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Real Estate Office Orgranization

( Originally Published 1924 )


What are the purposes of office organization in general? What departments does the ordinary real estate office have? What is the advantage of specialization by departments? What does the executive gain by careful departmentalization of his office? How should accounts be made to the owners of apartments? What should they show? What are the principal features of an insurance policy? What records does the sales manager wish to have before him in directing the activities of a sales organization? What is the advantage of keeping all records in connection with a real estate transaction?

Necessity for Organization.—In a large number of general real estate offices there is no attempt at organization. Such firms are usually small and most of the business is conducted by a very few men who carry all the business in their minds and are presumably able to remember who are prospects and what property is on the market. Although such procedure is perfectly natural. it is doubtful whether it is ever justifiable, for reasons hat will become evident. So long as the business is small the evil effects may not be apparent, but the very lack of system precludes great expansion. This expansion is not necessarily an end to seek, and it is not the only end accomplished by office organization. The small real estate office has as true a need for organization as the large, just as it has as true a function to perform. Organization enables the small business to render a more efficient service, but the need for organization becomes more evident as the size of the business grows.

For as soon as the business grows to any considerable size, as soon as the listings and the prospects are too numerous to be kept in mind by all the members of an office, some sort of records becomes necessary. And the moment records become necessary, office organization be-comes significant. Records for any organization that exists for the rendering of service are its chief stock in trade; their incompleteness or unavailability is in every instance a serious handicap. The organization that can work out the best method of utilizing its records possesses an advantage in direct proportion to the superior use it obtains.

Purposes of Organization.—Office organization should be planned so as (I) to enable specialization by departments in certain lines of activity ; (2) to effect the largest possible amount of cooperation between the different departments; (3) to relieve executives and heads of the business from the details connected with the regular routine of business; (4) to enable the executive to control the policies and the activities of the whole organization.

(1) Specialization by Departments. So long as real estate men are giving divided attention to every phase of the business, it is impossible for them to specialize and render expert service in any one field; a jack of all trades is necessarily master of none. Under such circumstances each man is trying to render a multiplicity of services. Like the clerk in a small store, he transacts business in all departments ; whether the customer wants to rent, buy, sell, borrow, or insure, he does business with the same man. But such an arrangement breaks down under its own weight as soon as the activities of the organization become greater than one man can carry in his mind at once.

A division of labor follows, and one man begins to specialize in rents, another in sales. The arrangement then becomes similar to that in a department store in which the varied wants of the customer are taken care of by the same firm, but no longer by the same clerk.

Besides the pressure of mere bulk of business there is another factor which operates to bring about the division of labor. Real estate offices are being called upon to render services which are more and more specialized. While a few years ago a rent agent was expected only to list property for rent and show it to prospective tenants, today the effective agent must be able to make recommendations as to the highest utilization of a piece of rentable property, or as to the amount of capital which can be most profitably invested in building on a specific lot. To be able to advise wisely in either of these typical cases requires thorough knowledge of the principles involved—an intimate understanding of the special types of property. In every case this situation demands a specialist. As business becomes more and more complex, the demand for specialists becomes more and more insistent. This fact is illustrated by the demand for specialists in the medical profession. While there still exists a great demand for the general practitioner, the reputations of the ablest men, especially in the large communities, are built up by special skill in a limited field. So the general real estate dealer still has a great function to perform in the smaller communities where conditions are not complex, but there is necessarily a growing tendency toward specialization or building up of departments presided over by specialists who are qualified to render expert service.

(2) Cooperation Between Departments. Specialization tends to break up a business into a number of separate parts ; office organization, having effected this specialization by departments, must also tie the parts together so that the business will operate as a whole, not as a number of separate units. It is highly desirable to have a department that specializes in rentals, but that department cannot operate most effectively as an isolated unit. It should profit from the knowledge and contacts of the sales department, and the sales department should profit from close contact with the rental department; many tenants grow into first-class sales prospects and their names should be available to the sales department. The means of correlating these departments must be provided by the office organization, and records again take a prominent place.

Two features of records are important in this connection, their completeness and availability. It is of little value to have records at all unless they are kept up to date and complete. Efforts are lost; waste motion is multiplied; great slack and inefficiency creep in when records are incomplete or out of date. For this reason accurate and complete reports of all transactions should be carefully secured from as many sources as possible and made a part of the stock in trade of the organization.' By the same token the records should be available to all and understandable by every member of the force. Many a sale is lost, and many a customer, because of the lack of adequate records. Ready reference to accurate records of the firm inspires confidence in the customer and slowly builds up a reputation for dependability that is enviable.

The specific means used to coordinate the activities of the departments must vary considerably from office to office, since each must work out the means best adapted to its peculiar needs. Such methods as those of written memoranda, interdepartmental meetings, office bulletin boards, card catalogues, staff conferences, etc., all are effective. A method which is in constant use for calling the attention of different members of the firm to memoranda or other material is to attach to the material a slip bearing the names of the people in the office. The names of those to whom the material is to go are checked, and it is passed around, each man checking off his name or initialing the slip as he becomes acquainted with the contents.' If this slip is filed with the material, it serves as a means by which responsibility for knowledge of the contents of the message can be fixed upon those whose initials are checked.

Obviously this method must be used only for important material, or it will become burdensome and lead to a waste of important time. And if the method is employed too frequently, it defeats its own purpose; the material is not given attention.

It must not be forgotten, however, that the real burden of coordination lies upon the shoulders of the general manager. Memorandum slips and other means are used to assist him; it is his personality, his energy, and his supervision that make the organization an effective whole. It is useless for him to attempt to shift this responsibility or to evade it. A weak manager will be reflected in a weak organization; a strong manager will always build up and energize the whole organization.

(3) Relieves Executives from Details.-There is necessarily a large amount of detail about the management of a business of any considerable size. This detail can easily absorb so much of the time of those who are responsible for the business that they will not have time for its larger aspects. The work of the office ought to be so arranged as to relieve the executives of as much of this routine as possible. Clearly the time of an executive is too valuable to be wasted on routine. Successful management is to a very large degree the delegation of responsibility and detail, and the successful executive is not one who is tied up in routine which could be as well taken care of by a clerk or an office boy. There are always large considerations and policies to be determined, large transactions to be closed, that demand and should receive the influence and prestige of the heads of the business. These men ought to devote a large part of their time to working out the proper relationship of the whole organization to others in the same business and to society, and to interpreting the organization to the public. The success of a firm is to a very large degree dependent upon the impression which the public has of it. To secure and maintain a position of importance in the public mind requires all the energies which the heads of a business can give to that subject, and this is a responsibility which cannot be delegated.

The contribution which office organization makes here is that of enabling the executive to employ his time most economically. So long as his desk is cluttered up with rent bills and a thousand other minor matters, his business suffers and retrogresses. Office organization must free him from these impediments so that he can direct the activities of his concern, not spend his time adding columns of figures.

(4) Enabling Control. As the release of the executive from detail involves delegation of responsibility, so it carries the possibility of bringing about a loose organization owing allegiance to no central figure an organization difficult to control. Office organization must be so carried out as to avoid this difficulty; and at the same time that it allows the delegation of authority, it must insure close and accurate control by the heads of the business. The business executive is responsible to his board of trustees or other authority for the whole business ; while he may delegate this responsibility, he can never avoid it, and he ought always to be able to control with unerring certainty the various activities of the many departments. His policies should dominate the business, his orders pass quickly to his subordinates and receive instantaneous response.

Control over activities involves accurate and complete information about such activities. Nothing can take the place of reports in this connection. Without an intimate knowledge of what each department is accomplishing, the executive is a blind pilot. When sales drop or other disrupting factors enter his organization, he ought to know it first of all. But such knowledge can be kept at hand only by a system of careful reports. Such devices as charts and other statistical methods of presenting facts are very valuable. The executive who does not avail him-self of them is not likely to be effective.

Departments of the Ordinary Office. The usual real estate office will find it advisable to have at least five departments, namely, rents, insurance, loans, sales, and stenographic or records department. These are not given in the order in which a real estate business is ordinarily developed, but rather in the order in which the novice would be introduced to a "going concern." When a real estate business is founded, it usually begins with sales or brokerage, and the other departments are added with the purpose of building up this one. Thus the broker frequently finds himself unable to consummate a sale because of difficulty in financing it, and he immediately begins to plan a loan department. Or again he buys a business house or a multiple dwelling for a client who wants to leave the operation to the agent, and a rental department is added. Obviously sales and rentals both lead to insurance; the prospective purchaser of insurance is already known and in business relations with the agent.

Organization and Forms of the Rental Department. The organization of the rental department will vary ac-cording to the amount of rental work done by the company. The manager of the department occupies an important place and must be chosen with discretion. He probably will want to subdivide his department so as to have divisions responsible for contracts with owners, for leases, for repairs, and for accounting. If the work is not voluminous all these functions may be performed by the same man.

A copy of an owner's contract is given in Figure . It is important that some such agreement be signed by the company and by the owner so that responsibility is fixed and authority definitely and legally established. The main features of such a contract, indicated in the margin, are (I) the term of the contract and description of the property, (2) enumeration of the powers and duties of the agent, (3) the compensation of the agent, (4) method to be used in accounting to the owner, (5) freedom of the agent from liability, and (6) renewal provisions. It will be noted that under the contract here reproduced the agent is given wide powers so as to relieve the owner of all details of operation. His trouble is reduced to an absolute minimum. The company which uses this form is very enthusiastic about its method of handling repairs indicated in this contract, and exploits the plan in its advertising.

As soon as a property is listed for management it ought to be inspected by the manager and carefully inventoried. As soon as possible the whole property should be checked over and recommendations made to the owner regarding necessary repairs and any matters of policy which should come early to his attention.

A list of tenants and prospective tenants should be kept. The F. B. Arnold Company, of Cleveland, keeps such a list on seven by four cards, a reproduction of which is shown on Figure 2. This card is self-explanatory. Another more complete card which shows the prospect's preferences as to location, amount to be paid, date of occupancy, address, references, and so on, is reproduced in Figure 3. When tenants are not difficult to find not much attention is given to such a file, but it becomes more valuable when tenants are scarce and housing accommodations plentiful. These cards can be filed according to date when application is made and cross-indexed according to price to be paid. The back of the tenant's card is also shown in Figure 4. This furnishes a large amount of information about a tenant which is valuable if he should apply at a later time.

Another important form in the rental department is the statement to the owner, rendered with settlement every month (Figure 5). This statement should show gross rentals collected, amounts expended for repairs and other expenses, with a balance showing net income.

The form for keeping the account of each apartment house is shown in Figure 6. This form shows gross rental and collections, amount of fixed charges indicating how they are divided, the expenditures for repairs and the net receipts. The items shown at the bottom of the sheet are valuable and present summaries in a succinct and easily grasped form.

Additional forms which will be found useful are owner's repair report, shown in Figure 7, which enables checking on the part of the owner and written permission on his part for the work to proceed, and the lease. The ordinary short term lease is discussed in Chapter III.

Organization and Forms for the Insurance Department. ,The chief instrument of the insurance department is the policy itself. A copy of the New York Standard Fire Policy is shown in the appendix. The chief provisions

of the policy may be grouped as follows: 1. The parties to the contract, including insurable interest and agency.

2. Description of the property.

3. The risk assumed.

4. The term of the contract.

5. Other insurance on the same property.

6. Special endorsements and privileges.

7. Provisions applying after a loss has occurred. Some of the special provisions of the insurance policy will be discussed in Chapter IV.

Another important record is the "insurance expiration" card. This card is shown in Figure 8. By using these cards the agent can give the owner service by reporting to him the date of expiration and calling on him several weeks beforehand to renew his policy so that he will be always covered. This advance information affords a strong competitive advantage as well, for it prevents competitors from stepping in and writing the policy.

The insurance department should also have some means of recording the amount of business which is done from year to year and from month to month. A chart can easily be constructed showing in parallel columns or by graph the business done the current month as compared with the preceding month and at the same time as compared with the business for the corresponding month of the previous year. By consulting this chart, the manager of the insurance department will be led to apply the stimulus necessary to secure volume of business, if the volume is small or he will be able to encourage each department to continue when the business volume is greater than before. These charts should show both the renewals and the new business. The department is not growing unless the record of new business shows a consistent increase; it is consistently failing if the records of the renewal department show losses.

Another card that is helpful is one showing the number of kinds of insurance written for the same customer. As is indicated in Chapter IV, nearly all real estate offices write a variety of kinds of insurance. The man who has a fire policy is a logical customer usually for an automobile, liability, tornado, or theft policy. The farmer who carries insurance on his house is a good customer for crop insurance. Consequently a card with parallel columns for each type of insurance with the name of the customer at the top and a check after each type of insurance carried would be valuable in indicating where policies can probably be easily secured. The logical time for such expansion would be on securing renewals. This is not only a method of expanding the insurance business but it is also a distinct advantage to the customer to have his insurance policies all written and cared for by the same company.

No more important records can be kept in the insurance department than those having to do with collections. People are innately negligent of insurance matters and policies are likely to lapse because of failure to pay premiums unless the department makes careful and close collections. The tendency is not due to any desire to drop the policy but to a natural procrastination and negligence.

Records and Organization of the Loan Department. The records and organization of the loan department depend on the nature of the loans made. If the loan department consists of a building and loan association, as it frequently does, the records will be different from those used if the company makes loans for an insurance organization. In this chapter the records of the real estate department of a large trust company which may be adapted to the use of any company are presented; while not all of these will be used in many instances, an adaptation of some of them will be found helpful.

The first record of importance is the application for a loan. A new form of such an application, embodying the desirable features of a large number of forms, is found in Figure 9. Every point of importance to the lender is shown in this form; when accurately filled out it gives the information which will enable the lender to appraise the property readily and to make all other judgments necessary to granting the loan intelligently. The same form makes room for the statement of the appraisal of the property by a local bank and by the company which makes the loan. The reports of the appraisers sent to inspect the particular property are of such a nature that they can hardly be standardized. The only thing that can be put into a standard form is the result of the appraiser's judgments, not the process by which he arrived at those judgments.

In building and loan associations the appraisal of the property is made by the committee of the association and the loan approved for either the full amount requested or such amount as the committee feels safe. The opinion of attorney as to title is then secured on the same blank and a record made of all insurance papers before the loan is actually disbursed.

The order for disbursement shown in Figure 10 is used by companies which handle large sums of trust funds. It is made out and signed in duplicate so that the company can have a copy for file purposes.

After the loan has actually been made, the duty of the loan department is to make all collections when they are due. A record of all loans and payments made on them is kept by most organizations in ledgers. But the large organizations find it necessary to mail out notices of payments due and as soon as this becomes necessary a special form becomes advantageous. The Chicago Trust Company has devised a fan fold form the first face of which is shown in Figure 11 . This is filled out with carbon sheets so that the whole series to be described is made out in one operation. The first sheet notifies the lender that certain payments are clue soon and requests that he for-ward the notes to be collected upon. The second sheet, which is torn off and sent upon receipt of the notes, indicates that they have been received. The following form is a record for the department. The opposite side of the fan fold shows the notices to be sent to the borrower, beginning first with the notification of payment about to fall due. The next acknowledges receipt of payment and encloses cancelled notes, and the next fold is a file copy.

By use of this ingenious device, the whole operation of collection is simplified so far as the office work is concerned, six typewritings being reduced to the single operation with carbon copies. Of course, the carbon copies are kept in the files until the proper time for them to be sent out.

Organization and Records of the Sales Department. In the sales department perhaps to a larger degree than anywhere else, organization for the purpose of control is necessary. The manager of the sales department ought to be able to check the activities of his department from three points of view ; namely, (1) that of volume of sales of the whole organization, (2) that of records of individual salesmen, and (3) that of the listing of properties and the subsequent activities of his organization connected with the sale of every particular property listed with it. The records of the department will be discussed in connection with each of these functions.

Volume of sales records are easy to keep and easy to use. Naturally there are too many factors that affect day-by-day sales to enable a direct comparison to be made. But these factors balance each other if the records of a sufficient length of time are compared. For example, when March is an open spring month the sales will be larger than when winter hangs on through the whole month. But the sales of the first three or four months of the year ought not to be allowed to fall far behind those of previous years.

Individual salesmen's records can be kept by means of a daily report card or sheet to be filled out each day. A copy of the form used by a successful company in a medium-sized town is shown in Figure 12. This report shows the name of the prospect, the owner and the ad-dress of the property, the type of effort made (Ad. means advertisement, P., personal call, and T., telephone call), and remarks. Under remarks such items as the prospects's reaction to the offering, the excuses he makes, etc., are recorded, and furnish valuable information for further action. The data from this report are transferred to the sales manager's record of individual salesmen, where in squares arranged across the page according to date the number of calls made and the kind of calls are recorded. The sales manager can tell at a glance what each sales-man has been doing. It is a matter of his judgment as to what means of encouragement or repression he should use in each individual case.

Some of the methods of training salesmen are discussed in the chapter on salesmanship. One of the additional means of exerting control is through personal conference. In addition to checking up on the salesmen's records, it gives an opportunity to help them solve their problems, to inspire them with new enthusiasm and loyalty to the organization.

The listing of property and the record of subsequent activities on it are important features of the machinery of each office. Property may be listed under an exclusive sales contract, or simply under an agreement to sell. Reputable dealers are strong in their adherence to the practice of exclusive listing. This practice makes the dealer the exclusive agent for the property and guarantees the commission to him, even though the property be sold by another. A typical exclusive sales contract is shown in the appendix, page 284. The argument used by those who favor this form of listing is that it enables the dealer to give attention and study to the sale of the property with the assurance that, after spending his time and efforts on it, he will not lose them by a chance sale which the owner or some other broker might make. It is urged that the broker cannot be expected to give any special attention to a property that is everybody's to sell; he must have an inherent interest in the sale. When any-one has the property listed, but no one exclusively, and no one consequently is actively pushing its sale, the owner may rightfully believe that he is not getting the service he ought to have.

Exclusive listing, however, imposes upon the broker the responsibility of giving conscientious effort to the sale of the property thus listed. Many brokers will not accept an exclusive listing unless they are prepared to give it attention. This attitude is only fair to the owner.

If he gives an exclusive listing and the property receives no attention, he has been deceived and disappointed.

A system known as "multiple listing" has been worked out by the National Association of Real Estate Boards which is combined with the practice of exclusive listing and has been widely adopted. It combines all the advantages of promiscuous listings and those of exclusive listing. It will be discussed in Chapter XIV.

A number of methods are used to keep a record of listings which the office is authorized to handle. The commonest of these is the card index, filed in a visible filing case. Each property is listed on a card containing all information necessary to make the sale of the property. (See Figure 13.) These cards are filed either according to street and number, according to wards, or in the manner most convenient for the particular business. Some offices file in separate racks the cards listing the different kinds of property, such as industrial, residential, vacant lots, etc. This is again a matter of convenience.

Another method of filing listings, which is strongly advocated by some larger offices, is the loose leaf binder method. Those who prefer this method point out that when a card file is used, the cards are constantly being removed and are not available when most needed. When the loose leaf binders are used, the difficulty is obviated. One large office files its listings according to street number, the streets being arranged alphabetically. Different types of property are kept on sheets of different color, white is used for single residence property, pink for apartment houses, yellow for vacant lots, and so on. A copy of one of these sheets is given in Figure 14.

A problem which arises in connection with an exclusive listing is that of satisfying the owner that his property is getting the amount of attention which he thinks it deserves. One office handles this problem as follows : A card (see Figure i5), called the owner's card, is kept, showing exactly what attention has been given to the property. This card is filled out from the salesman's report sheet (see Fig. 12). When the owner calls and asks about his property, he is shown the record in black and white of the number of people to whose attention his property has been called both by telephone and by personal calls, how many times it has been shown and advertised.

The owner's card file also gives the sales manager an easy way to check the amount of effort which his sales force has been giving to each listing. When a property is being neglected, the card shows it and the attention of the salesman responsible for that property can be called to it. The plan of writing the owner from time to time to keep him informed about what has been done has been tried, but it has been found expensive and burdensome. But it is felt by some who have used it to be advisable because it eliminates interviews yet keeps the client satisfied. It further stimulates the sales manager, who dislikes to report no action on exclusive listings.

This completes the records necessary for checking the activities of the sales organization from the standpoint of each property listed, the individual salesman, and the sales record of the whole organization. Other forms which will be found of assistance to the sales force are (I) a "search card," (2) a preliminary agreement to purchase, (3) a memorandum sheet showing the points to be remembered and checked in connection with the closing of each sale, (4) a "dead" file containing the listing cards of all property which is reported sold, (5) a records file containing duplicates of all papers in connection with all transactions made through the office, and (6) maps and other miscellaneous equipment.

The "search" card serves the same purpose for the customer that the owner's card serves for the owner. It gives a record of what has been shown and may serve as an indication to the salesman of what the customer is likely to be interested in. A preliminary agreement to purchase or "earnest money contract" (see Figure 17) is valuable in serving as the basis for negotiations which must be gone through before the deal is finally closed. It commits the parties to the sale and establishes a legal status through the payment of earnest money. The memorandum sheet to be checked on closing the deal prevents errors slipping through because, as is otherwise natural, the salesman forgot. (See page 304.) The "dead" file containing the cards of property that has been sold may serve as a valuable record in appraisal cases, and in other instances where specific information is wanted regarding particular properties.

A file of all duplicate papers in connection with a transaction is a valuable asset to an office. In case of any misunderstanding, or loss of papers by one of the parties to the transaction, the dealer is able to perform a service of significance by having a copy of all papers.

Maps and other equipment which will aid the sales organization and enable the company to give better service to its clientele are a good investment. Equipment and organization can be carried to the extreme, but at present more offices are handicapped by lack of equipment than by a surplus of it. More and more, however, the basis of leadership in the real estate business is coming to be service to clients ; no office unequipped and unorganized can hope to compete with one which possesses both organization and equipment.


1. Office organization is desirable for two reasons ; it enables the small concern to do more effective work and render better service, and it enables the expansion of the small organization into a large one which maintains the same degree of efficiency.

2. There are four purposes of office organization ; (1) to enable specialization by departments; (2) to make it possible for departments to work with each other to the best possible advantage ; (3) to allow the executive of the business relief from the detail of routine work ; (4) to give executives more freedom and power in directing the policies and the large activities of the organization as a whole.

3. The departments of the ordinary real estate office are rents, insurance, loans, and sales. Offices in large cities that specialize may have only a few of these departments or they may have other departments, if their business is large and varied.

4. Rental departments should be organized so as to render satisfactory service to both tenants and owners. The principal forms in use are the owner's contract, tenant's card, and statement to the owner.

5. The insurance department, while it may be divided into a number of special departments according to the different kinds of insurance written, is interested chiefly in fire and casualty insurance. The chief records are the fire insurance policy and insurance expiration card.

6. The chief forms of the loan department are the application for a loan, appraiser's report, insurance papers, and adequate records for checking and securing payments.

7. The sales department is organized to enable the sales manager to keep informed of the individual salesmen's activity and to know what attention has been given each property listed. The chief forms are the salesman's daily report, record of comparative sales, and record of each property listed.

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