Supervision, Office Policy and Attention to Detail
You have just opened a new brokerage company and things are really happening. Agents want to “come over” and people are taking listings, showing buyers and making sales. Man, that is the way it should be.
What should you be doing to make sure that it all works and you stay on the good side of the agents and regulators? There is no shortage of things to think about as the new broker in charge/owner. These three areas all overlap but the result is the same. Don’t just leave the light on, keep an eye on the rules of your business.
1. Supervision. Supervise those that have licenses under you. Issues will come in through the agent door. Let the agents know that you are always available and always be available for them. There is a tendency to let the people “with experience” just run with things. Imagine the amazement of a local broker when he found out that his “office manager/recruiter” was also listing, advertising and selling real estate. No, he did not have a license. Everyone needs to be supervised: the new, experienced and medium agents. Hire people who will do it your way and not fight you about your policies. You decide how you will operate and let them decide if they want to work under you. Start with verifying with the Department of Real Estate that each person is licensed. Next, make sure that the Errors & Omissions insurance for the company and each licensee is properly paid up, high enough, and current. Think about an umbrella policy for a big mistake. Mark the renewal dates for licensees so that you are sure that they renew with the state. It is a mess when the claim comes in and we find out that the agent’s license is not current, so there is not only a license law violation but no insurance. Remember the insurance runs with a valid license. This is an easy thing to miss now that a lot of states have renewal dates other than the end of the calender year.
Supervise each transaction. Make it known that all listings, sales and closing are actually reviewed by the company. Do it.
2. Office Policy – Don’t leave home without it. A comprehensive office policy that identifies all aspects of the operations of the brokerage is critical. Ideally it is in place before the first agent is signed up. A “standard” is set at the beginning, and you are not back peddling and making exceptions and alterations for different groups of agents. You may need to offer different compensation plans in recruiting or retention, but the basics of the operation must be set out in the office policy. Compensation can be an amendment to or “fill in” in the independent contractor agreement. Please have one agreement for every agent.
This is where you cover a myriad of issues: procedures for listings and sales, systems for access and dissemination of information to the public, decisions on office agency policy (assigned/ designated, dual, transaction brokerage). How are we going to operate? Easy to set up, hard to change. This is not the place for compensation. This is the place to write the rules of the road for the brokerage. Take the time to outline it first. Then fill in the outline and finally let the attorney review it. In addition to the items mentioned in Supervision, you need a policy on multiple affiliated business relationships. You need to fully understand and make sure your agents understand what the rules are for those that also want to be in the mortgage business, the title insurance business or other related businesses. Incorporate RESPA into your office policy. If in doubt, start with no one can do anything but list and sell property for the public. No multiple businesses without broker/owner consent and work from there.
Make sure that the rules for self dealing are well laid out. If an agent is going to buy or sell for their own account, many Errors and Omissions insurance policies do not cover that activity. Many offices have policies that indicate that a licensee cannot buy/sell without the prior consent of the broker, whose consent can be withheld. The more hats the agent wants to wear, the greater chance that one won’t fit. The same rules apply for those that want to build, manage, list and sell property.
3. Attention to Detail. Be known as a detailed person. If you set a good example, others will follow. The tendency to delegate to others as things pick up is hard to resist. After all, if you want to make it big, you cannot micro manage the operations. The delegation of duties needs to be documented, well thought out and reviewed on a quarterly basis. Make sure that those you trusted to keep an eye on others are doing it and doing the way you wanted it done.
Hire professionals to take on some of the details. Associate with a good CPA who does the tax payments for all employees. Missing a federal tax payment will ruin any great day. Make sure you have an attorney – without too many potential conflicts, that knows your business – available as needed.