Real Estate Brokerage: A Management Guide, Eighth Edition
Chapter 1: The Challenge of Change
Key Terms
consumer-driven model
core services
downsizing
Internet Data Exchange (IDX)
multiple listing services (MLS)
rightsizing
supplier model
Learning Objectives
At the end of this chapter, you will be able to
§ discuss the effects of the economic environment on businesses and consumers;
§ describe the evolution of practices in the real estate business; and
§ discuss trends that can alter business models for real estate companies, MLSs, and professional organizations in the future.
Chapter Overview
History teaches powerful lessons about economic forces over which companies have little control. Managers must look at the big picture of that economic environment and consider what were, what are, and what will be the events framed in that picture to make wise decisions for their companies. Companies cannot continue to do the same things the same way and expect different results, especially when the world around them is different.
The fundamental business of real estate has been to bring buyers/tenants and sellers/landlords together to facilitate transactions. Brokers banded together to form multiple listing services to facilitate the exchange of their property information. Consumers relied on brokers to guide their transactions and provide information, especially about property listings.
Today, information is power, the hot commodity in the marketplace that is served up by the Internet. The Internet also challenges the real estate industry’s model that has controlled that information.
The marketplace is no longer geocentric and the workforce and consumer populations are more culturally and generationally diverse. These factors challenge real estate companies to learn new ways to manage their workforces and serve consumers and do so within increasing financial pressures and regulatory oversight that challenges traditional business models.
Consumers are also challenged by financial pressures. Job layoffs, damaged credit, and record amounts of student-loan debt have made the American Dream of homeownership unattainable. For some consumers, the less permanent feature of renting is also more suitable for their lifestyles.
Considering all of these factors, companies must look at all the industry’s traditional practices and make wise decisions about how to serve consumers in the future.
§ What role will the real estate company play in the real estate transaction?
§ What are the core services for a company?
§ What role will multilists play?
§ How will listing information be managed?
§ What role will the industry’s professional organizations play?
§ What will the model be for a real estate company and its offices?
§ Who will the company’s leaders be?
§ What will be the American Dream of the future?
These are provocative questions but essential ones to consider for a company to make money, or even survive. The key to success is a willingness to look outside the real estate industry and learn how business organizations, in general, function.
Lecture Outline
I. The Challenge of Change
II. The Big Picture
A. Impact of Low Interest Rates
1. Stock market plunged, credit markets seized, and people lost jobs
2. Great Depression contributed banking regulations and amortized mortgage loans to protect bank investors
3. Greed craves more in good times and drives desperation in the bad times
4. Everyone took risks but not everyone knew how much risk they were taking
B. The Next Wave
1. Current wave is a recovery one
2. Global terrain is rockier than has been in recent decades
3. Geopolitical environment is unstable
4. Only time will tell how well or fast the economy grows out of the Great Recession
III. The Future Picture
A. Change Is Necessary
B. What Will a Real Estate Company be Doing?
1. Real estate companies don’t make any products or have any control over the products they sell; claiming rights to products with listings and controlling that information
2. Model is not as relevant today
3. Internet and technology provides a more efficient way to distribute information
4. Companies are run by over-age-50 crowd, confronted by Gen Ys
C. What Is the Role for MLS?
1. Information is power
2. Internet Data Exchange (IDX) and Virtual Office Web sites (VOWs) provided information, promoted listings, and added an e-commerce
3. RETS (Real Estate Transaction Specification), an standardized digital format, makes it easy for companies to update that listing information
4. Once information is cast in digital form, there’s very little way to control where data circulate and how it’s used
5. MLSs generate revenue, often for local REALTOR® Associations, but MLSs are being challenged
D. What Will Consumers Want?
1. Companies serve marketplace with consumer-driven modes, creating products and services tailored to suit consumer demand
2. Wants rooted in cyber economy
3. Real estate today has no geographic boundaries and serves culturally-diverse population
4. Hispanics now being the “majority minority”
5. Real estate core services expanded beyond traditional brokerage services
6. Providing alternatives to the one-stop-shop and one-size-fits-all service models
7. Can real estate be fully traded online?
E. Where Will the Real Estate Office Be?
1. Traditional measure of market share has been tied to brand recognition in geographic or physical locations
2. Big companies got bigger
3. Majority of today's real estate companies are small enterprises
F. What Will a Real Estate Company Look Like?
1. Real estate companies have merged, divested themselves of previous affiliations, and forged new alliances
2. Rightsizing is what real estate companies must do to realign their operations
3. Hiring smaller number of people, but ones who are highly productive
4. Hiring salespeople employees rather than independent contractors and exercise greater control
5. No one suitable model for real estate companies
G. Who Will Be Leading the Company in the Next Ten Years?
1. Today’s workforce is a melting pot of cultures and generations
2. Companies must promote younger workers
H. What's the Next Generation’s American Dream?
1. Homeownership peaked at 69 percent in 2006
2. More people turning to renting
3. Students are working to pay off their past, not save for the future
4. Will renting be the new American Dream?
I. What Will Professional Associations Be Doing?
1. Do the members need what the organizations offer?
2. Will a new association model emerge?
J. What Will Industry Regulations Look Like?
1. Real estate is becoming one of the most highly regulated business
2. Establishing credibility and trustworthiness is crucial to survival, let alone success
3. Department of Justice (DOJ) is more diligent
a) Traditional policies inhibited the providers of innovative alternatives
b) MLS controlled the marketplace and restrained competition, affecting practices of non-members as well as choices for the consumer
c) How will real estate companies make money in the future
IV. A Final Thought
A. Although the real estate industry is still about real estate, the way that it does business is definitely changed
B. All businesses face similar challenges
V. Conclusion
A. Change is inevitable
B. Be open-minded and innovative
Classroom Resources
1. Internet articles from real estate industry journals relating to emerging trends in the industry
2. Internet articles and publications or speakers to address the class about uses for technology in our business and personal lives
3. State licensing laws, rules, or guidelines for personal assistants
4. Speakers from the business community (real estate or other industries) to discuss how companies respond to changing environments
5. Managers to address the class about their experiences in making the transition from sales to management or experiences with juggling both sales and management responsibilities
6. Salesperson or manager to address the class about the use of personal assistants, working in sales teams, or working remotely
Discussion Exercises
The following questions and discussion exercises appear in the text. They can be used for general class discussions, break-out groups, or individual writing assignments.
1. What is your candid assessment of the current housing market in your area? The current economic climate? What do you expect to be different during the next few years?
2. What has changed about the demographic profile of your consumers and your company’s workforce in recent years? What do you expect in the future?
3. What effect has recent litigation or regulatory changes had on real estate practices in your area? What issues are pending that could affect future practices?
4. Considering the financial pressures on today’s organizations and the consumers’ attitudes about the cost of real estate services, how do you think fees for real estate services and costs for transactions should be structured?
Additional exercises not in the text
5. What are the most dramatic changes you have observed in the real estate industry since 2001? Were these changes predictable?
6. How well do you adjust to change?
7. Discuss ways you are using technology in your business.
8. Discuss the effect of technology on the size of the geographic area you serve and the way you provide real estate services.
9. Discuss the advantages and disadvantages of a salesperson working primarily outside of the broker’s office (working from home or working remotely).
10. Review and report on a book about trends in the business world and how organizations meet the challenges of changing environments.
Chapter 2: Leadership
Key Terms
accountability
decisiveness
delegation
ego
empathy
integrity
leadership
management
team building
Learning Objectives
At the end of this chapter, you will be able to
§ identify essential character traits of a leader;
§ analyze leadership qualities that affect people’s perceptions of a leader;
§ discuss how leaders use their positions to command a following;
§ distinguish between the way managers and leaders view their roles in an organization; and
§ discuss how a person can develop as a leader.
Chapter Overview
The essence of leadership is the ability to influence other people and persuade them to follow. Leaders are able to command a following because they have certain character traits—integrity, honesty, trustworthiness, loyalty, and respect—that demonstrate they are worthy of allegiance and will use the power of the position responsibly.
Leaders also possess certain qualities that demonstrate they can do an admirable job of guiding us. Qualities that are generally attributed to leaders include:
§ Vision—the long-range, independent thinking that looks for new or more inspired ways to do things. This is the quality that blazes trails, takes risks, and inspires others with their passion and enthusiasm.
§ Ego and empathy—the self confident presence and self respect (ego) that respects the thoughts, feelings, and abilities of others and acknowledges their worth (empathy).
§ Team building—the quality that draws people together and builds coalitions to stimulate creative thinking and problem solving, build consensus, resolve or manage conflict, and achieve support for what the leader wants to do.
§ Decisiveness—the ability to take charge and provide direction, to frame definitive courses of action.
§ Accountability—the quality that takes responsibility for the consequences of that person’s actions and decisions and those of the people the person supervises.
§ Delegation—the transfer of authority to another person to do a job and trusting someone else to do a job for which the delegator is ultimately responsible, which also means giving up control, conferring the right to make commitments and use resources.
Managers are work focused, while leaders are people focused. Many people have inherent qualities that can make them effective leaders. But leadership qualities can also be developed.
§ How do leaders and managers approach their jobs in an organization differently?
§ What are the benefits of leadership versus management in an organization?
How do managers become leaders?
Lecture Outline
I. Character of a Leader
A. Most Revered Traits
1. Integrity
2. Honesty
3. Trustworthiness
4. Loyalty
5. Respect
II. Values and Ethics
A. Values and Ethics
1. No one universal set of values
2. Moral compromises become intolerable
B. Power
1. If coercion, we obey out of fear
2. Power can corrupt
3. Judge leader unworthy of power if our values or ethics are compromised
III. Leadership Qualities
A. Vision
1. Leaders are long-range, independent thinkers
2. Inspire by passion and enthusiasm for work
B. Ego and Empathy
1. Self-esteem
2. Acknowledging worth of followers
3. Want leaders who are selfless rather than selfish
C. Team Building
1. Stimulate creative thinking or problem solving
2. Build consensus
3. Resolve or manage conflict
4. Achieve support for a policy, position, or course of action
D. Decisiveness
1. Leaders should take charge and provide direction
2. Ability to frame definitive courses of action
E. Accountability
1. Responsible or accountable for decision outcomes
2. Real estate brokers are responsible for actions of licensees
3. Accountability extends to all that happens under the leader's domain
F. Delegation
1. Right people must be identified for the specific work
2. Delegator must let go
IV. Leaders versus Managers
A. Two separate roles
1. Managers are work focused
2. Leaders are people focused
B. Leadership Development
1. Person makes the leader, not the title
2. People develop as leaders through observation and introspection
3. Leadership becomes a way of life, once developed
4. People involved in community guide their organizations to do the same
5. Image and reputation of company measured by organization's volunteer and financial support
V. Conclusion
A. Leaders have powerful influence over group or organization
B. Leaders inspire a following, thus they become role models
Classroom Resources
1. Internet articles or selections from publications by contemporary authors about leadership and the way leaders impact an organization
2. Internet articles or selections from publications by contemporary authors about personal growth and development
3. Internet articles or selections from publications by contemporary authors about decision making
4. Speakers to address team building
Discussion Exercises
The following questions and discussion exercises appear in the text. They can be used for general class discussions, break-out groups, or individual writing assignments.