Florida Real Estate Brokers Guide Sixth Edition Linda

Unit 3 Owning, Managing, and Supervising a Real Estate Office

Introduction This unit will cover • Developing a business plan • Project start-up costs • Estimate operating costs • Buying a franchise or remaining independent • Compensation plans • Policy and procedures manual 3 © 2017 Kaplan, Inc.

Capital for Start-up Costs and Expenses • Broker needs enough cash for start-up costs – Office lease, furniture, signs, supplies • AND Six months of operating expenses – Assume there will be no income 4 © 2017 Kaplan, Inc.

Start-up Costs • • Attorney and accountant fees Office setup and occupancy Office equipment and furniture Internet and technology Signs and lockboxes Realtors® and Multiple Listing Service® fees Office supplies Promotional expenses 5 © 2017 Kaplan, Inc.

Developing a Business Plan • Lack of planning can affect firm’s success • The plan analyzes budgeting and controlling expenses • The broker must include plans for recruiting and training 6 © 2017 Kaplan, Inc.

Income Projections • Income and Expenses will vary based on – Scope of company operations – Market conditions • Buyers’ market—easy to get listings • Sellers’ market—listings sell quickly – Number of sales associates – Income sources 7 © 2017 Kaplan, Inc.

Two Types of Expenses • Fixed – Don’t vary proportionate to the income •

Examples of Fixed Expenses • Occupancy – Rents, utilities, janitorial • Payroll – Salaries

Examples of Fixed Expenses, cont’d • Equipment and furniture rental • Association and MLS

Variable Expenses • Advertising – Specific—a house – Institutional—the firm, its management and services • Commissions – The largest company expense – Company dollar is income less commissions 11 © 2017 Kaplan, Inc.

Variable Expenses, cont’d • • • MLS listing fees Utilities Supplies Printing Technology 12

Franchises Offer Benefits to the Broker • • • Referral networks Formal training programs National recognition Advertising assistance Management and sales training programs Technology 13 © 2017 Kaplan, Inc.

Brokers Can Benefit by Staying Independent • • Lower overhead Increased operational freedom Local

Bookkeeping Systems • Cash basis—used by most small businesses – Income is booked when received (at closing) – Expenses are booked when paid • Accrual basis – Income is booked when the contract is written – Expenses are booked for the period they benefit • For example, a mail out campaign this month may be charged to next month when the customers start buying. 15 © 2017 Kaplan, Inc.

Personnel Issues • Support staff – Receptionist, bookkeeper, sales manager • Sales associates – Number relates to budget • Broker must calculate the desk cost – Space considerations • If agents can’t meet desk costs, the broker must decide whether to keep the associate – Should the broker hire part-time associates? – When should a sales manager be employed? 16 © 2017 Kaplan, Inc.

Calculations to Know • Desk cost • Average company dollar per transaction • Number

Desk Cost Calculation Total expenses ÷ number of associates Example: • A company’s total expenses are $100, 000. There are 7 associates. • Each associate must generate $14, 286 in company dollars for the company to break even. ($100, 000 ÷ 7 associates) 18 © 2017 Kaplan, Inc.

Average Company Dollar per Transaction Company dollar ÷ Number of Transactions Example: $150, 000

Number of Transactions Required per Month Amount needed for expenses + profit Average Company

Personal Assistants • Unlicensed – May not do real estate activities – Is paid by salary, either by the sales associate or by the broker – Cannot be a statutory IC • Licensed – Can do real estate activities – Broker must pay commissions – Broker may pay salary – Sales associate may pay salary only. © 2017 Kaplan, Inc. 21

Personal Assistant Can be paid by Can do real estate activity? Can be IC? Unlicensed >Salary only Broker or sales associate No No Licensed >Commissions >Salary -Only by broker -Either broker or sales associate Yes 22 © 2017 Kaplan, Inc.

Miscellaneous Contract Services • Janitorial service • Sign delivery and construction • Computer programming

Recruitment and Selection • Broker must know how many associates are needed – Some brokers want many associates and are willing to accept lower standards. – Other brokers are content with smaller staffs of highly trained professionals • Number of sales associates must be manageable. 24 © 2017 Kaplan, Inc.

Sources for Recruiting Sales Associates • Advertising • Career nights • Prelicense schools • • – Can’t recruit during class hours Support personnel may have contacts Personal contacts License applicants Sales associate referrals 25 © 2017 Kaplan, Inc.

Application Requirements • Equal employment opportunity laws prohibit discrimination based on – Race, color, religion, sex, age, national origin, marital and family status, or disability • Americans with Disabilities Act (ADA) – Must make accommodations – May not fire or refuse to hire persons with disabilities or persons associated with – Ask if a person has a disability – Require a medical exam before offering a job 26 © 2017 Kaplan, Inc.

Application Process • • Application forms Verify license status References Interview – Many brokers

Statutory Independent Contractors (IC) • Broker saves by not paying payroll taxes or benefits to sales associates • Three major requirements – Independent contractor must hold real estate license – Gross income must be based on production, not hours worked – Must have a written contract showing sales associate is not an employee 28 © 2017 Kaplan, Inc.

Can’t be IC if broker has • Behavioral control – Broker can’t tell IC when or where to work • Financial control – Broker reimburses IC for expenses, pays a salary, or pays for insurance 29 © 2017 Kaplan, Inc.

Employment Arrangements and Agreements • Reporting payments to employees and independent contractors • Non-compete clauses • Hours and working conditions • Written understanding and acceptance of company policies 30 © 2017 Kaplan, Inc.

Licensee Compensation Plans • • • Straight Salary 100% commission Fixed percentage commission split

Typical Commission Reductions • Fees and payments • Franchise fees • Sign fees 32

Training Sales Associates • Company policies and procedures – Best orientation course for new agents • Technical skills – Time management, goal setting, filling forms • Listing skills – Prospecting, listing presentations, pricing the property, • Selling skills – Qualifying buyers, showing properties, closing contracts • Technology skills – Learn all tools available in tech © 2017 Kaplan, Inc. 33

Policy and Procedures Manual • Chapter 475 requires brokers to supervise agents • Prevent misunderstandings • Clear statements prohibiting – Unlawful discrimination – Sexual harassment – Price fixing – License law violations • Dispute resolution procedures © 2017 Kaplan, Inc. Policies Manual 34

Sales Manager Duties • Monitor production, both company and individual associates • Ensures compliance with policies and procedures, law, and ethics • Supervises advertising • Schedules floor duty for volunteers 35 © 2017 Kaplan, Inc.