1631052
Reading Comprehension Quiz 16
The statement is FALSE. Sales associates are more likely to leave because they are dissatisfied with the company’s management than
because of the company’s commission split. According to a study conducted by Abelson & Co., 55 percent of the top producers were
dissatisfied because low producers are not terminated, 35 percent cited conflicts with others in the office, and 18 percent cited
conflicts with the manager.
Sales associates are more likely to leave because they are dissatisfied with the company’s
commission split than because of the company’s management.
True
Fals
e
ID: RE_31379
The statement is FALSE. Incentives are ways for companies to recognize performance and encourage people to keep going. Because
people’s motives for working and responses to recognition differ, companies should employ a variety of incentives to reward and
To motivate employees, companies should avoid using incentives, as they likely will
prove too costly to the company’s bottom line.
True
Fals
e
ID: RE_31373
The statement is FALSE. Independent contractors work in a less structured environment. An independent contractor (IC) signs a
service-for-hire contract in which the company engages the IC to achieve certain outcomes or objectives. The independent contractor
determines the methods used to accomplish these objectives. A written contract is used to define the responsibilities of the IC and the
company, but the contract cannot direct the independent contractor’s methods. Management cannot impose but can recommend,
suggest, or encourage certain behavior.
Independent contractors work in a highly structured, closely supervised environment.
True
Fals
e
ID: RE_31370
The statement is FALSE. Legally, evaluations must be clearly based on job-performance, not personality or character assessments,
and must be fairly and equitably administered for each person.
Performance evaluations should be based largely on personality and character
assessments.
True
Fals
e
ID: RE_31375
The statement is TRUE. A manage must also handle morale issues (jealousy, commission disputes, personality conflicts, and cliques)
that can turn a once positive, energized environment into an unpleasant place to work. The result can be turnover, and the litigation
over employee discrimination and harassment.
The most common employee-related problems that a manager must deal with involve real
estate transactions and breaches of company policies.
True
Fals
e
ID: RE_31377
The statement is FALSE. Self-evaluations are often quite constructive. Sometimes people are far more critical of their performance
than the manager might be. Self-evaluations also reveal what matters most to people about their performance and provides insight that
management may not have about what people are doing.
Managers should never ask their employees to complete self-evaluations.
True
Fals
e
ID: RE_31376
The statement is TRUE. If the sales associate is an independent contractor, mutual agreement over performance standards is essential.
The manager can identify what needs to be done based on the company’s business plans and budgets.
Personal plans are developed as a team effort with the manager providing guidance.
True
Fals
e
ID: RE_31372
The statement is TRUE. Performance is a two-way street. The company must uphold its end of the bargain by providing the leadership
and a supportive, energized work environment.
Performance management consists of identifying performance criteria and then using that
criteria to encourage, improve, evaluate, and reward performance.
True
Fals
e
ID: RE_31371
The statement is TRUE. When the time comes to administer variable, or performance-based, pay, the company must ensure that the
pay is properly benchmarked to performance. The company must have defensible evidence to justify pay decisions to avoid violations
of equal employment laws
A variable pay plan is designed to reward for past performance and be an incentive to
perform well in the future.
True
Fals
e
ID: RE_31374
The statement is TRUE. The manager needs to speak with the employee about the problem. The conversation needs to end with a
description of what the manager intends to do to handle the situation and a commitment to that course of action. The manager only
makes matters worse if the person feels that frustrations have fallen on deaf ears.
If the manager is the source of an employee-related problem, the manager is responsible
for finding a fair solution.
True
Fals
e
ID: RE_31378
Unit Exam 16
The answer is CONSIDER WHETHER IT’S APPROPRIATE TO TERMINATE THE SALES ASSOCIATE. To show fair and evenhanded application of the rules and penalties, the company may have to consider letting even a top producer go. The company should
document warnings, evidence of the conduct, etc. Termination is always the last resort.
The company’s top producer has violated a company policy. You have had several
discussions with the person about this and the sales associate agreed to ways to prevent
this from happening again. When you find out the problem has reoccurred, your next step
is to
consider whether it’s appropriate to terminate the sales
associate.
exempt the sales associate from the policy.
investigate to see if other sales associates are doing the same
thing.
change the company’s policy to retain the top producer.
ID: RE_31680
The answer is DISCUSS A WORKER’S PROGRESS AND PLANS. The primary purpose of a performance interview is to mutually
understand the results of the evaluation and to plan for the coming year.
The primary purpose of a performance interview is to
criticize what a person does.
discuss a worker’s progress and plans.
identify a worker’s faults so that they can be
corrected.
identify whether a person should be terminated.
ID: RE_31677
The answer is ENCOURAGE THEM AND SHOW HOW THEY WILL BENEFIT FROM YOUR SUGGESTIONS. The way to
manage independent contractors is to encourage them and show how they will benefit from your suggestions.
The way to manage independent contractors is to
ignore their status and do whatever it takes to reach the company’s
goals.
resign yourself to the fact that they can’t be managed.
set production quotas they are required to achieve.
encourage them and show how they will benefit from your
suggestions.
ID: RE_31672
The answer is INQUIRE ABOUT THE REASON FOR LEAVING. When a sales associate walks into your office and announces that
he or she is leaving the company, you should inquire about the reason for leaving.
When a sales associate walks into your office and announces that he or she is leaving the
company, you should
ask the person to clean out his or her desk
immediately.
increase the commission split to keep the sales
associate.
inquire about the reason for leaving.
protect your company from sabotage.
ID: RE_31679
The answer is MAKING DIFFERENT RULES FOR DIFFERENT PEOPLE. Sometimes, management can do some pretty
counterproductive things, such as making up different rules for different people, or treating people as though they can’t be trusted, etc.
The coaching role of the manager of a real estate office is all of the following EXCEPT
coaching.
solving problems.
being responsible for the workplace
environment.
making different rules for different people.
ID: RE_31671
The answer is BE FAIR AND OBJECTIVE WITH EACH PERSON. The legal reality of evaluations is they must be clearly jobperformance based, and fairly and equitably administered for each person. Otherwise, the company can have significant legal
exposure.
One of the major challenges for a manager when evaluating people’s performance is to
find the time to do this.
be fair and objective with each person.
overcome the resentment of independent sales
associates.
keep productive sales associates from leaving.
ID: RE_31676
The answer is BOTH CAN BE HARMFUL UNLESS EVERYONE HAS A CHANCE TO WIN OR BE RECOGNIZED. Generally,
companies should try to develop contests and awards that are attainable in some way by almost everyone. One of the problems with
using contests and award programs as incentives is that sometimes the same people win over and over again, thus demoralizing the
rest of the staff.
How effective are contests and award programs as incentives?
Contests are more effective than award programs.
Both can be harmful unless everyone has a chance to win or be recognized.
Both are suitable for employees but not for independent contractors.
The licensing laws prohibit tangible prizes but not intangible awards such as
recognition.
ID: RE_31674
The answer is NEGATIVES. A dictatorial manager is most likely to see fear, embarrassment, reprimand, and criticism as incentives
for people to change behavior. At best, these only work momentarily.
Which of the following incentives is most likely to be favored by a dictatorial manager?
Praise
Bonuses
Negative
s
Contests
ID: RE_31675
The answer is ADDRESS THE PROBLEM WITH THE SALES ASSOCIATE AND AGREE ON A SOLUTION. If the manager has
a problem with something a sales associate has done, the manager should address the problem privately with the sales associate and
together, they should agree on a solution.
If the manager has a problem with something a sales associate has done, the manager
should
ignore the problem if the sales associate is an independent contractor.
talk to other sales associates to find out what they think about what the sales associate has
done.
address the problem in the next sales meeting to find a solution.
address the problem with the sales associate and agree on a solution.
ID: RE_31678
(17)Monitoring Operations
LEARNING OBJECTIVES
After completing this unit, the student should be able to


calculate a company's gross income from the total of the sales associates' income;
and
list at least three important considerations when conducting customer surveys. ID:
RE300781_C1731073
INTRODUCTION
Do you know how effective your advertising is? Are you over or under budget?
Is your income ahead or behind budget so far this year?
Are your customers and clients satisfied with your service?
The core of the monitoring function is statistics and reports, the quantitative evidence that
management needs to accurately assess the company's activities. Management must
develop the required procedures to collect the necessary information, and its success in
this endeavor is a function of how well they are designed. Management needs the
cooperation of everyone in the organization to gather accurate information, so ease and
efficiency are critical. ID: RE300781_C1731074
If the information is worth gathering, it's worth using. Information tells powerful stories
that need to be read periodically throughout the year. Is the organization taking all the
steps necessary to maximize income? Are expenses under control and as effective and
productive as possible? And because the future of the company depends on its reputation
with consumers, what does the company's customer service report look like? ID:
RE300781_C1731075
MANAGEMENT OF INFORMATION
Managers must ensure that paperwork and data collection and retention procedures
comply with the laws. In Florida, brokers must retain documents relating to listings, sales
and escrow accounts for at least five years. The broker should request guidance from
legal counsel to determine which other records that should be retained, and for how long.
ID: RE300781_C1731076
Much of this information is useful for monitoring the company's activities. The data that
should be



accurate,
complete, and
timely. ID: RE300781_C1731077
Sometimes the information that is important to management is not important to the
people who fill out the forms. Forms and reports must be easy use and procedures
developed to



manage the flow of information and paper, including what, where, how, when, and
by whom forms, reports, documents, and data are processed.
specify who has access to what data and files to ensure that accuracy and
confidentiality (where appropriate) are protected. Procedures should specify what
must remain onsite, what is permitted offsite (including in the sales associate's
possession), and what information can be released (and by whom) to outsiders.
maintain and retain data, files, and records as required by law. ID:
RE300781_C1731078
Transaction or Service Files
Transaction files should be sufficiently complete to comply with Florida's license law,
including contracts, disclosures, closing cost statements and escrow documents. The
license law is usually quite specific about the way escrow funds must be handled, so
transaction files should include a paper trail to track funds from the time they are
received by the sales associate through each step along the way until funds are deposited
and then released.
All of this documentation puts the company on sound footing with respect to legal issues,
and transaction files can also provide a lot of information about the organization's listing
and sales activities to help better manage the company. ID: RE300781_C1731079
Listing Activities
Management can monitor listing activities by reviewing the listing dates and prices in
comparison with the results of the contracts.




How long are listings on the market?
What's the difference between the listing and the actual selling price?
How many listings terminated or expired?
What is the source of the listing contacts?
Where are the listings located? ID: RE300781_C1731080
Sales and Closing Activities
When the pending sales files are compared with the closed transaction files, management
can learn how well buyers and sellers are being serviced. One of the most significant
pieces of information is the cause of contracts failing close.








Were buyers not properly qualified?
Are appraisals coming in low?
Are there problems with home inspection reports?
Are certain types of mortgage loans or lenders a problem?
Did buyers feel deceived, or were there misrepresentations?
Are contracts being lost because contingencies aren't being satisfied?
Were there defects in the way contracts were prepared?
How well were transactions prepared for closing?
If the company does not have a transaction coordinator on staff, all of the closing details
become the sales associates' responsibilities. Monitoring closings identifies tasks that are
overlooked and procedures that are needed to correct problems. ID:
RE300781_C1731081
License Records
Good license management procedures are critically important for the company to provide
its real estate services. Unlicensed persons should not be permitted to perform activities
for which a real estate license is required
Although a staff person could be assigned the responsibility of tending to the paperwork,
the broker is ultimately responsible for seeing that all requirements are satisfied. The
broker also should review the license records periodically to ensure that all associates'
licenses are active. ID: RE300781_C1731082
Personnel Records
Individual personnel files are important from a legal as well as a practical point of view.
Personnel files become a history of a person's affiliation with the company and provide
information managers need to know about the people are they are supervising. Personal
data; employment applications; independent contractor agreements (if applicable); wage,
salary, or commission records; manager's notes and reports from interviews with
personnel; performance reviews; and other information the company lawyer recommends
should be in the files. Because this is personal data, procedures are needed to limit access
to the files to preserve confidentiality. ID: RE300781_C1731083
MANAGING WITH INFORMATION
Senior management should review the balance sheet, cash flow statement, and income
statement, comparing the actual figures against the budget each month. Office managers,
division managers, and other staff people usually are responsible for reviewing the
reports that relate to their areas of responsibility.
Monthly review shows trends in the flow of money and production activity, and by
watching these trends, management can take corrective actions during the year if
warranted. By looking at the year's goals in comparison with year-to-date company
performance, management can see which efforts are on track and those that need
correction. ID: RE300781_C1731084
MAXIMIZING INCOME
Management must strive to maximize income, regardless of whether the company is
meeting projections or needs to take corrective steps to get back on track. A real estate
company typically gets income from sales or listings, and the better the quality, the better
the income. Quality service standards help maximize income. ID: RE300781_C1731085
Quality Service Standards
Customer satisfaction is a major priority in most business enterprises. That best chance
comes from giving quality service. This means that a company needs to define quality
service so that everyone, especially the sales associates, knows what is expected. Quality
service standards must become a priority in the company. ID: RE300781_C1731086
The 2002 Profile of Buyers and Sellers (based on 37,000 survey respondents who either
bought or sold during 2001) published by the National Association of REALTORS® says
a lot about the role of licensees and the link of services, especially for future business.
The survey's findings include:






Sellers of homes typically interviewed just one real estate sales associate before
selecting the person who ultimately sold the property.
Over half of the home sellers chose the sales associate based on prior interaction
with the person or based on referral from friends, relatives, or another brokerage
company.
Seven of ten sellers of homes said they would use the same sales associate in
future transactions.
Forty percent of sellers used the same real estate person who assisted them in
selling their previous home to help in the most recent purchase.
Almost half of the homebuyers first find the home they ultimately purchase
through the services of a sales associate.
The typical home search took seven weeks, during which the buyer visited ten


homes.
More than half of the homebuyers first learned about their real estate sales
associate from either prior experience or referrals.
Two-thirds of the buyers said they would definitely use the same sales associate
again in a future transaction. ID: RE300781_C1731087
Servicing sellers
Standards should be developed how the company services listings, and try to address
sellers' most common complaints:






Sales associates don't return phone calls.
Sales associates don't contact sellers frequently enough.
Sellers don't know what the sales associates are doing to get the property sold.
Sales associates make promises when the properties are listed that aren't fulfilled.
The property took too long to sell.
The closing didn't go smoothly. ID: RE300781_C1731088
Sales associates should explain the listing-to-sales process to the seller including what the
company and the sales associate intend to do throughout. Good communications will
minimize the problems. A comparative market analysis and a discussion about current
market conditions help avoid unrealistic expectations about price and the marketing time.
ID: RE300781_C1731089
ervice standards can include home warranty programs, referral or relocation services, or
discount programs. For risk-management purposes, service standards should also include
contract preparation and consumer protection issues such as agency, property, and leadbased paint disclosures. ID: RE300781_C1731090
Servicing buyers
Quality service standards for buyers should address brokerage relationship disclosures,
standards for preparing and negotiating sales agreements, and assisting the buyer through
the transaction to closing. Such services could include mortgage financing, home
inspections, home warranties, insurance, title closing services, referral programs.
Consumer protection and risk-management procedures, including procedures for
documenting the showings, conversations, and negotiations with a buyer should also be
addressed. ID: RE300781_C1731091
Quality Control
The next task is to monitor performance. Sales associate activities can be monitored with
information in the transaction files. Everyone involved in any aspect of customer service
should be accountable for doing his or her part. ID: RE300781_C1731092
Customer feedback
A customer service survey is designed to gather feedback about how the company and the
sales associate performed. No one should conclude business with the company without an
opportunity to critique the experience.
Keep several things in mind when conducting surveys:



Survey questions must be short and easy to complete.
Gather only information that the company plans to act on.
Develop a plan for reviewing the surveys and acting on the information. ID:
RE300781_C1731093
Don't overlook feedback from people who have terminated their relationship with the
company. The seller who terminates a listing or whose listing expires before the property
sells should be given an opportunity to critique the experience. This tells management
about corrective steps that might be necessary, but also reveals what the seller is
broadcasting to the community about the experience. Simply the act of soliciting opinions
can help defuse negative feelings. ID: RE300781_C1731094
Problem Solving
Management typically becomes the customer relations department. These are the irate
phone calls from a seller who's disturbed because his house hasn't sold or from the buyer
who's upset because her closing is delayed. Institutionalized customer service standards
will minimize these calls, but there will still be occasions when conflicts arise. ID:
RE300781_C1731095
The source of many problems is a misunderstanding that can easily be resolved by the
manager. The goal is to resolve the problem so that everyone feels at least satisfied, if not
victorious.
The first goal is to satisfy the customer. The earlier the intervention, the more likely the
matter can be resolved informally, rather than becoming the subject of litigation. But
before trying to develop a solution, get all the facts straight. Review information in the
transaction file and talk with the sales associate involved. Resolution may be easily
accomplished with phone calls to all of the parties, or in a meeting with all of the parties.
ID: RE300781_C1731096
The company, management, and the sales associate should present a united front to the
public and competitors. Don't disparage one another in front of outsiders. If the issue is
expected to become a legal problem, refrain from making any comments and seek legal
advice about how to proceed.
Once the matter is resolved, investigate the internal activities. Digressions from company
policy should be handled one-on-one with the individual sales associate, and solutions
should be developed to prevent problems from arising again. ID: RE300781_C1731097
MINIMIZING EXPENSES
As a practical matter, there's a limit to how much expenses can be cut before the
company's operations are seriously compromised. The advantage of frequent monitoring
is that areas where the company is over budget can be identified and management can
take corrective action. The following are cost efficiencies that can be considered. ID:
RE300781_C1731098
Telephone
A productive place to look for hidden expenses is in the phone bill. Duplicate charges and
charges for uncompleted calls often are hidden among legitimate charges. There are also
many ways that people can pirate access to an account and run up charges.
The company needs phone log procedures for long-distance calls so legitimate charges
can be identified. Discourage personal long-distance calls. Personal usage is less
problematic in recent years because of the number of people who have personal cell
phones.
Because of the competition among carriers, many discount programs and incentives are
available. In the case of long-distance service, carefully compare costs in addition to perminute rates to be sure the carrier selected is the best deal. ID: RE300781_C1731099
Computers
E-mail, has become commonplace. This is less expensive than the cost of duplicating
documents and sending by postal mail or fax. In-house printing can be more costefficient, especially when the time comes to revise the documents. ID:
RE300781_C1731100
Marketing and Advertising
Advertising is typically a real estate company's largest expense, after cost of sales.
Companies gather data about initial inquiries and include a line on the transaction report
to indicate the source of contact that actually resulted in a transaction.
Phone logs are important for identifying the marketing strategy that prompted the contact
and then comparing the number of contacts with the cost to determine the per-contact
cost. But this also means looking at the conversion of contacts to contracts to be sure that
the advertising is reaching the target audience and that sales associates are making the
most of the contacts. ID: RE300781_C1731101
Yard signs, newspaper advertising, and the Internet were indicated in the 2002 NAR
homebuyer and seller profile to be the most widely used marketing tools for listings. A
company may find that some strategies are more or less effective in its marketplace, and
select the strategy that actually results in business.
The Internet may generate enough traffic so the company can reduce the amount of
classified advertising. ID: RE300781_C1731102
Other advertising cost efficiencies can be achieved in several ways:





Proofread classified ads for typographical errors. Newspapers will usually give
credit for these mistakes.
Count the number of lines in the ads as they appeared and compare the number of
line charges on the bills.
Check the length of ads because it's possible that one or two fewer words can save
an entire line charge.
Check with the publisher to be sure that the company has the best deal. A package
plan may be cheaper than running an ad for only two days.
Look at the size of display ads. A half page may be just as effective as a full page,
or a quarter page may do instead of a half page. The savings can be substantial as
long as the quality or purpose of the ad is not compromised. Newspapers are also
willing to negotiate attractive contracts.
The company may have to consider shifting part of the advertising costs to the sales
associates. Great care should be taken to ensure the decision is fair, or the associates may
begin looking to other brokerage firms. ID: RE300781_C1731103
Postage
Put a scale in the office! If the mailing is lighter than the maximum weight for one stamp,
include a flyer or other promotional piece. Use second-day delivery rather than overnight
delivery when possible, and compare prices and services of various carriers. Encourage
people to choose packaging wisely, because a fraction of an ounce can push delivery cost
into the next price category.
Consider bulk mailing. The price of a bulk permit each year and the extra attention
needed to prepare the mailings properly are considerably less expensive than using firstclass postage for large mailings. The services of a mail house may be more cost-effective
than the cost of a staff person to stuff envelopes or fold flyers. ID: RE300781_C1731104
Economies in the Office
Have the utility company do an energy audit if the company is paying utilities. Even if a
staff person has to do the pickup and delivery of office supplies, the cost savings could be
worth the company time. Buy in bulk, provided the stock has a long shelf life, and don't
make all of the stock readily available, to discourage waste. ID: RE300781_C1731105
Use paper wisely. Don't skimp on the quality of the paper stock and graphics on the
company letterhead, but don't use them for interoffice communiqués or scratch paper.
Buy cheaper paper for this purpose, and scatter scratch pads generously around the office.
Test recycled paper in the computer printer or duplicating machine.
Keep track of yard signs and lockboxes. Use a log to identify locations where these items
are being used and the people who checked them out. ID: RE300781_C1731106
Salaries and Benefits
It's tempting to cut support staff when expenses are over budget. Consider ways to
economize by outsourcing some tasks or activities. A contractor's service might be
cheaper than salary and benefits for a staff person. Ask employees to pay part of their
benefits such as health insurance. ID: RE300781_C1731107
Costs of Sales
The cost of sales on the income statement includes all of the costs for commissions and
referral and franchise fees that are associated with the sales transactions. Before cutting
commissions to control costs, remember the rationale for setting the pay schedules in the
first place.
Pay attention to the number of in-house versus cooperating sales. Depending on
commission arrangements with the sales associates and other brokers, one way to
minimize costs is to encourage the sales associates to sell the company's listings. ID:
RE300781_C1731108
LOOKING INTO THE FUTURE
The company may decide that the way to cope with change is to expand its horizons and
grow the organization either vertically or horizontally. Vertical growth increases capacity
in current services. Horizontal growth increases the scope or number of services or target
markets the company serves. (See below.)
ID: RE300781_C1731110
LOOKING INTO THE FUTURE
Management that has been faithfully monitoring the company this year is already armed
with a considerable amount of the information needed to chart a profitable path for the
next year. ID: RE300781_C1731111
CONCLUSION
Monitoring the operations involves keeping in touch with all aspects of the business and
controlling activities and making adjustments where necessary. While there's nothing
quite so exhilarating as seeing the company exceed expectations, there's nothing quite so
unnerving as to discover that the company is struggling, especially if reserves are
dwindling. The information about the company can be used to either praise progress or
correct faults. Controlling should not restrict the organization, but rather should inspire
the company to grow by directing its resources to the most productive activities. ID:
RE300781_C1731112
Reading Comprehension Quiz 17-1
The statement is FALSE. Good license management procedures are critically important for the company to provide its real estate
services. Unlicensed persons should not be permitted to perform activities for which a real estate license is required
The importance of license management procedures is often overemphasized.
True
Fals
e
ID: RE_31382
The statement is FALSE. A customer service survey is designed to gather feedback about how the company and the sales associate
performed. The feedback gathered helps sales associates to become more effective professionals. No one should conclude business
with the company without an opportunity to critique the experience.
Customer service surveys should not be given to buyers and sellers, as the surveys might
contain negative feedback that demoralizes sales associates.
True
Fals
e
ID: RE_31386
The statement is TRUE. Good communications will minimize any problems. A comparative market analysis and a discussion about
current market conditions help avoid unrealistic expectations about price and the marketing time.
When working with sellers, sales associates should explain the listing-to-sales process,
including what the company and the sales associate intend to do throughout.
True
Fals
e
ID: RE_31385
The statement is FALSE. Feedback from people who have terminated their relationship with the company should not be disregard.
The seller who terminates a listing or whose listing expires before the property sells should be given an opportunity to critique the
experience. This tells management about corrective steps that might be necessary, but also reveals what the seller is broadcasting to
the community about the experience. Simply the act of soliciting opinions can help defuse negative feelings.
Management should disregard feedback from individuals who have terminated their
relationship with the company.
True
Fals
e
ID: RE_31387
The statement is TRUE. Don’t disparage one another in front of outsiders. If the issue is expected to become a legal problem, refrain
from making any comments and seek legal advice about how to proceed.
The company, management, and the sales associate should present a united front to the
public and competitors.
True
Fals
e
ID: RE_31388
The statement is FALSE. Real estate companies should consider bulk mailing. The price of a bulk permit each year and the extra
attention needed to prepare the mailings properly are considerably less expensive than using first-class postage for large mailings. The
services of a mail house may be more cost-effective than the cost of a staff person to stuff envelopes or fold flyers
Bulk mailing should be avoided, as they are costly and, when used as a marketing tool,
almost always ineffective.
True
Fals
e
ID: RE_31389
The statement is TRUE. Absent a transaction coordinator, the sales associates will need to monitor closing details, identifying tasks
that are overlooked and procedures that are needed to correct problems.
If a company does not have a transaction coordinator on staff, all of the closing details
become the sales associates’ responsibilities.
True
Fals
e
ID: RE_31381
The statement is TRUE. A real estate company typically gets income from sales or listings, and the better the quality, the better the
income
Quality service standards help to maximize a real estate company’s income.
True
Fals
e
ID: RE_31384
The statement is FALSE. Personal data; employment applications; independent contractor agreements (if applicable); wage, salary, or
commission records; manager’s notes and reports from interviews with personnel; performance reviews; and other information the
company lawyer recommends should be in the files.
An employee’s personnel file should not contain salary information, as this would breach
the employee’s right to privacy.
True
Fals
e
ID: RE_31383
The statement is TRUE. Transaction files need to be sufficiently complete to comply with Florida’s license law, including contracts,
disclosures, closing cost statements and escrow documents.
Transaction files need to be sufficiently complete to comply with Florida’s license law.
True
Fals
e
ID: RE_31380
Unit Exam 17
The answer is MISUNDERSTANDING. One of the major sources of dissatisfaction with a real estate company is miscommunication
or misunderstandings.
One of the major sources of dissatisfaction with a real estate company is
misunderstanding.
company cost-containment measures.
from sellers who are annoyed that buyers learn so much from the
Internet.
from cooperating agents who wanted their offer accepted.
ID: RE_31685
The answer is ACCURATE, COMPLETE, AND TIMELY. To ensure that management has the necessary information to adequately
monitor and evaluate a company’s operations, data must be accurate, complete, and timely gathered.
To ensure that management has the necessary information to adequately monitor and
evaluate a company’s operations, data must be
accurate, complete, and timely.
assembled on a computer
system.
assembled by clerical staff.
at least a year old to detect
trends.
ID: RE_31681
The answer is ANALYZE THE PER-CONTACT COST AND RETHINK THE DISTRIBUTION OF THE ADVERTISING
DOLLARS. Management should monitor the per-contact cost over the course of several months and then rethink the distribution of its
advertising dollars.
It is six months into the budget year and you discover that the company has already spent
75 percent of its advertising budget. What is the best course of action?
Cease all advertising until the last quarter of the year
Tell the sales associates that they will have to pay to advertise their listings for the rest of
the year
Analyze the per-contact cost and rethink the distribution of the advertising dollars
Change the budget to reflect the current pace of spending
ID: RE_31688
The answer is THE COMPANY IS WILLING TO ACT ON THE INFORMATION THAT IS GATHERED. Companies should only
gather information that it intends to act. Customers appreciate the opportunity to provide feedback, but they become dissatisfied if the
company doesn’t pay attention to what they say.
One of the most important issues to consider when deciding to survey customers is
whether
sales associates will resent their customers being surveyed.
other brokerage companies use customer surveys.
the company is willing to act on the information that is gathered.
the company has sufficient computer capability to compile results from the
surveys.
ID: RE_31687
The answer is AS AN ON-GOING PRACTICE TO ENSURE THE COMPANY’S FINANCIAL STABILITY. Management should
institute strategies to maximize income as an on-going practice to ensure the company’s financial stability.
At what time should management institute strategies to maximize income?
At the end of the year after it’s apparent the company did not meet its
goals
Only when it’s apparent that the sales associates’ production is lagging
When the company’s accountant recommends this course of action
As an on-going practice to ensure the company’s financial stability
ID: RE_31684
The answer is ESCROW OR TRUST ACCOUNT. The state’s licensing law requires that the real estate firm keep detailed records of
the escrow or trust accounts.
The state’s licensing law requires that the real estate firm keep detailed records of the
independent contractor agreements.
reasons for sales agreements falling
through.
length of time listings are on the market.
escrow or trust account.
ID: RE_31683
The answer is THEY CAN AVOID PROBLEMS THAT DIVERT PEOPLE’S EFFORTS FROM OTHER INCOME PRODUCING
ACTIVITIES. Quality control procedures are most useful when they assist in avoiding problems that divert people’s efforts from other
income producing activities.
When are quality control procedures most useful?
They are relevant in manufacturing companies but not in real estate brokerage
companies.
The cost of using quality control procedures does not reap sufficient benefit for the
company.
The quality of services is more important to the consumer than it is to the company.
They can avoid problems that divert people’s efforts from other income producing
activities.
ID: RE_31686
(18)Managing Risk
LEARNING OBJECTIVES
After completing this unit, the student should be able to


define the term for the incentive called status; and
calculate the market share for a brokerage firm given the firm's volume of sales
and the total market sales. ID: RE300781_C1831131
INTRODUCTION
What poses the greatest risk for your company?
What can you do to protect the company from these risks?
Risk is a given in the business world. Every business enterprise must learn to insulate
itself from threats to their enterprises and navigate an increasingly litigious environment.
Ours has become a nation whose court dockets are choked with lawsuits, and that's not
likely to change any time soon. But litigation is only one of the bolts of lightning that can
rock an organization's foundation. ID: RE300781_C1831132
PROTECTING THE INSTITUTION
There's a sense of comfort that can easily settle in when a company is making money and
manages to put out the daily brushfires as they flare. But there's more to consider about
the health and well being of the institution. ID: RE300781_C1831133
Brand
Call it brand, name, or goodwill, this is the company's reputation and prestige in the
marketplace. The name the organization attains is what gives it stature. Though it's an
intangible asset, brand or name has enormous effect on a company's position in the
marketplace and its future.
Protecting a company's name is crucial to the future of the organization. The reputation of
the institution rarely rises or falls on singular events. However, good deeds are easily
overshadowed by a few missteps in which consumers, investors, or people who work for
the company feel that trust has been violated. The broker must consider the jeopardy to
the bottom line if the company's reputation declines. ID: RE300781_C1831134
Licensing
A real estate broker must have a license to operate, and loss of that license means the
company is out of business. Because the broker is responsible for actions of his or her
licensees, the risk to the company increases with each licensee who comes to work. It's a
rare real estate company that says, “We can't hire any more licensees because we can't
keep track of them.” Certainly, the more licensees who work for you, the better your
supervisory and management skills need to be. Unfortunately, the larger the sales staff,
the greater the likelihood that the manager knows less about what licensees do. ID:
RE300781_C1831135
Some companies establish zero tolerance policies, refusing to hire anyone whose license
has previously been sanctioned or who has a criminal past. Associate pledges to observe
all license laws are meaningless unless the company institutionalizes procedures to
penalize violations.
The front line managers, the sales managers, are the company's most critical defense.
They must be diligent about investigating how people are conducting the company's
business. Customer service reports and transaction report forms and one-on-one
conversations with sales associates are useful ways to gather this information. ID:
RE300781_C1831136
Leadership
What happens if the broker, whose real estate license the entire entity depends on, dies?
What happens if any member of the management team suddenly departs, whether by
virtue of a better offer elsewhere, a change in career, retirement, a temporary disability,
or a terminal illness? ID: RE300781_C1831137
n Florida, corporations or partnerships that lose the sole broker by death or resignation
have 14 days to replace the broker or the corporate license is canceled. Confronting the
reality that an organization needs to have a succession plan is simply good business. The
organization needs, at a minimum, a plan for how responsibilities will be divided until a
suitable replacement is found, or temporarily assigned if the vacancy is not permanent.
Better still is a plan for identifying suitable replacements. ID: RE300781_C1831138
RISK MANAGEMENT CULTURE
Although a company can prepare financially by setting aside reserves for a litigation fund
or purchasing liability insurance, there are better ways to protect the company and direct
the company's financial resources to productive endeavors.
A risk management culture is an environment that assigns responsibility for managing
risk to everyone in the organization. This is a proactive environment that identifies
potential threats and assembling the processes, structures, and tools to eliminate or
minimize risk to the organization. In other words, the company takes a positive approach
to risk by building offensive strategies. ID: RE300781_C1831139
Identify Risk
Risk arises primarily because of ignorance, carelessness, or breach of a company policy
or procedure. There are things management should be looking for in its information
systems, workplace relations, and external or public relations. Many involve practices
that are fundamental simply because of the nature of the real estate business.





Advertising: Legal and business risks arise in what is said and how the
company's services, listings, and employment opportunities are portrayed. Equal
employment and housing laws are a particular concern, but so also are the
company's brand and reputation.
Antitrust: These are issues that create vulnerability under federal antitrust laws.
Price fixing, group boycotting, territorial assignments, and tying agreements are
all practices specifically prohibited.
Cultural diversity: These are issues that relate to the rights and practices in the
workplace and the marketplace, cultural awareness, and people's attentiveness to
appropriate behaviors with respect to race, ethnicity, gender, and the like.
Disability: Practices that fail to enable people with disabilities to access the
company's services and facilities and failure to properly accommodate these
people in the workforce violate the Americans with Disabilities Act and Florida
law.
Employee-at-will and equal employment laws: These are issues that arise from
a number of employment laws that affect recruitment, hiring, training,
advancement, discipline, and firing practices as well as pregnancy, family and









medical leave, military service considerations, and wage and salary laws.
Practices that target older workers (persons age 40 or older) and terminate any
worker without just cause and due process in accordance with employment-atwill, or EAW, also create vulnerability.
Fair housing: These are practices relating to federal, state, and local laws that,
whether by intent or effect, discriminate against persons seeking housing for sale
or rent because of their race, color, religion, sex, handicap, familial status,
national origin, and perhaps others as defined by state or local law. Failure to
display equal opportunity notices as prescribed by a law is also a violation.
Financial management: Vulnerabilities lie in the way client funds are handled
(license law issue) and financial obligations (debt payments or tax filings) are
managed and the vulnerability of company assets (money and equipment) to
tampering or misappropriation.
Harassment: A workplace environment that tolerates offensive behavior or fails
to respond to allegations of harassment is vulnerable under equal employment
laws, with sexual harassment being the most common issue.
Internet: The vulnerability of the company's database can cause major disruption
in business. The misuse of intellectual property either by the company or its staff
infringes on copyright, trademark, or business method patents. A company that
fails to protect its intellectual property also loses assets it thought were preserved.
Property conditions: These are the issues that relate to the real estate that is the
subject of transactions, particularly conditions that statutory or case law has
determined are material to a purchaser's decision. Florida law requires that
licensees disclose facts that materially affect the value of residential property and
are not readily visible.
Vulnerability can also arise from the way environmental conditions are handled,
common issues including the following: asbestos; lead-based paint (including the
Residential Lead-Based Paint Hazard Reduction Act); molds; PCBs; radon; toxic
waste sites and landfills; underground storage tanks; and urea formaldehyde.
Relationships: These are the issues that affect the way licensees work with
customers, beginning with legal requirements for disclosure of relationships to the
way sales associates handle their required responsibilities during a transaction.
RESPA: These issues relate to practices governed by the Real Estate Settlement
Procedures Act, including disclosures of settlement charges and affiliated business
arrangements (AfBAs) and payments of kickbacks and prohibited referral fees.
Workplace safety: In addition to OSHA (safe workplace laws), civil actions
could arise if workers or visitors to the place of business are injured on the
premises. The company must also be vigilant about dangerous or threatening
behavior. ID: RE300781_C1831140
A company can be vulnerable in any of these areas because of either a lack or inadequacy
of a policy or procedure to protect the organization. Frequently, however, the protective
mechanisms that for a variety of reasons fail to work the way they were intended. In
many cases, this occurs because management has fallen short on its enforcement
responsibilities or allowed rules to be ignored.
Assessment of risk requires looking all the company's operations. Another place to look
is the problems that are the brushfires management has had to fight. Yes, they represent a
breakdown in the company's offense but they say here are loopholes that need to be
closed. ID: RE300781_C1831141
Analyze Risk
This step in the process involves an analysis of the review made in the prior step. The
purpose is twofold: One is to analyze how the threat occurs. The other purpose is to
analyze the level of risk to the organization. In other words, how serious the threat is
from a financial, legal, or public relations point of view. This helps management close the
most dangerous loopholes first. Routine patterns or practices that are subjects of law and
recent civil litigation should get management's attention. ID: RE300781_C1831142
Evaluate Alternatives
This step identifies ways that the company can protect itself. What processes, systems, or
tools should be created or enhanced? A range of possibilities may exist, or perhaps there's
only one logical solution. Even if the risk is something that the organization can't do
anything about, the organization can be proactive by planning suitable defensive
strategies ahead of time. ID: RE300781_C1831143
Solutions can come in the form of more diligent oversight of company procedures and
staff behavior, new or revised procedures, or staff training.
One of management's most useful tools is the company's policies and procedures manual,
especially the way risk issues are addressed. The manual can be clear written evidence
about how processes are to work and people are to behave. While the benefits of a
manual should not be underestimated, failure to enforce policies compromises the
defense of the organization in the event of litigation.
The sales associates conduct themselves in a transaction makes the company vulnerable
unless certain procedures are established.


Sales training: A well-trained staff is one of a company's most powerful risk
management assets. Training is more than how to sell and make money. Training
should form a basis for ethical and legal conduct in the process and foster a
pattern of behavior in which consumer rights and laws are faithfully observed.
Discover, disclose, and document: The attentiveness of the sales associates to
any condition about a property that could materially affect a consumer's decision
is also effective risk management. A vigilant posture involves a process in which
sales associates observe (within the limits of their expertise) and facilitate
professional inspections to discover and disclose defects or environmental
conditions and then document the disclosures that have been made. ID:
RE300781_C1831144
Documentation may be a property disclosure form, a professional inspection report,
acknowledgment of conditions in a sales contract or lease agreement, and/or a trail of
notes and correspondence in the transaction file that document conversations between the
sales associate and the consumer. In fact, any notes, including telephone and appointment
logs, can provide protection, especially in the event of litigation.

Customer satisfaction: Attentiveness to customer service goes a long way
toward insulating the company. Establishing quality service standards should
contribute greatly, especially when those standards include educating buyers and
sellers about the “rules of the game” when they begin working with the company.
Although no one can prevent a person who feels harmed from pursuing his or her legal
rights, many times these actions can be averted with management's attention to a
customer complaint and attempt to resolve the differences. ID: RE300781_C1831145
Handling a Risk
This is the step in which management decides on the most suitable course of action,
implements it, and then follows up to ensure that the risk has been contained. ID:
RE300781_C1831146
Additional Offense
The importance of a lawyer and accountant can't be overemphasized. One of the most
valuable lines in the company budget is their monthly retainer and the roles they play at
management team meetings and at company events.
Will you take their advice, even if they don't tell you what you want to hear? Are you
going to search until you find someone to give you the answer you want? Or are you
going to ignore the professionals' advice entirely? Second opinions can be useful, but
ducking the facts can be risky business. Lawyers and accountants can't defend
indefensible actions. ID: RE300781_C183114
Another valuable resource arises from relationships the company develops with state
licensing authorities and fair housing agencies. These agencies can be useful for
clarifying the laws and answering specific questions. Everyone on the management team
should have the phone numbers of these agencies and the most recent versions of their
laws. Florida statutes and the Rules of the Florida Real Estate Commission are available
on the Internet.
The object of risk management is to protect the organization, not to bog it down in
procedures and paperwork. As people behave in ways that are attentive to risk, the
practice becomes second nature. ID: RE300781_C1831148
DEFENSE IN RISK MANAGEMENT
One of the ways to guard the company is with processes, systems, and tools that enable
the organization to present a suitable defense should that become necessary.
Regardless of how attentive management is to protecting the institution, even the best
intentions will not prevent an allegation of misconduct. It may come in the form of a
human relations complaint or a court summons.
Once an allegation is made, the company has to direct considerable financial and human
resources to defending against the charges. ID: RE300781_C1831149
Power of Information
Information empowers the organization to manage risk. Real estate industry Web sites
provide valuable legal references, including analysis of practices and summaries of recent
litigation. Complete texts of the laws are also available on the Internet, including
government sources that administer the laws. ID: RE300781_C1831150
Some of the most significant laws relate to









antitrust laws,
disclosure laws (agency and property conditions),
environmental laws,
fair housing laws,
ADA,
equal employment laws (including antiharassment),
RESPA (including pending regulations regarding AfBAs and pending regulations
involving referral fees and disclosures),
Foreign Reinvestment in Real Property Tax Act, and
intellectual property laws. ID: RE300781_C1831151
Another way to gather information involves assembling the information that the company
may need to protect itself in the future. A company will have a much more difficult time
resolving an allegation or building a defense for a formal proceeding without the proper
ammunition. The most persuasive ammunition is the documentation in the company's
transaction files, personnel files, and the policies and procedures manual. ID:
RE300781_C1831152
Insurance
Insurance is the part of a risk management defense that intends to shield the company
from financial impacts. While the cost of insurance can be a considerable expense, it will
return great benefits if it is ever needed. The company normally insures for a number of
events.
The first is workers' compensation that protects people against loss of income due to
injuries sustained on the job. Workers' compensation insurance is a statutory requirement
for employees. ID: RE300781_C1831153
Another is liability insurance. This comes in many forms, but automobile liability is the
most common. Insist that each sales associate carry an adequate amount, which in today's
economy should be at least $300,000 per person, $500,000 per accident, and $100,000 for
property damage. Verify their coverage yearly. In addition, the company can get an
umbrella policy to cover its liability over and above that of each sales associate in the
event of an accident while on company business.
Other types of insurance include liability insurance to cover injuries to clients or
customers on the company's premises, fire, and comprehensive coverage for equipment,
replacement of records, and business interruption insurance. ID: RE300781_C1831154
Errors and omissions (E & O) insurance is very important. The company's E & O
insurance covers certain claims against the company because of the actions of the sales
associates. In addition, licensees should have their own coverage, or the company could
offer a group policy in which the sales associates can participate. E & O insurance
includes the legal defense against a claim as well as damage awards for insurable events.
Violations of the law are normally excluded from coverage. ID: RE300781_C1831155
Dispute Resolution
The legal system in this country is designed to ensure that justice is served. Nevertheless,
the system is stressed to its limits, particularly with civil matters. Both the plaintiff and
the defendant incur sizable legal bills awaiting a resolution.
Mediation and arbitration are alternatives for resolving disputes in a speedy, affordable
manner. In mediation, the parties sit with an impartial person and negotiate a resolution to
their dispute. Arbitration involves an arbitrator who takes testimony from both sides of a
case, then, arbitrator renders a finding decision.
Brokers often recommend these mediation or arbitration to buyers and sellers because of
the speed of resolution and savings in legal fees. Some sales agreements include language
that requires the parties to resolve disputes in this manner. ID: RE300781_C1831156
Arbitration Between Brokers
Controversies between brokerage companies arise, usually over commissions.
Professional real estate organizations frequently offer their members an arbitration forum
in which these matters can be settled. The advantage is a speedier, less-costly way to
resolve these controversies. ID: RE300781_C1831157
CONCLUSION
The purpose of risk management is to be attentive to threats to the organization. All of
management's efforts to monitor activities to keep the organization on course are
insufficient to truly insulate the institution from risks that are inherent in doing business.
A risk management culture infuses the organization and its systems, processes, and
people with vigilance to risk. An organization manages risk not just in the way it attempts
to avoid the indiscretions that create vulnerability but also in the ways it prepares to
defend itself should the need arise. ID: RE300781_C1831158
Reading Comprehension Quiz 18
The statement is FALSE. In Florida, corporations or partnerships that lose the sole broker by death or resignation have 14 days to
replace the broker or the corporate license is canceled.
In Florida, corporations or partnerships that lose the sole broker by death or resignation
have six months to replace the broker; otherwise, the corporate license is canceled.
True
Fals
e
ID: RE_31392
The statement is FALSE. The importance of a lawyer and accountant can’t be overemphasized. One of the most valuable lines in the
company budget is their monthly retainer and the roles they play at management team meetings and at company events.
Real estate companies often overemphasize the importance of working with a good
lawyer and accountant.
True
Fals
e
ID: RE_31395
The statement is FALSE. Regardless of how attentive management is to protecting the institution, even the best intentions will not
prevent an allegation of misconduct. It may come in the form of a human relations complaint or a court summons.
If management takes all the appropriate steps, a real estate company will never face an
allegation of misconduct.
True
Fals
e
ID: RE_31397
The statement is TRUE. The manual can be clear written evidence about how processes are to work and people are to behave. While
the benefits of a manual should not be underestimated, failure to enforce policies compromises the defense of the organization in the
event of litigation.
One of management’s most useful tools is the company’s policies and procedures
manual, especially the way risk issues are addressed.
True
Fals
e
ID: RE_31394
The statement is TRUE. These agencies can be useful for clarifying the laws and answering specific questions.
A real estate company needs to establish good relationships with state licensing
authorities and fair housing agencies.
True
Fals
e
ID: RE_31396
The statement is TRUE. Workers’ compensation insurance, which protects people against loss of income due to injuries sustained on
the job, is a statutory requirement for employees.
Workers’ compensation insurance is a statutory requirement for employees.
True
Fals
e
ID: RE_31399
The statement is FALSE. Though it’s an intangible asset, a brand or name has an enormous effect on a company’s position in the
marketplace and its future.
As an intangible asset, a brand or name has little effect on a company’s position in the
marketplace.
True
Fals
e
ID: RE_31390
The statement is TRUE. Because the broker is responsible for actions of his or her licensees, the risk to the company increases with
each licensee who comes to work.
A broker’s liability risk increases with the addition of each new licensee.
True
Fals
e
ID: RE_31391
The statement is FALSE. A risk management culture is an environment that assigns responsibility for managing risk to everyone in
the organization. This is a proactive environment that identifies potential threats and assembling the processes, structures, and tools to
eliminate or minimize risk to the organization. In other words, the company takes a positive approach to risk by building offensive
strategies.
A risk management culture assigns the responsibility for managing risk squarely on the
shoulders of managers, deflecting the risk away from sales associates.
True
Fals
e
ID: RE_31393
The statement is TRUE. A company will have a much more difficult time resolving an allegation or building a defense for a formal
proceeding without the proper documentation, including the company’s transaction files, personnel files, and the policies and
procedures manual.
Documentation represents the most effective means of building a defense against
allegations of misconduct.
True
Fals
e
ID: RE_31398
Unit Exam 18
The answer is FOSTER A PATTERN OF BEHAVIOR IN WHICH CONSUMER RIGHTS AND LAWS ARE OBSERVED. Sales
training should be more than how to sell and make money. It should form a basis for ethical and conduct in the process.
Which of the following sales training could be a valuable tool to minimize risk?
Encourage sales people to take short cuts to “get the deal done”
Allow sales associates to “fill in the blanks” after the fact
Foster a pattern of behavior in which consumer rights and laws are
observed
Engage in practices that contradict the company’s ideals
ID: RE_31699
The answer is IS A WAY OF APPROACHING RISK FROM A POSITIVE POINT OF VIEW. A proactive approach to risk
management is a way of approaching risk from a positive point of view.
A proactive approach to risk management
burdens the company with extra procedures that may never be
needed.
is a way of approaching risk from a positive point of view.
is unnecessary if the company has adequate cash reserves.
distracts sales associates from concentrating on production.
ID: RE_31691
The answer is KICKBACKS AND CERTAIN REFERRAL FEES. The Real Estate Settlement Procedures Act (RESPA) specifically
prohibits kickbacks and payment of certain referral fees. The fair housing laws prohibit steering and blockbusting and the antitrust
laws prohibit price fixing.
The Real Estate Settlement Procedures Act (RESPA) specifically prohibits
kickbacks and certain referral
fees.
steering and blockbusting.
price fixing.
workplace harassment.
ID: RE_31698
The answer is SALES ASSOCIATE VIOLATES THE STATE LICENSE LAW. The real estate company is far more likely to be
affected by something one of its sales or broker licensees does in violation of the state license law. While it is possible that the broker
could be arrested for fraud or drug trafficking or even embezzlement, a license law violation is more probable.
There are many events that can propel a company into a crisis. Which of the following is
most likely to affect a real estate company?
Principal broker arrested for fraud
Manager in jail because of drug
trafficking
Sales associate violates the state license
law
Bookkeeper embezzles trust funds
ID: RE_31695
The answer is CREATING A PROACTIVE, RISK MANAGEMENT CULTURE. The best defense is to develop a proactive, risk
management culture that requires responsibility from everyone in the organization.
Which of the following is most effective for managing risk?
Dousing the brushfires as they flare up
Hiding vulnerabilities
Budgeting for costs to bail the company out of
problems
Creating a proactive, risk management culture
ID: RE_31697
The answer is PROTECT PEOPLE AGAINST LOSS OF INCOME DUE TO INJURIES SUSTAINED ON THE JOB. The purpose of
workers’ compensation is to protect people against loss of income due to injuries sustained on the job.
The purpose of workers’ compensation is to
protect employees against loss of income due to any illness or
injury.
pay the company’s legal costs to defend a lawsuit.
compensate the company for loss due to the interruption of business.
protect people against loss of income due to injuries sustained on
the job.
ID: RE_31693
The answer is THEY ARE INVALUABLE RESOURCES FOR CLARIFYING LAWS AS YOU CONDUCT BUSINESS. Real estate
licensing authorities and fair housing agencies are invaluable resources for clarifying laws as you conduct business.
Is there any reason for a broker to maintain any relationship with licensing authorities and
fair housing agencies?
They are invaluable resources for clarifying laws as you conduct business.
They are your adversaries and management should keep its distance from
them.
Contacts with them should be handled through the company’s attorney.
Their job is to enforce their laws and not provide information.
ID: RE_31692
The answer is DISCOVER, DISCLOSE, AND DOCUMENT. Today, the best attitude for dealing with risk is to encourage licensees
to discover, disclose, and to document everything.
Which of the following attitudes is most valuable for managing risk in a real estate
office?
See nothing, hear nothing, say
nothing
Discover, disclose, and document
Buyers are liars and sellers are too
The best deal is the done deal!
ID: RE_31700
The answer is FAIR HOUSING LAWS. Failure to display equal opportunity notices could be consider a violation of the fair housing
laws.
Failing to properly display an equal opportunity notice could be a violation of
the antitrust laws.
fair housing laws.
workplace safety
laws.
disability laws.
ID: RE_31696
The answer is YES, BECAUSE IT IS OFTEN LESS EXPENSIVE FOR AN ARBITRATOR INSTEAD OF A JUDGE OR JURY TO
RENDER A DECISION ABOUT A DISPUTE. The arbiter hears testimony from both sides and then renders a decision. Arbitration is
often speedier and less costly to resolve certain controversies.
Is there any value to the use of arbitration?
No, it is more costly to resolve disputes through arbitration than in court.
No, arbitration cannot be used to resolve disputes in real estate transactions.
Yes, because it is often less expensive for an arbitrator instead of a judge or jury to render a decision about a
dispute.
Yes, because the parties in dispute negotiate a resolution with one another in the presence of an impartial third
person.
ID: RE_31694
(19)Instructions for the Final Exam
IMPORTANT INFORMATION ABOUT THE FINAL EXAM
The final exam in this course is designed to measure your understanding of the course
content. Please note the following:








You must have completed your online prelicense course before taking the end-ofcourse final exam.
You have ONE opportunity to complete this final exam. If you pass, you will be
given instructions on how to submit your results. If you do not pass, you must
wait at least 30 days to take the alternate exam. To help you study for the alternate
exam, you will have access to this course for one year. Please contact your school
for further information.
The final exam consists of 50 questions.
The pass rate for the final exam is 75%.
Bookmarking is not allowed.
Read the question carefully, select the answer you believe to be correct, and click
Next.
You have 1½ hours to complete this exam. If you have not completed the exam
within the time limit, all unanswered questions will be marked incorrect.
When you have answered the last question, click Finish to turn in your exam. ID:
RE300781_C1931179
(20)Final Exam