Real Estate Office Administration

1. Real Estate Office Administration Real Estate Brokers’ Program Barbara Grodaes

2. What to do to Start a Brokerage? • Plan a Real Estate Brokerage • Establish an office • Plan Administrative Systems • Market and Promote the Real Estate Brokerage • Plan for your Financial RecordsDo all this and you have Office Administration at work!

3. Your Personal Goals • Why do you want to start up a brokerage? • Will developing and managing a brokerage meet your personal and professional needs? • Do you have the necessary skills to attract, manage, train and motivate others? • Do you have the necessary finances to start and maintain a brokerage?

4. Identify you! • Personal Strengths? • Personal Weaknesses? • Determine what you want to achieve. • Are business and personal goals compatible? • Where are you on your career path? • When do you hope to retire? • How will a brokerage help you fulfill your retirement plans?

5. Business Plan • Blueprint for planning and building. • Set clear goals and objectives. • Success is based on planning and organization. • Share your goals with your agents and employees. • Plan includes every essential detail that is necessary to consider. • Put the plan on paper.

6. Make your plan concrete • This plan determines whom you hire, your budget, sources of working capital, the legal structure of your brokerage, office set-up, equipment, financial record system, and marketing plan. • Recording this plan in one document helps you focus and starts you on your way to success.

7. Categories to address • Business Profile • Financing Needs • Business Financial Statements • Personal Financial Statement • Market Research • Brokerage Specialization • Brokerage Style • Ownership Decisions

8. Brokerage Specialization • Residential Real Estate • Rural Real Estate • Commercial Real Estate • Property Management Real Estate • Seller Brokerage • Buyer BrokerageAlberta trend is toward increased specialization. Best strategy is to limit to your area of experience.

9. Brokerage Style • Styles can be adapted to suit your particular needs. • Different styles will have different concerns. • Franchise vs. independent brokerage have various pros and cons for each. • Do a cost/benefit analysis when considering the several different styles.

10. Ownership Decisions • Sole Proprietorship • Partnership • Corporation • Start New Brokerage or Buy an Existing OneThere are advantages and disadvantages for each form of ownership and you need to consider all perspectives.

11. Evaluate Compensation Packages • Effective packages accomplish 3 things: • Attract qualified applicants resulting in increased productivity. • Retain good employees. • Motivate employees to perform at higher levels of production or sales.

12. Examples of Compensation • Straight Salary • Straight Commission • Combination Salary and Commission • Bonuses • Commission Plans • Related to sales volume • Sliding commission • Shared commission • Monthly Fee • Transaction Fee

13. Choose a Visual Identity • There are many benefits of brand-name awareness. • Choose special colours, a logo, mascot, and slogan. • Adopt a visual identity to represent your brokerage in the community. • Carefully choose this identity and be consistent to attract attention over the long term to become linked with your brokerage in the public eye.

14. Assessing Success • Your brokerage’s goals are the benchmarks by which you can measure your success. • Choose goals that can be measured. • Underlying goals may direct the day-to-day activities of the brokerage. • Adapt to changing circumstances. • Create a Plan B. • Review goals regularly.

15. Mission Statement • A concise declaration of the brokerage’s overall purpose and direction. • Should embody and promote the corporate values of the organization. • Provides a central reference point for the development of specific operating objectives. • Should show what your goals are and how you plan to achieve them.

16. Recruiting Agents • Each brokerage has something unique to provide agents with the edge to compete successfully. • Current trend is one-stop shopping. • Brokerages are distinguished from each other in 4 ways: • Physical environment • Management • Image and marketing tools • Compensation.

17. Recruiting, Recruiting • Each brokerage develops its own personality based on its plan. • The business plan helps define your hiring criteria. • Hire the right people from the beginning for your reputation. • Do what is necessary to keep them. • Agents will stay with a brokerage with respect, recognition and compensation.

18. On-going Recruitment • Assume that 10 to 20% of people will leave every year. • Plan to recruit on an ongoing basis and allocate a monthly budget for it. • Recruiting is as important to a broker as prospecting is to an agent. • Achieve a balance between how many agents are needed to maintain the budget and how many the brokerage can afford to carry.

19. Financial Projections • Face-to-face research with bankers, loans officers, financial planners, and accountants. • Set up a good accounting system from the beginning. • Use proper budgeting and forecasting techniques yearly with a review every 6 months. • Compare budget to actual every month for control/correctives.

20. Contingency Plans • Minimize negative cash flow by cutting expenses, increasing revenue or both. • Plan for what to do if things do not work out the way you intend. • This will lessen stress resulting from unforeseen problems. • Prepare for unforeseen financial crises.

21. Financial Reporting Systems • Success depends on accurate and timely accounting and management. • Choose an accountant and an ongoing financial reporting system that is most useful to you. • Legislation requires some reporting. • You may choose other reports suited to your needs and interests. • Do monthly reports, quarterly reports and annual reports.

22. Sources of Working Capital • Sources of funding include: • Personal financial resources • Institutional financing • Outside sources such as partners, investors, family shares, co-operatives and syndicates. • Any outside sources of funds will involve personal guarantees and caveats.

23. Relationships • The greatest asset to your relationship with a financial institution is “trust”. • Get to know what credit rating and financial information the institution prefers and structure your business plan around that. • Put full disclosure of financial status and credit in your business plan. • Plan ahead.

24. Lending Options • Research as many as 5 financial institutions and pursue further detail with 3 (detailed investigations). • The strength of your business plan and your credit rating have a major impact on the decisions of financial institutions. • Some institutions are lenient, some may have seasonal quotas, some specific lending ratios – find out!

25. Establish a Brokerage Office • Understand how the Real Estate Act, administered by RECA, determines the legal requirements of a brokerage (provides framework). • Location, location, location! • Determine the equipment and furniture needs of your brokerage. • Should you lease or own? • Periodic review for continuance.

26. Location, Location, Location • Most applicable when choosing the location of your office. • Type of business and cost factors govern the location best suited. • Costs vary with location and type of structure. • Consider the amount of space you will need. • Consider the ease of access and parking.

27. Office Space • Review all your options before you decide whether to lease or to own. • There are many issues to consider for either owning or leasing. • Whatever you decide, you will likely have to make improvements to the space for the right look and feel. • You will need equipment and furniture.

28. “Need to Haves” • Desks, chairs, filing cabinets, round table • Photocopier • Fax machine(s) • Computer equipment and software • Telephone system • Paging systemCompare your options of cost for owning vs. leasing equipment.

29. Financial Records • Accounting and financial management are among the most important areas because they form the foundation on which the business structure stands. • Set up: • Assess the needs of the system. • Research available systems/methods. • Select/implement a system. • Spend time considering your needs.

30. Accounting Records • Reasons for Accounting Records: • Government compliance • Internal monitoring • Requirements of the Real Estate Act • Getting started: • Decide what form the business will be. • Set a year-end (unincorporated 12/31). • Assess software packages. • Register the business. • Find Accountant that is good match.

31. Elements of a Good System • Be simple. • Provides accurate information. • Is timely. • Provides a proper audit trail. • Meets regulatory requirements. • Provides for retention of records. • Get a good accounting system, set it up properly and run and maintain it.

32. Basic Accounting Cycle • After chart of accounts established: • Source documents (originals) • Entered into journals (posting) • Journal totals transferred to G/Ledger Accounts (final posting) • Trial Balance (listing of final accounts – starting point for accountants’ work) • Financial Statements

33. Financial Statements • 3 basic statements: • Income Statement – shows all revenues and expenses for a specific time period (profit/loss). • Balance Sheet – photograph of assets and liabilities at a specific date (Assets=Liabilities+Equity). • Cash Flow Statement – reports cash received and spent – statement reconciles the Income Statement. • The idea is to obtain timely and accurate information that is useful in managing the business.

34. Other Accounting Topics • Income Tax – reporting income for tax purposes. • GST – a “flow through” tax for business. • Real Estate Trust Accounting – brokerage MUST have at least 2 accounts (Trust/General). • Brokerage assumes great responsibility to handle trust monies.

35. Trust Deposits/Disbursements • All money received in trust MUST be deposited within 2 banking days. • Funds can be disbursed ONLY in accordance with the terms of the trust. 4 possible permissions: • Amount of Commission • Disbursement to seller’s lawyer • Return of the Deposit to the Buyers • Payments to other brokerages. • Withdrawals made by cheque or bank transfers under signature.

36. Trust Accounts • The trust control account and subsidiary trust accounts MUST always balance. • Bank Reconciliation statement MUST be prepared within 30 days of the prior month’s bank statement and MUST be signed and dated. • Postings are made to trust control account and also to an individual (subsidiary) ledger sheet.

37. Real Estate General Account • The general bank account reflects ALL banking activities of the brokerage EXCEPT those in trust. • General account uses ‘cash receipt journal’ and the ‘cash disbursement journal’. These two journals record ALL activities of the account. • Monthly reconciliation is imperative.

38. Trade Record Sheet • Every trade MUST have a fully completed trade record sheet. • Trade record sheet MUST be completed AS SOON AS a purchase contract is accepted / deposit made. • Provides the following source info: • Commissions • Trust account – details re deposit • Buyer’s brokerage – details of how much should be collected/received.

39. Monitoring Accounting System • Monthly basis, monitor: • Bank Reconciliations noting outstanding deposits and outstanding cheques • Internally generated financials • Detailed listings of receivables and payables • Current budget vs. actual figures. • An effective and efficient system is VITAL. Continually review!

40. Noted Definitions • Current Asset – something you sell and get money for it. • Fixed Asset – something required to make your operation happen. • Fixed Expenses – happens every month regardless of a sale. • Variable Expenses – changes based on productivity.

41. NEED TO KNOW DR CR B/S ASSETS LIABILITIES I/S EXPENSE REVENUE

42. COOL THING TO KNOW 70/30 E.G. – BREAK EVEN FORMULA PROFIT - $ 60,000 FIXED - $ 50,000 14% $110,000 VARIABLE - 16% of gross income14% x gross income = $110,000

43. Administrative Systems • Develop office operations manual. • Develop office policy and procedures manual. • These ensure each agent is aware of the policies required to remain active within the brokerage. • Implementing effective policies will help the office maintain and stay consistent.

44. Common Sections for Inclusion • Welcome, Mission Statement • Real Estate Act and the Rules • Code of Ethics, Code of Conduct • Brokerage Policies & Procedures • Office Facilities • Administrative Support • Office Meetings and/or Training • Working with Principals • Advertising and Marketing material

45. Common Sections, continued… • Expenses • Professional Conduct • Commissions, Remuneration, etc. • Confidentiality • Insurance • Policies, including Keys and Lock Box, Legal Action & Representation, Office Co-operation and Referrals, Personal Selling and/or Buying

46. Common Sections, continued… • Transaction Documents • Trust Account Deposits Policies • Unlicensed Assistants • Awards and Contests • Vacation Time • Resignations / Terminations • NOTE: Property Management Office Operations Manual contains a few others, see page 66

47. Performance Appraisals • Schedule regular ongoing performance appraisals to ensure policies and procedures are followed ethically and that agents and staff meet their productivity requirements. • Regularly schedule appraisals to help improve weaknesses and develop strengths. • Agent/Associate Broker appraisals to ensure compliance with legislated standards and office policies.

48. Labour Law • You must comply with relevant labour law affecting agents and support staff. • Labour laws do not affect anyone deemed to be an independent contractor (usually agent). • You must always comply with current regulations.

49. Commissions paid to Corporation • The following must be kept in agent personnel file: • A current GST number • A letter stating to which company the agent wishes to be paid • A copy of the Certificate of Incorporation • The documents of incorporation, especially the shareholders and the percentage of the company that they own (at least 50%).

50. Criteria for Support Staff • Labour laws do not affect contract labour when: • Less than 80% of income comes from the company. • Provides own equipment on which to work. • Chooses own work hours instead of the company dictating. • All other employees must be paid as either salaries or paid-hourly and CPP, EI and income tax is deducted.