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Critical analysis of organization and management in the real estate brokerage business

University of British Columbia

In recent years the real estate business has been subject to a great deal of criticism concerning the organization and management of the business. However, there has been limited evidence to support the criticisms. It was the purpose of this thesis to analyze data which had been collected concerning the real estate business and determine if the business is poorly organized and managed. If the evidence supported the criticisms, an attempt would be made to determine whether improvements were possible within the existing structure of the business or whether imporvements will depend on a change in the structure. Information concerning the real estate business was collected and analyzed under the following headings: (a) Organization of the Real Estate firms. (b) Recruiting, Selecting and Training Real Estate Salesmen. (c) Compensation Plans for Real Estate Salesmen and Managers. (d) The Real Estate Salesmen - Characteristics and Work Habits. The data for this study was collected from the members of the Vancouver Real Estate Board. A total of 192 firms employing 1200 salesmen were included. This represented 66% of the firms and 97% of the salesmen in the study area. The geographic area included Vancouver, District of North Vancouver, West Vancouver, Burnaby, Richmond, Surrey, Port Moody and Coquitlam. In order to collect the required data, two questionnaires were used. One questionnaire was completed by the agent or manager, the other was completed by the salesmen. In addition, each manager or agent was interviewed. The Vancouver Real Estate Board handled the mailing of the questionnaires, each of which was accompanied by a covering letter from one of the executive members of the Board soliciting full cooperation. A total return of 152 usable firm questionnaires representing a 79.1% was received. The return form the salesmen was considerably lower. Only 415 usable questionnaires, representing a 37.5% return were received. The data was coded and tabulated by the I.B.M. 7040 computer. Based on the data obtained it was found that the real estate firms were poorly managed. In particular the areas of recruiting, selecting, training, compensating and supervising salesmen were poorly handled. At present the real estate firms appear to hire unlimited numbers of salesmen without due regard to their chances of succeeding in the real estate business. This has resulted in an excess number of salesmen entering the real estate business. Many of the new recruits have left the real estate business after a short period of time, resulting in a high turnover of salesmen. In addition to the excess number of salesmen, many of the new recruits are entirely unsuited to the real estate business. The real estate firms have failed to provide proper training for their salesmen. The pre-licensing course, which new recruits are required to complete does not include sales training. Because of the high turnover of salesmen and the fact that the salesmen are not paid a salary, the firms appear unwilling to train their salesmen. Without proper training the salesmen require considerably more time to become efficient. During this "Trial and error" period the salesmen earn a relatively low income! This has further increased the turnover of salesmen. Many of the problems facing the real estate business appear to be related to the form of compensation used for the salesmen. At present all salesmen are paid on a straight commission basis. This has limited the firms monetary costs for salesmen and enabled the firms to employ large numbers of salesmen without concern as to their success. The commission plan has also made it very difficult for new salesmen to remain in the real estate business because of the low income for the initial few months! The salesmen were analyzed to determine what type of men and women enter the real estate business! It was found that the average salesman enters the real estate business in his late thirties and the average number of years experience in the real estate business is six and one-half years. The average salesman earns approximately $4,950 per year, however, they must work approximately sixty hours per week to earn this income. The salesmen enjoy few fringe benefits such as medical insurance, pension plans or group life insurance so the income of $4,950 represents their total monetary return. There appears to be a need for substantial improvements in the real estate business and these improvements are possible within the existing structure of the business. Many of the improvements can be made by the individual managers and agents without any support from the other agents. Improvements are possible in the firm's recruiting, selecting and training methods. A change in the form of compensation would require the support of the majority of the agents since the local real estate boards usually establish standards of compensation. However, the agents need not wait until group action is taken, many improvements are possible and necessary on an individual basis.

Text

2011-09-06

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http://hdl.handle.net/2429/37111

Business Administration

University of British Columbia

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