Broker - Gold Coast Schools · Chapter 3 Broker Owning, Managing and Supervising a Real Estate Office. Copyright Gold Coast Schools 2 2 Learning Objectives Describe what …

Copyright Gold Coast Schools1

Chapter 3

Broker

Owning, Managing and Supervising a Real Estate Office


2

Learning Objectives Describe what considerations are involved in

developing a business plan and what types of initial start-up costs are involved in opening a real estate business

Describe factors to consider when projecting income and expenses of a real estate business and list typical fixed and variable expenses incurred by a real estate business.

Compare the advantages of purchasing a franchise versus remaining an independent broker


3

Learning Objectives

Distinguish between cash basis accounting and

accrual basis accounting

Describe considerations when hiring sales

managers and personal assistants and when

recruiting sales associates, and identify IRS

treatment concerning employees versus

independent contractors

Describe the considerations regarding

development of employment agreements,

including the various commission structure plans

and what fees and payments typically are

deducted from the associate’s commission


4

Learning Objectives Describe the considerations regarding

development of employment agreements,

including the various commission structure

plans and what fees and payments typically

are deducted from the associate’s

commission

Identify important topics to include in a

training program for sales associates and

what should be included in a policy and

procedures manual


5

Capital and Start-up Costs

Sufficient capital to cover start-up costs and to

supplement income for a given period of time

At least 6 months of operating expenses


6

Capital and Start-up Costs

Initial start-up costs include Attorney and accountant fees

Office setup and occupancy

Office equipment and furniture

Signs and lock boxes

Board of Realtor and M.L.S. fees

Office supplies

Promotional materials

Advertising, direct mail, and a grand opening costs


7

Estimating Income and Expenses -

Factors to consider

Projections will depend on Scope of company operations

Market area and general market conditions

Number and projected productivity of sales associates

Income sources

Licensee/employee compensation


8

Developing a Realistic Business Plan

Provides direction for an organization

Basic Information to Include in Your Business Plan (see page 68)


9

Fixed Expenses Occupancy costs

Salaries

Payroll costs

Equipment costs and maintenance

Furniture rental

Liability insurance

Property insurance


10

Variable Expenses Commissions

A direct deduction from gross commissions

Company dollar provides for

– Operating expenses

– Broker’s profit


11

Variable Expenses

Advertising

Institutional is designed to make the public

aware of the firm

Specific or product advertising is for one

property e.g. ad for a duplex

M.L.S. listing fees

Telephone

Office supplies

Printing


12

Franchise vs. Independent Firm

Advantages of purchasing a franchise

Built in referral network

Formal training programs

National recognition

Advertising assistance

Management and sales training program

Technology benefits


13

Franchise vs. Independent Firm

Advantages of remaining

independent Lower overhead

Increased operational freedom

Local personality

Reduced start-up fees


14

Tax Considerations

Bookkeeping system (cash vs. accrual method)

Recognition of income and expense categories

– Cash

❖ Income when it is received

❖ Expenses when they are paid

– Accrual

❖ Income when it is earned

❖ Expenses when they are incurred


15

Independent Contractor

Major requirements: Sales associate must have a license

Compensation must be based on production

not on hours worked

Written contract (IRS requirement)

Sales associate responsible for paying

federal income tax (no withholding)


16

Staff and Sales Personnel Support staff

Receptionist

Accounting staff

Support staff

Real estate sales associates Number of associates relates to budget

Total transactions needed divided by average sales per

agent indicates number of agents required

Space limitations

Hiring part-time associates

Need for a sales manager

Occupational licenses


17

Staff and Sales Personnel

Unlicensed personal assistants and clerical assistants Broker legally and financially responsible for the

actions of personal assistants

Unlicensed

– May not be paid a commission

– May not be classified as independent contractors

Licensed personal assistants can only be paid commissions by the broker


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Recruitment and selection Set recruiting goals

Sources for new sales associates

– Media advertising

– Career nights

– Pre-licensing schools

– Support personnel

– Personal contacts

– Applicants for licensure

– Referrals from sales associates


19


Application process Equal employment opportunity laws

ADA requirements regarding hiring personnel

Application forms

Verifying license status

References

Interview Procedures


20

Employment Arrangements

and Agreements

Tax considerations

IRS treatment (employees vs. independent

contractors

Nature of the independent contractor relationship

Factors that describe an employee relationship

Noncompete clauses (consult with an attorney)

Hours and working conditions


21

Reporting Payments

Employees vs. independent contractor Record names and Social Security numbers

Employees must complete W4

– Withhold taxes, Social Security and Medicare

Deposit unemployment taxes

File form 941

File quarterly Unemployment

Each employee must receive a W-2 by

January 31

Each independent contractor must receive a 1099 by January 31

File forms W-2, W-3 with the Social Security Admin

– And 1096 with the IRS by Feb 28


22

Compensation of Sales Associates

Methods include

– Straight salary

– 100% commission with management fee

– Straight commission with split

– Commission with bonus

– Graduated commission


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Commission reductions include

Fees and payments

Franchise fees

Sign fees

Other fees


24

Training Sales Associates

Company policy and procedures

Technical skills

Listing skills

Selling skills

Technology skills


25

Policy and Procedures Manual

Define the company's function Types of property

Property management policies

Brokerage relationship policy

Statement of company's objectives Business philosophy

Ethical code


26

Policy and Procedures Manual

Items to include Company status, history, philosophy and goals

Responsibilities and requirements of associates

Organizational chart

Job descriptions

Office procedures

Employment policies (including compensation policies and employment agreement)

Listing and sales policies

Buyer representation

Property management provisions


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Sales Manager Responsibilities Supervision and control of sales staff

Monitoring sales activities and evaluating performance

Ensuring compliance with office policies

Assisting sales associates with transaction problems

Supervising advertising

Assign floor duty to those requesting

Assuring compliance with rules and regulations

Conduct regular sales meetings

Monitor listings and pending contracts


28

Sales Meetings

Regular time and place

Review

Recent sales and listings

Changes in price, terms and so forth

Sales activity

Company sales and productivity goals

Recognition of associate's accomplishments

Communication between workforce and management

Documents

Broker - Gold Coast Schools · Chapter 3 Broker Owning, Managing and Supervising a Real Estate Office. Copyright Gold Coast Schools 2 2 Learning Objectives Describe what …