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UBC Theses and Dissertations

Critical analysis of organization and management in the real estate brokerage business Hamilton, Stanley William 1965

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CRITICAL ANALYSIS of ORGANIZATION and MANAGEMENT  i n the REAL ESTATE BROKERAGE BUSINESS by STANLEY WILLIAM HAMILTON A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION IN THE DIVISION OF ESTATE MANAGEMENT. We accept this thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA APRIL 20, 1965 I n p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l m e n t of the r e q u i r e m e n t s f o r an advanced degree at the U n i v e r s i t y of B r i t i s h Columbia, I agree t h a t the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r r e f e r e n c e and s t u d y . I f u r t h e r agree t h a t p e r -m i s s i o n f o r e x t e n s i v e c o p y i n g of t h i s t h e s i s f o r s c h o l a r l y purposes may be g r anted by the Head of my Department or by h i s r e p r e s e n t a t i v e s . I t i s understood t h a t , c o p y i n g or p u b l i -c a t i o n of t h i s t h e s i s f o r f i n a n c i a l g a i n s h a l l not be a l l o w e d w i t h o u t my w r i t t e n p e r m i s s i o n . Department of The U n i v e r s i t y of B r i t i s h Columbia, Vancouver 8, Canada . 1 \ m ABSTRACT In recent years the r e a l estate business has been subject to a great deal of c r i t i c i s m concerning the organization and management of the business. However, there has been l i m i t e d evidence to support the c r i t i c i s m s . I t was the purpose of t h i s t hesis to analyze data which had been collected con-cerning the r e a l estate business and determine i f the business i s poorly organized and managed. I f the evidence supported the c r i t i c i s m s , an attempt would be made to determine whether improvements were possible x^rithin the existing structure of the business or whether imporvements w i l l depend on a change i n the structure. Information concerning the r e a l 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 f o r Real Estate Salesmen and Managers. (d) The Real Estate Salesmen - Characteristics and Work Habits. The data for t h i s study was collected from the members of the Vancouver Real Estate Board. A t o t a l of 192 firms employing 1200 salesmen were included. This represented 66$ of the firms and 97$ of the salesmen i n the study area. The geographic area included Vancouver, D i s t r i c t of North Vancouver, West Vancouver, Burnaby, Richmond, Surrey, Port Moody and Coquitlam. In order to c o l l e c t 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 l e t t e r from one of the executive iii" members of the Board s o l i c i t i n g f u l l cooperation. A t o t a l 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* 70^0 computer. Based on the data obtained i t was found that the r e a l estate firms were poorly managed. In p a r t i c u l a r the areas of r e c r u i t i n g , selecting, t r a i n i n g , compensating and supervising salesmen were poorly handled. At present the r e a l estate firms appear to hire unlimited numbers of salesmen without due regard to t h e i r chances of succeeding i n the r e a l estate business. This has resulted i n an excess number of salesmen entering the r e a l estate business. Many of the new r e c r u i t s have l e f t the r e a l estate business after a short period of time, resulting i n a high turnover of salesmen. In addition to the excess number of salesmen, many of the new r e c r u i t s are e n t i r e l y unsuited to the r e a l estate business. The r e a l estate firms have f a i l e d to provide proper t r a i n i n g f o r t h e i r salesmen. The pre-licensing course, which new re c r u i t s are required to complete does not include sales t r a i n i n g . Because of the high turnover of salesmen and the fact that the salesmen are not paid a salary, the firms appear unwilling to t r a i n t h e i r salesmen. Without proper t r a i n i n g the salesmen require considerably more time to become e f f i c i e n t . During t h i s " T r i a l and error" period the salesmen earn a r e l a t i v e l y low income! This has further increased the turnover of salesmen. Many of the problems facing the r e a l estate business appear to be related t o the form of compensation used f o r the salesmen. At present a l l salesmen are paid on a straight commission basis. This has l i m i t e d the firms. i V monetary costs for salesmen and enabled the firms to employ large numbers of salesmen without concern as to t h e i r success. The commission plan has also made i t very d i f f i c u l t f o r new salesmen to remain i n the r e a l estate business because of the low income for the i n i t i a l few months! The salesmen were analyzed to determine what type of men and women enter the r e a l estate business! I t was found that the average salesman enters the r e a l estate business i n h i s l a t e t h i r t i e s and the average number of years experience i n the r e a l estate business i s s i x and one-half years. The average salesman earns approximately $4,950 per year, however, they must work approximately s i x t y hours per week to earn t h i s income. The salesmen enjoy few fringe benefits such as medical insurance, pension plans or group l i f e insurance so the income of $4,950 represents t h e i r t o t a l monetary return. There appears to be a need f o r substantial improvements i n the r e a l estate business and these improvements are possible within the existing structure of the business. Many of the improvements can be made by the i n d i v i d u a l managers and agents without any support from the other agents. Improvements are possible i n the firm's r e c r u i t i n g , selecting and t r a i n i n g methods. A change i n the form of compensation would require the support of the majority of the agents since the l o c a l r e a l estate boards usually establish standards of compensation. However, the agents need not wait u n t i l group action i s taken, many improvements are possible and necessary on an i n d i v i d u a l basis. TABLE OF CONTENTS Chapter Page I Introduction 1 A. Purpose of the Study 1 B. Importance of the Study 4 C. Scope of the Survey ' 5 D. Other Studies 6 E. D e f i n i t i o n of Terms 6 I I The Real Estate Business 8 A. Scope of the Real Estate Business 8 B. Importance of the Real Estate Business 11 C. Development of the Real Estate Business 15 D. Development i n B r i t i s h Columbia.......... 19 E. Government Regulations and Professional Organizations 24 I I I F i e l d Coverage and Method of Survey 38 A. Designing and Handling of the Questionnaire.... 38 B. Size and Nature of the Sample. 41 C. Survey Tabulation 43 IV Organization and Management of a Real Estate Brokerage Firm 47 A. Legal Organization 47 B. Internal Organization 52 C. Supervision i n the Real Estate Firms.. 6l V Recruiting and Selecting Sales Personnel 64 A. Recruiting. 64 B. Selection of Salesmen. 74 C. Turnover of Salesmen 86 VI Training i n the Real Estate Business 92 A. Pre-Licensing Course; 95 B. Agent's Licensing Course 98 C. Specialized Courses i n Real Estate 98 D. Cost of Training a Salesman 101 E. Training Objectives 103 F. On the Job Training 105 G. Sales Meetings 109 H. P o l i c y Manuals I l l I . Other Training Devices I l l J . Summary of Training i n the Real Estate Business 112 vi:'. Chapter Page VII Compensation Plans 114 A. Salesman's Compensation Plans 114 B. Other Salesman's B e n i f i t s ! 124 C. Advertising Allowances 126 D. Compensation Plans f o r Sales Managers 128 VTII The Real Estate Salesman 131 A. Number of Licensees i n B r i t i s h Columbia.... 131 B. Importance of Women i n the Real Estate Bus-iness...... 133 C. M a r i t a l Status of Real Estate Salesmen 133 D. Age D i s t r i b u t i o n of Licensees.... 134 E. Educational Background of the Salesmen 136 F. Work Experience of the Salesmen 137 G. Length of Service i n the. Real Estate Business * 137 H. Length of Service with Present Employer.... 139 I . Type of Real Estate Salesmen 140 J . Hours of Work per Week 141 K. Gross Earning of Salesmen 143 L. Reasons why Salesmen Enter the Real Estate Business........ 146 M. Composite Picture of the Typical Real Estate Salesmen , 146 IX Summary and Conclusions 148 A. Organization Within the Real Estate Firms.. 143 B. Management of A Real Estate Firm.;.!!....., 150 G* The Real Estate Business!...!...!.........! 161 Bibliography!.............................. 166 Appendicies Ai Canadian Association of Real Estate Boards Code of Ethics!!........... .........! 171 B! Firm's Questionnaire!....!...!...!!..!!!... 178 C. Salesmen's Questionnaire.!!...........!..!! I85 D. Letter From the President of the Vancouver Real Estate Board!......!!...:......!...... 188 E. Letter from the President of Salesmen's Di v i s i o n . I89 F. Model Application Form 190 G. Model Interviewers Guide.......!..........! 192 H. Course Outline f o r the Pre-Licensing Course 197 I . Course Outline f o r the Diploma Course.....! 198 J . Syllabus of Office Training!:!....!..!..!!! 199 v i i l . TABLES Table Page I Real Estate Transfers i n Canada 13 I I Mortgage Registrations i n Canada 14 I I I Value of A l l Construction Expenditure i n Canada 14 IV Geographical Coverage of the Questionnaire as of June 1964 42 V Forms of Organization... 50 VI C l a s s i f i c a t i o n of Real Estate Firms by Number of Salesmen Employed 53 VII Number of Separate Departments Within a Firm... 57 VIII Major Sources of Sales Applicants 72 IX Major Sources of Salesmen i n the Real Estate Brokerage Business 73 X Percentage Turnover i n the Sales Force During an Average Year 88 XI Number of Years Experience i n the Real Estate Business (Salesmen) 89 XII Number of Real Estate Firms Salesmen Have Worked with i n Past Four Years 90 XIII Number of Years the Salesmen Have Worked with t h e i r Present Employer 91 XIV Number of Students Enrolled i n the Pre-Licensing Course for Real Estate Salesmen 97 XV Enrollment i n the Diploma Courses 1964-65 : 99 XVI Cost of Selecting, Training and Supervising one Salesman u n t i l he i s Productive..... 101 XVII Training Programs of the Real Estate Firms 106 XVIII Frequency of Sales Meetings. 110 y i i i XIX Compensation Plans f o r Salesmen 116 XX Gross Earnings of Salesmen (19&3) a s Reported by:.. 119 XXI Frequency of Sales Contests 125 XXII Percentage of Gross Commissions Allocated f o r Advertising Expenses 127 XXIII Compensation Plans f o r Sales Managers. 129 XXIV Number of Licensees i n B.C. as of June 1964!... 131 XXV M a r i t a l Status of Real Estate Salesmen i n Greater Vancouver 134 XXVT Age D i s t r i b u t i o n of Licensee Salesmen by Sex..; 135 XXVII Educational Background of Salesmen 137 XXVIII Number of Years Experience i n the Real Estate Business (Salesmen)..... 138 XXIX Number of Years the Salesmen Have Worked with Their Present Employer 139 XXX Number of Real Estate Firms Salesmen Have Worked with i n the Past Four Years 140 XXXI Type of Salesmen 140 XXXII Time Salesmen Start Work 141 XXXIII Time Salesmen F i n i s h Work 142 XXXIV Number of Days o f f per Week. 142 XXXV Number of Evenings Off per Week....... 143 XXXVT Gross Earnings of Salesmen (1963) as Reported by 144 XXXVII Gross Earnings f o r I.C.I. Salesmen as Reported by the Salesmen. 145 CHARTS Chart Page I The Real Estate I n s t i t u t e of B r i t i s h Columbia 37 I I Organization Chart of Large Firm 58 I I I Organization Chart of Small Firm 59 IV Organization Chart of Small Firm 60. V Gross Earnings of Real Estate Salesmen (1963). 121 ACKNOWLEDGEMENTS The writer would l i k e to express h i s gratitude to those i n d i v i d u a l s whose co-operation made i t possible to complete t h i s study. In p a r t i c u l a r , the w r i t e r wishes to thank Professor P.H. "White without whose valuable assistance and advice t h i s study could not have been successfully completed and to the members of the Vancouver Real Estate Board f o r t h e i r kind co-operation. I n addition, special thanks are expressed to Dr. V.V. Murray for h i s assistance i n preparing the questionnaires f o r t h i s study. CHAPTER I INTRODUCTION A. Purpose of the Study As of August 31» 1964, there were 773 real estate brokerage firms employing 2425 salesmen i n the province of B r i t i s h Columbia! In common with most small business firms l i t t l e i s known about the structure, organization and management of these firms. The available information f a l l s far below any acceptable standard. The real estate business has seldom been the subject of interest for any comprehensive study from an organizational or managerial point of view. Members of the real estate business and others concerned with the business are aware of the need for more detailed information. However, the sources of available data and the quality of the data i s s t i l l incommensurate to the significance of the real estate business. In terms of dollar volume, t o t a l transfers of real estate i n Canada for 1963 were estimated to be about $5 b i l l i o n i n value. This involves approximately 519*000 transactions. To this figure may be added the value of new mortgages registered i n Canada. In 1962 the value of mortgage registrations was $3.07 b i l l i o n involving 313»407 mortgages. In 1963 there were 341,001 2 mortgages involving an estimated $3»5 b i l l i o n . 1 B.E. Willoughby, President of the Canadian Association of Real Estate Boards, (C.A.R.E.B.) Financial Post. October 17, 1964, P. 6. 2 Central Mortgage and Housing Corporation, Canadian Housing Statistics, 1963, P. 55, Table 63! - 2 -Thus i n terms of d o l l a r value the r e a l estate business involved approx-imately $8.5 b i l l i o n i n 1963. This does not include the value of new construction which i n 1963 was $7.6 b i l l i o n i There are a number of factors contributing to the growth of the r e a l estate business. The population of Canada i s growing and at the same time i s s h i f t i n g to urban areas. The population i n Canada increased from lk.0 m i l l i o n i n 1951 t o 18.2 m i l l i o n i n 1961, an increase of 30.2$.3 At the same time the number of households i n Canada increased from 3«^ m i l l i o n to 4.5 m i l l i o n , an increase of 3^»^»^ During the ten year period, 1951 - 196l, the number of occupied r u r a l dwellings increased by only 1;2$ while the number of occupied urban dwellings increased from 2il5 m i l l i o n to 3*27 m i l l i o n , and increase of 52.1$.-' This urbanization of the population w i l l increase the demand f o r the higher priced urban dwellings. One other major factor contributing to the growth i n the r e a l estate business has been the growth i n home ownership; During the ten year period, 1951 - 19&1, the number of owner occupied dwellings i n Canada increased from 2.17 m i l l i o n to 3,00 m i l l i o n , a 3*$ increase.^ This increase i n owner - occupied dwellings i s one of the major factors contributing to the r e a l estate business because the owner - occupied dwellings are trans-fered more frequently than dwellings occupied under other tenure. 3 Dominion Bureau of S t a t i s t i c s , Census of Canada, "Households and Families", 2:i Series, p. 1 - 1, 1961. 4 I b i d p. 1 - 1. 5 Op. C i t . , Central Mortgage and Housing Corporation, p. 35. 6 I b i d p. 27, Table 23. - 3 -As the importance of the r e a l estate business continues to grow, the need f o r r e l i a b l e information becomes more urgent. In recent years the r e a l estate business has been subject to a great deal of c r i t i c i s m concerning i t s organization and operation. One such c r i t i c , Mr. R. Wilson, Past President of the Calgary Real Estate Board Cooperative Limited, stated: Observations made during my ten years i n Real Estate have convinced me that r e a l estate firms i n general are lacking i n organization. Complete and proper organization i s essential i n a l l large firms, but few r e a l estate agents recognize that the need i s just as important to them. Many r e a l estate firms have been forced to close up simply because they were not properly organized.7 Opinions such as t h i s are commonplace i n the r e a l estate business, but i n the absence of evidence i t i s impossible to determine the weight which should be given t o them. Therefore, i t i s the purpose of t h i s thesis t o analyze data which has been collected concerning the r e a l estate business and determine i f the business i s poorly organized and i n e f f i c i e n t i n i t s operations. I f the data supports the charges that the r e a l estate business i s poorly organized and i n e f f i c i e n t i n i t s operations, an attempt w i l l be made to determine whether any substantial improvements appear possible w i t h i n the e x i s t i n g framework or whether improvements w i l l depend on a change i n the framework. I t i s the s p e c i f i c purpose of t h i s theses t o secure data on the following points regarding the r e a l estate brokerage business: 7 " R. Wilson, "Management of a Real Estate Office", The Canadian Realtor, Volume 7, October 196l, p. 9. - 4 -1. General background information which may explain how the present structure of the r e a l estate business developed. This w i l l include a review of the development of the various r e a l estate associations and boards; 2. S p e c i f i c data regarding the i n t e r n a l organization of the firms. 3. S p e c i f i c information regarding the r e c r u i t i n g , selecting and h i r i n g procedures used by management. 4. The t r a i n i n g program for sales personnel; 5. The methods of compensation used to compensate sales personnel! 6. The type of supervision exercised withing each r e a l estate brokerage firm. 7. The personal ch a r a c t e r i s t i c s of the licensed salesmen. I t must be recognized at the outset that complete information w i l l not be available f o r each of the seven points! For example, no attempt w i l l be made to examine the " s t y l e " of the managers i n the business; Only the organizational structure within which the managers operate w i l l be examined. In addition the l a s t point regarding the personal characteristics of the salesmen i s incomplete. Since i t was not possible to interview a sample of the salesmen a questionnaire was used. The. use of a questionnaire has l i m i t e d the type of information which can be collected! Factors such as maturity, desire, personality and s a t i s f a c t i o n could not be measured. On the other hand factors such as age, sex, earnings, education and work experience can be determined by used of a questionnaire; B. Importance of t h i s Study. The available data regarding the r e a l estate business i n general i s very meager. The available data regarding the organization and management i s even more scarce. There are a few sources the p r a c t i s i n g r e a l estate . . 5 - . agent may use to obtain r e l i a b l e information. Since the success of a r e a l estate firm depends to a considerable degree on proper organization and e f f i c i e n t management i t i s imperative that the firms have current and r e l i a b l e data to which to refer. I t i s possible that through careful analysis of the date concerning the organization and management practices the r e a l estate business may obtain relevent information on which to base future changes. In addition to the important task of gathering current data, t h i s survey may indicate other areas i n which future research may be done. Since t h i s i s one of the few studies d i r e c t l y related to the problems of organ-i z a t i o n and management i n the r e a l estate business, i t seems l i k e l y that other studies w i l l follow. C. Scope of the Survey. The evaluation of organization and management problems i n the r e a l estate brokerage business requires contact with a great many in d i v i d u a l firms. The firms included i n the survey were selected from the active and g f i n a n c i a l membership of the Vancouver Real Estate Board. The active and f i n a n c i a l members include 289 firms, 488 agents and nominees and 1,226 salesmen. This t o t a l was reduced by the elimination of: 1. 33 member firms which are not primarily involved i n the r e a l estate brokerage business. These firms include Trust Companies, L i f e Insurance Companies and Mortgage Companies. 2. 64 member firms which do not presently employ salesmen. I t was f e l t that these firms would not contribute s u f f i c i e n t l y accurate i n f o r -mation of the nature required f o r t h i s study. 8 Active and f i n a n c i a l membership represent approximately 95$ of the t o t a l membership. The remaining 5$ represents honorary members and associate members from outside of the Vancouver area. Members of the Vancouver Real Estate Board represent 98$ of a l l r e a l estate brokerage firms. - 6 -The f i n a l survey sample includes 192 firms, employing 3°9 agents and 1,200 salesmen. This represents 66$ of the firms and 97$ of the salesmen i n the study area. The geographic area includes Vancouver Cit y , D i s t r i c t of North Vancouver, West Vancouver, Burnaby, Richmond, Surrey, Port Moody and Coquitlam. D. Other Studies. As stated e a r l i e r , the l i t e r a t u r e available i n t h i s area i s r e l a t i v e l y meager. The studies l i s t e d below cover one or more of the areas included i n t h i s survey. 1. Stewart, J . I . , Personnel Administration Survey, Toronto, 1957, Unpublished. 2. Bain, H.O. and P i e r o i r c h , A.L., A Survey of .California's Real Estate Industry - I t s Characteristics and Information  Sources, Berkeley, University of C a l i f o r n i a , 1956. 3. Maisel, S.J. and Schaaf, A.H., Characteristics and Performance of Real Estate Brokers and Salesmen i n C a l i f o r n i a , Berkeley, University of C a l i f o r n i a , 1956. h. Maisel, S.J. and Schaaf, A.H., "The Business of Real Estate Brokerage - Current Performance and Future Pot e n t i a l " . Appraisal Journal, July 1957> P» 337. The more general texts i n the f i e l d of r e a l estate have chapters or portions of chapters devoted to the organization and operation of r e a l estate brokerage firms. However, the information i s of a very general nature. In addition, there are a number of short addresses and reports. Once again the information contained i n these a r t i c l e s i s very meager. E. D e f i n i t i o n of Terms. 1« Real Estate Agent. An agent i s a person who on behalf of another, fo r a fee, purchases, s e l l s , exchanges, leases or rents r e a l estate or negotiates mortgage financing or manages property and includes a person who receives a fee f o r l i s t i n g r e a l estate f o r sale. The agent i s a person properly licenced to act i n the capacity of a middleman i n r e a l estate transactions. - 7 -2. Real Estate Salesman. A r e a l estate salesman i s an i n d i v i d u a l employed by an agent, properly licenced, t o carry out the a c t i v i t i e s referred to i n the d e f i n i t i o n of agent. The important difference i s that a salesman must be employed by an agent. The salesman cannot act on h i s own. 3. Licensee. A licensee i s a person licensed under the Real Estate Act to act as a salesman or an agent. 4. Real Estate Agency or Brokerage Firm. This i s a business firm s p e c i a l i z i n g i n those a c t i v i t i e s l i s t e d under the d e f i n i t i o n of agent. The terms agency and brokerage are used interchangably. The agency may vary from a firm of one agent and no salesmen to a firm employing several agents and one hundred salesmen. Some agencies specialized i n certain functions and areas; others o f f e r a complete l i n e of services. 5. Nominee. A nominee i s a person nominated by a corporation or partnership to represent the corporation. A nominee has exactly the same q u a l i f i c a t i o n s as an agent. A firm may have more than one agent or nominee! 6. Real Estate Business. Throughout t h i s study the term " r e a l estate business" i s used to include a l l a c t i v i t i e s r e l a t i n g to r e a l estate. This includes the transfer of r e a l property, mortgage financing and construction of r e a l property. 7. Gross Commissions. Gross commissions includes a l l commissions earned by a r e a l estate salesman before they are s p l i t between the fir m and the salesman. This includes commissions received f o r the sales of r e a l property, arranging mortgage financing and, where properly licensed, the commission received on property insurance! CHAPTER I I THE REAL ESTATE BUSINESS A. Scope of the Real Estate Business. The real estate business includes a wide variety of participants. The direct participants include the various types of buyers and sellers, the traders or speculators, the investors and the builders. The market intermediaries include the mortgage lenders, the trust companies which act for estates, the lawyer who provides the much needed legal advice and the real estate brokerage firms or real estate agency. Of these, the real estate agency i s the main intermediary providing a wide range of necessary services, including a contact with the other market intermediaries. The real estate brokerage firm or agency exists because they perform a service to the public, a service for which people are willing to pay. The services offered can be classified into three categories. 1. Marketing. The principle service offered by the real estate agency i s that of marketing real property. The agency seldom acts as a principal, the most common practice" i s for the agent or salesman to act as a middleman to bring the vendor and purchaser together. The normal practice i s for the vendor to employ the services of an agent or salesman to locate potential purchasers for the property. This applies equally to leasing and development. 2. Financing. The real estate licensee acts on behalf of a client to obtain mortgage financing for a property or development! The agency does not provide the funds, they simply seek out a mortgage lender who i s willing to provide the funds to the - 9 -prospective borrower, 3. Specialized Services. The real estate agency also provides a number of specialized services. Appraising i s one such service. Since the value of each parcel of property must be determined, the services of a specialist are required. Often the appraisal i s performed i n connection with the marketing service, However, i t i s possible to separate the two a c t i v i t i e s . Another type of specialized service i s that of property management. The licensee w i l l manage a piece of property, usually income producing property, for the owner. These are the two main specialized services, others include supplying property insurance and assisting i n property development. There are a number of factors contributing to the growth and develop-ment of the real estate business. To begin with the commodity, real property, has certain characteristics which distinguish i t from other commodities. Real property i s limited i n quantity, immobile, indestructible and heterogeneous. No unit of real property i s identical to any other unit of property. Secondly, the legal characteristics of real property are complex. Property may be subject to numerous legal claims such as leases, liens, mortgages, and easements. Real property i s local i n nature since i t i s fixed i n location. The supply of and demand for real property i s entirely determined by local conditions. These factors a l l contribute to the fact that real property i s not well adapted to easy trading. The great majority of property transactions are between buyers and sellers who are not familiar with market prices and the mechanics of real estate transactions. This statement applies particularly to the housing ^ market but i t i s also true to a lesser extent to commercial and industrial - 10 -property. Real estate i s offered f o r sale f o r the most part by owners who are not i n the business of trading i n r e a l property and who are involved i n a very few r e a l estate transactions during t h e i r l i f e t i m e . Also buyers and s e l l e r s are normally motivated by factors other than economic ones, especially i n the r e s i d e n t i a l market. Some other factors contributing to the growth i n the number of r e a l estate agents are the complicated cases of property ownership, the absentee owners, and the scattered ownership of r e a l property. Unlike the market for stocks and bonds, there i s l i t t l e uniformity of r e a l property, the market i s l o c a l i n nature and there i s l i t t l e c e n t r a l i z a t i o n of information. I t i s i n a market such as that just described that the r e a l estate broker or agent performs a useful service to the public. Because of t h e i r special knowledge of the r e a l estate market, the agents and salesmen are equipped to advise c l i e n t s and to a s s i s t owners i n securing the best price for t h e i r properties. The agent i s a useful "middleman" i n transactions involving "haggling" and "horse-^trading". The agent acts on behalf of the c l i e n t s to obtain l e g a l assistance when required, to arrange f o r mortgage financing and to provide property insurance. This saves the property owners time and money since they do not have to contact these various market intermediaries i n d i v i d u a l l y . The large number of r e a l estate agents and salesmen i s , i n part, a di r e c t r e s u l t of the market iraperfectious. I f the sale of r e a l property was as simple as the sale of an automobile or furniture there would be no need for so many agents. However, the heterogeneous nature of the product and the complex nature of the transactions require the services of an intermediary. The normal practice i s f o r the agent or salesman to receive a commission f o r h i s services. This commission i s generally based on results - 11 -achieved. The vendor of property i s generally responsible f o r paying the compensation to the agent, however, i t i s possible f o r a purchaser to employ the services of an agent. In cases of mortgage financing, the agent generally charges a percentage of the funds raised, f o r leases or sale of property the lessor or vendor generally pays a percentage of the value. For the more specialized services such as appraising the agent generally charges a f l a t fee unless the appraisal i s done i n connection with a l i s t i n g . B. Importance of the Real Estate Business. The importance of the r e a l estate business to our economy i s c l e a r l y evident. Unfortunately the diverse ownership of r e a l estate and the problems i n assessing the value of r e a l estate have hindered the c o l l e c t i o n of accurate data. One of the most s i g n i f i c a n t estimates of the value of r e a l estate i n Canada was made by Mr. O.J. Firestone i n 1949."*" Mr. Firestone estimated the value of r e s i d e n t i a l r e a l estate i n Canada was at that time $15.3 b i l l i o n . This sum included Newfoundland, .fukon and the Northwest T e r r i t o r i e s . To t h i s amount of $15.3 b i l l i o n must be added the unknown value of a l l i n d u s t r i a l , commercial, a g r i c u l t u r a l and undeveloped r e a l estate. The value of r e s i d e n t i a l r e a l estate alone was almost equal t o Canada's funded debt which as of March 1949 was $15.6 b i l l i o n . ^ Another estimate of the c a p i t a l value of r e s i d e n t i a l r e a l estate i n Canada was made i n one of the studies f o r the Royal Commission on Canada's Economic Prospects.However, as with Firestone's study, t h i s information 1 O.J. Firestone,. Residential Real Estate i n Canada, University of Toronto Press, Toronto, Ontario, 1951. 2 I b i d , p. 77 . 3 Appendix t o the Budget. 1949 - 1950 House of Commons Debates March 2 2 , 1949, p. 41. 4 Wm. C. Hood and A. Scott, Output, Labour and Capi t a l , i n the Canadian  Economy, Royal Commission i n Canada's Economic Prospects 1957. - 12 -i s now outdated. One method of determining the present value of r e s i d e n t i a l r e a l estate i n Canada would be to start with Firestone's estimate, add the value of a l l new r e s i d e n t i a l construction since 1949, subtract the value of a l l demolitions and adjust f o r changes i n the price l e v e l s . This i s the method used by Messeiurs Grebler, Blank and Winnick i n t h e i r estimate of the value of r e a l estate i n the United States.^ There are several disadvantages to t h i s method of calculating c a p i t a l value. F i r s t l y , there i s no; accurate data concerning the value of demolitions. Secondly, there i s no assurance that the value of r e s i d e n t i a l property w i l l change d i r e c t l y with the price l e v e l changes. Thirdly, t h i s estimate includes only r e s i d e n t i a l property! There i s no available information regarding the value of non-residential property. Fortunately the c a p i t a l value i s only one measure of the importance of r e a l estate. Measured i n terms of annual sales volume, 519>453 r e a l estate transfers valued at approximately $5.0 b i l l i o n took place i n 1963.^ This i s an average of $9,400 per transfer. A sales volume of $5.0 b i l l i o n makes the r e a l estate business one of the largest businesses i n Canada. Real estate transfers have increased from 10.2$ of Gross National Expenditure i n 1951 to approximately 11.4^ i n 1963. To the value of transfers must be added the value of mortgages since the r e a l estate licensees are instrumental i n obtaining these funds. In 1963» 341,000 mortgages were registered f o r a value of approximately $3.5 b i l l i o n . 5 Grebler, Blank and Winnick, Capital Formation on Residential Real Estate, Princeton University Press, 1956. ~~ 6 Op. C i t . , Central Mortgage and Housing Corporation, 19&3» P« 55» TABLE I REAL ESTATE TRANSFERS IN CANADA3, AVERAGE YEAR NUMBER AMOUNT(000,s) AMOUNT 1 9 5 1 . . . . . .......441,784 $2,164,477 $4,899 1952 442,685 2,245,553 5,073 1953 480,696 2,688,550 5,593 1954 463,031- 2,959,141 6,391 1955 491,119 3,453,692 7,032 1956 507,179 3,871,953 7,634 1957 ..484,691 3,638,540 7,507 1958...: : .527,708 4,330,161 8,206 1959 -550,544 4,959,878 9,009 I960..... 475,631 4,113,808 8,649 1961 475,619 4,408,315 9,267 1962.... ...482,988 b b 1964 c 519,453 5,000,000 9,400 a Canadian Housing S t a t i s t i c s 1963, p. 55. b Not available c Estimated by O.J. Firestone. This does not include the value of mortgages which were not registered. Total mortgage registrations have increased from 5.1$ of Gross National Expenditure i n 1951 to 7.9$ i n 1963. Depending on the d e f i n i t i o n of r e a l estate which i s used, i t may be desirable.^ t o include the value of c a p i t a l expenditure i n r e a l estate. I n I963 the value of a l l construction expenditure f o r Canada was $7.6 b i l l i o n . 7 Op. C i t . , Central Mortgage and Housing Corporation, p. 22. - 14 -T A B L E I I MORTGAGE REGISTRATIONS I N CANADA* Y e a r Number A v e r a g e R e g i s t e r e d V a l u e Amount 1951 209,575 $1,082,278 $5,164 1952 216,537 1,252,835 5,786 1953 246,680 1,429,174 5,808 1954 266,3i4 1,854,286 6,963 1955 299,160 2,444,740 8,172 1956 , 306,305 2,830,373 9,240 1957 281,655 2,299,114 8,163 1958 334,754 2,889,013 8,630 1959. 338,173 3,311,432 9,792 i960....... 289,726 2,646,265 9,134 1961 323,008 3,158,982 9,779 1962 313,407 3,078,064 9,821 1963b 341,001' 3,500,000 c a C a n a d i a n H o u s i n g S t a t i s t i c s 1963, p . 55. b E s t i m a t e d , c Not a v a i l a b l e . T A B L E I I I VALUE OF A L L CONSTRUCTION EXPENDITURE I N CANADA3-T o t a l V a l u e o f G r o s s N a t i o n a l a l l C o n s t r u c t i o n E x p e n d i t u r e Y e a r ($000,000) ($000,000) 1951 . 3,858 21,170 1952 4,444 23,995 1953. 4,826 25,020 1954. 4,842 24,871 1955 . . . . . . . . . . . . . . i . . 5,305 27,132 1956... 6,454 30,585 1957 7,021 31,909 1958 7,092 32,894 1959..' 7,076 34,915 I960 . . . . . . . 6 , 8 8 4 36,254 1961. 6,973 37,421 1962 7,295 40,401 19631? . . . . . . . . . . . . . . . I . . . . : . . : . . . . 7,695 43,000 a C a n a d i a n H o u s i n g S t a t i s t i c s , p . 21 a n d 22. b E s t i m a t e d . - 15 -In 1962 the value of c a p i t a l expenditure i n r e a l estate was approximately 17.4$ of the Gross National Expenditure. This i s a s l i g h t drop from 18.4$ i n 1951. Depending which d e f i n i t i o n of the r e a l estate business i s used, the value i n Canada f o r 1963 was $5.0 b i l l i o n on transfers of existing property or $8.5 b i l l i o n i f mortgage registrations are included or $16.0 b i l l i o n i f the new c a p i t a l expenditures are included. This i s approximately 37•2$ of the 1963 Gross National Expenditure. The t o t a l possible value of business available to the r e a l estate business i n 1963 was $16.0 b i l l i o n , however, t h i s was not a l l handled by r e a l estate firms. There i s no way of determining the value of business transacted by r e a l estate firms as opposed to private transactions. Real estate transfers handled on the multiple l i s t i n g services accross Canada was valued at $675 m i l l i o n i n I 9 6 3 , however, there i s no means of knowing the value of exclusive or open l i s t i n g s handled by independent r e a l estate firms. Even i n the absence of any one measure which indicates the value of r e a l estate i n Canada, the transfers, mortgage r e g i s t r a t i o n s , and construction expenditures point out the significance of r e a l estate to our economy. Even though the r e a l estate licensee i s not involved i n every transfer, mortgage or construction expenditure, they are p r i n c i p l e market intermediaries i n t h i s diverse area of business. C:. Development of the Real Estate Business! The hist o r y of early r e a l estate companies i n North America i s very sparse. So are the d e t a i l s on early r e a l estate practices. During the early days of settlement i n North America there was no need f o r r e a l estate brokers as they are known today. Early colonization was carried out by large c o l o n i a l firms such as the Hudson's Bay Company - which were awarded large t r a c t s of - 16 -land by the B r i t i s h Crown. This land encompassed most of the area known today as the p r a i r i e provinces and B r i t i s h Columbia. Similar c o l o n i a l firms held large t r a c t s of land i n the eastern areas of Canada and United States. During the era of the large c o l o n i a l firms there was no need for r e a l estate brokers. Land was sparsely populated and mainly held by the c o l o n i a l firms. The most important step towards the modern form of land transfer and ownership was taken when ownership of land shifted from the colonizing companies t o the government and subsequently t o the i n d i v i d u a l s . Such a step was taken i n Canada i n 1868 when as part of the process of forming the Dominion of Canada the B r i t i s h Government purchased the enormous land ownership r i g h t s of the Hudson's Bay Company and turned i t over to the new Canadian Government. The si m i l a r s h i f t i n ownership was slower i n the United States. I t i s very d i f f i c u l t to determine at what point the r e a l estate broker appeared i n North America. The establishment of i n d i v i d u a l land ownership paved the way f o r the broker; however, during early years the population was too sparse to support a f u l l time broker. The s e t t l e r s usually were able to purchase land from the governments on easy terms so there was no need to purchase land from other s e t t l e r s . Sales of property i n a small community did not require the use of a broker. Buyers and s e l l e r s knew one another and transactions were r e l a t i v e l y uncomplicated since property transferred infrequently. The f i r s t persons engaged i n r e a l estate were usually p r i n c i p a l s not brokers. However, there were a number of agents employed by large land owners. These land agents began to appear i n the larger urban areas as early as 179^. 8 P.J. Davis, Real Estate In American History, Public A f f a i r s Press, Washington, D.C. 1958, p. 18. - 17 -Property management, as a separate phase of r e a l estate, began about the same time. I n Philadelphia, as early as 1809, Mr. S. Hains established a r e l a t i v e l y 9 large r e a l estate brokerage firm. By 1848, r e a l estate finance was established as a specialized business. By 1890 the r e a l estate business included appraisal, negotiating and making leases, c o l l e c t i n g rents, handling r e a l estate sales and arranging mortgage financing. Inexperienced men flocked i n t o the r e a l estate business. At t h i s time entry i n t o the r e a l estate business was f a i r l y simple. There were no licenses required, the c a p i t a l requirement was very low and there were few regulations governing the a c t i v i t i e s of r e a l estate salesmen. About the only c a p i t a l required was enough to purchase the necessary stationery supplies and perhaps purchase an occassional advertisement. The opportunities f o r fraud increased. Losses due to incompetent r e a l estate agents were increasing. I t was reported i n I883, by Mr. B. Weil, that Milwaukee had 12 or 14 good agents and 10 or 15 who were only land sharks with no o f f i c e s and no homes. Land frauds and land speculation became a serious problem. This was p a r t i c u l a r l y true during the land booms of F l o r i d a , C a l i f o r n i a and even i n B r i t i s h Columbia. To encourage improved r e a l estate practices, l o c a l r e a l estate associations, known as Real Estate Boards, were established. The f i r s t known Association was established i n Chicago, 1872. Similar associations were established i n Cincinnati i n 1886; St. Louis i n 1877; New York i n I883 and Denver i n 1887.^ " L i t t l e i s known about the early development i n 9 I b i d , p. 38. 10 I b i d , p. 39. 11 I b i d , pp. 39 - 42. - 18 -12 Canada, however, there were at least two boards established before 1892; The f i r s t National Association of Real Estate Boards was formed i n the United States i n 1892. This was a short l i v e d association since i t was discontinued i n 1894. A new association, The National Association of Real Estate Exchanges, was formed i n 1908. Total membership was 1,435 i n d i v i d u a l s or farms! The name was changed i n 1916 to the National Association of Real Estate Boards. The Canadian Boards continued to be part of the American Association u n t i l 1943 when the Canadian Association of Real Estate Boards was formed. The early National Association was plagued by a number or problems! Funds were i n short supply, communication was slow and development of l o c a l boards was s t i l l i n the early stages. However, the National Association formed i n 1908 continued to the present time. By 1915 the National Assoc-i a t i o n had developed a code of ethics f o r use by i t s members. This was one of the p r i n c i p l e purposed of the association and i t was a major step towards improving the ethics of the r e a l estate firms! The next major step i n the development of the r e a l estate business was the establishment of a l i c e n s i n g system! By the lSyO's a number of c i t i e s has started to issue r e a l estate licenses as a source of revenue which required no examination or q u a l i f i c a t i o n s . These early licenses were not sponsored by the r e a l estate boards. However, by 1902 the r e a l estate boards recognized the value of a l i c e n s i n g system. The f i r s t state laws to be enacted was i n C a l i f o r n i a i n 1913 "but t h i s act was held unconstitutional. The f i r s t license systems to be permanently established were enacted i n 1919! 13 Two states, C a l i f o r n i a and Michigan l e d the way. J The f i r s t l i c e n s i n g laws 12 I b i d , p. 45. Two boards from eastern Canada were present at a National Meeting i n Chicago. 13 I b i d , p. 108. - 19 -i n Canada were enacted i n 1920 i n the province of B r i t i s h Columbia. 1 I t i s i n t e r e s t i n g t o note that most of the early l i c e n s i n g laws developed i n areas where great land booms had taken place or where the areas were heavily populated. Today li c e n s i n g laws are an integrated part of the r e a l estate business i n most of the United States and the provinces of Canada! D. Development of the Real Estate Business i n B r i t i s h Columbia. P r i o r to i860 there was no need f o r r e a l estate brokers i n B r i t i s h Columbia. The Hudson's Bay Company was s t i l l the most prominent land owner! After B r i t i s h Columbia became a province of Canada, the importance of the Hudson's Bay Company was reduced. The majority of the land formally held by the Hudson's Bay Company was vested i n the province. Individuals wishing to purchase property could deal d i r e c t l y with the p r o v i n c i a l government or the Canadian P a c i f i c Railway which was granted large t r a c t s of land by the federal government. Land was r e a d i l y available and terms'.were reasonable. There was no need to purchase land from the other s e t t l e r s ! .....land on the Gold Colony (Northern B r i t i s h Columbia) should be made available f o r settlement on easy terms. In 1859, he v> opened the country lands f o r sale by public auction, f i x i n g the upset price at ten s h i l l i n g s per acre.15 Shortly before the f i r e of 1886, the C.P.R. started to s e l l l o t s along Granville Street. The corner l o t s as f a r south as Robson Street were put on the market f o r $1,200 and the inside l o t s f o r $1,000.....not many were sold before the f i r e but more were taken after the f i r e . 1 0 In 1849 Vancouver Island was s t i l l i n the hands of the Hudson's Bay Company. Land could be purchased at a price of L l per acre. In early 1849 there were only about twenty s e t t l e r s on the Island, a l l located at least ten 14 An Act to Provide f o r the Licensing of Real Estate Agents and Salesmen. R.S.B.C. 1920, CH. 48. 15 R.H. Coats and R.E. Gosnell, S i r James Douglas; Makers of Canada, series, V. IX, p. 227. Oxford University Press, London England, 1926. 16 Province Newspaper, September 17, 1919, Vancouver, B r i t i s h Columbia. miles outside of V i c t o r i a . T h e f i r s t public auction of land i n B r i t i s h Columbia was held i n the Fort Langley area. 3»294 l o t s , size 64 by 120 feet, were sold at an upset price of $100 per l o t ! Because of the competitive bidding, prices went as high as $?25 per l o t . Ten percent of the price was down payment, the balance the balance to be paid w i t h i n one month! In order t o keep up with the growing demand f o r land, i t was necessary to establish pre-emptive r i g h t s . This authorized any person to occupy up to 160 acres of land and improve the land providing the s e t t l e r s would pay ten s h i l l i n g s an acre whenever a survey was completed and the t i t l e granted.^ This ordinance was designed to encourage settlement, not speculation. There was wide spread fear and concern over the p o s s i b i l i t y of an i n f l u x of land speculators. The pre-emptive rights only applied to unsurveyed lands. At the time B r i t i s h Columbia joined the Confederation, there were only about eleven thousand s e t t l e r s i n the province. These s e t t l e r s l i v e d mainly i n the lower mainland area and on Vancouver Island. There were approximately 22,000 acres under c u l t i v a t i o n , out of a t o t a l of 230,000,000 a c r e s . 2 0 I t was i n these conditions that the r e a l estate brokerage firm made i t s f i r s t appearance In B r i t i s h Columbia. One of the e a r l i e s t r e a l estate firms i n B r i t i s h Columbia was established i n V i c t o r i a i n I883. The firm, Richards, Akroyd and G a l l Limited, moved to Granville Township i n 1885. This firm drew up t h e i r f i r s t deed i n I883 f o r two l o t s i n Port Moody at $75 per l o t . 17 Op. C i t . R.H. Coats and R.E. Gosnell, p. 236 18 Op. C i t . R.H. Coats and R.E. Gosnell, p. 284 19 This ordinance was adopted i n 1870. 20 Op. C i t ! R.H. Coats and R:E. Gosnell, p. 306. 21 Native Sons of B r i t i s h Columbia, Romance of Vancouver, 1936, Ward and P h i l i p s Co., Vancouver, p. 28. - 21 -By 1891, the Daily News-Advertiser, a newspaper d i s t r i b u t e d i n the Vancouver 22 area, carried f i v e page advertisements for a number of r e a l estate firms. By 1903 the Province Newspaper carried r e a l estate advertisements f o r at least 23 s i x d i f f e r e n t r e a l estate firms and several mortgage lending companies. I n order to set these developments i n perspective with other developments i n B r i t i s h Columbia, i t i s i n t e r e s t i n g to note that the f i r s t bank i n B r i t i s h 24 Columbia was established i n V i c t o r i a i n 1862. The f i r s t t r a i n from eastern Canada arrived i n Vancouver i n 1886. The most active period i n the r e a l estate business occurred between the years 1902 and 1914. This was the period of the land boom i n B r i t i s h Columbia. Although the land boom i n Vancouver di d not start u n t i l 1907 the fever was b u i l d i n g as early as 1902.^ By 1910 there was a large i n f l u x of foreign c a p i t a l i n t o the Vancouver area. By 1911 a rush of speculative buying broke out i n Vancouver and i n the Central and Northern parts of the province. As l a t e as 1914, 144 syndicates held land f o r speculative purposes.....By t h i s time disturbing reports of swindling of misguided English purchasers and s e t t l e r s were c i r c u l a t i n g throughout the provinces.26 I t was i n the year 1909 that the r e a l estate boom reached a new high i n transactions. 1406 r e a l estate transactions took place i n Vancouver.*"'' Although the r e a l estate business became best known by the speculative transactions and fraudulent dealings, these occurred i n r e l a t i v e l y few 22 Daily News-Advertiser, Wednesday November 4, 18911 23 Province Newspaper, September 1903, C l a s s i f i e d Section 24 Cp. C i t i Native Sons of B r i t i s h Columbia, p. 45. 25 Province Newspaper, January 15, 1902. 26 Romance of Vancouver, Op. C i t . , p l 359. 27 Province Newspaper, March 22, 1909. - 22 -situations. The newspapers headlined the sensational stories about land frauds and malpractives. Lots were advertised and sold on the top of Grouse Mountain, represented as wonderful investments; Real estate agents operated from tents, homes and stores. There was no attempt to l i m i t the number of r e a l estate salesmen. I t was during the r e a l estate boom i n Vancouver and throughout the province of B r i t i s h Columbia that the r e a l estate business received i t s bad name; The price of l o t s i n Vancouver increased rapidly. I n 1904 l o t s on Granville Street between Robson and Georgia sold f o r $7,000. By 1910 l o t s i n the same area were s e l l i n g f o r over $100,000. In 1910 the owner of a corner l o t on Granville and Robson refused to s e l l f o r $250,000, however, the l o t sold i n 1916 f o r $122,500. The corner of Granville and 28 Helmeken was refused f o r $125,000 i n 1912, but sold i n 1917 f o r $40,000. This speculative fever spread throughout the entire area: The r e a l estate salesmen d i d not have to resort to fraudulent practices t o promote sales. I t was more a matter of ignorance, optimism and mass fever. Hdwever, any thought that a l l r e a l estate salesmen were fraudulent was f a r from correct. The following quotation appears to be a f a i r summary of the condition of r e a l estate business i n the e a r l i e r 1900'si A great deal of the r e a l estate game i s thoroughly legitimate, and many of the men i n i t are thoroughly honest, but by f a r the greater number are ignorant or impossible optimists. The game offers splendid chances f o r swindlers. Once a boom s t a r t s , men come out of t h e i r barbers' shops, from pick and shovel work, from behind bars and t h e i r numbers are augmented by many ex-gaol b i r d s , who often succeed i n persuading honest buyers and statesmen to l e t them have a l i t t l e money, and lend them credit on t h e i r names. Very naturally the bankers, the great carrying companies, and the sound business men deplore r e a l estate as i t s whole effect i s t o enrich the men dealing i n i t , making i t harder for everyone to l i v e and leaving the country poor.29 28 J . P . N i c o l l s , Real Estate Values i n Vancouver. C i t y Archives, Vancouver, 195^, PP. 26 - 28 i 29 J.B; T h o r n h i l l , B r i t i s h Columbia i n the Making. 1913 Constable and Co. London, England, p. 120 - 23 -Although the real estate business was held to be a disreputable and dishonest business, this did not apply to a l l real estate salesmen. Unfortunately the action of a few promoters,>rspeculators and dishonest salesmen caused the entire business to suffer. There were, however, a group of real estate businessmen who were very concerned about the real estate practice i n British Columbia. Attempts were made to form assoc-iations to improve the character of the real estate business and to protect the public at large. Because of the number of real estate firms, the lack of license requirements and the calibre of individuals i n the business, progress was very slow! In 1920 the f i r s t real estate licensing laws were passed i n the province of B r i t i s h Columbia.^0 Between the years 1920 and 1956 substantial improvements were made i n the real estate business. Local real estate boards were established throughout the province. The information regarding the devel-opment of the real estate boards i s the real estate business i n Br i t i s h Columbia has lead the way i n Canada! Although improvements were continually made throughout the period 1920 - 1 9 5 6 , the most important steps taken was the introduction of the various real estate acts designed to protect the public from the irresponsible and fraudulent acts of the real estate salesmen and agents! During this time the attention of those concerned with the real estate business was directed at formulating procedures to protect the public and improve the business ethics rather than concerning themselves with methods of improving the efficiency and organization of the real estate business. 30 Op! Cit . , R.S.B.Ci, CH; 48 - 24 -E! Government Regulations and Professional Organizations! The r e a l estate business was f i r s t subjected to p r o v i n c i a l control i n 1920.3-*- The purpose of t h i s act was to ensure that a l l r e a l estate agents and salesmen i n the province were properly licensed. The requirements to obtain a license were very meager. The main intent of the act appears to have been to regulate certain operating methods and actions! The act was valuable to the extent that any active agent or salesman who was not granted a license or who had t h e i r license revoked could not operate i n the r e a l estate business. Although the 1 9 2 0 Act did not transform the r e a l estate business i n t o a profession, i t was a b i g step i n the r i g h t d i r e c t i o n . Between the years 1 9 2 0 - 1 9 5 8 there were numerous improvements i n the p r o v i n c i a l acts regulating r e a l estate agents and salesmen! Rather than trace these changes, i t i s of more immediate concern to review the provisions of the current act and determine to what extent the act affects the operation of the r e a l estate firms. The current r e a l estate act, as with a l l the previous acts i s mainly concerned with the regulating the a c t i v i t i e s of r e a l estate agents and salesmen so as to protect the public.-^ 2 In f u l f i l l i n g t h i s purpose certain sections of the act necessarily affect the operation and management of the firms. I t i s these sections of the act which are of p a r t i c u l a r i n terest at t h i s time! I n addition to the Act, i t i s necessary to review the Regulations Under the Real Estate Act.3 3 3 1 Province o£ B r i t i s h Columbia, An Act to provide f o r the Licensing of Real  Estate Salesmen. R.SiBiC! 1 9 2 0 Chapter 48! 3 2 Province of B r i t i s h Columbia, Real Estate Act, R!S!B.C!, Shapter 3 3 0 , 1 9 5 8 . 3 3 Province of B r i t i s h Columbia, Regulations Under the Real Estate Act, Order i n Council, 1 9 2 0 , May 1 9 6 1 , As Amended. - 25 -1. R e a l E s t a t e A c t . S e c t i o n 4 ( l ) No person s h a l l act o r h o l d h i m s e l f out as an agent u n l e s s he i s t h e h o l d e r o f a v a l i d and s u b s i s t i n g a g e n t ' s l i c e n s e i s s u e d t o him under t h i s Act by t h e S u p e r i n t e n d e n t ! (2) No p e r s o n s h a l l a c t or h o l d h i m s e l f out as a salesman u n l e s s he i s t h e h o l d e r of a v a l i d and s u b s i s t i n g salesman's l i c e n s e i s s u e d t o him under t h i s Act by t h e S u p e r i n t e n d e n t , and u n l e s s he i s employed by an agent . (4) I f i t appears t o t h e Super intendent that t h e a p p l i c a n t i s not a s u i t a b l e person t o be l i c e n s e d , o r t h a t t h e person nominated by the a p p l i c a n t under s e c t i o n 5 i s not a s u i t a b l e p e r s o n t o ex-e r c i s e t h e r i g h t s and p r i v i l e g e s under t h e l i c e n s e , and t h a t t h e a p p l i c a n t i o n should be r e f u s e d , t h e Super intendent s h a l l r e f u s e t o i s s u e t h e l i c e n s e ; S u b s e c t i o n s ( l ) and (2) c l e a r l y s t a t e t h a t no i n d i v i d u a l can act as an agent o r salesman u n l e s s p r o p e r l y l i c e n s e d , subject t o a few e x c e p t i o n s noted i n S e c t i o n 3 ° f t h e A c t . I n a d d i t i o n no salesmen are p e r m i t t e d t o operate on t h e i r own. Every salesman must be employed by a p r o p e r l y l i c e n s e d agent; I n o r d e r t o o b t a i n a salesman* s l i c e n s e , an i n d i v i d u a l must - s a t i s f y t h e q u a l i f i c a t i o n set f o r t h i n t h e R e g u l a t i o n ; These w i l l be d i s -cussed l a t e r i n t h e c h a p t e r . S u b s e c t i o n (4) g r a n t s t h e Super intendent power t o r e f u s e a l i c e n s e i f , i n h i s o p i n i o n , t h e a p p l i c a n t i s not a s u i t a b l e p e r s o n t o be l i c e n s e d . S e c t i o n 20 o f the R e a l E s t a t e A c t e s t a b l i s h e s t h e n e c e s s a r y power t o d i s c i p l i n e r e a l e s t a t e l i c e n s e e s . I n p a r t i c u l a r s u b - s e c t i o n 20-7, 20-8, and 20-9 grant t h e Super intendent power t o suspend or c a n c e l a l i c e n s e . 20-7 The Super intendent may, whether or not an i n q u i r y has been h e l d o r a r e p o r t has been made under t h i s s e c t i o n , and whether o r not any c o m p l a i n t has been made, suspend o r c a n c e l a l i c e n s e where i n h i s o p i n i o n suspension o r c a n c e l l a t i o n i s i n t h e p u b l i c i n t e r e s t . - 26 -20-8 Where a person appointed by the Superintendent or by the Council to examine the books and records of a licensee reports that i n h i s opinion there has been an i n f r a c t i o n of t h i s Act or the regulations r e l a t i n g to accounts, the Superintendent may forth-with suspend the license of the licensee pending the resu l t of the inquiry under t h i s section! 20-9 The Superintendent may, (a) where the license of a person has been suspended or cancelled; or (b) where d i s c i p l i n a r y action against a person has commenced or i s about to commence under t h i s section; or (c) where crimianl proceedings or proceedings i n respect of a v i o l a t i o n of t h i s Act or the regulations are about to be or have been i n s t i t u t e d against a person, which i n the opinion of the Superintendent are connected with or arise out of a real-estate trans-action, i n w r i t i n g or by telegram d i r e c t (d) any person having on deposit or under control oi- f o r safe-keeping any funds or secu r i t i e s of the person referred to i n clause (a), (b), or (c) to hold the funds or sec-u r i t i e s ; or (e) the person referred t o i n clause ( a ) , (b), or (c) ( i ) to r e f r a i n from withdrawing funds or securities from any other person having any of them on deposit, under control, or for safe-keeping; Sections 30 and J>2 of the Real Estate Act states that no agent s h a l l employ the services of an unlicensed salesman nor s h a l l the agent pay commissions to an unlicensed salesman. This i s because the success of the Act depends;:; on the effectiveness of the lic e n s i n g system. I t i s also impossible f o r an unlicensed agent or salesman to recover any unpaid commissions i n the courts (Section 37). - 27 -Section 3Q» Payment of commission to persons not licensed prohibited. 30i No licensee, and no o f f i c e r , agent, or employee of a licensee, s h a l l d i r e c t l y or i n d i r e c t l y pay or allow, or o f f e r or agree to pay or allow, any commission or other compensation or thing of value to any person f o r acting, or attempting or assuming to.act, as an agent or salesman, unless at the time he so acts, or attempts or assumes to act, that person holds a license as may be appropriate under t h i s Act; and every person who vi o l a t e s any pro-v i s i o n of t h i s section, or who knowingly receives any commission, compensation, or thing of value paid or allowed i n v i o l a t i o n of t h i s section, i s g u i l t y of an offence against t h i s Act, but nothing i n t h i s section applies t o the payment by a duly authorized agent to an agent duly licensed or otherwise authorized by law as such i n a j u r i s d i c t i o n other than B r i t i s h Columbia of a commission or other compensation with respect to the sale of r e a l estate i n the province. 1958, ci47, si31; 1961, c.54, s.21. Section 32. Employment of unlicensed salesman or nominee. 32. No agent s h a l l employ or engage the salesman or nominee of another agent or any unlicensed salesman or nominee i n any real-estate transaction, and no agent s h a l l pay a commission or other remuneration t o any such salesman or nominee. 1958, C.47, s.34; 1961, c.54, s.23. Sections 35 and 36 l i m i t the type of renumeration receivable by the r e a l estate agent. Section 35. Commission and remuneration, scale o f i 35. A l l commission or other remuneration payable to an agent i n respect of the sale of any r e a l estate s h a l l be upon an agreed amount or percentage of the sale price; and where no agreement as to the amount of the commission has been entered i n t o , the rate of commission or other basis or amount of remuneration s h a l l be that generally p r e v a i l i n g i n the community where the r e a l estate i s situate. 1958, c.47, s.36. 36. No licensee s h a l l request or enter i n t o an agreement f o r the payment to him of commission or other remuneration based on the difference between the price at which any r e a l estate i s l i s t e d f o r sale and the actual sale price thereof, and no licensee i s e n t i t l e d to r e t a i n any commission or other remuneration so computed. 1958, c.47, s.37; 1961, c.54, si24. Although these sections do not serious l i m i t the methods of remun-eration used, they do eliminate the p o s s i b i l i t y of undervaluing property i n ant i c i p a t i o n of receiving a high p r o f i t based on the difference between a - 28 -l i s t e d p r i c e and the actual sale p r i c e . I n the absence of any agreement the rate of commission that generally prevails i n the community s h a l l apply. Sections 35 and 36 only apply to the sale of r e a l estate. Section 4l-(b) of the Act establishes the r e s p o n s i b i l i t i e s of the agent i n respect to h i s salesmen. 4l-(b)! where an offence i s committed by a licensee, the d i r e c t o r , partner, o f f i c e r , nominee, employee, or agent i n charge of the business of the agent at the place at which the offence i s committed or i n charge of the real-estate transaction i n connection with which the offence i s committed i s prima f a c i e deemed to be a party to the offence so committed and i s personally l i a b l e t o the penalties prescribed f o r the offence as a p r i n c i p a l offender; and the records of the agent are as against the di r e c t o r , partner, o f f i c e r , nominee, employee, or agent prima f a c i e evidence of the facts and transactions therein recorded, set out, or indicated; but nothing i n t h i s section r e l i e v e s the licensee or the person who actually committed the offence from l i a b i l i t y therefor; I t i s because of t h i s prima f a c i e r e s p o n s i b i l i t y that the agent should provide proper supervision f o r h i s salesmen! One offense committed by a salesman could cause serious d i f f i c u l t i e s f o r the agent involved. This does not mean that the salesman responsible f o r the offense would not also be punished. These are the main sections of the Act which affect or influence the management of a r e a l estate firm! There are other sections which require the agent to maintain sales records (Section 15-1) and t r u s t accounts (Section 1 5 - 2 ) . Other sections affect the handling of agreements f o r sale (Section 29) and requirements f o r bonding salesmen! 2. Regulations Under the Real Estate Act! The Regulations are as important, i n many respects, as the Real Estate Act. Various regulations have an effect on the management of the r e a l estate firms. - 2 9 -Regulations 4 . 0 1 . Every person who applies f o r a license under the Act, and i f a partnership or corporation each nominee thereof, s h a l l (a) be a bona fide resident of B r i t i s h Columbia; (b) be of the f u l l age of twenty-one years i n the case of an agent or nominee and of eighteen years i n the case of a salesman; (c) be of good reputation, and i n the case of an applicant f o r license as an agent be i n sound f i n a n c i a l circumstances; (d) have an appropriate knowledge of the books of account required i n the operation of a r e a l estate business; (e) have an understanding of the obligations between p r i n c i p a l and agent, of the p r i n c i p l e s of r e a l estate practice and canons of business ethics pertaining thereto, as w e l l as an understanding of the provisions of the Act; ( f ) have passed such examination or examinations as s h a l l have been prescribed by the Council and approved by the Superintendent. These regulations affect the r e c r u i t i n g p o l i c i e s of the firm. The applicants must be eighteen years of age, a boni f i d e resident of B r i t i s h Columbia, of good reputation and at present complete the pre-licensing course at the University of B r i t i s h Columbia; Therefore, a r e c r u i t i n g firm must abide by the regulations and at the same time s a t i s f y themselves that t h e i r applicants can pass the pre-licensing courses. I f the applicant f a i l s the course, the license w i l l not be granted. In addition, every applicant fo r a license must have references from three people who w i l l vouch f o r h i s i n t e g r i t y , good business, reputation and good character. (Section 4 . 0 5 ) Regulations 4 . 0 2 . No person s h a l l be licensed as an agent unless, f o r not l e s s than two years during the f i v e years immediately preceding h i s application, (a) he has served as an agent or salesman licensed under the Act or the Real-estate Agents' Licensing Act; and (b) each of h i s nominees, i f a nominee i s required, has served as an agent or salesman licensed or nominee q u a l i f i e d under the Act or the Real-estate Agents' l i c e n s i n g Act. Section 4 . 0 2 of the Regulations sets out the requirements f o r an agent's license. Although the a c t i v i t i e s of the agents are not of immediate - 30 -concern, i t can be seen that the requirements for an agent's license may prevent some salesmen from opening their own office. Sections 5»01, 5*02 and 5.03 affect the advertisement policies of real estate firms. Regulations Section 5.01. A licensee shall not publish, or cause or permit to be published, an advertisement for the purchase, sale, exchange, or rental of real estate other than an advertisement. (a) for the purchase, sale, exchange, or rental of real estate by or for himself and not i n his capacity as licensee; and (b) that does not set forth the name, address, or telephone number of any place of business where he i s engaged i n his capacity as licensee, unless the advertisement displays his name as the person advertising and, i f he i s not an agent, the name of the agent who i s his employer. 5.02. No licensee shall place a "For Rent" or "For Sale" sign on property without the consent of the owner or the authorized agent of the owner. Although these regulations are not stringent, they do eliminate the poss i b i l i t y of intentionally false statements. There i s nothing i n the regulations to discourage unethical adverti sement s. Section 6.01 regulates the establishment of branch offices. A branch office cannot be established unless there i s an agent or nominee i n charge of the office. 6.01. No agent shall operate a branch office unless the location and the manager thereof are approved by the Superintendent, and unless he i s the holder of a valid and subsisting license for such branch office issued to him by the Superintendent. There are a number of other regulations which affect the organization and management of a real estate office. 9.03. A corporation to which an agent's license i s issued shall have, as i t s main business, the conduct of real estate or real estate and insurance. 9.13. I t shall be a condition of every salesman's license that the salesman shall not engage i n any business, profession, or employment other than that of; (a) a real-estate salesmen; (b) an insurance salesman; (c) an insurance agent; - 31 -and the Superintendent may, i n the event of f a i l u r e to comply with the clause, suspend or cancel the license of the salesman. Any suspension of a license under t h i s clause may be for a f i x e d period or f o r an i n d e f i n i t e period terminable when the salesman has ceased to engage i n another business, profession, or employment. Sections 9.03 and 9.13 are designed to eliminate part time r e a l estate agents and salesmen. This was one of the major problems i n the recent h i s t o r y of the r e a l estate business and the Regulations appear to have eliminated t h i s problem t o a certain extent. Part time r e a l estate salesmen s t i l l work i n the business, however, they do not have another job. These include married women and semi-retired i n d i v i d u a l s . There are the main sections of the Act and the Regulations which affect the management and organization of r e a l estate firms. I t can be said that a l l sections of the Act and Regulations affect the management, however, the sections sited appear to have the most d i r e c t affect on those management practices which are considered i n t h i s study. I t must be kept i n mind that the purpose of the Act and Regulations i s not to improve the ef f i c i e n c y and management of the firm, t h i s i s only a side e f f e c t . In addition to the changes that have been brought about by the Real Estate Act, the various boards, associations and i n s t i t u t e s w i t h i n the province have helped influence the a c t i v i t i e s of the r e a l eastate firms. In B r i t i s h Columbia, there are three l e v e l s of organization. There are l o c a l r e a l estate boards, a p r o v i n c i a l association and a f f i l i a t i o n to the national association. The l o c a l r e a l estate i s an association of r e a l estate firms(and other firms such as mortgage lenders) who carry on t h e i r business i n a given l o c a l i t y . At present there are eight r e a l estate boards i n the province. The boundaries of the r e a l estate boards do not necessarily correspond to any p o l i t i c a l boundaries. Membership to l o c a l r e a l estate boards i s e n t i r e l y - 32 -voluntary, however, the introduction of multiple l i s t i n g service by the boards has caused membership to increase. Membership to the Vancouver Real Estate Board i n 1964 was 98$ of a l l e l i g i b l e firms. The objects or purposed of the l o c a l r e a l estate boards vary. The Vancouver Real Estate Board has l i s t e d twenty objects i n i t s constitution. The most important objects are: (b) to do a l l things necessary to promote interest i n the marketing of Real Estate i n a l l i t s aspects, and t o advance and improve the relations of the members of the Society with the public. (c) to advance and promote the in t e r e s t s of those engaged i n the Real Estate business as brokers, agents, salesmen, valuators, appraisers, examiners and experts and to increase public confidence i n and respect f o r those engaged i n the c a l l i n g of the r e a l estate agent: (d) to encourage the use of the designation "REALTOR" by the members of the Society and to encourage and promote the acceptance by the general public of such designa-t i o n and such use thereof and to protect, as f a r as p r a c t i c a l the exclusive use thereof by the members of t h i s Society and other societies and organizations, members of the Canadian Association of Real Estate Boards. (e) to encourage the study of r e a l estate i n a l l i t s aspects and to promote the exchange of views between the members of the Society by affording opportunities f o r discussion, correspondence and attendance at lectures f o r the reading of papers and to disseminate useful information by c i r c u l a t i o n among the members of publications, data and forms.3--; (p) to adopt a code of 'ethics and standards of business • conduct to which a l l members s h a l l be required t o conform.3 As the boards become more powerful, i n the sense that membership becomes more necessary, they may be able to suggest or enforce management changes. 34 Vancouver Real Estate Board, Constitution and By-Laws, 1962, As Amended: pp. 5 - 6 . - 33 -Such a move i s currently underway i n the Vancouver Real Estate Board which i s attempting to establish a minimum salary f o r a l l salesmen working f o r member firms. I n 1962 the various r e a l estate groups i n B r i t i s h Columbia were consolidated under one body, the Real Estate I n s t i t u t e of B r i t i s h Columbia: The I n s t i t u t e includes the functions of the former B r i t i s h Columbia Association of Real Estate Boards. The I n s t i t u t e i s made up of three separate d i v i s i o n : (See Chart 1, page 37)• (a) Realtor Membership D i v i s i o n ; This d i v i s i o n replaces the former B r i t i s h Columbia Association of Real Estate Boards. Membership comprises a l l l o c a l r e a l estate boards i n the province and i n d i v i d u a l members from areas which are not served by l o c a l board. The chief purpose of t h i s d i v i s i o n i s to serve the interest of l o c a l boards on a p r o v i n c i a l wide basis. At present t h i s d i v i s i o n represents 3287 agents and 35 Salesmen. (b) P r o v i n c i a l Membership D i v i s i o n ; A l l licensed agents and nominees of the province may belong. This d i v i s i o n elects representatives to serve on the Real Estate , Council of B r i t i s h Columbia. Although Chart 1, page 37 shows the Real Estate Council as part of t h i s d i v i s i o n , t h e i r function i s separateefrom t h i s d i v i s i o n ; 35 Real Estate Council of B r i t i s h Columbia Unpublished S t a t i s t i c s - 34 -(c) Professional Membership D i v i s i o n ! This d i v i s i o n requires special q u a l i f i c a t i o n s by experience or education of i t s members who may be agents, nominees, salesmen or others associated with the r e a l estate business. The Real Estate Council of B r i t i s h Columbia i s a body set up by the 36 Real Estate Act to advise and a s s i s t the Superintendent of Insurance. The Council i s i n practice elected by members of the P r o v i n c i a l Membership Di v i s i o n of the I n s t i t u t e . The duties of the Council include: (a) Advise the Superintendent i n the exercise of h i s powers. (b) Supervise the educational q u a l i f i c a t i o n s of agents and salesmen. (c) Publish and d i s t r i b u t e licensees and other information. (d) Handle i n q u i r i e s and hearings regarding complaints r e l a t i n g to the Act or the Regulations! The Canadian Association of Real Estate Boards i s a national association bringing together the various l o c a l boards throughout Canada! This association was formed i n 1943! The method of membership i s similar to that of the Realtor D i v i s i o n of the Real Estate I n s t i t u t e of B r i t i s h Columbia. Although membership t o the Canadian Association i s obtained through membership of l o c a l boards rather than p r o v i n c i a l association;, support i s given t o the l a t t e r by requiring that a l l boards seeking membership to the Canadian Association must be members i n good standing of the appropriate p r o v i n c i a l organizations. Membership i n the Canadian Association of Real Estate Boards i n 1962 included 72 l o c a l boards and 12,683 members. 36 Province of B r i t i s h Columbia, Real Estate Act, R!S!B!C! 1958, Chapter 330, Section 14. - 35 -The objects of the Canadian Association are sim i l a r t o those of the pr o v i n c i a l organizations except they r e l a t e to Canada. As part of the requirements, a l l members are obliged to abide by the Code of Ethics (Appendix A), In practice, most l o c a l boards have adopted a more stringent Code. The Code of Ethics of the Canadian Association i s , therefore, the minimum standard of behavior f o r the l o c a l boards which are members of the Association. I n an attempt to improve the standards of the r e a l estate business, the Association formed a branch known as the Canadian I n s t i t u t e of Realtors. Membership i s sim i l a r t o the Professional D i v i s i o n of the Real Estate I n s t i t u t e of B r i t i s h Columbia! In an attempt to distinguish members of the Canadian Association of Real Estate Boards from non-members, the term "Realtor" has been adopted! This name implies: . The name i s a pledge and i t s authorized use by r e a l estate dealers i s a guarantee of i n t e g r i t y and e f f i c i e n t service. Although every e f f o r t has been made i n the past years t o improve the ethics i n the r e a l estate business and protect the public, there has been r e l a t i v e l y l i t t l e progress made i n improving the ef f i c i e n c y of the firms! The future development of the r e a l estate associations and organiza-t i o n s may be able to make major contributions t o t h i s end! In addition t o the associations and boards which have been formed throughout the province, the salesmen i n B r i t i s h Columbia have organized the f i r s t union i n Canada f o r r e a l estate salesmen. The union, "The Vancouver Real Estate Salesmen's Union, Number 1570" was granted a charter by the Canadian Labour Congress. - 36 -The union was organized to ass i s t the r e a l estate salesmen to improve t h e i r working conditions. I n p a r t i c u l a r the union was concerned with: (a) obtaining Workman's compensation f o r r e a l estate salesmen! (b) Obtaining Unemployment Insurance benefits! (c) Obtaining rd.nim.um wage protection. (d) Obtaining a medical care scheme. (e) Obtaining holiday pay and a pension plan. In addition the union attempted to obtain a greater voice f o r the r e a l estate salesmen i n the Real Estate Council and the Vancouver Real Estate Board. I t was the union's contention that the Council and the Vancouver Board were nothing more than "associations of the agents (employers) having as part of t h e i r Constitution and By-laws a Charley McCarthy set up 37 to supposedly look after the interest of the salesmen". The union, despite t e r r i f i c opposition from almost a l l the agents, applied f o r c e r t i f i c a t i o n with two agents. The union, although c e r t i f i e d , has not been successful i n the Vancouver area. Membership has been l i m i t e d to a handful of salesmen! Under present conditions i t i s u n l i k e l y the union w i l l be a strong force. However, i f or when the salesmen receive a rrdnimum salary, the union may have another opportunity t o attempt to organize the salesmen. 37 W. Reid, The Address to the Vancouver Real Estate Salesmen's Union, 1961, Unpublished. - 37 -CHART 1 CANADA CANADIAN ASSOCIATION OF REAL ESTATE BOARDS BRITISH COLUMBIA REAL ESTATE. INSTITUTE. OF BRITISH .COLUMBIA Function - To act as the professional r e a l estate society i n B r i t i s h Columbia Governing Body - Board of 12 directors, 4 from . . . .each, d i v i s i o n PROVINCIAL MEMBERSHIP DIVISION. - Open to a l l agents and nominees - Elects a body f o r nomination to the Real Estate \ Council . ....... REALTOR MEMBERSHIP DIVISION - Local Real Estate Boards and indi v i d u a l s where no boards exist - Designed to co-ordinate the work of the various boards . . . . . . PROFESSIONAL DIVISION - Open only to persons with the required q u a l i f i c a t i o n s - Designed to establish r e a l estate as a . profession . . _ . . . CHAPTER III FIELD COVERAGE AND METHOD OF SURVEY A. Designing and Handling of the Questionnaires! In order to provide a wide coverage of firms and salemen, i t seemed desirable to use two separate questionnaires! These questionnaires were prepared with the help of Professor P.H. White and Professor V.V. Murray of the University of British Columbia and the Joint Broker - Salesman Committee of the Vancouver Real Estate Board. The Broker - Salesman Committee also assisted i n the handling of the questionnaire! The first questionaire, Appendix B, was designed to obtain information regarding the management and organization of the brokerage firms. The firm questionnaire included specific and open-end questions! The specific questions included: 1. Qualifications required of new salesmen. 2. Type of recruiting procedures! 3. Type and nature of the training program. 4. Compensation plans and other motivating factors for salesmen! 5. Compensation plans and other motivating factors for sales managers. 6. Success of the firm. This was measured by the earnings of each employee of the firm and the turnover in salesmen! 7. Size of the firm in terms of the number of salesmen, managers and number of offices! 8 . Type of internal organization! 9! Type of legal organization. - 39 -The open-end questions offered an opportunity to express personal opinions regarding the problems i n the r e a l estate brokerage business. The salesmen's questionnaire, Appendix C, was more sp e c i f i c i n nature. The salesmen were questioned on: 1. Age, sex, and marital status. 2. Background - formal education, work experience, reason f o r entering the r e a l estate business. 3. Working habits i n terms of hours, days worked and the type of property sold. 4. Experience i n the r e a l estate business. 5. Annual earnings from the r e a l estate business. Provision was made f o r opinions regarding the r e a l estate business by way of an open-end question. Between May 24 and June JO, 1964, the questionnaires were mailed from the o f f i c e of the Vancouver Real Estate Board! Questionnaires were mailed to 192 firms and 1,200 salesmen. The questionnaires, which were a l l directed to the agent or nominee of the firm, were accompanied by an explanatory l e t t e r from Mr. J . Boultbee, President of the Vancouver Real Estate Board. (See Appendix D). Mr. W. Clarke, President of the Salesman's D i v i s i o n of the Vancouver Real Estate Board, sent a l e t t e r d i r e c t l y to each salesman ex-plaining the nature of the survey and s o l i c i t i n g f u l l co-operation. (See Appendix E). In addition, notices were included i n the publications of the Vancouver Real Estate Board. Once the questionnaires were sent out, the agent or nominee of each firm was contacted by phone to arrange an interview! The agent was asked to complete the questionnaire p r i o r to the interview, thus permitting more time during the interview to discuss and c l a r i f y the answers. The salesmen were asked to complete the questionnaires i n d i v i d u a l l y and either hand them _ 40 -i n t o t h e i r agent o r t o m a i l them-to t h e Vancouver R e a l E s t a t e B o a r d . The i n t e r v i e w t e c h n i q u e was used t o gather d a t a from t h e f i r m s , however, t h e r e was no attempt made t o i n t e r v i e w t h e salesmen! There are a number o f advantages i n u s i n g t h e i n t e r v i e w t e c h n i q u e . Although t h e i n t e r v i e w and t h e q u e s t i o n n a i r e b o t h r e l y h e a v i l y on t h e v a l i d i t y o f v e r b a l r e p o r t s , t h e r e i s more o p p o r t u n i t y i n t h e i n t e r v i e w i n g s i t u a t i o n t o a p p r a i s e t h e i r v a l i d i t y t h a n t h e r e i s i n t h e q u e s t i o n n a i r e ! ! The i n t e r v i e w a l s o i n s u r e d a h i g h percentage o f r e t u r n s from t h e f i r m s . The r e p r e s e n t a t i v e s , r e s p o n s i b l e f o r t h e f i r m q u e s t i o n n a i r e , were encour-aged t o complete t h e q u e s t i o n n a i r e i n d e t a i l ! The problem o f p a r t i a l l y completed q u e s t i o n n a i r e s was m i n i m i z e d by t h e use o f a p e r s o n a l i n t e r v i e w . I n a d d i t i o n , t h e person i n t e r v i e w e d o f t e n o f f e r e d a d d i t i o n a l v a l u a b l e i n f o r m a t i o n not d i r e c t l y r e l a t e d t o the q u e s t i o n s on t h e q u e s t i o n n a i r e ! I t should be mentioned t h a t t h e r e were o t h e r q u e s t i o n s w h i c h c o u l d have been i n c l u d e d i n t h e q u e s t i o n n a i r e s . However, t h e J o i n t B r o k e r -Salesmen Committee a d v i s e d t h a t c e r t a i n q u e s t i o n s s h o u l d be a v o i d e d . I t was suggested t h a t t h e agents and salesmen may r e s e n t some p a r t i c u l a r q u e s t i o n s . I n o r d e r t o ensure t h e f u l l support o f t h e committee, and a t t h e same t i m e a v o i d i r r a t a t i n g any agents o r salesmen, some q u e s t i o n s which appeared c o n f i d e n t i a l were e l i m i n a t e d . There were s t i l l a few agents and salesmen who f e l t t h e f i n a l q u e s t i o n n a i r e s were t o o p e r s o n a l and f o r t h i s reason t h e y r e f u s e d t o complete them. Some o f t h e q u e s t i o n s w h i c h were exc luded from t h e survey were: (a) Salesmen's Q u e s t i o n n a i r e . 1. What o t h e r sources o f income do you have at t h e present? 1 M . J o h o d a , M . Deutsch and S.W. Cook, Research Methods i n S o c i a l R e l a t i o n s , The Dryden P r e s s , New Y o r k , 1951, p . 157. - 41 -2 . W&at percent of your t o t a l income comes from the r e a l estate business? 3 . Evaluate your immediate supervisor. (This question was to be broken down i n t o separate p a r t s ) . (b) Firm's Questionnaire; 1 . What percent of the firm's income i s derived from r e a l estate commissions? 2 . What i s the percent breakdown of the firm's expenses? i e . salary, rent advertising. B. Size and Nature of the Sample. The entire sample was selected from the current ( 1 9 6 4 ) membership of the Vancouver Real Estate Board. As of A p r i l , 1 9 6 4 , the active or f i n a n c i a l membership included 2 8 9 firms and 1 , 2 2 6 salesmen! P r i o r to the mailing of the questionnaires, 3 3 firms representing 2 6 salesmen were eliminated because t h e i r operations were not prima r i l y that of r e a l estate brokerage. The majority of these firms were Trust Companies, Mortgage Brokers and l i f e Insurance companies. An additional 64 firms were elimin-ated because they did not employ salesmen. The f i n a l sample included 1 9 2 firms employing 1 , 2 0 0 salesmen. The majority of the firms were located i n Vancouver, Burnaby, North Vancouver and West Vancouver. A t o t a l return of 1 5 2 usable firm questionnaires, representing a 7 9 . 1 $ return was received. This i s a satisfactory sample which i s t r u l y representative of the brokerage business i n Greater Vancouver. A l l sizes of firms are represented, as w e l l as a l l areas! There was no p a r t i c u l a r type or size of firm which refused t o complete the questionnaire. 2 Membership of the Vancouver Real Estate Board represents approximately 9 8 $ of the brokerage firms and salesmen within the area. - 42 -TABLE IV GEOGRAPHICAL COVERAGE OF THE QUESTIONNAIRE AS OF JUNE 1964 * Firms Salesmen Male Female Total 275 170 895 45 42 87 57 25 82 81 27 108 19 - 19 4 - 4 1 - 1 4 4 Total - 1 9 2 936" 264 1200 * Any firm having more than one o f f i c e was treated as a single firm located at the head o f f i c e s i t e . This high return i s due, i n part, to the fact that the agents were interviewed. The return from the salesmen was somewhat disappointing! Only 415 usable questionnaires, representing a 3 5 * 7 $ return, were received. This return excludes 30 p a r t i a l l y completed questionnaires which were not usable. There were a number of salesmen who refused to answer s p e c i f i c questions, especially regarding t h e i r income for the years 1 9 6 l to 1 9 6 3 « However, these questionnaires are useful despite the f a i l u r e to answer a l l questions. This low return from the salesmen r e f l e c t s , i n part, t h e i r attitude towards the business. However, i t i s only f a i r to mention that one cause contributing to the low return was not w i t h i n the control of the salesmen.» Several firms, representing approximately 100 salesmen, refused to support the survey and d i d not give t h e i r salesmen an opportunity to complete the - 43 -questionnaires. In addition, there were a l i m i t e d number of salesmen who were away on holidays during the period t h i s survey was conducted. I t i s unfortunate that the low income salesmen appear to be the largest group missing from the sample r e s u l t s . Income figures from t h i s sample do not have either the same d i s t r i b u t i o n as the income d i s t r i b u t i o n reported by the firms or the survey completed e a r l i e r by the Vancouver Real Estate Board.^ I t w i l l be necessary to bear t h i s shortcoming to mind throughout t h i s thesis.,However, the information w i l l s t i l l indicate the personal characteristics of the r e a l estate salesman, success being measured by income earned. C. Survey tabulation. After the questionnaires were collected the data was coded onto IiB.M. sheets to permit tabulation; Many of the answers required editing and class-i f y i n g before they could be coded. Once the questionnaires were coded they were processed on the I.B.M. 7040 computer to determine: 1. The frequency d i s t r i b u t i o n of the answers and a percentage d i s t r i b u t i o n of the answers. (Univariate tables) 2. Relationship between the success of the salesman, measured by his 1963 income from the r e a l estate business, and the personal characteristics and work habits of the salesman. (Bivariate tables including horizontal and v e r t i c a l percentages. The chi-squared relationship of each was determined). 3. Relationship between the success of the Salesman, measured by h i s I963 income^ from the r e a l estate business, and the management 3 See Table XXXVII, p. 119 4 The income f o r salesmen working less than one year was prorated to an annual income. There was no attempt made to adjust f o r seasonal variations i n r e a l estate income since the salesmen started work at various times! I t i s f e l t that the effect of seasonal variations would be averaged out for the new mem. - 44 -practices of the firms. (Bivariate tables including horizontal and v e r t i c a l percentages. The chi-squared relationship of each was determined). The purpose of points 2 and 3 i s to determine i f there are any personal characteristics or management practices which tend to resu l t i n a more successful salesman. Success i n point 2 i s measured by the 1963 income of the salesman, as reported by the salesman! Success i n point 3 i s measured by the 19&3 income of the salesman, as reported by the firm. Income reported by the fir m was used i n point 3 f o r several reasons. I t i s a more accurate f i g u r e , since i t includes incomes f o r a l l salesmen, even those not answering questionnaires. Also there i s no need to have additional personal information concerning the salesman to complete point 3 ! In point 2 i t i s necessary to use income reported by the salesmen so the comparison between the salesmen's char a c t e r i s t i c s and t h e i r incomes i s possible. There are a number of shortcommings i n the use of income as a measure of success. To begin, income on an annual basis does not give consider-ation t o the variations i n time actually worked! Some salesmen work a f u l l day, s i x days a week, every week of the year to earn $5,000. Another salesman may earn $5,000 i n h a l f t h i s time and then stop working f o r s i x months. Income per year also f a i l s t o measure the eff i c i e n c y of each salesman: Two salesmen working i d e n t i c a l time periods do not necessarily accomplish the same r e s u l t s ; Also there are many salesmen who are less interested i n the immediate return but who are building sound customer rel a t i o n s which w i l l return income i n the future; Other salesmen are overly concerned with making money today and often ignore t h e i r future p o t e n t i a l : Despite these shortcomings, income f o r the year i s s t i l l the most useful available measure of success. I t i s an in d i c a t i o n , a very - 45 -tangible i n d i c a t i o n , of the work accomplished by the salesman! I t i s also one of the few measures available to a researcher unless time permits the researcher to go i n t o the f i e l d and work xd.th the salesman. A multivariate contingency tabulation and chi-squared t e s t was used i n order to determine i f there i s a relationship between the 1963 income of salesmen and the other factors considered; The multivariate contigency tabulation i s a two-way c l a s s i f i c a t i o n specifying varying numbers of discrete catagories i n each of two dimensions! From t h i s i t i s possible to observe the frequencies of the data. The second problem i s to determine whether the two p r i n c i p l e s of c l a s s i f i c a t i o n are independent of one another. I s the 1963 income of the salesmen related to any personal c h a r a c t e r i s t i c s , habits or employer practices? In order to solve t h i s problem i t i s necessary to set up the hypothesis that i n the population of salesmen from which the sample i s drawn the two p r i n c i p l e s of c l a s s i f i c a t i o n are unrelated. This hypothesis i s tested against the observations made i n the survey. From the hypothesis made, a series of expected or t h e o r e t i c a l frequencies are derived: This series i s compared with the observed frequencies from the sample. Once the t h e o r e t i c a l frequency and the observed frequency are pre-pared, i t i s necessary to calculate the differences, i f any e x i s t , and explain the case of these difference! This i s the purpose of the c h i -squared t e s t . The differences may be due to chance fluctuations which would affect any f i n i t e sample, on the other hand they may be due to the presence of a r e a l connection between the two variables. The chi-squared t e s t determines whether the differences are due to chance or whether they are too great to be attributed to chance. - 46 -X 2 = (fo - f ) 2 f X 2 = measure of discrepancies between observed and theoreti c a l frequenci e s. fo = observed frequencies! f = expected or t h e o r e t i c a l frequencies! X 2 w i l l be zero i f observed and t h e o r e t i c a l frequencies are i d e n t i c a l throughout. The greater the discrepancies between the observed frequency 2 and the t h e o r e t i c a l frequencies, the larger X w i l l be. With reference to prepared tables f o r t h e o r e t i c a l X 2 values i t i s possible to determine the p r o b a b i l i t y that the discrepancies occured by chance. Throughout t h i s survey an a r b i t r a r i l y selected l e v e l of s i g n i f -icance of .95 i s used. This means that there i s only 5 chances i n 100 that the discrepancies could occur by chance. I t should be noted that as a t e s t of independence of p r i n c i p l e s of c l a s s i f i c a t i o n , X^ i s not a measure of the degree or form of relationship between the p r i n c i p l e s . X 2 only indicates whether two p r i n c i p l e s of class-i f i c a t i o n are or are not s i g n i f i c a n t l y related, without reference to the form of the relationship.-' 5 F.C. M i l l s , S t a t i s t i c a l Methods. 1955 Henry, Holt and Co! New York, Chapter 15, pp. 512 - 541. CHAPTER IV ORGANIZATION AND MANAGEMENT of a REAL ESTATE BROKERAGE FIRM A. Legal Organization. Whether a business w i l l operate as a sole proprietorship, partnership or corporation w i l l depend on such factors as the size of the f i r m , the need f o r outside financing, tax considerations, the expense of incorporation and the number of people who w i l l p a r t i c i p a t e i n the management and ownership. The sole proprietorship i s the most common form of organization, especially i n the service industry of which r e a l estate i s a part. I n 1951» 80$ °f a l l service businesses were sole proprietorships, 9$ were partnerships and 8.5$ were corporations. However, sole proprietorships accounted f o r only 37^ 5$ of the t o t a l service business, down 14$ from 194li Partnerships accounted f o r 12.5$ of the d o l l a r businsss and corporations accounted f o r 47i8$ up 12$ from 1941.^ Although corresponding figures are not available f o r 1961, indications i n the manufacturing and r e t a i l section suggest that the trend to incorporation has slowed up somewhat. The sole proprietorship has a number of advantages, including ease of establishment, f l e x i b i l i t y and single minded control. On the other hand, the firm's sources of funds i s l i m i t e d to the funds available t o the proprietor i n the form of debt, the p r o f i t s of the proprietorship are taxed 1 Dominion Bureau of S t a t i s t i c s , General Census S t a t i s t i c s , Queens Pr i n t e r s , Ottawa, Volume 8,"Service and Wholesale", 1941, 1951. - 43 -as personal income i n the year they are earned and the proprietor has no l i m i t e d l i a b i l i t y ! The proprietor's personal assets may be seized to s a t i s f y claiments; In addition the proprietor may not be able to attract s a t i s -factory management help unless the managers are given some incentives such as a voice i n the management of the firm or p r o f i t sharing. The partnership, an association of two or more persons to operate a business venture, f a l l s somewhere between the single proprietorship and the corporation. The partnership seems to have most of the disadvantages of a sole proprietorship and few of the advantages of a corporation from the point of view of a r e a l estate firm. The p r i n c i p a l advantage of the partnership over that of the proprietorship is,.that i t permits the pooling of c a p i t a l , s k i l l , experience and business contacts. This may be a valuable form of organization i n the r e a l estate business since two or more ind i v i d u a l s , each possessing varying s k i l l s , may operate an integrated r e a l estate o f f i c e ! Unfortunately, the partnership i s i n the same position as 2 the sole proprietorship with regard to income tax and unlimited l i a b i l i t y . The corporate form of organization offers a number of advantages which may or may not be useful i n the r e a l estate business. The p r i n c i p a l advantages of incorporation are the l i m i t e d l i a b i l i t y of the shareholders, the available sources of additonal funds and the income tax features! The use of equity shares and debt f o r additional funds i s not too important i n the r e a l estate business, unless the firm i s involved i n the construction 3 or "trade-in housing" market. J 2 The exception to t h i s statement i s the " s p e c i a l l y l i m i t e d " or s i l e n t partner"! 3 Trade-in housing i s a marketing arrangement whereby a homeowner can trade the equity i n h i s present home for the down payment on another house! There are several forms t h i s may take. The most common are: the straight trade i n plan whereby the r e a l estate firm contracts to buy the owners old house when the owner purchases the new one. The guaranteed trade-in plan whereby the r e a l estate firm guarantees to purchase the owners old house at a f i x e d price i f i t i s not sold before a given date! - 49 -However, i f a firm i s involved i n the development or tracbdn market substantial funds would be required! One other advantage of the corporate form of organization i s that shares i n the business may be sold or dis t r i b u t e d t o managers and senior salesmen, thus encouraging them to take a more active interest i n the firm. The tax advantage of incorporation i s l i k e l y to be of l i m i t e d value to many of the firms. The corporate tax rate of 21$ on the f i r s t $35»000 earnings i s l i k e l y to be higher than the i n d i v i d u a l tax rate of many r e a l estate agentsi Based on the 1964 tax rates, an i n d i v i d u a l would have to earn i n excess of $10,000 net income before h i s i n d i v i d u a l o v e r a l l tax rate would exceed 21$. At the same time the i n d i v i d u a l , i f incorporated, could avoid the 21$ corporate tax by paying out a l l p r o f i t s as a salary. The l i m i t e d l i a b i l i t y has a value to the r e a l estate f i r m . A l l salesmen are bonded and a c l i e n t would, when possible, claim against the bondi I t i s only i n the case where the firm's suppliers had a claim against the f i r m that l i m i t e d l i a b i l i t y would be an advantage. Since r e a l estate firms have very l i m i t e d purchases of supplies, the cases where l i m i t e d l i a b i l i t y would be advantageous are very few! The exceptions are the firms involved i n property development or the trade-in market! The three most commonly mentioned disadvantages of incorporation are the expenses of incorporation, the ^sharing of ownership and the "double taxation"; However, the cost of incorporation i s r e l a t i v e l y s ^ a i l l . The cost to incorporate a private company i n B.C. may be kept as low as $50.00 plus l e g a l fees.^ The"double taxation" need not apply since a l l income can be paid i n s a l a r i e s , thus avoiding the corporate income tax! I f the owner 4 Province of B r i t i s h Columbia, Companies Act, R!s!B!C! I963, p. 738. - 50 -i s concerned about sharing the ownership and management, he can avoid t h i s by maintaining a 51$ interest i n the company. This would insure him of control. Another method of maintaining control i s the use of non-voting shares. TABLE V FORMS OF ORGANIZATION • $ .of Real Estate $ of Manufacturing Form Firms (1964) Firms (l96o)a Sole Proprietorship.......... 5i9$ 3?i?$ P a r t n e r s h i p . . . . . . . . . . . . I . . . . . . . . i . l l . i i 2l0$ 1 0 i # I n c o r p o r a t e d . . 9 2 l l $ 49.5$ Othersi.... 0.0$ 2.' Total - 100:0$ 100.( a Source: General Census S t a t i s t i c s D.B.S. Manufacturing, Queen's Printers, Ottawa, i960. 92.1$ of the r e a l estate firms have incorporated t h e i r businesses. This i s a very high percent when one considers the fact that the majority of service firms are not incorporated. The firms were unable to offer any reason f o r incorporating: They seem to consider the corporate form of organization the most suitable, so they went ahead and incorporated: There seems to be very l i t t l e thought i n t h i s matter.: Of a l l the incorporated firms, only one firm was a public company: This i s a large, completely integrated firm which includes a brokerage firm, insurance department, development company and mortgage lending firm. - 51 -Partnerships are not an important form of organization i n the r e a l estate business. Only 2 .0$ of the firms, most of which are two man operations, are partnerships. These usually consist of two nominees or one nominee and one salesman. Sole proprietorships are s l i g h t l y more popular than partnerships. 5 .9$ of the firms are sole proprietorships, most of which are very small firms enploying one or two salesmen. Although partnerships are not an important form of l e g a l organization, many of the smaller firms operate as i f they^were partnerships. The owner or p r i n c i p a l shareholder acts more as a partner than as an employer. This i s perhaps true because of the straight commission form of compensation which i s used. Salesmen, paid on a commission basis, are somewhat more independent than those paid a salary. I t i s f o r t h i s reason that many salesmen act as i f they were partners with the owner. I t i s i n t e r e s t i n g t o compare the forms of organization i n Greater Vancouver, 1964, with the forms used i n Toronto i n 1957. In Toronto, 1957, only 25.0$ of the firms were incorporated. About 30$ of the firms were partnerships and 45$ were sole proprietorships. This breakdown of forms of organization i s e n t i r e l y d i f f e r e n t from that found i n Vancouver today. I t i s also i n t e r e s t i n g to observe the difference between the form of organ-i z a t i o n i n the Vancouver r e a l estate firms and the o v e r a l l manufacturing firms i n Canada. There i s almost twice as high a percentage of r e a l estate firms incorporated as there are manufacturing firms, (see Table 5 , p. 5 1 ) . The firms which are incorporated were asked who controls the voting shares. In a l l cases the voting control was i n the hands of either the nominees or the nominees and some outside i n t e r e s t s . In no case was the 5 J . I . Stewart, Personnel Administration Survey, Toronto, 1957, unpublished. - 52 -voting control i n the hands of the salesmen. A few (7) of the larger firms permitted t h e i r salesmen to purchase common shares, however, the actual number of shares was an i n s i g n i f i c a n t percentage of the t o t a l shares outstanding. This i s very important since the nominee i s responsible for action of a l l salesmen employed by him. I f the salesmen controlled the company they could use the agent to accept blame f o r any unethical operations. The Real Estate Council of B r i t i s h Columbia has had a few occassions to investigate complaints a r i s i n g from companies which were owned by the sales-men. However, since there i s no regulation regarding t h i s practise the Council must treat these companies as they would t r e a t any other company. Mr. P.D. Murphy, Secretary of the Real Estate Council and Mr. I . Davis, former Secretary of the Real Estate Council have both stated that they had not experienced frequent breaches of the Real Estate Act brought about by companies owned by the salesmen. B. Internal Organization. Organization i s the establishment of authority relationships, with provisions for structural co-ordination both v e r t i c a l l y and hor i z o n t a l l y , between positions to which have been assigned specialized tasks required f o r the achieve-ment of enterprise objectives.6 In common with most businesses i n the service industry, the r e a l estate business has a high proportion of small firms. In the survey area, 92.6$ of the firms employed 10 or fewer salesmen, 78.8$ of the firms employed 5 of fewer salesmen and 29.4$ of the firms employed no salesmen at the time of t h i s survey. There was only one fir m employing over 100 salesmen. Although only 7.4$ of the firms employed 11 or more salesmen, these firms accounted f o r 43$ of a l l salesmen employed. 6 H. Koontz and C. O'Donnell, Pr i n c i p l e s o f Management, New York, McGraw H i l l , 1959, P. 63. - 53 -TABLE VI CLASSIFICATION OF REAL ESTATE FIRMS BY NUMBER OF SALESMEN EMPLOYED a $ of Real Estate $ of R e t a i l $ of a l l Service 0 Number of Salesmen Firms (1964) Firms ( l 9 6 l Firms (1961 none 29.4$ .2$ .9$ 1 - 5 49.4$ 18.3$ 14.0$ 6 - 10 13.8$ 20.5$ 19.9$ 11 - 15.... 1.4$ 9.0$ 10.6$ 16 - 20..... .9$ 5.7$ 7.4$ 20 - 30... 1.9$") )3.8$ 15.7$ 19.9$ 31 - 50 1.9$) over 50 1.3$ 30.6$ 27.3$ Total - 100.0$ 100.0$ 100.0$ a This table i s based on 216 firms as of July, 1964; b Source: General Census S t a t i s t i c s D.B.S. R e t a i l Trade Locations, Queens P r i n t e r ' s , Ottawa, 196l, p i 9.1. c Source: General Census S t a t i s t i c s D.B.S. Service Trades, Queen's Pr i n t e r s , Ottawa, 1961, p i 36.1. As may be noted from Table 6, page 53» the size of firms i n the r e a l estate business i s r e l a t i v e l y small. Whereas 78.8$ of the r e a l estate firms have 5 or fewer salesmen, only 18.5$ of the r e t a i l firms and 14.9$ of the service firms have 5 or fewer employees. Only 1.3$ of the r e a l estate firms employ 50 or more salesmen whereas 30.6$ of the r e t a i l firms and 27.3$ of the service firms have 50 or more employees. Judged on the basis of the number of persons employed, r e a l estate firms must be consid-ered very small firms. - 54 -In a business so populated by small firms any discussion of the problems of organization may seem academic. However, proper organization i s essential i f these firms hope t o a t t a i n t h e i r objectives i n an e f f i c i e n t manner. Proper organization i s necessary because there i s a l i m i t to an individual's span of control. I f a person could handle a l l the tasks by himself there would be no need for organization. However, once there i s 'a need to employ the services of other individuals there i s a need f o r proper organization. This i s true i f the i n d i v i d u a l s sharing the work are acting as partners or i n an employer - employee relationship. Perhaps the f i r s t and most important step, before organization i s possible, i s the determination of the firms objectives be c l e a r l y defined. Sometimes i t i s very d i f f i c u l t to distinguish between the firm's objectives and the means of attaining these objectives. For example, p r o f i t max-imization may be one objective f o r a firm. One means of -attaining maximum p r o f i t i s to work towards a sales l e v e l where the marginal income just equals the marginal costs. Another f i r m may have as t h e i r prime objective the maximization of sales. I t i s apparent that i n one firm the maximization of sales i s a firm objective, i n the other firm i t i s only a means of achieving an objective. Some of the more common main objectives i n a firm are: 1. P r o f i t maximization, either i n the short run or the long run. 2. Growth to a s p e c i f i c size. 3. S p e c i a l i z a t i o n i n a p a r t i c u l a r type of service or d i v e r s i f i c a t i o n . I t must be kept i n mind that there i s not only one objective f o r a f i r m i Rather there i s a hierarchy of objectives expanding downward from the main objectives. - 55 -The firms objectives and p o l i c i e s , which are the guides to action to achieve the objectives, should be i n written form. This assures that they w i l l be somewhat more consistant through time. In a l l , 60$ of the firms interviewed had a written policy manual which included a l l p o l i c i e s per-t a i n i n g to the a c t i v i t i e s of t h e i r o f f i c e . There i s a r e l a t i o n between the firm's having a written p o l i c y manual and the earnings of t h e i r salesmen. Generally the salesmen working f o r a firm earn a higher income -than salesmen working f o r a firm with no written p o l i c y manual. This may suggest either that the p o l i c y manual i s a r e f l e c t i o n of better management within these firms or that the p o l i c y manual i n i t s e l f has/an effect on earnings. The former explanation appears to be the most plausable explanation. Once the objectives and p o l i c i e s are determined, the next step i s to design an organization to ensure that they are attained i n an e f f i c i e n t and e f f e c t i v e manner. To some extent the organizational structure i s dependent upon the objectives of the firm. The f i r s t step i n designing an organizational structure i s to assemble the various tasks i n a manner which w i l l ensure e f f i c i e n c y i n the operation of the firm. Some attention must be given to the a v a i l a b i l i t y of manpower since there i s no point i n designing an organization i f manpower to s t a f f such an organization i s not available. There i s no one best organizational structured I t must be suited to the p a r t i c u l a r circumstances of each firm! I f the f i r m i s r e l a t i v e l y small i t may not be p r a c t i c a l to departmentalized Each salesman may be responsible fo r l i s t i n g and s e l l i n g a l l types of property, s e l l i n g insurance, ( i f properly licensed) arranging finances, appraising and w r i t i n g advertisements. - 56 -AS the size of the firm expands i t may be desirable to specialize and set up separate departments. The important point i s that each i n d i v i d -ual should be aware of hi s r e s p o n s i b i l i t i e s . ( P r i n c i p l e of Functional D e f i n i t i o n ) . Departments i n a r e a l estate o f f i c e may be established on a basis of services, customers or t e r r i t o r y . T e r r i t i o r i a l departmentalization occurs either when a firm establishes branch o f f i c e s or when a firm estab-l i s h e s s p e c i f i c sales areas for each salesman. Of the 152 firms included i n the survey, only 9*6$ had branch o f f i c e s . In a l l cases these were the larger firms employing over 20 salesmen. Although none of the firms admitted that they assigned salesmen to sp e c i f i c areas, some salesmen claimed they only worked i n one area. The most common methods of departmentalization seemed to be based on services offered and/or the customers served! The two most common di v i s i o n s are r e a l estate and insurance departments. As the size of the firm increases, separate departments f o r mortgage lending, property management, appraisal and property development are established. The larger firms further subdivided the r e a l estate sales department i n t o separate d i v i s i o n s f o r r e s i d e n t i a l , commercial, i n d u s t r i a l and revenue property! As may be expected, there i s a r e l a t i o n between the size of the firms and the number of separate d i v i s i o n s or departments. As the size of the firm increases, the number of separate departments also increases. I n the smaller firms, aside from the d i v i s i o n between r e a l estate and insurance, the salesmen generally handle a l l types of property, appraising, and advertising. The agent or nominee generally looks after the mortgage financing. Very few smaller firms specialize i n s p e c i f i c types of property or sp e c i f i c services such as appraising. - 57 -TABLE VII NUMBER OF. SEPARATE DEPARTMENTS WITHIN A FIRM * Number of Departments $ of the Firms 1 Department.... 51.9$ 2 Departments.............. 30.3$ 3 Departments 9.9$ 4 Departments. 1.4$ 5 D e p a r t m e n t s . . i . . . . ; . . . . . . . . i . . d . i i i i . . i d . 2.6$ 6 Departments:....i....;....i.:..i.:ii:.::. 2i6$ 7 Departments 1.3$ Total - 100.0$ * Based on 152 r e p l i e s : Chart 1 i s an example of an organizational structure f o r a large firm; This chart incorporates a l l the possible d i v i s i o n s mentioned i n the questionnaires. Charts 11 and 111 depict the organizational arrangements of the smaller firms. These include the most commonly mentioned organizational structures: I n general i t i s safe to state that the problems of organization have received l i t t l e attention: Most firms appear to departmentalize and organize as conditions d i c t a t e : There would seem to be three possible reasons why so l i t t l e attention i s given to the problems of organization. F i r s t l y , the benefits derived from proper organization are d i f f i c u l t to measure. Conversely the problems associated with improper organization may not show up immediately. Secondly, i t i s always easier to ignore the CHART 2 Large Firm ORGANIZATION CHART Ownership Board of Directors Manager or President Office Staff . Staff Function Manager Appraisal Appraisers Manager Property Management Staff Manager Real Estate Residential Sales Manager Salesmen Manager Property Insurance I Staff Manager Mortgage Lending I Staff Manager Property Development Staff Commercial Sales Manager Salesmen Industrial Sales Manager Salesmen Revenue Property Sales Manager Salesmen CHART 3 Small F i r m O w n e r Normally one owner or two partners Manager O f f i c e S t a f f T" I Insurance One Man or Small Department Real Est a t e Salesmen - A l l types of property - Own a p p r a i s i n g - Mortgage funds NOTE: Normally the owner or partners are the only management personnel i n the o f f i c e . They manage salesmen, o f f i c e s t a f f and the insurance department. O f f i c e s t a f f i s r e s p o n s i b l e f o r property management. CH&RT k Small F i r m Owner One person Manager O f f i c e S t a f f one Salesmen - s e l l i n g r e a l e s t a t e - s e l l i n g insurance - arranging mortgages - own a p p r a i s i n g Note: Owner - manager i s responsible f o r o f f i c e s t a f f and salesmen. I n p r a c t i c e the manager spends l i t t l e time w i t h the salesmen. . Salesmen work by themselves, seek a s s i s t a n c e from manager only when necessary. - 61 -problems of organization. Other matters appear more important and urgent. Las t l y the entire concept or organizations and organizing are rather intangible i n nature! C! Supervision i n the Real Estate Firms. Supervision i s an extremely important area i n the r e a l estate business but i t i s also often overlooked! This i s unfortunate since the majority of salesmen working i n the r e a l estate business appear to be i n need of more supervision! There are a number of conditions which exist i n the r e a l estate business which makes careful supervision of the salesmen necessary! To begin with, the r e a l estate salesmen are often handling substantial sums of money belonging to t h e i r c l i e n t s ! Supervision i s necessary to ensure that these funds are properly handled! The importance of each c l i e n t i n terms of immediate income and future income necessitates proper and effec t i v e service. This means the salesmen should be closely supervised to ensure the c l i e n t i s not l o s t . L a s t l y , the c a l i b r e of men and women attracted to the r e a l estate business i s generally such that they w i l l require proper supervision. The majority of r e a l estate salesmen do not have the education, t r a i n i n g or experience which would enable them to work on t h e i r own with a minimum of supervision and s t i l l perform t h e i r tasks w e l l . Another point i s that salesmen i n general require more supervision than many other types of work because s e l l i n g i t s e l f i s not routine work! In the r e a l estate business i t i s generally the r e s p o n s i b i l i t y of the agent or nominee to supervise the salesmen! Only 12!6$ of the firms employ sales-managers! In almost a l l cases these are with the firms employing 15 or more salesmen. In the cases where the agent or nominee i s responsible f o r the supervision of the salesmen, the agents or nominees - 62 -appear t o have overextended t h e i r span of control! The agent i s respons-i b l e f o r the o f f i c e management, they often are i n charge of the property management and the mortgage financing. L a s t l y , they are responsible f o r the supervision of the salesmen! I n some cases the agents er nominees also handle transactions on t h e i r own. The only a c t i v i t y which appears to suffer i s the supervision of the salesmen. In the firms where a sales manager i s employed the supervision of the salesmen i s somewhat improved! However, even where a sales manager i s employed they seem to have overextended t h e i r span of control. Consider-ing only the firms employing sales managers, each sales manager i s i n charge of an average of 13».7 salesmen! Considering the sales managers other a c t i v i t i e s such as t r a i n i n g new salesmen, preparing f o r sales meetings and miscellaneous o f f i c e work, they seem to have too many salesmen to properly supervise! In discussions with sales managers of seven large national manufacturing firms, i t was found that they f e e l a manager can adequately supervise between 6 and 8 salesmen but no more that 8i In discussions during t h i s survey a number of manager, agents and nominees indicated they did not have time to properly supervise a l l t h e i r salesmen. Instead of allowing time f o r a l l salesmen, the supervisors spent t h e i r time with the high producing salesmen and spent very l i t t l e time with the low producing salesmen. This i s an unfortunate resu l t because the low producing salesmen are i n need of immediate and extensive super-v i s i o n . There i s a further problem i n the supervision of r e a l estate salesmen! Since the salesmen are paid on a straight commission basis they tend to f e e l very independent! This independent attitude has caused manyssalesmen - 63 -to resent supervision by t h e i r sales manager or agent. In order to overcome t h i s problem the supervisor must point out to the salesmen the benefits of proper supervision and the needs f o r proper supervision from the firm's point of view! CHAPTER V RECRUITING AND SELECTING SALES PERSONNEL A. Recruiting. Errors i n r e c r u i t i n g and selecting salesmen are expensive. On the one hand, there are the d i r e c t expenses involved. On the other hand, there are the i n d i r e c t costs a r i s i n g from the paperwork and processing done for items such as p a y r o l l . L a s t l y , there i s the l o s t business, the l o s t goodwill and the discontent created among other employees r e s u l t i n g from the inept performance of a m i s f i t . The problems associated with r e c r u i t i n g and selecting salesmen i s even more acute i n the r e a l estate business. So dangerously do most (Realtors) operate, and on such small margin of p r o f i t compare to the volume of business done, that the addition or subtraction of even one good man can mean the difference between success and f a i l u r e i n the course of a year. Unfortunately, i n many o f f i c e s , the poor salesmen outnumber the good, with the r e s u l t the good ones have to carry the bad. I f he i s lucky, the broker ends up with a p r o f i t a c tually coming from the eff o r t s of one or two men. The work from the balance of h i s force has been disapated i n carrying the o f f i c e expense load and other necessary cost contributed by deadwood material. The nature of the business and the service offered necessitates proper r e c r u i t i n g and selecting of salesmen! The r e a l estate brokerage firm depends to a very great extent on t h e i r reputation or goodwill. One poorly selected salesman can destroy the goodwill developed by years of good service. The nature of the service requires that only proper sales-1 National Association of Real Estate Boards, H i r i n g , Training and Financing  Salesmen, 1955, p! 9. - 65 -men be selected. The real estate salesman does not handle an exclusive product. A property owner i s not required to deal with a real estate firm and purchaser of property need not deal with a firm, except i n the case of an exclusive l i s t i n g . Even i f the vendor and purchasers f e e l obliged to negotiate through a real estate firm, they may deal with the firm of their choice. Another problem associated with the recruiting and selecting of salesmen arised because of the basis of earning an income. In the real estate business income i s based on the results attained. I f a firm obtains a l i s t i n g on a property and completes the sale, they w i l l earn a commission usually 5$ or 7$ depending on the type of l i s t i n g . I f the property i s not sold the firm does not receive any commission. Therefore, i f a salesman i s not successful i n completing the transaction the firm w i l l not earn a commission. In addition, this problem i s further aggrevated by the fact that one transaction represents a substantial income or commission. On a transaction for a $10,000.00 property the gross commission may be $700.00 (Multiple Listing Rates). Unlike many other businesses the loss of one client represents a substantial sum of money whereas the loss of one client to a grocery store may only represent 1$ or 2$ of the gross sales. This may only be 1$ or 2$ of $1,000.00 per year or $100.00 s $200.00. There are a number of necessary steps involved i n a sound recruiting program. The f i r s t step i s to determine the manpower requirements. A careful analysis should be made to determine how many ment are needed and what type of men are desirable. When analyzing the future need for salesmen, consideration should be given to the possibility of eliminating any low producer currently employed. I t i s not wise to wait u n t i l the salesman - 66 -decides t o leave before looking f o r another man. In addition, provision should be made for any future requirements necessitated by an expansion of the present s t a f f or the opening of a new o f f i c e . An ef f o r t should be made to determine what type of man has the best p o s s i b i l i t y of succeeding i n the job. This does not need t o become an expensive task and should be done by every firm employing salesmen or planning to employ salesmen. I t i s f i r s t of a l l necessary to determine the q u a l i t i e s , character-i s t i c s and background which w i l l contribute t o the success of a salesman. These factors may include such points as education, marital status, age, previous experience, sex and personality. Once i t has been determined which factors are the most important i n contributing t o the success of a salesman, i t i s then necessary to i d e n t i f y and measure these factors i n the new re c r u i t s . I t would appear that the active members of the r e a l estate business are unable t o agree on the q u a l i f i c a t i o n s required. This i s p a r t l y due to the dif f e r e n t ideas of the scope and functions of the r e a l estate business and, consequently, to the necessary q u a l i f i c a t i o n s . The firm representatives were asked t o comment on t h e i r requirements and q u a l i f i c a t i o n s f o r new salesmen. I n p a r t i c u l a r , attention was directed i n education, sex, age, marital status, and previous experience. Very few of the firms reporting appeared to have analyzed the type of i n d i v i d u a l who, from t h e i r experience, stands the best chance of succeeding as a r e a l estate salesman. 1. Education; 57#8$ of the firms reported they would prefer to h i r e salesmen with a minimum of Grade 12. However, the majority of these firms q u a l i f i e d t h e i r answers. Grade 12 was required but other factors such as experience or maturity may be a suitable substitute. 19.2$ of the firms reported that they d i d not f e e l education was an important factor. 23.0$ of the firms stated that education was useful but not an important factor when h i r i n g new sales-men. Although 57.8$ of the firms stated that they preferred Grade 12 as a minimum requirement, they were w i l l i n g to hire salesmen with l e s s than Grade 12 i f other factors are favourable! The following remarks, regarding education, are t y p i c a l of the answers: Salesmen must have a good command of English and Arithmetic plus good common sense. I f you consider two applicants, and everything i s equal, the one with more education w i l l get the job. Age: Most firms seem to agree that age i s not an important factor. Although the majority of the firms specified they would prefer salesmen i n certain age catagories, there are no stringent requirements. The most common age group mentioned was between 30 - ^5. A small percentage of the firms f e l t i t was necessary t o attract younger people into the business, preferably between 21 - 30 years of age. There seems to be a general f e e l i n g i n the business that persons under 30 years of age w i l l not be as successful as the older age groups. M a r i t a l Status: 73.1$ of the firms specified they preferred married men but that marital status was not an important factor. 11.3$ of the firms stated they would only h i r e married men. 26.2$ of the firms reported that they would only hir e single women. The reason f o r t h i s i s that single or s e l f - 68 -supporting women tend to apply more time and effo r t to the job. 4. Sex: 71.4$ of the firms reported they would hire male and female sales s t a f f . 27.5$ of the firms specified male only and one firm stated they only hired females. Although 71.4$ of the firms stated that either sex would be hired, a somewhat smaller percentage actually employs females. This i s not necessarily an inconsistancy between p o l i c y and practice since some of the firms are r e l a t i v e l y small and have not added to t h e i r s t a f f i n recent years. Comments regarding the d e s i r a b i l i t y of employing females varied con-siderably. Most firms f e l t that females could be successful providing they were self-supporting. 5. Previous Experience: The majority of the firms (65.2$) specified they would prefer to hire salesmen with previous s e l l i n g experience, p a r t i c u l a r l y i n the r e a l estate business, however, only 29.1$ of the firms i n s i s t e d on previous ex-perience i n r e a l estate. The majority of those firms were r e l a t i v e l y small and did not want to spend time t r a i n i n g new salesmen. 18.8$ of the firms f e l t that previous experience was not an important factor. 16.0$ of the firms wanted new sales s t a f f with no experience i n s e l l i n g . These firms f e l t i t was easier to t r a i n a new person rather than r e - t r a i n a person with experience. 6. Other Factors: While most firms f e l t that factors as education, sex, age and previous experience have a bearing on the ultimate success of the new salesman, there were other factors - 69 -which were considered as being more important. Some of the factors were: "Personality and appearance" "Integrity" "Honest and w i l l i n g xTOrker" "lakes to meet the public" "Financial S t a b i l i t y and good business sense" " A b i l i t y t o work on h i s own" "Desire to work and make money" "Si n c e r i t y , i n i t a t i v e , perseverance, patience" " A b i l i t y to get along with other salesmen i n the o f f i c e " "Energetic, s e l f - s t a r t e r " Although the managers were unable to agree on the s p e c i f i c q u a l i f i c a t i o n s required to ensure success, there was general agreement that the most important q u a l i f i c a t i o n s were those which would contribute to s e l l i n g a b i l i t y . The majority of the managers agreed that a minimum amount of technical knowledge i s required to succeed. There was not, however, complete agreement on t h i s point. A number of managers f e l t that the r e a l estate business should attempt to upgrade the technical knowledge required and s t r i v e f o r more professional service rather than mere sales a b i l i t y ! This they admitted was a long run aim and at present the most important factors were those contributing to sales a b i l i t y . Once the question of requirements has been answered, the next question i s , "where can salesmen possessing these q u a l i t i e s be found?". There are a number of sources f o r new salesmen: 1. Newspaper advertisements: I f a firm has a high turnover i n personnel, newspaper advertisements may be a p r o l i f i c source of new men. The advertisement may take one of several forms. I t may be an open or b l i n d ad. Open advertisements i d e n t i f y the advertiser while b l i n d advertisements do not i d e n t i f y the advertiser. The normal c l a s s i f i e d advertisement usually attracts a large number of responses, however, the majority - 70 -of the responses are usually of somewhat questionable a b i l i t y . The type of person who reads the "want-ad" section i s usually seeking a new job. This may indicate a d i s s a t i s f a c t i o n with h i s present job or an i n a b i l i t y to hold a job. I t i s possible to run a selective newspaper advertise-ment, usually i n the f i n a n c i a l page of the newpaper. This w i l l ensure a moderate number of responses, however, the calibre of the applicant i s usually much higher! The May 15, 1963 issue of Modern Industry reported, from a cross section of firms, that only one out of every 45 applicants who applied on the basis of newspaper advertisements were employed compared to one out of every 14 referred by agencies. Nevertheless, newspaper advertisements are s t i l l the best source f o r a quantity of salesmen even though the q u a l i t y may be questionable. 2. Personal contact: Personal contact i s perhaps the most promising source of new salesmen even though the supply i s somewhat l i m i t e d . Usually the i n d i v i d u a l i s known to the firm. His present a c t i v i t i e s and future potentials may be appraised before he i s approached about the job! This i s a very inexpensive source of salesman. The potential applicant can be examined without h i s knowing he i s being considered as a r e c r u i t ! 3. Recommendations to the Firm: A company's best possible r e c r u i t i n g source i s usually i t s own salesmen and customers. 2 Modern Industry. May 15, 1953, p. 8 - 71 -I f t h e y l i k e t h e i r f i r m , t h e y are t h e most p e r s u a s i v e •Recrui ters a f i r m can have. I f employees are happy on t h e i r j o b s , t h e y are apt t o i n t e r e s t t h e b e s t a p p l i c a n t s ; new salesmen who alreadyknow o t h e r salesmen u s u a l l y a d j u s t themselves t o t h e i r j o b s more e a s i l y because o f t h e h e l p t h e y r e c e i v e from t h e i r f r i e n d s . 4.Schools and U n i v e r s i t i e s ! Schools and U n i v e r s i t i e s are a v e r y l i m i t e d source o f new salesmen i n t h e r e a l e s t a t e f i e l d . The h i g h s c h o o l graduate i s u s u a l l y t o o young t o be employed as a r e a l e s t a t e salesman s i n c e t h e minimum age i s set at e i g h t e e n .3 The c o l l e g e student i s u s u a l l y not a t t r a c t e d t o t h e r e a l e s t a t e b u s i n e s s because o f t h e p r e s e n t compensation p l a n s and t h e r e l a t i v e l y l i m i t e d t r a i n i n g programs a v a i l a b l e . The r e a l e s t a t e f i r m s , on t h e o t h e r hand, are not g e n e r a l l y p r e -p a r e d t o compete w i t h o t h e r l a r g e r c o r p o r a t i o n s f o r t h e g r a d u a t e s . 5. Other F i r m : I t i s o t e n d e s i r a b l e t o h i r e men who have exper ience i n t h e r e a l e s t a t e b u s i n e s s . T h i s i s p a r t i c u l a r l y t r u e i f t h e f i r m does not w i s h t o t r a i n new men. U n f o r t u n a t e l y , t h e t y p e o f man who i s w i l l i n g t o change f i r m s u s u a l l y has a r e a s o n . He may not be d o i n g w e l l w i t h h i s p r e s e n t f i r m o r he may not be a b l e t o get a l o n g w i t h h i s employer o r f e l l o w s a l e s -men. On t h e o t h e r hand, t h e r e c r u i t i n g f i r m may o f f e r a good salesman a b e t t e r commission s p l i t o r o t h e r b e n e f i t s which would e n t i c e h im t o change f i r m s . 3 P r o v i n c e o f B r i t i s h Columbia , R e g u l a t i o n s Under the R e a l E s t a t e A c t , I963, S e c t i o n 4.01(b) 6. Unsolicited Applications: Unsolicited applications are not a major source of r e c r u i t s but good public relations require the screening of such applicants. A ^shortage of good salesmen gen-e r a l l y means that the u n s o l i c i t e d applicants w i l l be of an i n f e r o r quality. The American Management Association Research Report, No. 24, sets out 4 the main sources of sales applicants. TABLE VIII . MAJOR SOURCES OF. SALES APPLICANTS* Rank'of Importance Total Number of Companies Mention-1 2 3 4 5 ing Sources  Advertisements 48 23 12 4 1 88 Employment agencies 32 38 12 5 4 91 Schools and Colleges.. 35 20 18 4 1 78 Unsolicited applications 8 11 10 3 1 33 Promotion or transfer..... 24 2 5 - - 31 References and Contacts 36 39 17 4 6 96 * This table i s based on the responses of 174 companies. Multiple responses resulted i n more answers than the number of companies. 1. Personal Contact: As may be seen i n Table IX, the great majority of firms obtain t h e i r sales personnel through personal contact. In f a c t , 31*6$ of the firms obtain a l l t h e i r salesmen through t h i s source and 69.8$ of the firms obtain over one h a l f of t h e i r salesmen through personal contact. Only 12 firms or 7*9$ reported they did not hir e any salesmen through personal contact. However, these same 12 firms reported a high percentage of t h e i r salesmen 4 M. Mandell, A Company Guide to the Selection of Salesmen, American Management Association, New York, N.Y., Research Report Number 24, 1955> P« 4] - 73 -TABLE IX MAJOR SOURCES OF SALESMEN IN THE REAL ESTATE BROKERAGE BUSINESS* Number of Salesmen obtained Recommended Other from this source Personal Contact Advertising to the Firm Sources Number of answers 9.9$ 9.2$ 9.9$ 9.9$ Number of Salesmen obtained. from t h i s source.... 7.8 74.3 36.8 78.8 1 - 24$ obtained by this source... 2.6 5.9 16.4 S.6 2 5 - 4 9 $ obtained by this source.. 9.9 7.3 H.8 2.0 50 - 74$ obtained by this source.! 25.0 .7 18.4 i 0 75 - 99$ obtained by this source.. 13.2 2.6 2.1 .0 100$ obtained by this source 31.6 .0 4.6 ,J_ Total - 100.0$ 100.0$ 100.0$ 100.0$ * This table i s based on the responses of 152 firms, employing 886 salesmen! were obtained through a recommendation to the firm. 2. Advertising: Advertising i s not a particularly popular source of new salesmen. 74.3$ of the firms reported they had not used advertising to obtain their salesmen. Only 5 firms, 3.3$, reported they had hired over one-half of their sales-men through advertising. Of these five, three employed over f i f t y salesmen and one employed over thirty-one salesmen, th i s i s a clear indication that the larger firms rely more on advertising to obtain new salesmen. 3! Recommendations to the Firm: Recommendations to the firm appear to be the second most common source of new salesmen^ This source i s divided into two parts! New salesmen, just starting i n the real estate business, are usually recommended to the firm by someone outside! The salesmen joining the firm from another real estate firm are usually recommended by - 74 -someone w i t h i n t h e r e c r u i t i n g f i r m , u s u a l l y a n o t h e r s a l e s -m a n . T h e s e c o n c l u s i o n s r e g a r d i n g who recommends t h e new s a l e s m e n t o t h e f i r m a r e b a s e d on a s m a l l number o f comments o b t a i n e d d u r i n g t h e i n t e r v i e w s . 4. O t h e r S o u r c e s : O t h e r s o u r c e s o f r e c r u i t i n g , s u c h a s " w a l k -i n " a p p l i c a n t s , i s n o t a n i m p o r t a n t s o u r c e o f man p o w e r ! A l t h o u g h p e r s o n a l c o n t a c t i s t h e m o s t common s o u r c e o f new s a l e s m e n , a d v e r t i s i n g s t i l l p l a y s a n i m p r t a n t r o l e . T h e f o u r l a r g e f i r m s w h i c h d e p e n d h e a v i l y o n a d v e r t i s i n g a c c o u n t f o r a l a r g e p o r t i o n o f t h e s a l e s m e n ; M o r e p a r t i c u l a r l y , t h e s e f o u r l a r g e f i r m s a c c o u n t f o r a h i g h p r o p o r t i o n o f t h e new s a l e s m e n e n t e r i n g t h e b u s i n e s s . H o w e v e r , t h e r e i s no e v i d e n c e i n t h e i n f o r m a t i o n g a t h e r e d t o s u g g e s t t h a t s a l e s m e n o b t a i n e d f r o m one s o u r c e a r e a n y m o r e o r l e s s s u c c e s s f u l t h a n s a l e s m e n o b t a i n e d f r o m a n y o t h e r s o u r c e . T h e r e i s no s i g n i f i c a n t r e l a t i o n b e t w e e n e a r n i n g s o f s a l e s m e n i n a f i r m a n d t h e s o u r c e o f s a l e s m e n f o r t h e p a r t i c u l a r f i r m . B . S e l e c t i o n o f S a l e s m e n . We h a v e s t u d i e d s o m e t h i n g l i k e 20,000 o c c u p a t i o n s a n d x<re f i n d t h a t t h e d i f f i c u l t y e n c o u n t e r e d i n d e v i s i n g i m p r o v e d s e l e c t i o n t e q h n i q u e s f o r s a l e s -w o r k i s p r o b a b l y n o t e q u a l l e d i n a n y o t h e r g r o u p o f o c c u p a t i o n s . 5 A f t e r t h e r e c r u i t i n g p r o c e s s , t h e n e x t s t e p i s t h e s c r e e n i n g a n d s e l e c -t i o n o f t h e a p p l i c a n t s . T h e r e a r e t w o m e t h o d s o f s e l e c t i n g s a l e s m e n . T h e r e a r e two f u n d a m e n t a l p h i l o s o p h i e s o f s e l e c t i n g s a l e s p e r s o n n e l : ( 1 ) t h r o u g h s e l e c t i o n i n v o l v i n g h i g h s t a n d a r d s o f q u a l i f i c a t i o n a n d u s i n g a l l o f t h e p r o v e n m e t h o d s o f c h o o s i n g s a l e s m e n ; (2) s u p e r f i c i a l s e l e c t i o n , i n w h i c h a s many s a l e s m e n a r e h i r e d a s w i l l a g r e e t o 5 C L . S h a r t l e , D i s c u s s i o n , A m e r i c a n Management A s s o c i a t i o n , M a r k e t i n g s e r i e s , N o . 39, p . 9. - 7 5 -work for the compensation offered, with the expectation that a few w i l l become successful. However, this law of average method i s costly, destructive to moral, and creates i l l -w i l l of both salesmen and customers.6 Available information indicates that the real estate brokerage business has, by and large, used the second method. The selection of salesmen should be a combination of intuition and science. There are a number of modern devices which are useful aids i n the selection of salesmen. The selection process must be planned so that each step i n the process has a specific purpose. The process should include a variety of techniques since any one technique may not give sufficient information regarding the applicants. The techniques include; ( l ) the application blank, (2) the interview with the applicant, (3) the home interview, (4) reference investigation and (5) sales aptitude tests. Some combination of these techniques should be used i n the selection of salesmen! The effectiveness of any selection process depends upon the s k i l l of the individual responsible for the selection! In most real estate firms, the agent or nominee i s responsible for the selection of the salesmen! This i s to be expected since 87»*$ of the firms do not have managers! In the firms which do employ sales manager, hiring i s usually a joint effort between agent and manager. Only 5 firms reported the sales manager made the f i n a l decision on his own. Whoever i s i n charge of the selection process should have a sound knowledge of the job and of the requirements for the job. It i s preferable to have more than one individual included i n the selection process. It two individuals are i n charge of the selection, then one may compensate for the weaknesses of the other. 6 B.R. Canfield, Sales Administration, Prentice-Hall, Englewood C l i f f s , 1961, p. 78; New Jersey. - 76 -l i A p p l i c a t i o n B l a n k : The a p p l i c a t i o n b l a n k i s a b a s i c t o o l i n t h e s e l e c t i o n p r o c e s s and i s u s u a l l y t h e i n i t i a l s t e p . The a p p l i c a n t can complete t h e form on h i s own t i m e and t h e f i r m can r e v i e w t h e a p p l i c a t i o n w i t h o u t b e i n g i n f l u e n c e d by t h e a p p l i c a n t ' s appearance and p e r s o n a l i t y . The p r i m a r y purpose o f t h e a p p l i c a t i o n blar ik l . i s t o p r o v i d e f a c t u a l i n f o r m a t i o n about t h e a p p l i c a n t t o enable t h e p o t e n t i a l employer t o compare t h e a p p l i c a n t ' s q u a l i f -i c a t i o n s w i t h t h e s t a n d a r d q u a l i f i c a t i o n s . I t a l s o serves as a r e f e r e n c e source and suggests q u e s t i o n s t o be d i s c u s s e d d u r i n g t h e i n t e r v i e w . I f t h e q u a l i f i c a t i o n s o f t h e a p p l i c a n t are o b v i o u s l y u n s u i t e d f o r t h e j o b , t h e i n t e r v i e w e r need not waste any f u r t h e r t i m e . There i s no one c u r r e n t form t o be u s e d . The requirements v a r y from f i r m t o f i r m , however, i t may be p o s s i b l e t o have a n f a i r l y s t a n d a r d form t o be used by a l l r e a l e s t a t e f i r m s . ' S p e c i a l a d d i t i o n a l i n f o r m a t i o n may be o b t a i n e d d u r i n g t h e i n i t i a l i n t e r v i e w . The a p p l i c a t i o n b l a n k should p r o v i d e i n f o r m a t i o n r e g a r d i n g a c a n d i d a t e ' s b a s i c q u a l i f i c a t i o n . Any f a c t o r s c o n s i d e r e d e s s e n t i a l f o r t h e job s h o u l d be i n c l u d e d on t h e a p p l i c a t i o n b l a n k and s h o u l d have a d e f i n i t e v a l u e . Some l a r g e c o r p o r a t i o n s , p a r t i c u l a r l y t h e i n s u r a n c e companies, have developed a weighted a p p l i c a t i o n b l a n k i n which each i t e m i s s i g n i f i c a n t f o r s a l e s success i s weighted t o a r r i v e at a t o t a l s c o r e . The t o t a l score o f each a p p l i c a n t i s t h e n compared t o a s tandard score t o determine how w e l l t h e a p p l i c a n t i s apt t o do i n 7 See Appendix F , A sample a p p l i c a t i o n form developed by C . J . K r a u s k o p t , M i s s o u r i , R e a l E s t a t e A s s o c i a t i o n , C o l u m b i a , M i s s o u r i , 1964. - 77 -the insurance business. The weighted application i s of value i f i t i s based on extensive experience, that i s , i f i t is possible to separate and measure the factors which differentiate the success-ful salesmen from the unsuccessful salesmen. To date, there are no weighted application blanks designed for use in the real estate business. Until a detailed analysis i s made of the various factors which make a salesman successful, i t will not be possible to design 8 a weighted application blank. 2. Interviews: There i s no .other selection device that can take the place of the personal interview in selecting salesmen. The purpose of the interview is to (l) get additional information or clarify facts from the application blank, and (2) get an impression of the way applicants will affect customers by their personalities, appearance and attitudes. The interviewer also has an opportunity to appraise the applicant's willingness to handle the job. The interview may follow a variety of methods. If there are a large number of applicants, i t may be desirable to hold one brief interview to allow the interviewer to quickly screen out misfits. Normally i t i s desirable to have more than one interview since the applicant may not create a good (impression during the i n i t i a l interview. The second interview i s usually more relaxed; the more direct inquiries are completed and the atmosphere is more informal. The second and subsequent interviews also permit the interviewer and applicant to review and clarify any points missed during the i n i t i a l interview. 8 A more complete, discussion regarding application forms can be found in Yoder, D., Personnel Management and Industrial Relations, N.J., Englewood: Cliffs, Prentice-Hall, Inc., 1956, p.p. 166 - 233. - ?8 -It i s desirable,, j when possible, to have more than one individual interview the applicant. This reduces the dangers inherent i n i n the use of the interview: "the halo effect" and 9 "projection". The "halo effect" i s an impression, favorable or unfavorable, based on one or two factors which influence the appraisal of the other factors, "projection" occurs when the interviewer favors applicants who resemble himself or associates he admires. It would be desirable to have the sales manager, where one i s employed, and the agent or nominee interview the applicant. In a small office, without a sales-manager, i t may be desirable to introduce the applicant to one of the senior salesmen. This serves as a check on the agent's decision. There are several types of interviews: a. Preliminary Screening Interviews: This should only be used when a large number of applicants are being screened. I f the interview i s too brief, some good men may be eliminated. b. Standard, Patterned, or Guided Interview: The patterned interview i s a standard procedure designed to improve the effectiveness of the interviewer. Usually aniinterview form i s used to record answers and reactions. This form contains key questions to be discussed during the interview. The patterned interview i s extremely useful for inexper-ienced interviewers, however, there i s a danger of becoming too formal and impersonal. 9 A. Newgarden, The Field Sales Manager, A.M.A. Management Report Series, Number 48, The Riverside Press, Cambridge, Mass., I 9 6 0 , p. 299. - 79 -c. Conversational Interview: This i s an open type of interview where the applicant i s allowed, i n f a c t , encouraged, to express himself f r e e l y . This type of interview i s usually longer than the patterned interview. An inexperienced interviewer may loose control of the interview and neglect to cover a l l the pertinent factors! In practive the majority of the interviews are a combination of the patterned interview and the conversational interview. The interviewer should have a l i s t of the factors which must be covered but, at the same time, he should allow ample opportunity f o r free discussion. The applicant should f e e l at ease, not as i f he were undergoing a cross-examination;-:.-. A sample of the interview form and summary ra t i n g f o r r e a l estate i s included i n Appendix G.^ This i s one of the few interview guides developed exclusively f o r r e a l estate salesmen. The interviews should serve two purposes. F i r s t l y , they as s i s t the interviewer i n making h i s decision to hire or not to h i r e the applicant. Secondly, the interviews provide an opportunity f o r the applicant to decide i f he wants to work f o r the firm. During the interview, the interviewer should present ani accurate and f a i r description of the job and the opportunities open to the applicant. The interviewer must be careful not to overs e l l the job. I t i s d i f f i c u l t not to exaggerate, especially i f the interviewer i s anxious to h i r e the man or i f the interviewer i s enthusiastic about the job. Developed by C.J. Krauskopt, Missouri, Real Estate Association, Columbia, Missouri, 1964. - 80 -Normally two or three interviews are s u f f i c i e n t . In a business such as r e a l estate, where the salesman works i r r e g u l a r hours and receives i r r e g u l a r income, i t i s desirable to have one interview with the spouse of the applicant. Since the applicant's home l i f e has such a profound effect on h i s work habits, i t i s essential that the spouse should be completely informed about the pleasant and unpleasant aspects of the job. I f the spouse i s not prepared to tolerate the unpleasant aspects, then i t i s w e l l to know of t h i s i n advance. I f the applicant i s s t i l l hired, despite the spouse's opposition, h i s (or her) work w i l l l i k e l y r e f l e c t the unhappyy circumstances at home. Often the salesman w i l l decide to seek out a new job with more suitable working conditions. Some employees regard interviews with the applicant's spouse as an unwarrented i n t r u s i o n i n t o the applicant's personal life."'""'" I t i s i n t e r e s t i n g to note that 1 6 . 0 $ of the salesmen admitted t h e i r spouse di d not l i k e them working i n the r e a l estate business. 84 . 5 $ of the firms reported they had two or more interview with the applicants f o r sales po s i t i o n . 5 0 $ of the firms, employing a sales manager reported that both the agent and the sales manager interviewed the applicant. Of the 1 5 . 5 $ of the firms that had only one interview, about 2 / 3 , 1 0 . 2 $ , reported that they knew the applicant before they had been considered f o r the position. Therefore, i t i s unreasonable to assume that these firms hired sales s t a f f on the basis of one interview. For a more detailed discussion of the interview technique see: Bellows, R. and Estep, M.F., Employment Psychology: The Interview. Rinehart and Company, New York, 1 9 5 4 • - 81 -85.0$ of the firms reported they d i d not interview the applicants spouse. This seems to be a grave oversight on the part of the r e c r u i t i n g f i r m , especially i n a business such as r e a l estate where the salesmen are expected to work i r r e g u l a r hours. One of the common excuses given f o r leaving the r e a l estate business was the d i s s a t i s f a c t i o n of the spouse over the i r r e g u l a r hours. 3. References: Every person who applies f o r a license must prove three references to vouch f o r the good reputation, i n t e g r i t y and 12 good character of the applicant. The re c r u i t i n g firm should attempt to get at lea s t one of these references from a former employer of the applicant. The rec r u i t i n g firm should be careful i n using these references. Often the i n d i v i d u a l s asked to provide the references w i l l be reluctant to endanger the applicant's chances of getting the job even i f i t means omitting certain facts or interpreting facts i n a manner favorable to the applicant. I n order to overcome t h i s p o s s i b i l i t y , the r e c r u i t i n g firm should examine the references f o r what i s included and also f o r what information or comments are not included i n the references. 4. Psychological Tests: A variety of psychological tests have been developed to measure aptitudes, s k i l l s , special knowledge, i n t e r e s t , 13 mental a b i l i t y and personality i n applicants. J These t e s t s can be a useful aid i n the selection of salesmen. The tests can measure s k i l l s , aptitudes and knowledge, however, they do not measure the 12 Op. C i t . Regulations Under the Real Estate Act, Section 4.05. 13 R.E. Berman and S.J. Lachman, "How Tests Measure Man?.Hiring. Training. and Financing Salesmen. National I n s t i t u t e of Real Estate Brokers of The National Association of Real Estate Boards, Chicago, 111,, 1955, PP« 28 - 30. _ 82 -applicant's willingness to use the s k i l l s and knowledge. I t i s s t i l l necessary to motivate the applicant. Part of the popularity of psychological t e s t i n g i n selection i s attributable t o wartime experience. In World War I I , tests were of great value to the m i l i t a r y services i n c l a s s i f y i n g the numerous ik. draftees and r e c r u i t s . Since the war, a number of the large business •/ corpoations have adopted and improved a variety of te s t f o r employment selection. The l i f e insurance companies have been a leader i n t h i s f i e l d . 15 Psychological tests may be divided i n t o s i x major categories. 1. Performance or a b i l i t y t e s t s ! 2. Trade t e s t s . 3. I n t e l l i g e n t t e s t s . 4. Aptitude t e s t s . 5. Interest t e s t s . 6. Tests of emotional s t a b i l i t y of personality. 7. Tailor-made t e s t s . These are t e s t , especially designed to suit the needs of a p a r t i c u l a r company or business. The l i f e insurance companies have developed a series of tailor-made t e s t s t o be used i n the selection of salesmen, agents and o f f i c e help. The t e s t s , "Sales Method Index" and the "Aptitude Index" have not been i n use long enough to determine t h e i r success. 14 The most common test used i n World War I I by the m i l i t a r y authorities was the AGCT, a general c l a s s i f i c a t i o n t e s t . Eaton, J.W., "The Army's Personnel Research Laboratory", Personnel, Vol. 23, No. 5, March 1947, pp. 326 - 329. 15 Op. C i t . , D. Yoder, pp. 251 - 26l. - 83 --i t Early indications seem to suggest they are v a l i d . The Real Estate Research Department of the University of C a l i f o r n i a has been working on a series of t e s t s , especially de-signed f o r r e a l estate salesmen, since 1958. Although the t e s t s are not f i n a l i z e d yet, early indications show there i s a positive correlation between the t e s t results and ultimate success i n the r e a l estate business. The Department of Psychology at the University of B r i t i s h Columbia conducted a study to ascertain whether certain tests or groups of tests could predict the l e v e l of performance achieved by r e a l estate trainees i n the Pre-Licensing Course offered at the 18 University. There was no attempt to predict ultimate l e v e l s of performance i n s e l l i n g . A battery of ten t e s t s were administered to two groups of trainees. I t was shown that the t e s t s used could predict the chance which trainees have of performing at certain l e v e l s on the Pre-Licensing Course examinations. For predicting performance i n the examinations, the most important a b i l i t i e s were: general i n t e l l i g e n c e , vocabulary, arithmetical a b i l i t y , dominance, non-Verba 16 See:. . Testing A c t i v i t i e s , R e l i a b i l i t y and Canadian V a l i d i t y . A Report on  the Aptitude Index, Form 7. . Research. Report, 5. 1962. Predicting Health  and L i f e Sales Success with the Aptitude Index Research Report 7, 19621 The SMI (Sales Method Index) with Home Qffice~Supervision. Research Report 9, 1959. L i f e Insurance Agency Management Association, Hartford, Conneticut 17 RiR. Morman and D.G. Mortensen, ."Personnel Tests Ready for Try-Out by Realtors". C a l i f o r n i a Real Estate Magazine, October, i960, p. 10. R.R. Morman .and D.G.. Mortensen, ."Research Report: Personnel Selection". C a l i f o r n i a Real Estate Magazine, December 196l, p. 12. 18 E.I. Signori, Department of Psychology, University of B r i t i s h Columbia, i960, unpublished. - 84 -i n t e l l i g e n c e and speed o f w r i t i n g . The l e a s t u s e f u l t e s t was t h e 19 i n t e r e s t t e s t . y A l t h o u g h t h e b a t t e r y o f t e s t s used at t h e U n i v e r s i t y o f B r i t i s h Columbia are not des igned t o p r e d i c t success o r f a i l u r e i n s e l l i n g , t h e y are o f v a l u e t o t h e f i r m and t h e salesman. I f t h e salesman f i n d s t h a t the t e s t s p r e d i c t t h e y w i l l f a l l t h e p r e -l i c e n s i n g e x a m i n a t i o n , t h e y can r e c o n s i d e r t h e i r p l a n s t o e n r o l l . I t i s p o s s i b l e t h a t i n v i e w o f t h e c o s t s i n v o l v e d , the salesmen M w h i c h have a poor chance o f p a s s i n g t h e examinat ion may dec ide t o seek employment e lsewhere . T h i s may save them the cost o f t h e p r e - l i c e n s i n g course p l u s the o p p o r t u n i t y cost o f s i x weeks l o s t wages. The t e s t s are a l s o u s e f u l t o t h e f i r m ; One o f t h e main problems i n s e l e c t i n g salesmen i s t o f i n d a p p l i c a n t s who have the a b i l i t y t o pass t h e p r e - l i c e n s i n g e x a m i n a t i o n s . I f the a p p l i c a n t s do not have an a b i l i t y t o pass t h e e x a m i n a t i o n s , as p r e d i c t e d by t h e s e r i e s o f p s y c h o l o g i c a l t e s t s , t h e f i r m may w i s h t o r e c o n s i d e r t h e a p p l i c a n t ; A l t h o u g h t h e f i r m does not have a l a r g e d o l l a r investment on the a p p l i c a n t s u n t i l t h e y pass t h e e x a m i n a t i o n , i f t h e a p p l i c a n t s do not pass t h e f i r m must r e c r u i t more a p p l i c a n t s t o r e p l a c e t h o s e f a i l i n g t h e e x a m i n a t i o n ! One word o f c a u t i o n must be made c o n c e r n i n g the use o f p s y c h o l o g i c a l t e s t s i n t h e s e l e c t i o n o f salesmen. These t e s t s are not p e r f e c t , at l e a s t t h e y should p r o v i d e an i n d i c a t i o n t o support o r r e f u t e t h e d e c i s i o n of t h e i n t e r v i e w e r . I f t h e t e s t s agree w i t h t h e d e c i s i o n made b y t h e i n t e r v i e w e r t h e n t h e y o n l y serve t o support 19 I b i d , E . I . S i g n o r i , p . 1 9 . - 85 -the interviewer's own decision! I f the t e s t s do not support the interviewer's decision, then the applicant should be reviewed. I n the f i n a l decision, however, the applicant should be turned down or hired on the basis of the interviewer's decision, not on the basis of the psychological t e s t s . With the exception of the t e s t s currently being developed i n C a l i f o r n i a , there are no proven tests available to predict success or f a i l u r e i n s e l l i n g r e a l estate. This probably explains why only 2! 7$ of the firms use any type of te s t i n g program i n the selection of salesmen. These firms have developed and are using tests of a general nature. These four firms (2.?$) have no information regarding the usefulness of t h e i r t e s t s ! The remaining 97.3$ of the firms reported they did not use a tes t i n g program of any nature! The process of r e c r u i t i n g and selecting salesmen i s , and should be, the r e s p o n s i b i l i t y of the i n d i v i d u a l firms. Aside from the requirements set out i n the Regulations Under the Real Estate or) Act, the firms are free to select t h e i r salesmen as they see f i t . As the number of pre-licensing students would suggest, the majority of the firms s t i l l select salesmen on the "numbers" basis rather than the basis of careful selection. As long as the present methods of r e c r u i t i n g and selection are used, the r e a l estate business w i l l continue t o have a high number of low producers and high turnover of salesmen. 20 Op. C i t . , Regulations Under the Real Estate Act, Section 4.01 (a - f ) . - 86 -C. Turnover of Salesmen. One of the most c r u t i a l problems facing the r e a l estate business today i s the high turnover i n sales personnel. A proper r e c r u i t i n g and selection programme can be instrumental i n reducing t h i s turnover. The turnover of salesmen can be examined as a combination of two factors. The f i r s t i s the "drop-out" of salesmen. This i s the portion of the t o t a l sales force which leaves the r e a l estate business. The second factor i s the mobility of salesmen wi t h i n the r e a l estate business! This i s the change made by the salesmen who remain i n the r e a l estate business. I t i s extremely d i f f i c u l t to measure turnover and drop-outs per firm i n the r e a l estate business. The size of the firms vary so much that measurements become meaningless. The loss of one salesman to a firm of 10 means a 10$ turnover, the l o s s of one salesman to a firm of 100 means only a 1$ turnover. Rather than examine drop-outs and turnover on the basis of in d i v i d u a l firms, i t may be more meaningful to examine the results of the business as a whole! In the r e a l estate business i n B r i t i s h Columbia f o r the year ending August 31> 1963, there was a 30$ drop-out! This i s calculated as follows: 626 New licenses issued i n 1962 - 1963! 2271 Salesmen as at August 31, I962! 2897 Total 2199 Salesmen as at August 31, I963! 698 Surrendered licenses. The corresponding drop-out rate f o r the year ending August 31» 1964 1 21 was 20$. Based on the information gathered from the questionnaires, 152 firms representing 886 salesmen reported: (a) They hired 391 salesmen i n 1963* There i s no way of determining what percent of the new men were new to the r e a l estate business 21 Real Estate Council S t a t i s t i c s , Vancouver 1964, Unpublished. - 87 -and what percent transfered from another r e a l estate firm. (b) They f i r e d 234 salesmen i n 1963. (c) 175 salesmen gave notice to t h e i r firms, either to go to work fo r another r e a l estate firm or to leave the r e a l estate business! Based on t h i s information, the turnover rate f o r the 152 firms i n the survey was 409 salesmen out of a t o t a l of 886 or approximately 43.8$! The D i v i s i o n of Estate Management, Faculty of Commerce, University of B r i t i s h Columbia completed a survey of turnover of r e a l estate salesmen! This survey was based on the changes made by the students of s i x di f f e r e n t pre-licensing courses. I t was found that during the f i r s t s i x months, 18.8$ of the salesmen dropped out of the r e a l estate business and by the end ' of the second year, 49.5$ of the salesmen had l e f t the r e a l estate business. In addition to the drop-out rate, there was a high turnover w i t h i n the r e a l estate business! The combined effect of drop-out and mobility within the r e a l estate business gives a high turnover rate. The turnover rate indicates that only 65$ of the salesmen were with t h e i r o r i g i n a l firm at the end of s i x months, 45$ were with t h e i r o r i g i n a l firm at the end of one year and 21$ remained with t h e i r o r i g i n a l firm at the end of two years. In a survey completed by the Sales Executive Club of New York, i t was found that only 68!5$ of the new salesmen remained with t h e i r o r i g i n a l firm at the end of one year. At the end of the second year 50.2$ of the new salesmen were s t i l l with t h e i r o r i g i n a l f i r m . ^ " „ ' The percentage turnover i n the entire sales force, by type of business, i s as follows: 22 Sales Executive Club of New York., A Nationwide Survey of the 1964 Sales  Manpower Requirements of American Manufacturing, and Service Companies. New York 1964, p. 1. : - 88 -TABLE X PERCENTAGE TURNOVER IN THE SALES FORCE DURING AN AVERAGE YEAR* Percent of Turnover Consumer In d u s t r i a l Service A l l 22.7$ 19.8$ 19.4$ 56.8$ 49.9$ 60.4$ 7.6$ 7:o$ 6.9$ 8.1$ 5.8$ 1.1$ 8.1$ 3.0$ 5.9$ 4.7$ 3.9$ 0.5$ 2.4$ 0.6$ Overall Average - 7.3$ 8.1$ 11.2$ 8.4$ * Source Sales Executive Club of New York, 1964. As may be seen from Table !X, the average turnover i n the service industry i s approximately 3$ - 4$ higher than turnover on the Consumer or In d u s t r i a l sector. Unfortunately, si m i l a r data i s not available f o r the in d i v i d u a l firms i n the r e a l estate business. However, the ov e r a l l drop-out rate of 20$ indicates that turnover i n the r e a l estate business i s sub-s t a n t i a l l y higher than turnover i n any of these three sectors! There are a number of other indications r e l a t i n g to the turnover of salesmen i n the r e a l estate business. I t i s encouraging to f i n d such a high proportion of the sales personnel have been regularly employed f o r over f i v e years. 54.0$ of the males and 51.3$ of the females have over f i v e years experience. - 89 -TABLE XI NUMBER OF YEARS EXPERIENCE IN THE REAL ESTATE BUSINESS (SALESMEN) T o t a l a T o t a l a Number of Years Experience Male" Female*3 Vancouver BlC. Less than one year............. 15.3$ 17.6$ 14 .7$ 15.5$ 1 - 2 years........:......!.... 11 .?$ 14 .9$ 8 .3$ 10.3$ 2 - 3 years.......!. 7 .0$ 2.7$ 5.1$ 6.2$ 3 - 4 years 4.4$ 5.4$ 15 .0$ 15.5$ 4 - 5 years............. ... 7 .6$ 8 .1$ 5 - 7 S y e a r s . . . . 13.8$ 8 .1$ 18 .0$ 17.8$ 7 - 1 0 years 15 .0$ 21.6$ 19.5$ 17.3$ Over 10 years 25.2$ 21.6$ 19.4$ 17.4$ Total - 100.0$ 100.0$ 100.0$ 100:0$ a Source - Real Estate Council S t a t i s t i c s , 1963: b Source - This i s based on 415 salesmen's questionnaires: I t would appear from Table XX that once salesmen have been i n the business over four years, the drop-out factor i s reduced rather sharply. Drop-out i s only one troublesome factor. A more alarming factor i s the mobility of salesmen within the r e a l estate business: This would not be alarming except that i t i s usually the low income producers which change firms. TableXII i s an i n d i c a t i o n of the mobility of salesmen remaining i n the r e a l estate business. I t i s apparent that over one-half of the salesmen, male and female, have been with t h e i r present firm since they started i n the business, or for the past four yearsl This i s somewhat misleading since a high percentage of these salesmen are just new to the business. I t can be noted that 10$ of the males and only 4 .1$ of the females have worked with three or more firms i n the past four years! - 9 0 -TABLE H I NUMBER OF REAL ESTATE FIRMS SALESMEN HAVE WORKED WITH IN PAST FOUR YEARSa Number or Firms Salesman Male Female 54.0$ 41.9$ 4.1$ 1 .0$ > 1 . . . . . I .6$ lo$ Total - ioo:o$ 100.0$ a This table i s based on 415 r e p l i e s . A more meaningful i n d i c a t i o n of the mobility of salesmen i s the number of years service with the present employer. TableXIIIindicates the small percentage of salesmen with long service records with one firm. The salesmen with the long service records, are generally the better producing salesmen. I t was found that there i s a si g n i f i c a n t r e l a t i o n between the 19&3 income of salesmen and the number of firms with which they have worked. Salesmen who change firms frequently earn a lower income than the more stable salesman. I t seems rather strange that a firm would hire a low producing salesman from another f i r m i Some of the excuses offered by the salesmen f o r leaving t h e i r l a s t employer seem to indicate the type of salesman which i s highly mobile. "Didn't earn enough money because " "Found the o f f i c e was too f a r from home" "Downtown o f f i c e too inconvenient" "No parking space at former o f f i c e " "Couldn't get along with some of the fellows i n the o f f i c e " - 91 -TABLE XIII: NUMBER OF YEARS THE SALESMEN HAVE WORKED WITH THEIR PRESENT. EMPLOYERS Number of Years with Present Employer Salesmen Male Female Less than 1 year... 30.5$ 27.0$ 1 - 2 years. 21.7$ 24.3$ 2 - 3 years 12.6$ 12.2$ 3 - 4 years 7.0$ 915$ 4 - 5 years 5.6$ 8 i l $ 5 - 7 years . 9.4$ 5.4$ 7 - 1 0 years! : i : . . . . . . 7.9$ 8.1$ 10 years and over. 5.3$ 5.4$ Total - 100$ 100$ a This table i s based on 415 r e p l i e s . The managers suggested the following factors were the major causes of termination of employment. 1. Low income earned by the salesmen. 2. Unsatisfactory behavior i e . unable to follow company p o l i c i e s . 3. I n a b l i l i t y to get along with fellow workers. CHAPTER VT TRAINING IN THE REAL ESTATE BUSINESS Today, sales managers recognize that good salesmen are not born, but made by properly organized and directed sales t r a i n i n g programs.1 The development of a sound r e c r u i t i n g and selection process w i l l be i n vain i f the r e c r u i t i n g firm i s not prepared to t r a i n the new r e c r u i t s . The new re c r u i t i s , i n a sense, only the raw material from which a good salesman may be developed. Even experience salesmen working f o r a firm w i l l require continuous t r a i n i n g i f they are to remain effe c t i v e salesmen! The t r a i n i n g of salesmen i s one of the most controversial and one of the most v i t a l subjects i n the management of sales force. Training i s controversial because i t i s not always possible to determine the effect of tr a i n i n g on a salesman's performance. Also i t i s d i f f i c u l t t o determine which method of t r a i n i n g to use. Many di f f e r e n t forms of t r a i n i n g programs succeed. Training i s v i t a l because the qu a l i t y and extent of the man's training may, and often does, determine h i s success or f a i l u r e to a greater extent than any other single factor, save perhaps h i s natural aptitude f o r the job. In designing t a i n i n g programs there has been a tendancy to r e l y on so ca l l e d common sense methods of t r a i n i n g . The t r a i n i n g program i s usually designed by a sales manager or someone who has had considerable experience s e l l i n g r e a l estate. This i s not always a satisfactory method of designing a t r a i n i n g plan since the sales manager may not have the knowledge required 1 B.E. Canfield, Sales Administration, Prentice-Hall Inc., Englewood C l i f f s , N.J., 1961, p. 200. - 93 -to design a t r a i n i n g program even though he may be an excellant salesman or sales manager. Once the t r a i n i n g program i s established, i t s v a l i d i t y may go unquestioned f o r extended periods of time. Therefore, i t i s necessary to f i r s t decide what type and amount of t r a i n i n g and knowledge a r e a l estate salesman should receive and continuously review the t r a i n i n g program to ensure that i t i s meeting the needs of the firm and the trainees. I n a s t u d y c o n d u c t e d i n C a l i f o r n i a , D r . S.J. M a i s e l a n d Dr. A.H. Schaaf attempted to determine what type of t r a i n i n g and knowledge r e a l estate salesmen required. f c The brokers surveyed by Maisel and Schaaf indicated there were f i v e basic s k i l l s which a r e a l estate salesman must lea r n . ^ 1. A b i l i t y to locate buyers and s e l l e r s . 2. Knowledge of the property and i t s value. 3. S e l l i n g a b i l i t y . 4. Legal knowledge. 5. Knowledge of financing. However, the brokers d i d not agree on the amount of t r a i n i n g required i n each s k i l l . One group of brokers f e l t that salesmen should attempt to be professional i n t h e i r work. The other groups f e l t that the salesman's main r e s p o n s i b i l i t y was to s e l l . Therefore, the need f o r technical knowledge was minimized and s e l l i n g a b i l i t y was emphasized. 4 A si m i l a r study was conducted by Mr. A.G. DeVries. Using a c r i t i c a l incident technique, Mr. DeVries found that the most positive or successful 2 S.J. Maisel and A.H. Schaaf, Characteristics and Performance of Real Estate  Brokers and Salesmen i n C a l i f o r n i a . 1956, Real Estate Research Centre, University of C a l i f o r n i a , Berkely. 3 I b i d , p. 24. 4 A.G. DeVries, A Study of Training Needs i n the S e l l i n g of Real Estate  Through the Use of C r i t i c a l Incident Technique. M.A. Thesis, University of B r i t i s h Columbia, 1957, Unpublished. - 94 -incidents i n the s e l l i n g of r e a l estate occurred i n regard to dealings involving personalities rather than dealings involving property and monetary considerations. That i s to say, incidents leading to success depending more on a b i l i t y to handle people rather than any s p e c i f i c knowledge regarding property or f i n a n c i a l matters. At the same time Mr. DeVries found that most negative incidents, these r e f e r r i n g to l o s t sales, occurred i n regard to dealings involving property. Either the salesmen d i d not show the right property to the c l i e n t or the salesman di d not have s u f f i c i e n t information regarding the property. From the data i n Mr. DeVries study i t i s evident that sales a b i l i t y i s the most important factor contributing to success. However, sales a b i l i t y i s not i n i t s e l f enough to guarantee success. Salesmen must have a good knowledge of t h e i r properties and to a much lesser extent knowledge regarding f i n a n c i a l matters. Depending on the attitude of the brokers, i n the r e a l estate business, the t r a i n i n g program f o r salesmen could vary considerably. At the present time the r e a l estate business i s geared to s e l l i n g . A salesman's income and the firm's income are d i r e c t l y related to the number of transactions completed. As long as income i s dependant on completing transactions, i e . commission s e l l i n g , the main s k i l l s required w i l l be those d i r e c t l y associated with s e l l i n g ^ I f and when the r e a l estate business moves towards a more professional concept, the emphasis on s e l l i n g s k i l l s w i l l be reduced and greater emphasis w i l l be placed on technical knowledge. At present the t r a i n i n g program f o r r e a l estate agents and salesmen f a l l s somewhere between the two extremes. On the one hand there i s the - 9 5 -technical knowledge obtained from the li c e n s i n g courses and the university diploma courses. On the other hand there i s the sales t r a i n i n g obtained on the job and the work,experience on the job. Each program attempts to t r a i n the salesmen to become a more e f f i c i e n t and effec t i v e representative of the r e a l estate business. A.. Salesman's Pre-Licensing Course.. The Real Estate Act of 1958 set out new regulations regarding the lic e n s i n g of salesmen.-' The 1958 Act was a much more stringent and comprehensive act than the e a r l i e r l i c e n s i n g statutes insofar as pre-lic e n s i n g requirements for salesmen are concerned. The previous l i c e n s i n g board was replaced by the Real Estate Council of B r i t i s h Columbia. Section 14(a) of the Act grants the Council authority to supervise the educational requirements of agents and salesmen. Section 14(a) also grants the Council power to delegate the handling of educational requirements to the University of B r i t i s h Columbia. I t i s through t h i s section of the Act that the University of B r i t i s h Columbia has been given the r e s p o n s i b i l i t y f o r conducting the educational courses-for r e a l estate sales-men and agents. According to the Regulations under the Real Estate Act, every person who applies f o r an agent's license or salesman's license must have an under-standing of certain subjects and pass an examination. Section 4.01 (d) have an appropriate knowledge of the books of account required i n the operation of a r e a l estate business, (e) have an understanding of the obligations between p r i n c i p a l and agent, of the pr i n c i p l e s of r e a l estate 5 Province of B r i t i s h Columbia, Real Estate Act, 1 9 5 8 , R.S.B.C., Chapter 3 3 0 - 9 6 -practice and canons of business ethics pertaining thereto, as w e l l as an understanding of the provisions of the Act; ( f ) Have passed such examination or examinations as s h a l l have been prescribed by the Council and approved by the Superintendent. The University of B r i t i s h Columbia has been delegated the authority to administer the educational requirements! The salesman's pre-licensing course consists of twenty lessons spread over a four week period followed by an examination. The pre-licensing course i s primarly a correspondence course. However, for students i n the lower mainland area, the course i s supplemented by twenty-two hour a f t e r -noon lectures. There i s an assignment following most lessons and the students are required to pass a l l assignments before they are permitted to write the examination. A passing grade of 6 0 $ i s required on the examination. Once the students have successfully completed the pre-licensing course, they are issued a salesman's lic e n s e . The length and cost of the pre-licensing course f o r salesmen has not d r a s t i c a l l y reduced the number of applicants f o r licenses! Approximately 9$ of the students drop out of the course before the examination. Of those w r i t i n g the examination, approximately 90$ pass on t h e i r f i r s t or second attempt! The content of the course i s technical i n nature. There i s not attempt to teach the students how to s e l l . Of the twenty lessons, ten relate to land law and the law of agency, the remainder cover business practice, the mortgage 6 Province of B r i t i s h Columbia, Regulations Under the Real Estate Act, B.C. Reg. 7 5 / 6 1 , Section 4 . 0 1 ( d ) , ( e ) , ( f ) . - 97 -TABLE XIV NUMBER OF STUDENTS ENROLLED IN THE PRE-LICENSING COURSE FOR REAL .ESTATE SALESMEN* 1962-63 1963-64 1964-65b 397 271 182 115 Total - 593 668 297 a Source: Pre-Licensing S t a t i s t i c s , Real Estate O f f i c e , University of B r i t i s h Columbia. b This t o t a l only includes 3 of the seven classes. This compares with 241 students at the same date on 1963-64 li c e n s i n g year. market, t i t l e r e g i s t r a t i o n , accounting, building construction, and property tax. (See Appendix H for a course o u t l i n e ) . The intent of the course i s t o provide a salesman with the general knowledge of/and ins i g h t i n t o the r e a l estate business. The main emphasis i s on the l e g a l aspects concerning the salesman's r e l a t i o n with h i s c l i e n t s and the law r e l a t i n g to r e a l property. I t i s i n t e r e s t i n g to compare the t r a i n i n g requirements f o r r e a l estate salesmen to those of other service businesses. For purposes of comparison, the l i c e n s i n g requirements of a barber w i l l be used, whereas a r e a l estate salesman must take a four week course and write one examination, a barber must take a s i x month course at one of itwo centres i n Vancouver before ^ obtaining a licensee The pre-licensing r e a l estate course costs approx-imately $100 whereas the barbers course cost $95. In addition, anyone wishing to take the pre-licensing r e a l estate course need wait no longer than s i x weeks before they can e n r o l l . I t i s not uncommon f o r a barber to wait s i x or - 98 -eight months to e n r o l l since the size of the classes are l i m i t e d . Once the r e a l estate salesman completes the pre-Licensing course, there are no further requirements. The barber, on the other hand, i s consid-ered t o be an apprentice f o r twelve months after which time there i s another set of three examinations. I f the barber f a i l s any of the three examinations, the examining board may require a further apprenticeship; I f the barber passes a license w i l l be issued. Although the r e a l estate l i c e n s i n g system and q u a l i f i c a t i o n s required i n B r i t i s h Columbia are comparable to any other centre i n North America, they are not as r i g i d as the systems used i n other businesses; This does not only apply to the comparison between r e a l estate and barbers, i t also applies to many other trades and service businesses. B. Agent's Licensing Course. The agents pre-licensing course consists of twenty-five lessons spread over a s i x month period. The lessons are a l l handled by correspondence at a rate of one lesson and assignment per week. The lessons are lengthier and at a more advance l e v e l than the salesman's course. F i f t e e n of the lessons are of a l e g a l nature, the remainder include accounting, appraisal, o f f i c e management, property management, general insurance and advertising. C. Specialized Courses i n Real Estate. The University of B r i t i s h Columbia offers diploma courses i n r e a l estate and appraisal f o r individuals wishing t o obtain further knowledge i n these areas. B a s i c a l l y these courses are designed f o r persons i n manage-ment and for persons planning to move i n t o a management position i n the r e a l estate business. The diploma courses are not required f o r any type of licens e , they are completely optional; The diploma courses are spread over a - 99 -three year period, the f i r s t two years being the same f o r the r e a l estate and the appraisal option. During the t h i r d year a student must specialize i n r e a l estate or appraisal. At the end of three years a student receives a diploma i n r e a l estate or appraisal! I f the student so decides, i t i s possible t o take a for t h ^ear and receive another diploma i n the other option. Each year of the diploma course consists of approximately t h i r t y lessons i n three or four subject areas. These courses are b a s i c a l l y correspondence courses, however, weekly lectures are held at the uni v e r s i t y to supplement the lessons. (See Appendix I for course o u t l i n e ) ! The f i r s t class to receive the Diploma graduated i n 1 9 6 2 . At that time t h i r t y - f i v e students received t h e i r diplomas! I t i s s t i l l too early to determine i f these courses are e f f e c t i v e i n improving performance i n the r e a l estate business. The results of a similar survey conducted ten years from now maybe quite d i f f e r e n t . The number enrolled i n the diploma courses has increased substantially since the f i r s t courses were offered. TABLE XV ENROLLMENT IN THE DIPLOMA COURSES 1 9 6 4 - 6 5 * Type of License Held 1 s t year 2nd year 3rd & 4th year Agents License.... 11 (14 . 5 $ ) 7 (13.5$) 4 ( 1 0 . 9 $ ) Salesman's License.... .! 32 (42 . 1 $ ) 19(3615$) 10 ( 2 7 . 0 $ ) Others............!............!!...! ^ (43.4$) 2 6 ( 5 0 . 0 $ ) 2J_ ( 6 2 . 1 $ ) Total - 76 52 37 * Source - Diploma Student F i l e s - Real Estate Office, University of B r i t i s h Columbia! - 100 -As may be seen from table X$, there i s a substantial increase i n the enrollment. Another encouraging point i s the increase i n the number of students holding a salesman's or agent's license! In the t h i r d year class only 37«9$ of the students were active i n the r e a l estate business. The remaining 62!1$ were employed i n f i e l d s associated with r e a l estate. These included mortgage appraisers, property managers and assessors. In the f i r s t year class the percentage holding salesmen's or agent's licenses has increased to 56.6$! This i s an increase of 18!7$ of the class i n two years. Another encouraging point i s the number of students returning to complete the additional year f o r t h e i r second diploma. There are 13 students currently taking the four year (other option year)! Recognition has been granted to the Diploma courses offered at the University of B r i t i s h Columbia. The Canadian I n s t i t u t e of Realtors, %*ho are responsible f o r advance courses i n other parts of Canada, have recognized the diploma courses as a satisfactory substitute f o r t h e i r own courses. In addition to the diploma courses, the University of B r i t i s h Columbia also offers a number or under-graduate and graduated courses i n estate management! These courses are part of the university's regular program! Degrees i n Commerce and Business Administration, both at the Bachelor and Masters l e v e l , s p e c i a l i z i n g i n Estate Management are offered at the University! 78.4$ of the firms reported that they encouraged t h e i r sales s t a f f t o take extra courses i n r e a l estate or salesmanship. The most commonly mentioned courses were the diploma courses offered at the University of B r i t i s h Columbia. Although 78.4$ of the firms encouraged t h e i r sales s t a f f to take extra courses, only 3^!8$ of the firms were w i l l i n g to pay part or a l l of the fees! Most of these firms w i l l i n g to pay part or a l l of the fees stipulated they would only pay upon successful competion of the courses! - 101 -D. Cost of Training a Salesman. TABLE XVI COST OF SELECTING, TRAINING AND SUPERVISING ONE SALESMAN UNTIL HE IS PRODUCTIVE* A l l . Consumer I n d u s t r i a l Service Cost Companies Firms Firms Firms 4.3$ 0.6$ 4.2$ 25:9$ 1013$ 13.9$ 14.4$ 9.1$ 18.1$ 22.3$ 20.9$ 19.4$ . . i 5.1$ 4.3$ 4.9$ 6.9$ 28.8$ 55.1$ 3715$ Average Cost - $8,731 $7,162 $10,593 $7,490 * This cost does not include the new man's salary! The expenses of a l l trainees starting at the same time were charged to the cost of those who succeeded. The cost of t r a i n i n g a salesman varies considerably from firm to firm and from industry to industry: However, the cost factors which" should be included i n the cost of making a salesman productive remain f a i r l y uniform. The cost factors include the cost of r e c r u i t i n g , selecting and t r a i n i n g the salesman. This includes the t r a i n e r ' s time, the new salesman's salary, o f f i c e expenses and the cost of material and supplies f o r t r a i n i n g . In a nationwide survey of 503 manufacturing and service firms em-ploying 89,322 salesmen the following data was obtained.''' 7 Sales Manpower Foundation D i v i s i o n of the Sales Executive Club of New York. A Nationwide Survey of the 1964 Sales Manpower Requirements of American  Manufacturing and Service Companies, 1964, New York 17, New York. - 102 -The a v e r a g e c o s t o f making a new salesman p r o d u c t i v e i s $8,731* The c o s t o f making a salesman p r o d u c t i v e i n t h e s e r v i c e i n d u s t r y , o f w h i c h r e a l e s t a t e i s a p a r t , i s $7,490. These f i g u r e s do n o t i n c l u d e t h e s a l e s -man's s a l a r y o r co m m i s s i o n . I t i s d i f f i c u l t t o d e t e r m i n e t h e c o s t o f making a r e a l e s t a t e s a l e s -man p r o d u c t i v e . I n a l l l i k e l i h o o d t h e c o s t w o u l d be somewhat l e s s t h a n $7,490 p e r man. The r e a l e s t a t e salesman w o u l d n o t i n c u r a c o s t f o r t r a v e l l i n g , h o t e l s o r m e a l s . The second l a r g e s t expense i n c u r r e d b y a r e a l e s t a t e s a l esman i s a d v e r t i s i n g expense! S i n c e t h i s i s d i r e c t l y r e l a t e d t o t h e income e a r n e d ( $ o f g r o s s c o m m i s s i o n s ) i t w o u l d be k e p t a t a minimum u n t i l t h e salesman i s p r o d u c t i v e . I n o r d e r t o a r r i v e a t a c o s t o f making a salesman p r o d u c t i v e , i t i s n e c e s s a r y t o o b t a i n f i g u r e s f o r t h e c o s t o f : H e l p Wanted A d v e r t i s e m e n t s . T e s t i n g programmes. Management i n t e r v i e w i n g t i m e . B a s i c T r a i n i n g . C o s t o f S a l e s M e e t i n g s ! O u t s i d e T r a i n i n g C o u r s e s ! F i e l d S u p e r v i s o r s Time. U n f o r t u n a t e l y t h i s i n f o r m a t i o n i s n o t r e a d i l y a v a i l a b l e . However, i n t h e r e a l e s t a t e b u s i n e s s t h e ave r a g e c o s t o f a t e s t i n g programme w o u l d b e e x t r e m e l y l o w s i n c e o n l y a 2.7$ o f t h e f i r m s u s e t e ' s t s . A l s o t h e c o s t o f b a s i c t r a i n i n g w o u l d be v e r y l o w as may be se e n b y t h e t y p e o f t r a i n i n g programmes g i v e n ! ( S e e C h a p t e r 6). The c o s t o f becoming p r o d u c t i v e f r o m t h e salesman's p o i n t o f v i e w i s d i f f i c u l t t o d e t e r m i n e . A s i d e f r o m t h e c o s t o f t h e p r e - l i c e n s i n g c o u r s e w h i c h i s u s u a l l y b o r n b y t h e salesman, t h e o n l y o t h e r c o s t i s t h e o p p o r t u n i t y c o s t - 103 -> involved. This thus equal to the income the salesman could have earned i n another job. A number of firms have started to pay the cost of the pre-licensing course providing the salesman completes the course success-f u l l y . This would then become another cost factor i n the firm's cost of making a salesman productive. E. Training Objectives. There are at least four important objectives or purposed of t r a i n i n g salesmen. The f i r s t of these i s to secure early production! In the great majority of cases, the p r a c t i c a l necessity i s that the new man must be trained s u f f i c i e n t l y w e l l during the f i r s t few weeks to be effective at h i s work i n the f i e l d w ithin that time. Regardless of how long h i s t r a i n i n g w i l l continue, and obviously i t should be carried f a r beyond the point of h i s f i r s t f i e l d work, i t i s important to establish good s k i l l s and habits promptly! These early habits are l i k e l y to l a s t i n g habits! A second purpose of t r a i n i n g i s to. cause the new man to produce a better q u a l i t y of business than would be the case without the influence of t r a i n i n g . I t i s to be expected that as a man gains i n experience, he w i l l bring i n a better q u a l i t y of business. Yet good t r a i n i n g can combat i n large measure, the natural tendency of the new man to neglect certain factors! The r i g h t kind of t r a i n i n g can start him off on the r i g h t foot! Thirdly, the t r a i n i n g of the new man w i l l cause him to produce more business than he would i n the absence of the influence of t r a i n i n g . I t i s necessary to mention t h i s t h i r d purpose i n order to keep i n mind the primary purpose of s e l l i n g ! I f t h i s f act i s not kept i n mind, undue emphasis may be placed on the lecture part of the t r a i n i n g process instead of the f i e l d t r a i n i n g process. - 104 -S t i l l another objective i s to bring through to success some of those men, who, i n the absence of t r a i n i n g would f a i l . The man who i s completely lacking i n personal drive and the w i l l to succeed, w i l l f a i l whether he i s trained or not. In a l l p r o b a b i l i t y , the man who has a high measure of aptitude and a high degree of personal determination w i l l succeed whether or not he i s trained. The man of aptitude and determination w i l l succeed more re a d i l y , i n greater measure, and with less d i f f i c u l t y i n consequence of the t r a i n i n g . I n the great middle body of men, those average men who are neither notably lacking i n aptitude nor possessed of i t i n outstanding measure, there are many who w i l l almost cer t a i n l y f a i l withouttraining. In the i n -terest of t h e i r success, and i n the i n t e r e s t of the company's success and p r o f i t , i t i s desirable to bring through to success the largest possible proportion of these men. There are a number or more s p e c i f i c objectives of a t r a i n i n g program! 1. Training must help the salesman secure more l i s t i n g s ; properly appraised. 2. Training must help the salesman obtain a l i s t of possible buyers. 3. Training must help him economize h i s own and his prospect's time. 4. Training should help him anticipate obstacles and be prepared to overcome these. 5 . Training must help him maximize h i s chances of closing the sales. 6. Training must help him increase h i s earning, his repeat c l i e n t s , and h i s trade goodwill. - 105 -F. On the Job Training. As long as the licensee's basic function i s s e l l i n g , on the job t r a i n i n g and work experience w i l l remain the most important t r a i n i n g devices! A salesman's t r a i n i n g should start the day the trainee begins the pre-l i c e n s i n g course. Firms are asked to give the trainee " i n o f f i c e t r a i n i n g 8 during the pre-licensing course. Each lesson i s accompanied by s p e c i f i c instructions regarding the type of " i n o f f i c e t r a i n i n g " to be given. A syllabus of " i n o f f i c e t r a i n i n g " i s included i n appendix J . This i s not additional work f o r the student. The purpose of the " i n o f f i c e t r a i n i n g " i s to a s s i s t the student with h i s lessons. After each lecture the student can see how the f i r m uses or applies the information. 78.1$ of the firms reported that they gave " i n o f f i c e " t r a i n i n g during the pre-licensing course. About one-half of the firms which did not give " i n o f f i c e t r a i n i n g " during the course reported they used the time between the pre-licensing examination and the issuing of the license to give " i n o f f i c e t r a i n i n g " . I t should be -A noted that " i n o f f i c e t r a i n i n g " i s not designed to t r a i n the student to be a salesman. The main purpose of the " i n o f f i c e t r a i n i n g " i s to assist the student i n h i s pre-licensing course. As may be seen i n the syllabus (Appendix J ) , " i n o f f i c e t r a i n i n g " has nothing to do with s e l l i n g . Sales t r a i n i n g begins after the student has successfully completed the pre-licensing course and starts to work. Once the trainee successfully completes the pre-licensing course, he should start immediately with the firms sales t r a i n i n g program. I t i s extremely d i f f i c u l t to describe and c l a s s i f y the separate t r a i n i n g programme of each r e a l estate firm. The method of c l a s s i f i c a t i o n used i n t h i s study i s l a r g e l y arbitrary. The c l a s s i f i c a t i o n used i s based not only on the length of the t r a i n i n g program, but also on the type of t r a i n i n g and the content of the program. - 106 -TABLE XVII TRAINING PROGRAMS OF THE REAL ESTATE FIRMS* Type of Program $ of the Firms Type 1 52.1$ Type 2... 18.5$ Type 3 20.0$ Type 4 . . . . . . . . . . . i 9.4$ Total - 100.0$ * This table i s based on 152 r e p l i e s . Program Type 1. This i s an informal t r a i n i n g program. New salesmen to be given a minimum of i n i t i a l t r a i n i n g and there i s no continuous t r a i n i n g aside from sales meetings. Salesmen work on t h e i r own, the agent or manager does not assist the salesman unless help i s requested. This t r a i n i n g i s most common i n the small firms. Program Type 2. This c l a s s i f i c a t i o n i s an i n d i v i d u a l t r a i n i n g programi The agent or manager works with the new salesman during the f i r s t few weeks on the job and continues to hold meetings with each salesman. Program Type 3 . This i s a more formal t r a i n i n g program! Readings are assigned to the new salesman, regular meetings are held, and the agent or manager works i n the f i e l d with the new salesman. Program Type 4. This type of program i s most common i n the larger firms. Regular meetings or classes are held f o r new salesmen, reading assignments are required and f i e l d work i s included. This type of program i s usually expended o v e r a longer period of time than the other three programs. - 10? -I t i s extremely d i f f i c u l t to measure the effectiveness of any of these t r a i n i n g programs. In order to accurately measure the results of each type of program i t would be necessary to control the salesman included i n the sample. Under normal conditions, with a high turnover of salesmen, i t i s impossible to measure the effectiveness of a firm's t r a i n i n g program. Any p a r t i c u l a r salesman may have received different t r a i n i n g i n a number of other firms. I t i s , however, possible to determine what type of t r a i n i n g programs are being used by the firms. 52.1$ of the firms use the type 1 t r a i n i n g program. B a s i c a l l y t h i s i s not a t r a i n i n g program at a l l . The new salesman i s working on h i s own immediately after starting with the firm. There i s no attempt to d i r e c t or guide the salesman. I f the new salesman encounters any d i f f i c u l t i e s he may request help from the agent, otherwise he works alone. This i s , of course, a very i n e f f i c i e n t method of producing successful salesmen. The salesman w i l l t r y , by t r i a l and error, to f i n d a satisfactory method of performing h i s tasks. Once he finds a method that works reason-ably w e l l , he w i l l stay with i t . There i s no guarantee that i t w i l l be the best method. Even i f the salesman had previous experience with another r e a l estate firm i t would seem necessary to spend some time teaching him the p o l i c i e s and methods used by the new firm. The second type of t r a i n i n g program i s used by 18.5$ of the firms! This should be the minimum acceptable t r a i n i n g program f o r any firm. The new salesman receives some attention and assistance from the agent f o r the f i r s t few weeks. This i s either by discussion groups or work i n the f i e l d when the agent or t r a i n e r finds time. This i s not a formal t r a i n i n g program. - 108 -The t h i r d type t r a i n i n g program i s used by only 20.0$ of the firms. This i s a more formal t r a i n i n g program! The new salesman receives regular attention and assistance during the f i r s t few weeks with the firm. In addition t o lectures, meetings and reading assignments, the salesman works i n the f i e l d with an agent or t r a i n e r . The fourth type t r a i n i n g program i s a very satisfactory program for r e a l estate-salesmen. The new salesmen receive w e l l planned regular t r a i n i n g . The t r a i n i n g i s usually extended over a prolonged period of time. Unfortunately only 9»^ $ of the firms use t h i s type of t r a i n i n g program^ I t appears that the majority of the r e a l estate firms are presently offering marginal or sub-marginal t r a i n i n g programmes. 52.1$ of the firms have no adequate t r a i n i n g programmes and an additional 18.5$ of the firms have only a minimum t r a i n i n g programme. The majority of the firms r e a l i z e that the pre-licensing course i s not s u f f i c i e n t t r a i n i n g f o r a salesman, however, the majority of the firms have not provided an adequate supplement to the course. There has been seme pressure exerted by the r e a l estate firms to have the pre-licensing course extended to include sales t r a i n i n g . There are two main reasons why t h i s has not been done. To begin with, the purpose of the Real Estate Act and the pre-licensing course i s not to produce better salesmen. The purpose of the Act and the pre-licensing course i s to protect the public against incompetent and unethical agents and salesmen and t o encourage the participants i n the r e a l estate business i n the province to prepare themselves f o r t h e i r work through adequate studies. This explains the heavy emphasis on law and ethics on the pre-licensing course. The second arguement against extending the pre-licensing course to include sales - 109 -training as that sales training can best be taught on the job rather than i n a classroom. I t i s true that lectures and discussion groups are unable supplements to on-the-job training, however, they are only supplements. I t i s a clearly established fact that sales training must include a max-imum amount of time working i n the f i e l d , not i n the classroom. Some of the arguments advanced by the firms for not spending a great deal of time training salesmen are as follows. Since the turnover i n salesmen i s so high, about 51.2$ leave their original firm i n the f i r s t year, i t seems rather f u t i l e to spend time training salesmen. The argument i s foolish since the main cause of turnover i n the real estate business i s the low earnings of the salesmen. I f sales training was instrumental i n increasing the earnings of the salesmen the turnover may be reduced. I t i s very seldom that a high income producing salesman w i l l change firms. A second argument advanced by some of the smaller firms i s that they cannot afford to t r a i n one or two salesmen. These firms agree that they can hire experiencedisalesmen from other firms i n the business and thus around the problem of training new salesmen. There i s some val i d i t y i n this argument, however, hiring only experienced salesmen does not entirely eliminate the need for sales training, i t only reduces the amount of training required. The recruiting firm must s t i l l aquaint the new salesmen with their policies and practices as well as give the salesmen continuous training and supervision. G. Sales Meetings. Sales meetings are generally a useful device for providing a continuation of the i n i t i a l training program. The content of the sales meeting varies considerably. Some firms discuss matters such as new l i s t i n g s , changes i n company policies and the problems encountered since the l a s t meeting. A small percentage of the firms introduce new topics of - 110 -discussion each meeting! These topics are generally related to the r e a l estate market or sales problems! TABLE XVIII FREQUENCY OF SALES MEETINGS*. . Frequency $ of the Firms Daily Meetings!.....!.!....!..!.!!.!...!.!!...!...! 1.8$ Weekly Meetings....... ! !!.. .!... 30.2$ Bi-Monthly Meetings. 2.8$ Monthly 8.4$ Informal Meetings. ! . 33.0$ No Meetings................!................ !. 23.8$ Total - 100.0$ * This table i s based on 152 r e p l i e s . There i s a s i g n i f i c a n t r e l a t i o n between the size of the fi r m and the frequency of the sales meetings. 93«i|$ of the firms employing over 10 salesmen hold t h e i r sales meeting d a i l y , weekly or bi-monthly! In contrast only 23.5$ of the firms employing 10 or less salesmen hold weekly or b i -monthly meetings. The firms which hold informal sales meetings or do not hold sales meetings a l l employed 1 - 5 salesmen. There i s no si g n i f i c a n t r e l a t i o n between the frequency of sales meetings and the I963 earnings of the salesmen f o r any given firm! This does not indicate that sales meetings do not affect income! U n t i l accurate information concerning the content of the sales meetings i s available, i t i s not possible to determine i f sales meetings are useful i n increasing sales! - I l l -H. P o l i c y Manuals. Poli c y manuals, although they are not normally considered as a t r a i n i n g device, can be a very useful a i d t o the salesmen! The manual i s a re a d i l y available source of information f o r salesmen. 6ofo of the firms reported they had a written p o l i c y manual available f o r use by t h e i r s t a f f ! There i s a s i g n i f i c a n t r e l a t i o n between the firms which have a written p o l i c y manual available and the 19&3 income of the salesmen f o r these firms! I t seems highly u n l i k e l y that the mere existance of a p o l i c y manual would affect the earnings of the salesmen. What i s more l i k e l y to be the case i s that the existance of a written p o l i c y manual i s a v i s i b l e r e f l e c t i o n of the q u a l i t y of the management within the firm. This does not mean that a l l firms which do not have a p o l i c y manual are poorly managed. I t simply suggests that since there i s a s i g n i f i c a n t relationship between earnings and the existence of a written p o l i c y , the most plausible explanation i s that the majority of the firms with a written p o l i c y manual are better managed than the majority of the firms without a written p o l i c y manual. The significance of t h i s conclusion can be ea s i l y over-rated! I . Other Training Devices. There has been a number of attempts made throughout the Province of B r i t i s h Columbia to hold special meetings and seminars f o r the r e a l estate agents and salesmen! The purpose of these seminars i s to review topics of immediate interest to the r e a l estate business! Although there i s no means of measuring the effectiveness of these seminars, they have proven very popular with the participants. I n f a c t , ors r e a l estate board, the Okanagan-Mainline Real Estate Board, i s now holding annual seminars f o r the member agents and salesmen. The in t e r e s t shown by the r e a l estate, boards i n B r i t i s h Columbia i n the seminars i s a p o s i t i v e step toi-rards better t r a i n i n g f o r the agents and salesmen. - 112 -J . Summary of Training i n the Real Estate Business* Although the current sales t r a i n i n g programmes and supplementary t r a i n i n g devices used by the r e a l estate firms are not adequate, there i s evidence that the firms are begining to improve t h i s situation. At present there i s some disagreement as to the best solutions, however, the members of the r e a l estate business are much more conscious of the need for more t r a i n i n g and a general upgrading of the standard of performance. Now that the members of the business are more conscious of the immediate need f o r improvements, i t seems l i k e l y that progress w i l l be made i n t h i s area! However, one of the major problems, the need f o r better sales t r a i n i n g , cannot be e n t i r e l y solved by additional seminars or courses. Each i n d i v i d -ual firm must take a responsible attitude for the t r a i n i n g of t h e i r own salesmen! CHAPTER VTI COMPENSATION PLANS One of management's major tasks.is to encourage salesmen to serve the company's goals. An employee w i l l behave so as to maximize the company goals only i f he has been properly motivated. This then i s the straight-forward p r i n c i p l e guiding the development of compensation plans. However, developing a compensation plan i s not an easy matter. Salesman's compensation i s one of the most fundamental and important aspects of managing salesmen, yet i t remains probably the most complex and misunderstood. There i s no perfect plan, no single system that i s right f o r everyone, or even f o r a l l companies i n any given industry at any given time.l A. Salesman's Compensation Plans. Compensation plans are generally described i n terms of monetary rewards since f i n a n c i a l incentives are such an important consideration. The main f i n a n c i a l incentives are salaries and/or commissions, however, there are other f i n a n c i a l incentives. Fringe benefits such as medical plans or group insurance form a v i t a l supplement to the main f i n a n c i a l considerations. Sales contests are another important feature i n many ov e r a l l compensation plans. But an impression that f i n a n c i a l considerations constitute the only means of motivating salesmen i s erroneous. Non-financial considerations such as recognition, status and group acceptance are also very important. 1 W.C. Caswell, "New Ways to Pay Salesmen", Sales Management, March 15, 1963, p. 17. - 114 -In order to design an effective compensation plan, i t i s f i r s t necessary to have a clear understanding of the objectives of the plan. From the salesman's point of view a compensation plan should provide: 1. Income and security - compensations should be neither excessive nor at a starvation l e v e l . 2. Incentive - a good compensation plan should induce e f f o r t s consistent with the company's objectives. 3. F l e x i b i l i t y - a compensation plan should operate s a t i s f a c t o r l y from the firm's and the salesman's point of view during periods of fluctuations i n business conditions. In addition the company's position should be analyzed i n three main parts. 1. The supply of salesmen. What kind of salesmen are available? I t i s wasteful to o f f e r a plan designed to attract and hold men which are not available. 2. The service offered - the compensation plan must encourage salesmen to offer the most satisfactory service. 3. The competitive si t u a t i o n - a compensation plan must be com-p e t i t i v e i f the firm hopes to attract and hold good salesmen. The objectives of the compensation plan must be c l e a r l y defined. I s i t sales p r o f i t or q u a l i t y of service that the plan i s designed to accomplish? To what extent? Some of the more important variables to be considered i n making the decisions are: 1. To increase t o t a l sales volume. 2. To increase p r o f i t s . 3. To increase sales volume i n s p e c i f i c areas i e . r e s i d e n t i a l , • • commercial. - 115 -4. To increase sales t o a p a r t i c u l a r type of customer. 5. To gain new c l i e n t s . 6 . To develop goodwill. 7. To obtain more l i s t i n g s of a p a r t i c u l a r type, i e . high or low priced r e s i d e n t i a l property or i n d u s t r i a l property. 8 . To reduce expenses. The majority of the compensation plans combine r e l a t i v e l y few f i n -a n c i a l elements. Depending upon the res u l t s desired, d i f f e r e n t combinations of these elements w i l l be used to maximize r e s u l t s . I n some cases there may be c o n f l i c t i n g objectives. For example an attempt to increase sales volume and at the same time reduce expenses maybe c o n f l i c t i n g objectives. In these cases a compensation plan must attempt to motivate salesmen to achieve both objectives, i n order of importance. Elements which may be included i n a compensation plan are: 1. Salary 2. Commission 3. Drawing account 4. Bonus 5. Expense account 6 . Fringe benefits such as group insurance, medical and pension Mr. H.R. Tosdal completed a very thorough study of compensation plans. o His study examined the variety of compensation plans used i n business. 2 H.R. Tosdal, Salesmen 1s Compensation, Harvard University Press, Volume 1, 1953, p. 309. - 116 -The survey, completed i n 1950, showed that 20$ of the firms used straight salary, 24$ used straight commission and 56$ used a combination of salary and commission. In a more recent survey conducted by Sales Management-^ i t was found that 30$ of the firms used straight salary, 14$ used straight commission and 56$ used a combination of the two. This indicates a strong trend away from the straight commission plan. In the r e a l estate business the majority of the firms used a straight commission plan rather than a salary or combined plan. TABLE XIX COMPENSATION PLANS FOR SALESMEN* Type of Compensation Plan $ of the' Firms 50$ - 50$ Commission only 5.3$ 60$ - 40$ Commission only 55.3$ 60$ - 40$ Commission and Drawing Account.. • 18.5$ Commission plus P r o f i t Sharing or Bonus 3*9$ Commission plus minimum salary.. 0$ Commission with a Rising Scale 9.2$ Commission with a Rising Scale plus Drawing Account 7.2$ Commission Varying with Length of Service... .6$ Total - 100.0$ * This table i s based on 152 r e p l i e s . 3 "How Salesmen are Paid" Sales Management, Part 1, January 19, 1962, p. 9. - 11? -I t i s i n t e r e s t i n g to note that no firms are presently using a salary plan f o r t h e i r salesmen. Several firms indicated that they had offered t h e i r salesmen a salary, however, the salesmen turned i t down. The high income salesmen had no need f o r the salary and the low income salesmen were af r a i d they would lose t h e i r job. There are a few licensed salesmen receiving a salary, however, they are not primarily involved i n s e l l i n g r e a l estate. The majority of the licensees on salary are o f f i c e managers. The majority of the salesmen, 77.6$ are on a straight commission plan of some type. Another 18.5$ of the salesmen receive straight commission with a refundable drawing account. Only 3«9$ of the firms use a p r o f i t sharing or bonus incentive f o r t h e i r salesmen. The most common commission plan i s a straight 60$ - 40$ s p l i t with the firm getting 40$ of the gross commission. The salesman must cover in c i d e n t a l expenses from h i s portion. The firms usually pay part or a l l of the advertising expense. 5*3$ of the firms use a 50$ - 50$ commission s p l i t , however, most firms cannot hold t h e i r good salesmen unless they are paying competitive rates, normally 60$ -40$ s p l i t . I t i s necessary to bear i n mind the by-law provisions of the Vancouver Real Estate Board. Aside from the standard rate of fees set out i n the by-laws, the Board has also set a maximum commission s p l i t between 4 salesmen and the firm. At present the maximum percentage payable to the salesmen i s 60$. This could only be changed by a proper ammendment to the by-law. 16.4$ of the firms use a r i s i n g scale of commission s p l i t . This i s related to the volume of sales produced by the i n d i v i d u a l salesmen. The 4 Vancouver Real Estate Board, Vancouver Real Estate Board Constitution and  By-Laws, November 1962 (Amended). - 1 1 8 -p r i n c i p l e followed by these firms i s that as a saleman produces gross commissions i n excess of a predetermined break-even point, the marginal expenses are very much lower than they would be on sales volumes lower than the break-even point. The r i s i n g scale used i s r e a l l y very l i m i t e d . 50$ - 50$ s p l i t of gross commission up to $5,000.00 gross commission per annum. 55$ - 45$ s p l i t on gross commissions from $5,000.00 -.$8,000.00 per annum. (Firm receives 45$) 60$ - 40$ s p l i t on gross commissions i n excess of $8,000.00 per annum. (Firm receives 4 0 $ ) The r i s i n g scale of commission i s an extremely useful method of compensation. I t i s a reasonable plan since expenses are not generally d i r e c t l y related to sales volume. Once a salesman has contributed h i s share towards covering the fi x e d expenses, he should only be obliged to cover variable expenses. In addition, the s l i d i n g scale of commission provides a powerful incentive f o r the salesman! At present the salesman receives a maximum commission of 60 cents on the d o l l a r of gross commission earned. I f the salesmen were permited to receive 75$ or 85$ of the gross commission, af t e r a certain sales volume had been reached, the incentive may result i n improved sales performance. At present there are a number of obstacles preventing the use of a r i s i n g scale of commission. The Vancouver Real Estate Board has set a maximum commission s p l i t of 60$ - 40$, with 60$ to the salesman."' Another obstacle i s the pre-occupation of a number of the Board members with the idea of implementing a rrdnimum salary f o r a l l salesmen. However, even i f a 5 I b i d , Amendments To: The Vancouver Real Estate Board Constitution. - 119 -minimum salary was implemented, i t i s s t i l l possible and may be desirable to use a r i s i n g scale of commission over and above the minimum salary. Another obstacle concerning the r i s i n g scale of commission i s the fear that many of the salesmen w i l l not work on such a plan. This i s unfounded since the good salesmen w i l l earn more, the average5salesman w i l l remain about the same and the poor salesmen w i l l earn l e s s ! Therefore the salesmen who are apt to d i s l i k e the r i s i n g scale are the poor salesmen. These•are the very salesmen who w i l l l i k e l y be out of a job i f a minimum salary i s introduced. This should not be a great loss t o the business since the low income salesmen are not paying t h e i r way at present. TABLE XX GROSS EARNINGS OF SALESMEN (1963) AS REPORTED BY: Earnings Salesmen--* F i r m 2 V.R.E.B. $ of the Salesmen $2999.00 18.7$ 31.9$ 28.2$ 3000 - 3999 10.6$ :;>i§.4$ 14.7$ 4000 - 4999; 11.6$ 12.4$ 13.0$ 5000 - 5999. 12.8$ 10.8$ 13.0$ 6000 - 6 9 9 9 . . . 10.0$ 7.6$ 6.7$ 7000 - 7999 i 10.6$ 7.5$ 6.5$ 8000 - 9999 12.8$ 6.2$ 10.6$ 10,000 +.... ...... 12.9$ 6.2$ 10.6$ Total - 100.0$ 100.0$ 100.0$ 1 Survey completed by the Vancouver Real Estate Board. 2 152 r e p l i e s covering 889 salesmen. 3 415 r e p l i e s . - 120 -I t i s apparent from Table M that the low income salesmen did not complete the questionnaire. Due to t h i s lack of response, the results reported by the firms w i l l be used. This should provide much more accurate data. The average income f o r a l l salemen, as reported by the firms, was $4,981.00 i n 1963. 31.9$ of the salesmen earned l e s s than $ 3 , 0 0 0 i 0 0 and only 31*5$ of the salesmen earned i n excess of $ 6 , 0 0 0 i 0 0 . This means that approximately one-third of the salesmen returned l e s s than $2,000.00 per man to the firm i n 1963. (Assuming a 60$ - 40$ s p l i t ) . Since the average salesman's share of the expenses i s about $250.00 per month, the firm i s u not recovering expenses from these salesmen. This means that the high income salesmen are "carrying" the low income producers. Chart i'V, page 121 i s a more useful device f o r examining the income d i s t r i b u t i o n of the salesmen. The horizontal axis i s a cumulative per-centage of the number of salesmen. The v e r t i c a l axis i s a cumulative percentage of the t o t a l earnings of the salesmen starting at the lowest income group. The do*, curve, drawn at a 45 degree angle to the axis, charts the percentage of d o l l a r sales f o r a given percentage of salesmen i f a l l salesmen earn an equal commission. The black curve, the actual curve of the salesmen's earnings per given percentage of the salesmen, indicates the percentage of t o t a l d o l l a r earnings of the business earned by a given cumulative percentage of the salesmen. From t h i s chart i t becomes apparent that: 6 The firms interviewed indicated that the cost of employing a salesman was somewhere between $200 per month and $350 per month. These figures are only estimates since the firms do not appear to allocate t h e i r expenses per man. Included i n these figures, i s the salesman's share of the rent, o f f i c e s t a f f , supplies, advertising, sales management and i n c i d e n t a l expenses! This does not include the firms p r o f i t . -121- HART ; i. ... t_; 10% ; ;20% 30% ! ;40% 50% 60% :M7/0%'| 80% . 9.0% .; ,'100% . - . ' . L.I . . L L I ,.. , I i i 1 i j I. 1 i l i ' i i • i j : i | j • • 1 ; . , . , . . . . . , ..• . : : ; • , . ' ( C u m u l a t i v e P e r c e n t o f T o t a l S a l e s m e n ! i i L I -J -J - .1-' ! : ; i i i - 1 i i nil. i .'. . 1 l . i . l > t- I ...j ; i-j. L . i • • . I. I I . . . ' - r r l - T - 1 - 1 --I .1.4. E U G E N S | > U I ! . : t' i "f TT i" :.i:|;.iJ±H ;:i:J:LitJ:l:!:J:i;H-r • • • ! ' J > '• i' i - ' i T r r J . J . . L 1 t_t I ' t i M l-i'-i J. : M ... i !. , , : ! .;. i J . . . . - , -I 1-4 .j ! T ' ' ). t i c f l CO. NO T, • - 122 -1. The bottom 10.0$ of the salesmen earned only 2.75$ of t o t a l earnings i n 1963• 2. The bottom 25.0$ of the salesmen earned only 9.5$ of the t o t a l earnings i n 1963. 3. The bottom 50.0$ of the salesmen earned only 26.0$ of the t o t a l earnings i n I963. 4. The top 10.0$ of the salesmen earned 20i0$ of the t o t a l earnings i n 1963. 5. The top 25.0$ of the salesmen earned 5^ .5$ of the t o t a l earnings i n 1963. The question now becomes - what s h a l l be done about the low income producers. Why do firms maintain salesmen who are not paying for t h e i r share of the expenses? There are a number of reasons offered by the firms. The two most common were: (1) "Although the low income producers do not cover t h e i r f u l l share of the expenses, they do contribute something towards the f i x e d expenses". This may be true. However, i f the lower income producers were f i r e d , the firm may be able to reduce t h e i r f i x e d expenses by eliminating some telephones, moving to smaller premises, reducing sales management and reducing o f f i c e expenses. (2) "The low income producers attract business to the better sales-men". This i s not a v a l i d argument since i t presupposes that the good salesmen would not earn as much income i f the poor salesmen were f i r e d as he presently earns. I t seems more reason-able to suppose the good salesmen would earn more i f the poor salesmen forced out of the business. There would be fewer - 1 2 3 -salesmen to service the same area. I f the firms want to keep the low income producers employed, they should devise a compensation plan which w i l l ensure that the top salesmen w i l l not be responsible f o r more than t h e i r share of the fix e d expenses. I f , on the other hand, the firms are sincere i n t h e i r desire to eliminate the low income producers, a compensation plan can be designed to achieve t h i s end. At the same time the plan could provide added inducesment to the good salesmen. A sharply r i s i n g scale of commission i n favor of the salesman would serve two important purposes f o r the r e a l estate business. F i r s t l y , i t would provide a strong incentive f o r the good salesman. Secondly, i f properly designed, i t would help the fi r m recover t h e i r f i x e d expenses from the poor salesmen. A commission plan allowing a salesman a low per-centage of the f i r s t $ 2 , 0 0 0 of gross commission and an increasingly higher percentage of the gross commission as sales increase. For example: F i r s t $ 2 , 0 0 0 gross commission the salesman earns 3 5 $ = $ 7 0 0 . Next $ 1 , 5 0 0 gross commission the salesman earns 5 0 $ = $ 7 5 0 . Next $ 1 , 5 0 0 gross commission the salesman earns 6 0 $ = $ 9 0 0 . Next $ 1 , 5 0 0 gross commission the salesman earns 7 0 $ = $ 1 , 0 5 0 . Balance over $ 6 , 5 0 0 gross commission the salesman earns 8 0 $ . Thus a:salesman earning $ 8 , 0 0 0 gross commission would receive $4,600 where he formally received $4,800 on a 6 0 $ - 40$ s p l i t ! A salesman earning $ 1 0 , 0 0 0 gross commission would receive $ 6 , 2 0 0 instead of $ 6 , 0 0 0 . A sales-man earning $ 5 , 0 0 0 gross commission would receive $ 2 , 3 5 0 instead of $ 3 , 0 0 0 . A salesman earning a gross commission of $ 1 5 , 0 0 0 would earn $ 1 0 , 2 0 0 instead of $ 9 , 0 0 0 . - 124 -Such a compensation plan could be introduced and used with a minimum salary or guaranteed drawing account. Without a minimum salary some of the salesmen would l i k e l y be forced out of the business! The one-third of the salesmen earning l e s s than $35000 at present would l i k e l y leave the business. Under the proposed commission plan, a man earning $3,000 at present would only earn $2,350. The loss of the $650 would l i k e l y force them out of the business. These same salesmen w i l l l i k e l y be f i r e d i f a minimum salary or guaranteed drawing account i s introduced. B. Other Salesman's Benefits. 1. Drawing Accounts. The use of drawing accounts i s not widespread i n the r e a l estate business. Because of the uncertainty of recovering the money, firms seldom permit drawing accounts. Only 25.7$ of the firms indicated that drawing accounts were used regularly. In most cases, the drawing accounts served to " t i d e the salesman over" u n t i l another trans-action was completed; 2. Bonus and P r o f i t Sharing! Only 3!9$ of the firms reported the use of a bonus or p r o f i t sharing plan. The bonus plan was generally a fi x e d sum of money available to the salesmen earning a gross commission i n excess of some pre-determined amount. P r o f i t sharing plans were based on a salesman reaching a quota, then receiving an additional bonus. In both cases the purpose was to provide additional incentive f o r the saleanan without actually increasing the salesman's s p l i t of the gross commission to over 60$. The bonus or p r o f i t sharing schemes permit the firms to give the salesman i n excess of 60$ of the gross commission without breaking the regulations of the Vancouver Real Estate Board. 3. Other Fringe Benefits. Other fringe benefits such as medical, insurance and pension plans have not become too popular i n the r e a l estate - 125 -business. 37.^$ of the firms do not offer any of the three mentioned benefits. 58.7$ of the firms offer a group medical plan to the salesmen and 20.2$ of these firms also offer group l i f e insurance. However, only 3«3$ °f the firms have a group pension plan. The high turnover i n manpower i s one of the major problems preventing a widespread use of pension plans, l i f e insurance plans and group medical insurance. 4. Sales Contests. TABLE XXI FREQUENCY OF SALES CONTESTS Frequency Monthly Every Every No of contests. 3 months 6 months Yearly Contests $ of the Firms using contests 7.2$ 6.5$ 6.5$ 2.2$ 77.6$ Sales contests would not appear to be an important feature i n the r e a l estate business. Only 22.4$ of the firms reported they used sales contests. The prizes offered i n the contest varied considerably depending on the frequency of the contests. The largest prize was a t r i p for two to Hawaii, however, the majority of the prizes had a cash value between $25 and $100. An attempt was made to determine the r e l a t i o n between the use of sales contests and the income of the salesmen working with the firms. I t was found that there was no s i g n i f i c a n t r e l a t i o n between the use of sales contests and the earnings of the salesmen i n each firm. A more complete study of the value of sales contests i n the r e a l estate business was conducted by the Westminister County Real Estate - 126 -Board. 7 The findings of t h i s survey may be summarized as follows: 1. 88$ of the Real Estate Boards used sales contests at some time i n the previous year. (1962) 2. After the sales contest 30$ of "the Boards reported sales dropped to precontest l e v e l s , 5$ reported sales dropped below pre-contest l e v e l , 20$ reported sales remained over the pre-contest l e v e l and 45$ reported sales remained at the l e v e l attained during the contest. 3. 55$ of the Boards surveyed f e l t that sales contests were success-f u l i n stimulating sales. 4. 95$ of the Boards surveyed achieved either a temporary or permanent sales increase although, only 65$ reported higher sales during the contest; The r e s u l t s of the Westminister survey indicated more successful results from sales contests than do the r e s u l t s of the firm's survey. Generally speaking, most firms included i n the Vancouver survey f e l t that sales contests were not a useful device f o r stimulating o v e r a l l sales and service. C. Advertising Allowances. Advertising allotments are not generally considered to be part of the compensation plan of a firm. However, advertising i n the r e a l estate business i s a major item, both to the firm and to the salesmen. Therefore, i t i s f e l t that advertising should be considered along with compensation i f not as part of compensation. 7 Westminister County Real Estate Board -. A .Study of Multiple L i s t i n g Sales  Competitions Used by Canadian Real Estate Boards. 1963, Westminister County Real Estate Board. -. 127 -I t has long been considered that allotments f o r advertising expenses are a v i t a l factor affecting sales and gross commissions. Most salesmen f e e l that sales are d i r e c t l y related to advertising budgets. I t i s the practice i n the r e a l estate business f o r the firms to allow a specified percentage of gross commissions to be allocated to each salesman for advertising. This normally constitutes the major expense f o r most r e a l estate firms. In the survey there were only three firms which d i d not pay a l l adver-t i s i n g expenses up to a specified l i m i t . TABLE XXII PERCENTAGE OF GROSS COMMISSIONS ALLOCATED . FOR ADVERTISING. EXPENSES* . . . $ of Gross commission $ of Firms i n each spent on advertising advertising group 5$ 10.7$ 6$ 1.7$ 7$ 20.5$ 8$ 14.2$ 10$ 35.7$ 12$ 6.2$ 14$ 6.2$ 16$ 2.7$ Over 16$ 2.1$ 100.0$ * This table i s based on 149 r e p l i e s . 70.4$ of the firms spent between 7$ and 10$ of each salesman's gross commission on advertising. Only 17.2$ of the firms reported they spent over 10$. A l l the firms determine the amount to be spent on advertising as a percentage of gross commissions earned. I f a salesman does not earn s u f f i c i e n t gross commission at any one time his advertising allotment may be depleted very rapidly. - 128 -As an i n d i c a t i o n of the importance placed on advertising allowances, several firms indicate the arrangements f o r advertising i n t h e i r salesman's contract. By f a r the greatest majority of r e a l estate advertising i s done i n the c l a s s i f i e d advertisement section of the l o c a l newspaper. There i s very l i t t l e t e l e v i s i o n or radio advertising and seldom any advertising outside the metropolitan area. I t i s surprising to note that there i s not s i g n i f i c a n t r e l a t i o n be-tween the amounts spent on advertising by the firms and the earnings of the salesmen of each firm i n 1963. This i s somewhat unexpected since most r e a l estate salesmen and agents place so much emphasis on the value of advertising. There are a number of explanations for the apparent i n e f f e c t -iveness of advertising. 1. Advertising i s not as useful i n the r e a l estate business as i t i s i n other businesses. 2. C l a s s i f i e d advertising i s not the best form of advertising f o r the r e a l estate business. 3. Advertisements are poorly designed and poorly timed. 4. The salesmen are not making themselves available to maximize the benefits of advertising! 5. The firms have not s t r i c t l y controlled t h e i r advertising expenses. Therefore the r e s u l t s of the survey are inconclusive. I t i s d i f f i c u l t to pin-point the major reason for the ineffectiveness of advertising, perhaps i t i s a combination of a l l fiars reasons. However, some agents di d state that many of t h e i r salesmen would run advertisements and then f a i l to be available to handle i n q u i r i e s r e s u l t i n g from the advertisements. D. Compensation Plans f o r Sales Managers. - 129 -TABLE XXIII COMPENSATION PLANS FOR SALES MANAGERS* 1. 2. 3. 5. 6. 7. Override plus commission on t h e i r sales. Override but no personal sales Salary and override and p r o f i t sharing.. Override and p r o f i t sharing Override and car allowance.... Salary, override and car allowance...... Salary and p r o f i t sharing 15.1$ 36.8$ 11.5$ 21.0$ 5.2$ 5.2$ -5*4 Total - 100.0$ * Table based on 20 r e p l i e s . Compensation of sales managers i s a very complicated matter. To begin with, the managers must be motivated to perform the tasks expected of them. I f the sales managers are expected to as s i s t the salesmen i n the f i e l d , i t i s necessary to design a plan which w i l l insure that they do so. I f the sales manager i s expected to perform other functions not d i r e c t l y related t o the f i e l d work, they must be compensated accordingly. In order to insure that sales managers do not spend a l l t h e i r time with the good salesmen, i t may be necessary to guarantee a basic salary. The majority of the firms have seen f i t to prohibit t h e i r sales managers from completing sales on t h e i r own. Only 15.1$ of the managers are permitted to handle sales on t h e i r own. This eliminates an immediate c o n f l i c t of i n t e r e s t . I f sales managers are allowed to handle sales on t h e i r own i t i s quite possible that they would not spend s u f f i c i e n t time working with and managing the salesmen under them. Sales managers should devote t h e i r time to the management of the sales s t a f f . There i s a variety of compensation plans used to reward sales managers! The majority of the plans 9^.8$ include an override on the gross commissions - 130 -of the salesmen. Thus the manager's income i s , to some degree, attached to the resu l t s achieved by the salesmen he supervises. 21.9$ of the plans include a minimum salary to encourage the manager to perform tasks he may otherwise ignore. P r o f i t sharing of some nature i s used i n 37*7$ of the plans. The firms were somewhat reluctant to disclose the de t a i l s of t h e i r p r o f i t sharing plans! Expense and allowances and car allowance are not a major feature i n the sales manager's compensation plans. Only 10.4$ of the firms have expense or car allowances f o r t h e i r managers. One serious problem arises when the sales managers are not permitted to handle transactions on t h e i r own. Unless the manager receives a substantial salary, t h e i r t o t a l income i s apt to be much l e s s than the income of some of the salesmen. This i s not a problem unique to the r e a l estate business. L i f e Insurance companies have, f o r many years, been faced with exactly the same problem. The normal override t o the sales manager i s 10$ of the gross commissions earned by salesmen working with the manager. I f the manager had 10 salesmen, grossing a t o t a l of $122,000.00 i n commissions! the manager would receive $12,200.00 override. However, one or more of the salesmen w i l l earn i n excess of $12,000.00. Example 1. (Above average sales) 3 salesmen x 6,000 = 18,000 10$ of = 1,800 2 salesmen x 8,000 = 16,000 10$ of = 1,600 2 salesmen x 9,000 = 18,000 10$ of = 1J800 1 salesman x 10,000 = 10,000 10$ of =1,000 2 salesmen x 30,000 - 60,000 10$ of = 6,000 Total override - $12,000 Example 2. (Average f o r the Industry) 3 salesmen x 4,100 = 12,300 10$ of = 1,230 1 salesman x 5,800 = 5,800 10$ of = 580 1 salesman x 7,500 = 7,500 10$ of = 750 1 salesman x 9,100 = 9,100 10$ of = 910 2 salesmen x 12,500 = 25,000 10$ of = 2,50.0 2 salesmen x 25,000 = 50,000 10$ of =5,000 Total override - $10,970 - 131 -In both examples there were salesmen earning more than the sales manager. This problem, i f indeed i t i s a problem, may be overcome i n several ways. The firm could either include a salary or other monetary return which would increase the sales manager's income or the firm could also o f f e r some non-monetary benefits ( i e . prestige, holidays) to compensate fo r the difference i n income. On the other hand, t h i s difference i n income between the better salesmen and the sales managers may not be a serious problem. There i s no reason to suppose that the sales manager could have been one of the top producing salesmen i f he had chosen to s e l l rather than manage. A l l sales managers are not necessarily top salesmen, conversly a l l top salesmen are not necessarily good managers. Therefore, i t i s very possible that the sales manager i s s a t i s f i e d with h i s l e v e l of income. CHAPTER VIII THE REAL ESTATE SALESMAN After examining the salesman's q u a l i f i c a t i o n s required by the firms and the management practices of the firms, i t seems desirable to examine the type of persons who have been attracted to the r e a l estate business. A. Number of Licensees i n Greater Vancouver. TABLE XXIV NUMBER OF LICENSEES IN B.C....AS .OF JUNE 1964 Male Female Total 36 1 4S8 Salesmen: 170 918 ... 96 27 123 42 90 J l _25_ Total Salesmen - 962 264 1226 Total Agents and Salesmen - 1424 290 1 7 l 4 B Total Agents and Salesmen f o r B r i t i s h Columbia - 3048 a Vancouver includes the licensees from Richmond, Surrey, Port Coquitlam and Ladner which are members of the Vancouver Real Estate Board, b This t o t a l includes only members of the Vancouver Real Estate Board! There were a t o t a l of 1226 salesmen and 433 agents working on the Greater Vancouver area, excluding New Westminster as of June 30, 1964! - 133 -In a l l , 55$ of the licensees i n B r i t i s h Columbia are operating i n t h i s area. Ba"sed on a population of 650,000, t h i s i s an average of one r e a l estate salesman for every 530 residents. Comparing t h i s with the results of a survey completed i n early 1964, Vancouver has the t h i r d highest r a t i o of r e a l estate salesmen to population.-'- I t i s i n t e r e s t i n g to note that Vancouver also had the fourth lowest d o l l a r sales per man f o r January to March 1964. B. Importance of Women i n the Real Estate Business* The r e a l estate business i s one i n which women can do w e l l . The minimum education requirements and the a b i l i t y to work t h e i r own hours makes t h i s business a t t r a c t i v e to women. Women are able to keep t h e i r household duties up and s t i l l f i n d some time to s e l l r e a l estate. In the study area, 16.9$ of the sales s t a f f were female. Although some firms w i l l not hire female sales s t a f f , most firms f e l t they were quite acceptable. The most common complaint concerned the amount of time spent at work by the women. I f the saleslady was married, s e l l i n g r e a l estate was generally of secondary importance. When time permitted the women would work. I t i s f o r t h i s reason that some firms specify that salesladies must be s e l f supporting. I t i s also noted the majority of women specialize i n r e s i d e n t i a l property sales. Very few women become involved i n commercial or industry property sales. C. M a r i t a l Status of Real Estate Salesmen. As seen i n tableXXV, there i s a smaller percentage of married women than married men. This i s t o be expected since a number of firms w i l l only 1 The Canadian Realtor, May 1964, p. 11. - 134 -TABLE XXV MARITAL STATUS OF REAL ESTATE SALESMEN IN GREATER VANCOUVER* Ma r i t a l Status Total -* This table i s based on 415 r e p l i e s . Male ]y Female 65.5$ 4.1$ . 1.4$ 17.-3$ . 5.3$ 3.6$ ?.5$ 100.0$ 100.0$ employ self-supporting females and most firms prefer married men i f at a l l possible. There i s no s i g n i f i c a n t r e l a t i o n between the m a r i t a l status of men and t h e i r income. However, there i s s i g n i f i c a n t r e l a t i o n between the marital status of females and t h e i r incomes. The married women do not generally eai;n as much as the self-supporting women. Presumably the self-supporting women devote more time to the job because they need the money. D. Age D i s t r i b u t i o n of Licensees! There i s a s i g n i f i c a n t difference i n the age d i s t r i b u t i o n of male and female sales personnel! The salesladies are concentrated i n the age group 25 - 54 with very few younger women entering the business. The men, on the other hand, are scattered i n a l l age groups! The one encouraging point i s that 13.9$ of men were under t h i r t y - f o u r years of age! However, t h i s i s -offset by the high percentage of men i n the 55 and over age bracket. - 135 -TABLE XXVI AGE DISTRIBUTION OF LICENSEE SALESMEN BY SEX* Age Male Female No answer... 1 . . . . . . . . . 5-3$ 13.5$ Under 24 y e a r s . . . l i 118$ 1.4$ 25 - 29 years 5.9$ .0$ 30 - 34 years 6.2$ 2.7$ 35 - 39 years........ ...14.1$ . 13.5$ 4 0 - 4 4 years. 14.1$ 16.2$ 45 - 49 years . . . . . . 1 . . . 15.2$ 16.2$ 50 - 54 y e a r s i . l . . . . . . . . . 12.9$ 211-6$ 55 - 59 years. .12.9$ 3.1$ 60 and over. 1........11.6$ 6.8$ Total - 10010$ 10010$ This table i s based on 415 r e p l i e s l I f the 34.6$ of the males over 55 bad been i n the r e a l estate business f o r a long period of time, t h i s high percentage would not be too alarmingl Unfortunately many of these men were hired i n t h e i r l a t e f o r t i e s and early f i f t i e s . I t would seem that the r e a l estate business must attempt to attract and hold a higher percentage of younger men and women, especially under 35 years of age. I f younger salesmen can be attracted to the business i t may be possible to upgrade the services offered. Since experience i n the r e a l estate business seems to be an important factor influencing earning power, - 1 3 6 -the younger men and women would be available f o r a longer period of time after they have gained the necessary experience. Younger men and women would also view the r e a l estate business as a l i f e t i m e career rather than a temporary ( f i v e - ten years) job. Also i t i s easier to t r a i n younger men and women who have had work experience elsewhere! An attempt was made to determine i f there was any r e l a t i o n between income and age. I n the case of male and female sales personnel, i t was found that there i s no sig n i f i c a n t r e l a t i o n between the age of the sales person and t h e i r income f o r 1 9 6 3 . This would refute the common b e l i e f that men under 3 5 years of age cannot be successful i n the r e a l estate business. E. Educational Background of the Salesmen. TABLE XXVII EDUCATIONAL BACKGROUND OF. SALESMEN* . . Education Total -* This table i s based on 4 1 5 r e p l i e s . Male Female 4 4 . 4 $ .131.6$ 3 0 . 0 $ 12.8$ 12.8$ 1 0 0 . 0 $ 1 0 0 . 0 $ The high proportion of licensees with junior or senior matriculation r e f l e c t s the age of the licensees and the type of business! The r e a l estate business has not been successful i n attracting the young uni v e r s i t y graduate since i t i s very d i f f i c u l t to attract university graduates unless they can be guaranteed a salary plus an opportunity to advance i n the business. - 137 -There seems to be no si g n i f i c a n t r e l a t i o n between the salesmen's earnings f o r I963 and the formal education of the salesman. This does not necessarily mean that education i s not an important factor. There are four possible explanations f o r the i n s i g n i f i c a n t relationship. ( i ) The bias of the sample has lead to a d i s t o r t i o n . The low income group which d i d not complete the questionnaire may account for the i n s i g n i f i c a n t r e l a t i o n s h i p , ( i i ) The better educated men and women may be promoted to management or may be preparing f o r a promotion to management, ( i i i ) Since the average salesman has been out of school f o r f i f t e e n -twenty-five years, t h e i r formal education has been supplemented by experience. ( i v ) General education (High School or University) i s not an important factor. Specific education or knowledge concerning the r e a l estate business may be of greator importance. Since a l l sales-men take the pre-licensing course, they a l l start out at the same sp e c i f i c education l e v e l * F. Work Experience of Sales Personnel. About one-third of the salesmen have previous s e l l i n g experience before entering the r e a l estate business. Only 13$ of the- salesladies had previous s e l l i n g experience before starting i n the r e a l estate business. There i s no i n d i c a t i o n that previous s e l l i n g experience leads to higher earnings. This i s probably due to the fact that the r e a l estate business i s so di f f e r e n t from other types of s e l l i n g . G. Length of Service i n Real Estate. - 138 -TABLE XXVIII NUMBER OF YEARS EXPERIENCE IN THE REAL ESTATE BUSINESS (SALESMEN) Male*3 Female^ Total Total Number of Years Experience Vancouver3- B.C. a 17.0$ 14.7$ 15.5$ 14.9$ 8.3$ 10.3$ 2.7$ 5.1$ 6.2$ ..... 4.4$ 5.4$ 15.0$ 15.5$ 7.6$ 8.1$ - -8.1$ 18.0$ 17.8$ 21.6$ 1915$ 17.3$ .....25.2$ 21.0$ 1?.4$ 17.4$ Total - 100.0$ 100.0$ 100.0$ 100.0$ a Source - Real Estate Council Statistics, I963. B This table i s based on 415 replies. The information, regarding length of service in real estate, which was obtained from the salesmen's questionnaires compared favorably with the information collected by the Real Estate Council. It i s encouraging to find such a high proportion of the sales per-sonnel have been regularly employed for over 5 years. 54$ of the males and 51.3$ of the females have over five years service. It would appear from Table XXVIII that the drop-out factor i s drastically reduced once a person i s employed over four years. It i s interesting to note that there i s no significant relation between the length of service in real estate and the I963 income for females. - 139 -However, f o r males there i s a very s i g n i f i c a n t r e l a t i o n ! Based on the information available, the r e l a t i o n between 1963 income and years of service f o r males to si g n i f i c a n t at the 99*9$ l e v e l . There i s only one chance i n one thousand that t h i s r e l a t i o n i s random. The longer a man has been i n the r e a l estate business, the more l i k e l y he i s to earn a high income. This does not seem t o hold for women. I t i s also evident that the longer men work i n the r e a l estate business, the more apt they are to perform more specialized a c t i v i t i e s such as commercial or i n d u s t r i a l sales. H. Length of Service with Present Employer. TABLE fflX NUMBER OF YEARS THE SALESMEN . . HAVE WORKED WITH THEIR. PRESENT EMPLOYER*. . Number of Years with Present Employer Salesmen Male Female 27:0$ 24.3$ 1212$ ! • • 9.5$ " • 1 • 8.1$ 5.4$ 8.1$ 5.4$ Total - 100.0$ 100.0$ * This table i s based on 415 r e p l i e s . - 140 -TABLE XXX NUMBER OF REAL ESTATE FIRMS SALESMEN HAVE WORKED WITH IN PAST FOUR YEARS* Number of Firms Salesmen Male Female One Firm.......... 1 ..................54.5$ 5 4 . 0 $ Two Firms.....!.........; .1 . 3 5 . 5 $ 4 l l 9 $ Three Firms.......:.,..!................. Q.2fo 4 . 1 $ Four Firms...........:........!.......... 1 . 2 $ . 0 $ Over Four Firms . 6 $ . 0 $ Total - 1 0 0 : 0 $ 1 0 0 . 0 $ * This table i s based on 415 r e p l i e s . Table XXIX indicates that there i s no appreciable difference, i n the length of service with the present employer, between male and female sales personnel. However, Table XXX indicates that females may be s l i g h t l y more stable than males. 10$ of the men have worked for three or more firms i n the past four years compared to 4 . 1 $ of the women. I . Type of Real Estate Salesmen. TABLE XXXI TYPE .OF SALESMEN*. Male Female Residential.: 8 7 : 0 $ 9 5 : 9 $ I n d u s t r i a l & Commercial:.....:...ii:.:.:! 1 3 : 0 $ 411$ Total - 10010$ 1 0 0 . 0 $ * This table i s based on 415 r e p l i e s l - 141 -The majority of salesmen are c l a s s i f i e d as r e s i d e n t i a l salesmen. In the small firms the salesmen may handle a l l types of property, however, commissions from commercial and i n d u s t r i a l property form a small part of t o t a l earnings. Only a small percentage (4.1$) of the women are class-the salesmen. I t i s also evident that s p e c i a l i z a t i o n i s usually dependant upon years of experience i n the r e a l estate business. Salesmen seldom start i n the r e a l estate business as s p e c i a l i s t s i n commercial or i n d u s t r i a l property. Almost everyone starts as r e s i d e n t i a l salesmen. The i n d u s t r i a l and commercial salesmen earn a higher income than the average r e s i d e n t i a l salesmen. I n d u s t r i a l and commercial salesmen earn approximately $3,326 per annum more than the r e s i d e n t i a l salesmen. This i s probably due to the fact that the average sale i n commercial or i n d u s t r i a l property i s worth considerably more than the average r e s i d e n t i a l sale. Hours of Work per Week. i f i e d as commercial and i n d u s t r i a l sales s t a f f as compared with TABLE XXXII TIME SALESMEN START WORK* Time % of the Salesmen 8:00 ;A.M 4.4$ 8:30 A.M. 9:00 A.M. 9:30 A.M, 10:00 A.M. or later, Total -* This table i s based on 415 r e p l i e s . - 142 -TABLE XXXIII TIME SALESMEN FINISH WORK* Time $ of the Salesmen Before 5:00 P.M 52.1$ 5:30 P.M 18.8$ 6:00 P.M 8.3$ 6:30 P.M. or later 20.8$ Total - 100.0$ * This table i s based on 415 replies. TABLE XXXIV NUMBER OF DAYS OFF PER WEEK* Number of Days Off $ of the Salesmen ifcitee- Ho" Days Off 17.3$ 1 Day Off 66.5$ 2 Days Off 15.8$ 3 Days Off .4$ Total - 100.0$ * This table i s based on 415 replies. The average salesman starts work between 8:30 and 9t00 A.M. They work u n t i l about 5*00 P.M. and work a six day week. The salesmen usually have from 1 to 3 evenings off per week. - 143 -TABLE XXXV NUMBER OF EVENINGS OFF PER WEEK* Number o f Evenings O f f i o f t h e Salesmen None 3.8$ 1 Evening Off, 15.9$ 2 Evenings Off, 27.3$ 3 Evenings O f f . 27.3$ 4 o r More Evenings O f f T o t a l -* T h i s t a b l e i s based on 415 r e p l i e s . The commercial and i n d u s t r i a l ( I . C . I . ) salesmen have a s l i g h t l y -d i f f e r e n t work week. The I . C . I , salesman s t a r t s about t h e same t i m e and f i n i s h e s at 5s00 P . M . They work a f i v e o r s i x day but v e r y few evenings . The I . C . I , salesmen u s u a l l y have f o u r o r more evenings o f f per week. T h i s i s due t o t h e f a c t t h a t t h e y see t h e i r c l i e n t s d u r i n g t h e day i n s t e a d o f t h e e v e n i n g s . There i s no s i g n i f i c a n t r e l a t i o n between t h e hours o f work and the e a r n i n g s o f t h e salesmen. T h i s i s s u r p r i s i n g s i n c e i t i s g e n e r a l l y f e l t t h a t more hours o f work l e a d t o a h i g h e r income. The f a c t t h a t t h e r e i s no r e l a t i o n between earnings and hours o f work may suggest t h a t t h e w o r k i n g e f f i c i e n c y o f t h e salesmen v a r i e s c o n s i d e r a b l y , o r t h a t t h e salesmen o n l y t h i n k t h e y are w o r k i n g when i n f a c t t h e y are j u s t s i t t i n g around t h e o f f i c e w a s t i n g t i m e . K . Gross E a r n i n g s o f Salesmen. - 144 -TABLE XXXVI GROSS EARNINGS OF SALESMEN (1963). AS REPORTED BY: Earnings Salesmen-^ Firrn^ V.R.R.B. $ of the Salesmen 31.9$ 28.2$ $3,000 - 13.4$ 14.7$ $4,000 - . . . 11.6$ 12.4$ 13.0$ $5,000 - 10.8$ 13.0$ $6,000 - 7.6$ 6.7$ $7,000 - 7 , 9 9 9 . 7 i 5 $ 6.5$ $8,000 - 6.2$ 10.6$ 10.2$ 7.3$ Total - 100.0$ 100.0$ 100.0$ 1 Survey completed by the Vancouver Real Estate Board. 2 1952 r e p l i e s covering 389 Salesmen. 3 415 r e p l i e s . I t i s apparent from Table XXXVI that the low income salesman d i d not complete the questionnaires. Only 18 .7$ of the salesmen earn $2,999 per annum or less according to the salesmens' questionnaires while 31.9$ earn 2,999 or le s s according t o the firms questionnaires. Since there i s a lack of questionnaires from these salesmen, the income calculations w i l l be taken from the firm questionnaires unless otherwise noted! The earnings f o r the I.C.I salesmen are higher than the earnings f o r a l l salesmen. 57.5$ of the I.C.I, salesmen earn over $8,000 per annum and 37.5$ earn over $5,000 per annum. The average income for I.C.I, salesmen i n 1963 was $8 ,307. - 145 -TABLE XXXVII GROSS EARNINGS FOR I.C.I. SALESMEN AS REPORTED BI THE SALESMEN Income $ $2,900 5.0$ $3 , ooo . - 3,999:...... 2.5$ $4,000 - 4,999.. 5.0$ $5,000 - 5,999 : .:...15.0$ $6,000 - 6,999 . . . . . . . . . . . . . . . . . . . . . . i . 5.0$ $7,000 - 7,999 ..UOiO$ $8,000 - 9,999 20.0$ $10,000 .37.5$ Total - 100.0$ The average income f o r a l l r e a l estate salesmen i n I963 was $4,981 as reported by the firm's questionnaires. 88$ of a l l salesmen earned l e s s than $9,000 i n 1963. The standard deviation f o r the salesmen's earnings i s $2,892 which i s rather high f o r an average income of $4,981. This can be explained by the fact that only 12.4$ of the salesmen have earnings i n the $4,000 - $4,999 group, the mean income group. The average income of $4,981 per man compares favourably with the average wage and salary per head of family i n Metropolitan Vancouver. The average income per family head was $4,637 i n I96I. However, the high 2 City of Vancouver, Vancouver's Changing Population, June 1964, p. 7, Table XXX. - 146 -percentage (31 .9$) of salesmen earning less than $2,999 per annum s t i l l remains as a cause of much d i s s a t i s f a c t i o n i n the r e a l estate business. L. Reasons why Salesmen Entered the Real Estate Business. The salesmen were asked to indicate the main factors which influenced t h e i r decision to enter the r e a l estate business. The main factors, l i s t e d i n decreasing order of importance, were: ( i ) To earn a high income. ( i i ) To enjoy more freedom, (from supervision) ( i i i ) Greater potential income based on an i n d i v i d u a l s ' own productivity. ( i v ) To meet more people, (v) Because the r e a l estate business offers a challenging career. The majority of the salesmen mentioned to p o s s i b i l i t y of unlimited earnings. I t would appear that the new salesmen either were not aware of the average income earned by r e a l estate salesmen or they f e l t that they would be the exceptional salesman that earns $10,000 or more per year. Perhaps part of the blame rests on the agents and managers. Almost every evening paper carries advertisements f o r r e a l estate salesmen i n d i c a t i n g the chances of earning unlimited income. I f the r e c r u i t i n g firm indicated the average income was less than $5,000 per annum and only a few salesmen earned i n excess of $10,000 per annum, fewer men may be attracted to the business. I t i s i n t e r e s t i n g t o note that only a few salesmen were attracted to the business because i t was a challenging work. Presumably these men were aware of the d i f f i c u l t i e s of earning unlimited incomes. M. Composite Picture of the Typical Real Estate Salesman. The t y p i c a l r e a l estate salesman i s a married male who works f u l l time i n the r e a l estate business. He spends an average of 58 hours per week at - 147 -h i s work. His work day starts between 8:30 A.M. and 9:00 A.M. and finishes at 5:00 P.M. He works s i x days per week and usually works four or f i v e evenings per week. He i s 47 years of age and has been i n the r e a l estate business f o r s i x and one-half years, during which time he has worked with three di f f e r e n t firms. The t y p i c a l salesman has a junior - senior matriculation. I n 1963 he took three weeks holiday! During the same year he earned $4,981, mainly from the sale of r e s i d e n t i a l property. Although the average annual income for r e a l estate salesmen compares favorably with the average earnings per family head i n Metropolitan Vancouver, further analysis points out some weakness of t h i s comparison. To begin with, a r e a l estate salesman has some expenses which must be recovered from h i s income. These include items such as car expenses. Aside from the expenses, an annual income of $4,981 calculated as earnings per hour worked gives a better i n d i c a t i o n of the earning capacity of the average r e a l estate sales-man. Based on a 58 hour week, the r e a l estate salesman earns $1.65 per hour! The minimum wage f o r a barber i n Greater Vancouver i s $1.87 per hour plus 65$ of earnings over $105.00 per week. The minimum salary f o r a route salesman f o r a milk company i s $2.53 per hour! In l i g h t of these comparisons i t becomes obvious that although the average r e a l estate salesman earns a comparable income per annum, they must work many more hours than individuals i n other comparable occupations. CHAPTER IX SUMMARY AND CONCLUSIONS The p r i n c i p l e purpose of t h i s study, as set out i n Chapter 1, was t o determine i f there i s evidence to support the charges that the r e a l estate business i s poorly organized and i n e f f i c i e n t i n i t s ' operation. I f i t was found that the r e a l estate business i s poorly organized and i n -e f f i c i e n t i n i t s ' operation, i t i s necessary to determine whether improve-ments are possible within the e x i s t i n g structure of the business or whether the existing structure of the business must be altered. Based on the data collected i t i s evident that there are a number of areas where improvements appear necessary. However, i t i s possible t o make the necessary improvements within the existing structure of the business. The improvements w i l l be discussed under the following headings: A. ..Organization Within the Real Estate Firms. B. Management of a Real Estate Firm. C. Structure of the Real Estate Business. A. Organization Within the Real Estate Firm. Real Estate firms are r e l a t i v e l y small firms as ccntpapgdcto'feibhe average service firm or r e t a i l firm. Because of t h e i r small s i z e , the problems of organization appear to have been overlooked. To begin with, only about 60$ of the firms appear to have d e f i n i t e objectives and p o l i c i e s . The remaining 40$ of the firms probably have some idea of t h e i r objectives, however, they are not s u f f i c i e n t l y clear to be i n written form. Since written p o l i c i e s and objectives can be a valuable aid to management and salesmen, i t appears desirable f o r a l l firms to c l a r i f y t h e i r objectives and - 149 -p o l i c i e s a n d p u t them i n w r i t t e n f o r m . T h i s i s n e i t h e r a c o s t l y n o r t i m e c o n s u m i n g t a s k a n d t h e b e n e f i t s s h o u l d b e w e l l w o r t h w h i l e . T h e x ^ r i t t e n o b j e c t i v e s a n d p o l i c i e s c o u l d s e r v e a s a c o n s t a n t a n d c o n s i s t a n t g u i d e t o a c t i o n . I t w o u l d a l s o s a v e t i m e s i n c e someone i n s e a r c h o f i n f o r m a t i o n c o u l d r e f e r t o a p o l i c y m a n u a l i n s t e a d o f t a k i n g u p t h e t i m e o f t o p management. I t i s d i f f i c u l t t o c r i t i z e t h e i n t e r n a l o r g a n i z a t i o n o f t h e f i r m s s i n c e t h e d e p a r t m e n t a l i z a t i o n d e p e n d s t o a c o n s i d e r a b l e d e g r e e o n t h e o b j e c t i v e s o f t h e f i r m s a n d t h e a v a i l a b l e manpower. B a s e d o n t h e d a t a c o l l e c t e d i t a p p e a r s t h a t t h e r e a l e s t a t e f i r m s h a v e n o t t e n d e d t o c r e a t e s e p a r a t e d e p a r t m e n t s b e f o r e t h e y w e r e n e c e s s a r y . T h e f i r m s w i t h t h e l a r g e -e s t number o f s e p a r a t e d e p a r t m e n t s a r e t h o s e f i r m s w i t h t h e l a r g e s t number o f s a l e s m e n . I n t h e c a s e o f t h e s m a l l e r f i r m s i t w o u l d a p p e a r t h a t t h e a g e n t o r n o m i n e e i s r e s p o n s i b l e f o r m o r e a c t i v i t i e s t h a n t h e y a r e c a p a b l e o f p r o p e r l y h a n d l i n g . I n t h e f i r m s e m p l o y i n g 5-15 s a l e s m e n a n d a t t h e same t i m e d i r e c t t h e o t h e r a c t i v i t i e s s u c h a s i n s u r a n c e s a l e s , m o r t g a g e f i n a n c i n g a n d o f f i c e management. A t p r e s e n t t h e m o s t s e r i o u s d e f i c i e n c y i n t h e o r g a n i z a t i o n o f t h e r e a l e s t a t e f i r m s i s t h e l a c k o f p r o p e r management p e r s o n n e l . F a r t o o many f i r m s a r e a t t e m p t i n g t o s u r v i v e w i t h o u t p r o v i d i n g p r o p e r management. I n many c a s e s t h e a g e n t o r nominee i n c h a r g e a t t e m p t s t o d i r e c t t o o many a c t i v i t i e s . I n s t e a d o f p r o v i d i n g p r o p e r management p e r s o n n e l , t h e p r a c t i s e a p p e a r s t o b e t o a l l o w t h e s a l e s m a n t o s e e k o u t a s s i s t a n c e a n d d i r e c t i o n r a t h e r t h a n h a v e a m a n a g e r s e e k o u t t h e s a l e s m e n i n n e e d o f a s s i s t a n c e . I t i s o b v i o u s t h a t t h i s i s i n t e n d e d t o b e a c o s t s a v i n g d e v i c e , h o w e v e r , i t i s v e r y s h o r t s i g h t e d . W i t h o u t p r o p e r management s o m e t h i n g w i l l s u f f e r , i n t h i s - 150 -case i t i s the salesmen i n the firm. In the long run t h i s practise i s very costly i n terms of l o s t sales and turnover i n salesmen. Even i n the firms employing sales managers there i s room f o r further improvements. The sales managers do not appear to be c l e a r l y i n -formed as to t h e i r function. Too often the sales manager appears to wait for the salesmen to seek him out f o r assistance rather than the sales manager scheduling h i s time to work with each salesman. I t would appear that most sales managers spend the majority of t h e i r time i n the o f f i c e . This means the salesmen receive very l i m i t e d f i e l d supervision. I f the sales manager must spend the majority of his time i n the o f f i c e then there i s a need for further supervisory personnel to work with the salesmen i n the f i e l d . Of the firms employing sales managers, over one-half of the sales managers are i n charge of 15 or more salesmen. This r a t i o of 1:15 appears too high since the manager has other tasks t o perform. This allows the manager a maximum of one and one quarter days per man l e s s the time required fo r the other tasks. I t i s apparent that the most urgent improvement needed i n the organ-i z a t i o n of the r e a l estate firms i s an increase i n f i e l d supervisors. This means an increase i n costs, however, a good f i e l d supervisor should be able to increase the sales volume of the salesmen more than enough to cover the increased costs. This i s not an area which can be overlooked i f the business hopes to improve the income to the firm and to the salesmen as w e l l as reduce the turnover of the salesmen. B. Management of a Real Estate Firm. The majority of the problems i n the r e a l estate business appear t o arise i n the area of management of the sales force rather than i n the organization - 151 -of the r e a l estate firms. The problems associated with the management may be caused i n part by the shortage of management personnel. However, t h i s i s only one of the causes. Another p r i n c i p a l factor contributing to the i n e f f i c i e n c i e s has been the industry's pre-occupation with public relations and protection of the public. U n t i l recent years the r e a l estate business as a group were l i t t l e concerned with management problems. The entire energy of the business appeared to be devoted to the problems of improving t h e i r public image. 1 . Recruiting and Selecting Salesmen. To date the r e a l estate managers have not taken a responsible attitude towards the problems of r e c r u i t i n g and selecting salesmen. This i s probably due t o the fact that the firms pay t h e i r salesmen on a straight commission basis. The majority of the firms h i r e almost unlimited number of salesmen without regard to t h e i r chances of succeed-ing i n the r e a l estate business. Most firms f e e l that two salesmen are no more expensive than one since the marginal costs associated with an increase i n the number of salesmen are mostly variable costs. Whatever the causes of t h i s s i t u a t i o n may be, the problem s t i l l p e r s i s t s . Assuming that the proper incentives e x i s t , i t i s possible and desirable to make improvements i n the r e c r u i t i n g and selection of salesmen. To begin with i t i s necessary to determine what personal characteristics and other factors are most instrumental i n the making of a successful r e a l estate salesman. With the l i m i t e d data analyzed i n t h i s survey i t appears that years of experience i n the r e a l estate business i s the most important factor contributing to success. However, a more complete study of t h i s problem i s required. - 152 -Assuming that the firms were aware of the factors which con-trib u t e d to the success or f a i l u r e of a r e a l estate salesman the next problem i s one of i d e n t i f y i n g these factors i n an applicant. At present the applicants are hired or rejected on the basis of an application blank and one or two interviews. This i s a bare minimum of e f f o r t f o r a selecting program. In addition to the application blank, the applicant should be interviewed at least twice by d i f f e r e n t interviewers. In order to a s s i s t the interviewers a standard interview guide should be developed to ensure that a l l factors are considered and to ensure that the interviewer i s not motivated by one or two factors while overlooking the other factors. In addition to the interviews with the applicant, every ef f o r t should be made to interview the spouse of the applicant! One of the main causes of "drop-out" i n the r e a l estate business has been the d i s s a t i s f a c t i o n of the spouse. This i s a genuine problem i n the r e a l estate business where the hours of work are long and i r r e g u l a r and the income flow i s so i r r e g u l a r . I t may be possible that a frank interview with the spouse w i l l help eliminate domestic problems and reduce the "drop-out" rate. I f the applicant decides not to enter the r e a l estate business after the spouse i s aware of the problems of the business the f i r m i s s t i l l better o f f , since the salesman would l i k e l y drop out a f t e r a short period of time. Once the firms develop a more responsible attitude towards the problems of r e c r u i t i n g and selecting salesmen i t may be possible to encourage the use of psychological tests to assist i n the selection of salesmen. At present the use of psychological t e s t s i s very l i m i t e d , due i n part to the time, cost and l i m i t e d number of suitable t e s t s . - 153 -However, there i s no reason that a tailor-made t e s t could not be designed that could predict an applicant's chances of succeeding. Providing the firms were w i l l i n g to pay the costs of administering such a test i t could be a useful selection aid. An improvement i n the o v e r a l l r e c r u i t i n g and selecting program would be instrumental i n helping to solve two of the most serious problems facing the r e a l estate business today. The f i r s t problem i s the seemingly excessive number of r e a l estate salesmen within the study area. As mentioned e a r l i e r , Vancouver has the highest r a t i o of sales-men to population f o r any metropolitan area i n Canada. I t i s obvious from the number of salesmen earning l e s s than $3,000 per year that the business cannot adequately support the present 1226 salesmen. The excess number of salesmen i s , i n part, i n d i r e c t l y causing the second major problem facing the business. This i s the high turnover of sales-men i n the business. The high turnover of salesmen, including drop-out and turnover within the business, could be reduced i f the r e c r u i t i n g firms were more thorough i n the selection process. Many firms w i l l r e a d i l y admit that they have hired salesmen who they did not f e e l would succeed. However, they hired the salesmen anyway since the firm had very l i m i t e d monetary costs associated with the new salesman. Another consideration regarding the r e c r u i t i n g and selecting of salesmen i s the pre-licensing course which a salesman must take. At present the r e c r u i t i n g firm does not share the cost of the pre-licensing course with the salesman. During the s i x x-reeks required to complete the course the salesman i s not earning an income. I f the salesman f a i l s to complete the course successfully the cost of the course i s l o s t and the f i r m has l o s t a salesman. I f the firm's r e c r u i t i n g program i s - 1 5 4 -t o be s u c c e s s f u l care must be t a k e n t o s e l e c t o n l y those a p p l i c a n t s who are l i k e l y t o pass t h e p r e - l i c e n s i n g c o u r s e . A l t h o u g h the f a i l u r e r a t e i n the p r e - l i c e n s i n g course i s not h i g h , about 90$ o f those w r i t i n g the examinat ion pass on the f i r s t or second a t tempt , t h o s e who f a i l t o s u c c e s s f u l l y complete the course r e p r e s e n t an unnecessary l o s s t o t h e b u s i n e s s w h i c h may be avoided by more c a r e f u l s e l e c t i o n . As an inducement t o t h e salesman the f i r m s should share t h e cos t s o f the p r e -l i c e n s i n g c o u r s e . T h i s would a l s o encourage t h e f i r m t o be more s e l e c t i v e when h i r i n g new salesmen. 2. T r a i n i n g R e a l E s t a t e Salesmen. A l l salesmen e n t e r i n g t h e r e a l e s t a t e b u s i n e s s , w i t h minor e x c e p t i o n s as set out by t h e R e a l E s t a t e A c t , are r e q u i r e d t o complete t h e p r e - l i c e n s i n g course o f f e r e d at t h e U n i v e r s i t y o f B r i t i s h Columbia . I n a d d i t i o n the salesmen may r e g i s t e r f o r the d i p l o m a course a l though i t i s not mandatory. However, t h e purpose o f t h e s e courses i s not t o develop good salesmen. The p r e - l i c e n s i n g and d i p l o m a courses are r e l a t e d t o the t e c h n i c a l knowledge r e g a r d i n g t h e r e a l e s t a t e b u s i n e s s . A l t h o u g h the new salesmen are r e q u i r e d t o have a knowledge o f t h e t e c h n i c a l aspect o f the b u s i n e s s , t h e most impor tant t r a i n i n g i n terms o f success i n the b u s i n e s s appears t o be s a l e s t r a i n i n g . As the r e a l e s t a t e b u s i n e s s i s now o p e r a t i n g , the sa lesman's success r e s t s on s a l e s a b i l i t y more t h a n any o ther f a c t o r . T h i s i s m a i n l y due t o t h e f a c t t h a t t h e sa lesman's income i s d i r e c t l y r e l a t e d t o s a l e s volume. Even though s a l e s a b i l i t y i s so impor tant t o the salesmen, t h i s i s one area where improvements c o u l d e a s i l y be made. Once a g a i n the shortage o f management p e r s o n n e l i s one of t h e major causes o f t h e l i m i t e d s a l e s t r a i n i n g g i v e n t o salesmen. - 1 5 5 -Every i n d i v i d u a l firm must take i t upon themselves to provide an adequate sales t r a i n i n g program f o r t h e i r salesmen. This means additional e f f o r t and expense upon behalf of the firm, however, i t i s an investment i n the future of the salesmen which should more than pay f o r the time, e f f o r t and expense involved. Even i f a sales t r a i n i n g program were to cost $ 2 , 5 0 0 per man f o r the f i r s t year, t h i s would only require an additional $ 1 0 0 , 0 0 0 i n sales volume to recover the costs, assuming a 5 0 $ - 5 0 $ commission s p l i t . The $ 2 , 5 0 0 figure i s arrived at as follows: (a) I n i t i a l Training 7 days ® $ 1 0 0 per day 7 0 0 (b) Continuous Training 1 day per month @ $ 1 0 0 1 2 0 0 (c) Supplies, books, b u l l e t i n s 1 0 0 (d) Sales Meeting Expenses 2 0 0 (e) Other Expenses, i e . Office Time 2 0 0 $ 2 5 0 0 t h i s does not include the cost of normal supervision, r e c r u i t i n g or selecting salesmen, the firms should not expect to recover t h i s expense i n the f i r s t year, t r a i n i n g expenses are a long term invest-ment. At present only one-half of the r e a l estate firms offer any type of sales t r a i n i n g , the other one-half of the firms depend mainly on sales meetings. I t would seem necessary that a l l firms o f f e r a t r a i n -ing program at least similar to type 2 as described on page 1 0 5 . This should be considered the minimum sales t r a i n i n g requirement, t h i s would include an i n i t i a l t r a i n i n g period of one week, regular sales meetings, continuous sales t r a i n i n g on the job and special meetings or discussion groups. - 1 5 6 -The exact t r a i n i n g needs w i l l vary from firm to firm. The smaller firms may t r y to avoid the i n i t i a l t r a i n i n g costs by h i r i n g only experienced r e a l estate salesmen. This would eliminate only the cost of i n i t i a l t r a i n i n g since the r e c r u i t i n g firm would s t i l l be required to provide continuous sales t r a i n i n g ! Based on the cost figures used, t h i s would represent a saving of $700! Unfortunately, the type of experienced salesman that i s w i l l i n g to change firms i s apt to be a low income producer. Therefore, the savings of $?00 may be offset by the low income earned by the salesman. The supply of high income producing experienced r e a l estate salesmen who are w i l l i n g to change firms i s very l i m i t e d . In the long run the smaller firms may be better off to seek out p o t e n t i a l l y successful new r e c r u i t s and t r a i n them. Although the i n d i v i d u a l firms must assume the r e s p o n s i b i l i t y f o r sales t r a i n i n g , the r e a l estate business as a unit can provide useful supplementary t r a i n i n g . Group seminars and meetings sponsored by l o c a l r e a l estate boards provide the salesmen and agents with an opportunity to exchange ideas and discuss problems! The Okanagan-Mainline Real Estate Board appears to be leading the other boards i n the province i n t h i s ? regard. They sponsor a one week seminar f o r the • member agents each year. In addition the salesmen attend an annual two day seminar. There i s evidence that other boards i n the province w i l l be holding a similar seminar f o r t h e i r members. These meetings and seminars are only a supplement to the firm's own sales t r a i n i n g programme! Although the introduction of a sales t r a i n i n g program or the improvement of a program i s a costly and time consuming e f f o r t , the r e s u l t s should be worthwhile. Sales t r a i n i n g can improve the product-- 1 5 7 -i v i t y of the salesmen providing the trainee i s suitable for the task of s e l l i n g . No amount of t r a i n i n g w i l l make a good salesman out of an in d i v i d u a l who, f o r some reason, i s not suited t o a career i n s e l l i n g . On the other hand, given the raw material from which to make a good salesman, sales t r a i n i n g w i l l help produce a better salesman i n a shorter period of time. I f sales t r a i n i n g helps produce better sales-men the income to the firm and to the salesmen should increase. I f the salesmen are earning a satisfactory income, there w i l l l i k e l y be a -corresponding decrease i n the number of drop outs and turnover of sales-men. Therefore, the improvements caused by better sales t r a i n i n g can be measured not only by increased earnings but also by the decrease i n turnover and the corresponding savings. 3. Compensation Plans. Many of the problems facing the r e a l estate business today appear to be caused by or associated with the type of compensation plan being used. Either d i r e c t l y or i n d i r e c t l y the straight commission form of compensation plan has affected the r e c r u i t i n g and selection of salesmen, the t r a i n i n g of salesmen and the supervision of salesmen. I t i s not suggested that a straight commission form of compensation resu l t s d i r e c t l y i n poor management practices i n the above areas but only that the straight commission plan has enabled management to ignore t h e i r r e s p o n s i b i l i t i e s because the d o l l a r costs of ignoring these areas are minimized under a straight commission basis. There seems to be l i t t l e doubt that i f r e a l estate salesmen xrere paid a minimum salary the firms would be more selective i n t h e i r new salesmen, provide better t r a i n i n g and provide better supervision. This would r e s u l t i n fewer new salesmen entering the business, some low - 158 -producing salesmen being f i r e d and the c a l i b r e of those remaining i n the business would be improved by better t r a i n i n g and supervision. A minimutti salary would force management to take a more responsible attitude towards selecting, t r a i n i n g and supervising salesmen by increasing the fi x e d costs associated with salesmen. I f a change i n the method of compensation, from a straight commission plan to a minimum salary plus commission plan, would r e s u l t i n improved management practices and reduction i n the number of sales-men, i t would appear worthy of consideration. Unfortunately the introduction of a minimum salary has some drawbacks. To begin with i t i s very d i f f i c u l t to force a l l firms to provide a minimum salary f o r t h e i r salesmen. The l o c a l r e a l estate boards could introduce such a change, however, unless i t was acceptable to the majority of members (75$ i n the Vancouver Board) i t would not be passed. Even i f the boards were successful i n passing such a motion, i t would not apply to non-members. Salesmen who are f i r e d by a firm using a minimum salary could be employed by firms which were not members of the l o c a l board and who were not granting a minimum salary. Although membership to the l o c a l r e a l estate boards i s desirable because of the multiple l i s t i n g serviee, i t would s t i l l be possible f o r a firm to operate success-f u l l y without being a member1 Another problem associated with the introduction of a minimum salary would be the task of enforcing such a plan. I t would be d i f f i c u l t to ensure that a l l firms supposedly granting a minimum salary were i n fact doing so. S t i l l another problem would be the added f i x e d expense to the firms. Some firms may be forced to reduce t h e i r sales s t a f f simply because of one or two poor months. In a business where even - 159 -the best salesmen could go one or two month without earning any commissions, the firm would be faced with a heavy f i x e d salary expense and no income. This would mean the firms either had to acc-umulate more c a p i t a l or release t h e i r salesmen. One other problem which must be considered i s the i n i t i a l effect of the introduction of a minimum salary. Almost overnight about 30$ of the sales force or 400 salesmen would l i k e l y be f i r e d . Although i t appears l i k e l y that the r e a l estate salesmen w i l l be receiving a minimum salary i n the future, an intermediate step to soften the effect of such a change would be desirable? - The introduction of a r i s i n g scale of commission would resu l t i n some improvements without any of the undesirable effects of introducing a minimum salary. I f a r i s i n g scale of commission was introduced, the low income producing salesmen would receive less than they now receive, the middle income producing salesmen would remain about the same and the high income producing salesmen would receive more than they now receive. Under such a compensation plan some of the low income producing salesmen would leave the business on t h e i r own although probably not as many would be forced out i f a minimum salary was introduced. The 30$ of the salesmen currently earning $3,000 per annum or less would only earn $2,350 or l e s s . This l o s t of $650 would force out any salesmen depending on r e a l estate earnings as the only source of income! I t would not force out a l l the salesmen using t h e i r r e a l estate income as a supplement to t h e i r other income. Another advantage of the r i s i n g scale of commission i s the fact that a l l firms need not adopt the plan. Any fir m could continue on the present 60$ - 40$ plan i f they so desired. However, the firms using - 160 -the r i s i n g scale of commission would be able to attract a l l the high income producing salesmen since these salesmen would earn a higher marginal rate at the f i r m using the r i s i n g scale! S t i l l another advantage i s the fact that the firms would not be required to increase t h e i r f i x e d costs associated with the salesmen! In fact the firms would receive the bulk of t h e i r income from the early earnings of the salesmen. Oneibf the chief disadvantages of the r i s i n g scale i s that i t w i l l not provide an incentive f o r the firms to improve t h e i r management practices. By remaining on a commission plan the firms are s t i l l able to r e c r u i t salesmen i n large numbers while a minimum salary plan would presumably improve the performance of the managers! I t i s possible that management w i l l improve no matter which compensation plan i s used, however, the minimum salary would l i k e l y bring about the most rapid changes. Even i f a minimum salary was introduced the r i s i n g commission scale could be used since i t would s t i l l provide a powerful incentive for the salesmen. In the event that the r e a l estate firms do not introduce a minimum salary, the r i s i n g commission plan should be adopted because of the benefits i t has to offer to the good salesmen and to the firm! Another consideration regarding compensation plans has to do with compensating sales managers. Because of the nature of the tasks per-formed, the sales manager should receive a saLary plus an override on commissions earned by the salesmen working under him! The salary i s used to ensure that the sales manager w i l l look after h i s o f f i c e work and miscellaneous tasks. The override w i l l provide the sales manager with an incentive to work with the salesmen. Both parts, salary and - 161 -override, must be included i f the sales manager i s to be motivated to perform h i s functions properly and e f f e c t i v e l y ! At present one of the major defects i n the sales manager's compensation plan i s the fact that the manager i s allowed to handle c l i e n t s on h i s own. This immediately introduces a c o n f l i c t of i n t e r s t . The sales manager receives an override of about 10$ of the gross commissions of h i s salesmen and the manager could also receive 60$ of the gross commissions from his own sales. Where t h i s s i t u a t i o n exists the manager has more incentive to spend a l l h i s time working with h i s own c l i e n t s rather than with the salesmen. The other problem i s that the salemen view the manager as a competitor rather than a supervisor. This leads to an unsatisfactory relationship between the manager and the salesmen. For these reasons i t seems desirable t o prohibit the managers from handling c l i e n t s d i r e c t l y . I f the sales manager cannot earn enough acting as a manager the salary or override should be adjusted, instead of permitting the manager to s e l l on h i s own. C. The Real Estate Business. A l l the changes that have been suggested are of a nature that can be brought about by the i n d i v i d u a l firms working wi t h i n the existing structure of the r e a l estate business. These changes are necessary i f the r e a l estate business i s to be more e f f i c i e n t and they are the r e s p o n s i b i l i t y of manage-ment. There appears to be no need to change the structure of the business, i n fact the present structure i s w e l l suited to the type of service provided! - 162 -At present the r e a l estate business i s comprised of a large number of r e l a t i v e l y small l o c a l firms. I t may be possible to reduce some expenses by eliminating some firms.and increasing the average size of the firm. However, there i s no evidence to suggest that the size of the firm i s i n any vr&y responsible f o r the i n e f f i c i e n c i e s which exist i n the business! The large number of small firms and easy entry conditions insure that the r e a l estate business w i l l remain competitive and provide l o c a l service to t h e i r c l i e n t s . This competition exists i n the qu a l i t y of the service offered, r a r e l y i n the cost of the service offered. I t has been argued that a reduction i n the number of r e a l estate firms and an increase i n the size of firms would reduce the costs per sales and possibly benefit the public! However, there i s no evidence to support t h i s argument. The service fee charged by the r e a l estate business i s fix e d f o r a l l firms belonging to the l o c a l boards! Therefore, the firms survive or f a i l on the basis of the service provided rather than on a cost basis! For t h i s reason the large number of firms appear to increase competition on the basis of service offered which benefits the c l i e n t s ! I t would seem therefore, desirable to maintain the present structure of the r e a l estate business. Considerable improvements are possible within the i n d i v i d u a l firms and the l o c a l boards and associations can assist the firms i n making the improvements! The boards and associations should l i m i t t h e i r a c t i v i t i e s to a s s i s t i n g the firms rather than forcing the members to adopt changes. I f the boards or associations attempt to force too many changes t h e i r membership may be reduced, thus reducing t h e i r sphere of influence. I t would not appear that any improvements i n the operation of the r e a l estate business could be brough about by the Real Estate Act. The - 163 -purpose of the act i s to protect the public, not improve the eff i c i e n c y of the firms. Therefore, the r e s p o n s i b i l i t y f o r improvements rests on the agents, nominees and managers. The r e a l estate salesmen were asked f o r t h e i r suggestions on how the r e a l estate business could be improved. Their comments are summarized as follows: (a) A guaranteed minimum salary should be provided. The salesmen earning a low income i n I963 suggested the minimum salary was necessary. (b) Eliminate the "part-time" and semi-retired salesmen. (c) Limit the number of salesmen's licenses i n a given area. (d) Introduce a minimum salary f o r the f i r s t four to s i x months while the new salesmen are getting established. (e) S t r i c t e r enforcement of the laws, regulations and code of ethics. ( f ) Establish periodic refresher courses f o r the salesmen. (g) Improve the public image of the r e a l estate business through increased public r e l a t i o n s . These comments are i n order of frequency. As may be expected, the salesmen are concerned mainly with those changes which would d i r e c t l y affect t h e i r own position and income. Only two or three salesmen mentioned the need f o r better supervision and sales t r a i n -ing. Although the salesmen are aware of the problems created by an excess of salesmen, however, the suggestions:".; f o r correcting these problems are not necessarily the most desirable. The idea of l i m i t i n g the number of licensees i n a given area creates a number of other problems. Who w i l l determine the number of licenses? Who w i l l determine which applicant w i l l - 164 -r e c e i v e a l i c e n s e ? The suggest ions t o e l i m i n a t e t h e " p a r t - t i m e " and semi-r e t i r e d salesmen i s v a l i d s i n c e these salesmen are t a k i n g b u s i n e s s away from t h e f u l l t i m e salesmen. The suggest ions f o r a minimum s a l a r y o r a s a l a r y d u r i n g t h e i n i t i a l few months a r e v a l i d , as are t h e suggest ions f o r r e f r e s h e r courses and s t r i c t e r enforcement o f the r e g u l a t i o n s . The agents and managers were asked f o r t h e i r suggest ions on how t o improve the r e a l e s t a t e b u s i n e s s . T h e i r suggest ions were: (a) Develop a more p r o f e s s i o n a l approach i n t h e r e a l e s t a t e b u s i n e s s . (b) I n c r e a s e t h e e d u c a t i o n a l requirements f o r r e a l e s t a t e salesmen. ( c ) A t t r a c t young men t o t h e b u s i n e s s . (d) I n t r o d u c e a minimum s a l a r y f o r t h e r e a l e s t a t e salesmen. (e) E l i m i n a t e t h e low income e a r n i n g salesmen. ( f ) E l i m i n a t e the " p a r t - t i m e " and s e m i - r e t i r e d salesmen. (g) Improve t h e q u a l i t y o f t h e s e r v i c e o f f e r e d t o t h e p u b l i c . I t i s apparent t h e agents e i t h e r are not aware o f t h e causes o f t h e problems o r t h e y are not w i l l i n g t o admit t h a t many o f t h e problems a r e caused by management. The suggest ions advance by t h e agents are a l l w o r t h w h i l e improvements, however, t h e y do not get t o t h e r o o t o f t h e p r o b l e m s . Develop-i n g a p r o f e s s i o n a l a t t i t u d e and i m p r o v i n g t h e q u a l i t y o f t h e s e r v i c e o f f e r e d are w o r t h w h i l e a i m s , however, t h e s e can o n l y be achieved i f t h e agents and managers w i l l attempt t o improve t h e i r management p r a c t i c e s . I f improvements are t o be made i n t h e r e a l e s t a t e b u s i n e s s , t h e agents and managers o f t h e i n d i v i d u a l f i r m s must be c r i t i c a l o f t h e i r own p e r -formance t o d a t e . Improvements are p o s s i b l e but i t w i l l r e q u i r e a c a r e f u l a n a l y s i s o f t h e problems, a more r e s p o n s i b l e a t t i t u d e on t h e p a r t o f t h e salesmen and management and some s a c r i f i c e s must be made by t h e salesmen - 165 -and management. Making improvements may cost money and t a k e up a c o n s i d e r a b l e amount o f t i m e . However, t h e r e a l e s t a t e b u s i n e s s s h o u l d s t a r t t o make t h e s e improvements r a t h e r t h a n waste t i m e seeking some"gimmick" o r s h o r t - c u t " w h i c h w i l l s o l v e t h e i r problems. - 166 -BIBLIOGRAPHY BOOKS Bellows, R., and Estep, M.F., Employment Psychology: The Interview, Rinehart and Company, New York, 195^ -. Canfield, B.R., Sales Administration, Prentice H a l l Incorporated, New York, 1961. Carrie, M.J., and Holmes, L.C, The Real Estate Handbook, Prentice H a l l Incorporated, New York, 1948. Case, Fred, E., Modern Real Estate Practice - A Managerial Approach, A l l y n and Bacon Incorporated, New York 1956. Selecting, Training; and~R"educing  Turnover of Real Estate Sales Personnel, Education Committee C a l i f o r n i a Real Estate Association, C a l i f o r n i a , 1957! City of Vancouver, Vancouver's Changing Population, Vancouver, B r i t i s h Columbia June 1964. Coats, R.H., and Goanell, R.E., " S i r James Douglas", Makers of Canada Series, Volume IX, Oxford University Press, London, England, 1926. Corb, D.A., and Kent, R.W., P r a c t i c a l Real Estate Brokerage, Prentice H a l l , Incorporated, New York, 1961. Davis, Pearl J . , Real Estate i n American History, Public A f f a i r s Press, Washington, 1958. Drake, F.S., Manual of Employment Interviewing, American Management Association Research Report Number 9, New York, 1946! Firestone, O.J., Residential Real Estate i n Canada, University of Toronto Press, Toronto, Ontario, 1951. Galbraith, J . I . , The Great Crash - 1929, Riverside Press, Cambridge, Massachusetts1 1955. Grebler, Blank and Winnick, Capital Formation i n Residential Real Estate, Princeton University Press, Princeton University, 1956^  H i c k e r n e l l , W.F., Establishing and Operating a Real Estate and Insurance Brokerage Business, Bureau of Foreign .and Domestic Commerce United States Department of Commerce, Washington, D!C. 1946! Hood, Wm. C. and Scott, H i , Output, Labour and Capital i n the Canadian Economy, Royal Commission on Canada's Economic Prospects, Queen's Pr i n t e r s , Ottawa, 1957. - 16? -Johoda, M., Deutsch, M. and Cook, S.W., Research Methods i n Social Relations, The Dryden Press, New York, 1951. Koontz, H. and O'Donnell, C , P r i n c i p l e s of Management, McGraw H i l l , New York, 1959. Maisel, Sherman J . .and. Schaaf, Albert. H..,. Characteristics and Performance of  Real Estate Brokers and Salesmen i n C a l i f o r n i a , Berkeley: Real Estate Research Program, University of C a l i f o r n i a , 1956. Mandell, Milton M., A Company Guide to the Selection of Salesmen, Research Report number 24, American Management Association, New York, 1955. M i l l s , F.C, S t a t i s t i c a l Methods, Henry Holt and Company, New York, 1955. Morley, Alan, Vancouver - From Milltown to Metropolis, M i t c h e l l Press, Vancouver, B r i t i s h Columbia, 196l. M c G i l l , DIM., L i f e Insurance Sales Management, S.S. Huebner Foundation for Insurance Education, R.D. Irwin Incorporated, Hamewood, I l l i n o i s , 1957. McMichael, Stanley, I . , How to Operate a Real Estate Business, Prentice H a l l Incorporated, New York, 1947. National Association of Real Estate Boards, H i r i n g , Training and Financing  Salesmen, National I n s t i t u t e of Real Estate Brokers of the National Association of Real Estate Board, Chicago, I l l i n o i s , 1955* Real Estate  Salesman's Handbook, National I n s t i t u t e of Real Estate Brokers of the National Association of Real Estate Boards, Chicago, I l l i n o i s , 1959* Native Sons of B r i t i s h Columbia, Romance of Vancouver, Ward and P h i l l i p s Limited, Vancouver, B r i t i s h Columbia, 1936. Newgarden, A., F i e l d Sales Manager - A Manual of Practice, American Manage-ment Association, Management Series, Number 48, Riverside Press, Cambridge, Massachusetts, i 9 6 0 . Ormsby, Margaret A., B i r i t i s h Columbia - A History, MacMillan Company of Canada. Pierovich, Andrew L. and Bain, Harry 0 . , A Survey of California's Real Estate  Industry - I t s ' Characteristics and Information Sources, Berkeley -Real Estate Research Program, University of C a l i f o r n i a , 1956i Pigors, P., and Myers, C.A., Personnel Administration, McGraw H i l l Book Company, New York, 1955. Royal Bank of Canada, The Canadian Construction Industry, "Submission to the Royal Commission on Canada's Economic Progress." Queen's Pr i n t e r s , Ottawa, 1956. Shartle, CL., Discussion, American Management Association, Marketing Series, Number 39, 1957. - 168 -Smith, Ray, Real Estate Brokers Operating Handbook, Mastercraft Press, Dayton, Ohio, 1958T • ' T h o r n h i l l , John B i , B r i t i s h Columbia'in the Making, Constable and Company Limited, London, England, 1913* Thustone, L.L., Applications of Psychology, Harper and Brothers - New York, 1962. Tosdal, Harry R., Salesman's Compensation Volume 1 and 2, Harvard University Press, Norwood, Massachusetts, 1953» Introduction to Sales Management, 4th E d i t i o n , McGraw H i l l Book Company, New York, 1957i Westminister County Real Estate Board,-A Study of Multiple L i s t i n g Sales Competitions Used by Canadian Real Estate Boards, Westminister County Real Estate Board, New Westminister, B r i t i s h Columbia, 1963! Yoder, D., Personnel Management and I n d u s t r i a l Relations, Prentice H a l l , Englewood C l i f f s , New Jersey, 1956. ARTICLES Caswell, W.C., "New Ways to Pay Salesmen" Sales Management, Volume 90 page 33-7, March 15, 1963. Department of Finance, " B r i t i s h Columbia Financial and Economic Rreview", V i c t o r i a , B r i t i s h Columbia, J u l y 1964. Eaton, J.W., "The Army's Personnel Research Laboratory", Personnel, Volume 23, Number 5, March 1947, pages 326 - 329. Kimball, J.F., "Analyzing Salesmen's Compensation", Financial Executive, Volume 31, pages 34 - 36, May 1963. Laing, F.W., "Hudson's Bay Company Lands and Colonial Form Settlement on the Mainland of B r i t i s h Columbia?-', P a c i f i c H i s t o r i c a l Review, Volume 7> 1938, pages 327 - 342. L i f e Insurance Agency Management Association Hartford, Conneticut, "Testing A c t i v i t i e s , R e l i a b i l i t y and Canadian V a l i d i t y - A Report on the Aptitude Index Form 7", Research Report 5, 1962. "Predicting Health and L i f e Sales Success with the Aptitude Index", Research Report 9, 1959! "The S.M.I. (Sales Method Index) with Home Office Supervision", Research  Report 9, 1959. Maisel, S.J., and Schaaf, AiH., "The Business of Real Estate Brokerage -Current Performance and Future Po t e n t i a l " , Appraisal Journal,July 1957« Morman, R.R. and Mortensen, D.G., "Research Report: Personnel Selection", C a l i f o r n i a Real Estate Magazine, December 196l, page 12. "Personnel Tests Ready for Try-Out by Realtors", C a l i f o r n i a Real Estate Magazine, October i960, page 10. - 1 6 9 -N i c o l l s , J.P., Real Estate Values i n Vancouver, City Archives, Vancouver, 195*4". Signori, E.I. and DeVries, A.G.,. "A P r a c t i c a l Approach to the Study of Training Needs", Canadian Personnel and I n d u s t r i a l Realations Journal, Third ;.Quarter August 1 9 5 7 . Snyder, C.B., "Training Can Increase Volume", Increase E f f i c i e n c y ; Cut Expenses, National I n s t i t u t e of Real Estate Brokers of the National Association of Real Estate Boards, Chicago, I l l i n o i s , 1 9 6 3 . Torbert, F., "Making Incentives Work", Harvard Business Review, Volume 37, Number 5, Page 81. Tosdal, Harry. R., "How to Design the Salesmen's Compensation Plan", Harvard  Business Review, Volume 31, Number 5, Page 64, 1953» Wallace, S.R. Jr. and Turchell, CM., "An Evaluation of Training Course for Li f e Insurance Agents," Personnel Psychology, Volume 6, page 25, 1953* Wensterworth, P., "How to Improve Employment Interviews", Personnel Journal, Volume 32, Number 2, pages 46-49, June 1953. Wilson, R., "Management of a Real Estate Office", The Canadian Realtor, Volume 7, October 196l. OTHER SOURCES Central Mortgage and Housing Corporation, Canadian Housing S t a t i s t i c s , 1963. C a i l , R.E., Disposal of Crown Lands i n B r i t i s h Columbia 1871 - 1913, Master's Thesis, Department of History, University of B r i t i s h Columbia, 1956, Vancouver, B r i t i s h Columbia, Unpublished. Daily News Advertiser, Wednesday, November 4, I89I. DeVries, A.G. , A'fStudy .of Training Needs i n the S e l l i n g of Real Estate Through  the use of C r i t i c a l Incident Technique, Master's of Arts Thesis, University of B r i t i s h Columbia, 1957, Vancouver B r i t i s h Columbia, Unpubli shed. Dominion Bureau of S t a t i s t i c s , Census of Canada, '-HHouseholds and Families Series" 196l. , General Census S t a t i s t i c s , "Service and Wholesale", Queens P r i n t e r s , Ottawa, Volume 8, 1941, 1951. Government of Canada, Appendix to the Budget, 1949 - 1950, House of Commons Debates March 22, 1949, Queens Pri n t e r s , Ottawa! - 1?0 -Province of B r i t i s h Columbia, An Act to Provide f o r the Licensing of Real  Estate Agents and Salesmen, R.S.B.C., 1920. Regulations Under the  Real Estate Act, Order i n "Council, .1920, May 19 61, As Amended. Real Estate Act, R.S.B.C. 1958. Companies Act, R.S.B.C, 1963. Province Newspaper, Vancouver, B r i t i s h Columbia, September 17, 1919. September 1903 - C l a s s i f i e d Section January 15, 1902. March 22, 1909. Real Estate Council of B r i t i s h Columbia, Unpublished Data, 1964, Vancouver B r i t i s h Columbia. Sales Manpower Foundation D i v i s i o n of the Sales Executive Club of New Ybrk, A Nationwide Survey of the 1964 Sales Manpower Requirements of American  Manufacturing and Service Companies, New York, 19,64. Signori, E.I., The Prediction of Performance on the Real Estate Diploma Course Through Psychological Testing, Unpublished, i960.The S c i e n t i f i c  Study of Training Needs i n the S e l l i n g of Real Estate, Unpublished, 1957/ Stewart, James I., Personnel Administration Survey, Toronto, Onatrio, Unpublished, 1957. Vancouver Real Estate Board, Unpublished Data 1964, Vancouver, B r i t i s h Columbia! - 171 -APPENDIX A CODE OF ETHICS The Canadian Association of Real Estate Boards ARTICLE 1 The member should keep himself informed as to developments and trends affecting r e a l estate i n h i s community, as w e l l as i n i t s p r o v i n c i a l and national aspects, so that he may be able t o contribute to public thinking on matters of taxation, l e g i s l a t i o n , land use, c i t y planning and other questions affecting property i n t e r e s t s . ARTICLE 2 I t i s the duty of the member to be w e l l informed on current market conditions i n order to be i n a posi t i o n to advise h is c l i e n t s as to the f a i r market pri c e . ARTICLE 3 I t i s the duty of the member to protect the public against fraud, misrep-resentation or unethical practices i n the r e a l estate f i e l d . He should endeavour to help stamp out or prevent a r i s i n g i n h i s community, any practices which could be damaging to the public or to the di g n i t y and i n t e g r i t y of the r e a l estate profession. I f there be an authority or commission i n his province, charged with the duty of regulating the practices of brokers and salesmen, the member should lend every help to such body, co-operate with i t , and report v i o l a t i o n s of proper practice. ARTICLE 4 The member should ascertain a l l pertinent facts concerning every property f o r which he accepts the agency, so that he may f u l f i l l h i s obligation to avoid - 172 -error, exaggeration, misrepresentation, or concealment of pertinent fa c t s . ARTICLE 5 The member s h a l l not be a party t o the naming of a f a l s e consideration i n a deed, unless i t be the naming of an obviously nominal consideration. ARTICLE 6 The member s h a l l not discourage parties to a transaction from seeking l e g a l counsel. ARTICLE 7 The member s h a l l keep i n a special bank account, separated from his own funds, monies coming i n t o h i s hands i n t r u s t f o r other persons, such as escrows, t r u s t funds, c l i e n t s ' monies and other- l i k e items. ARTICLE 8 The member i n h i s advertising s h a l l be careful t o present a true picture and s h a l l not advertise without disclosing h i s name or h i s firm name, nor permit h i s salesmen to use in d i v i d u a l names or telephone numbers, unless the sales-men's connection with the member i s obvious i n the advertisement. ARTICLE 9 The member, for the protection of a l l parties with whom he deals, s h a l l see that f i n a n c i a l obligations and commitments regarding r e a l estate transactions are i n w r i t i n g , expressing the exact agreement of the parties; and that copies of such agreements, at the time they are executed, are placed i n the hands of a l l parties involved. ARTICLE 10 The property should be offered by the member solely on i t s merit without exaggeration, concealment, or any form of deception or misleading representation. ARTICLE 11 Under no circumstances s h a l l a member permit any property i n h i s charge to be used f o r i l l e g a l or immoral purposes. - 1 7 3 -ARTICLE 1 2 . At the time the agreement i s reached as to the terms of a transaction the member s h a l l f u l l y inform each party regarding commissions and other expenses to which each i s respectively l i a b l e . ARTICLE 1 3 In accepting employment as an agent, the member pledges himself to protect and promote the int e r e s t s of the c l i e n t . This obligation of absolute f i d e l i t y to the c l i e n t ' s interest i s primary, but does not re l i e v e the member from the obligation of dealing f a i l y with a l l parties to the transaction. ARTICLE 14 In j u s t i c e t o those who place t h e i r interest i n h i s hands, the member should endeavour always to be informed regarding the law, proposed l e g i s l a t i o n , zoning r e s t r i c t i o n s , l e g a l orders issued and other essential facts and public p o l i c i e s which affect those i n t e r e s t . ARTICLE 1 5 The member s h a l l not accept compensation from more than one party to a transaction without the f u l l knowledge of a l l parties concerned. ARTICLE 1 6 The member s h a l l not acquire an interest i n or buy f o r himself, h i s firm or any member thereof, or a corporation i n which he has an i n t e r e s t , property l i s t e d with him or h i s company or firm, without making h i s true position known to the l i s t i n g owner! I n s e l l i n g property owned by him, or i n which he has some ownership i n t e r e s t , the exact facts s h a l l be revealed to the purchaser. ARTICLE 1 7 The exclusive multiple or co-operative l i s t i n g of property, as opposed to - 174 -"open l i s t i n g " should be urged and practised by the member as a means of preventing dissension and misunderstanding and of assuring better service to the owner! ARTICLE 18 When acting as agent i n the management of property, the member s h a l l not accept any commission, rebate or p r o f i t on expenditures made f o r an owner. ARTICLE 19 The member should charge f o r h i s services such fees as are f a i r and reasonable, and i n no case less than established by l o c a l custom. ARTICLE 20 When asked to make a formal appraisal of r e a l property, the member should not render an opinion without careful and thorough analysis and i n t e r -pretation of a l l factors affecting the value of the property. His counsel constitutes a professional service f o r which he should make a f a i r charge. The member s h a l l not undertake to make an appraisal or render an opinion of value on any property where he has a present or contemplated interest unless such i n t e r e s t i s s p e c i f i c a l l y disclosed i n the appraisal report. Under no circumstances s h a l l he undertake to make a formal appraisal when his employment or fee i s contingent upon the amount of h i s appraisal. The member s h a l l not undertake t o make an appraisal that i s outside the f i e l d of h i s experience unless he obtains the assistance of a member or appraiser f a m i l i a r with such types of property, or unless the facts are f u l l y disclosed to the c l i e n t . ARTICLE 21 The member should not advertise property x1dthout the owner's authority and i n any off e r i n g , the price quoted should not be other than that agreed upon with the owners as the offering price. - 175 -ARTICLE 22 In the event that more than one formal offer on a sp e c i f i c property i s made before the owner has accepted a proposal, a l l w ritten offers s h a l l be presented t o the owner for h i s decision! ARTICLE 23 The acceptance by a member of an exclusive or multiple l i s t i n g imposes the obligation or rendering s k i l l e d and conscientious service; when a member i s unable to render such service either himself or with the aid of h i s fellow members, he should not accept the l i s t i n g . ARTICLE 24 Before offering a property l i s t e d with him by the owner i t i s the member's duty to advise the owner honetly and i n t e l l i g e n t l y regarding i t s f a i r market value. ARTICLE 25 The member should seek no unfair advantage over h i s fellow-members and should w i l l i n g l y share with them the lessons of h i s experience and study! ARTICLE 26 The member should so conduct h i s business as to avoid controversies with h i s fellow-members; but i n the event of a controversy between those who are members of the same Real Estate Board, such controversy should be submitted f o r a r b i t r a t i o n i n accordance with regulations of t h e i r Board and not to a suit at law. The decision i n such a r b i t r a t i o n s h a l l be accepted as f i n a l and binding. ARTICLE 27 Controversies between members who are not members of the same Real Estate Board s h a l l be submitted to an a r b i t r a t i o n board consisting of one - 1 7 6 -a r b i t r a t o r chosen by each member from the Real Estate Board to which he belongs. One other member, or s u f f i c i e n t number of members to make an odd number, s h a l l be selected by the arbitrators thus choseni ARTICLE 28 When the member i s charged with unethical practice, he s h a l l v o l u n t a r i l y place a l l pertinent facts before the proper t r i b u n a l of the Real Estate Board of which he i s a member, f o r investigation and judgment. ARTICLE 2 9 The member should never p u b l i c l y c r i t i c i z e a competitor, nor volunteer an opinion of a competitor's transaction. I f h i s opinion i s sought i t should be rendered with s t r i c t professional i n t e g r i t y and courtesy. ARTICLE 3 0 When the member accepts a l i s t i n g from another broker, the agency of the broker who offers the l i s t i n g should be respected u n t i l i t has expired and the property has come to the attention of the accepting member from a diffe r e n t source, or u n t i l the owner, without s o l i c i t a t i o n , offers to l i s t with the accepting member unless contrary to the rules of the l o c a l Real Estate Board; furthermore, such a l i s t i n g s h a l l not be passed on to a t h i r d broker without the consent of the l i s t i n g broker. ARTICLE 3 1 Negotiations concerning property l i s t e d exclusively with one member s h a l l be carried on with the l i s t i n g member, not with the owner, except with the consent of the l i s t i n g member! ARTICLE 3 2 The member s h a l l not s o l i c i t the services of an employee or salesman i n the organization of a fellow-member without the knowledge of the employer. - 177 -ARTICLE 33 Signs giving notice of property f o r sale, rent, lease or exchange s h a l l not be placed on any property without authorization of the owner and no member s h a l l i n t e r f e r e with another member's sign. ARTICLE 34 I n the best i n t e r e s t of society, of h i s associates and of his own business, the member should be l o y a l to the Real Estate Board of h i s community and active i n i t s work. ARTICLE 35 The schedules of fees established by the various Real Estate Boards are believed to represent minimum compensation f o r service rendered i n t h e i r respective communities and s h a l l be observed by every member. ARTICLE 36 A member s h a l l never seek information about a competitor's transaction to use f o r the purpose of closing the transaction himself or f o r the purpose of i n t e r f e r i n g with any contractual undertaking! - 1?8 -F I R M ' S Q U E S T I O N N A I R E APPENDIX B R e c r u i t i n g a n d H i r i n g ( A ) S o u r c e o f N e w S a l e s m e n : Personal Contact Advertisement Recommendation to the firm Other Sources "A % ( B ) S a l e s m e n ' s Q u a l i f i c a t i o n s A s a p o t e n t i a l e m p l o y e r , a r e y o u i n t e r e s t e d i n a n y o f t h e f o l l o w i n g q u a l i f i c a t i o n s r e g a r d i n g p o t e n t i a l s a l e s m e n ? I n d i c a t e y o u r p o l i c y r e g a r d i n g t h e s e t e r m s . ( 1 ) (2) (3) (4) E d u c a t i o n : A g e : M a r i t a l S t a t u s : P r e v i o u s E x p e r i e n c e : iS) O t h e r q u a l i f i c a t i o n s w h i c h y o u r e g a r d as i m p o r t a n t : ( c ) H i r i n g P r o c e d u r e ( 1 ) W h o h i r e s t h e s a l e s m e n ? A g e n t ? M a n a g e r - ( w h e r e m a n a g e r i s e m p l o y e d ) - 179 -2. (2) Do y o u have more t h a n one p e r s o n a l i n t e r v i e w w i t h p o t e n t i a l e m p l o y e e s ? (3) Do y o u i n t e r v i e w the w i f e (husband) o f . t h e p o t e n t i a l e m p l o y e e ? (4) Do you use a t e s t i n g p r o g r a m or have y o u used a t e s t i n g p r o g r a m i n the past? , ( 5 ) What tests do y o u use or have y o u u s e d ? 11 T r a i n i n g P r o g r a m (A) Inte rn a l (1) P l e a s e e x p l a i n , i n d e t a i l , y o u r t r a i n i n g p r o g r a m for new s a l e s m e n . ( I n d i c a t e : Who is r e s p o n s i b l e for t r a i n i n g ; the t r a i n i n g " a i d s " or " t o o l s " u s e d ; the l e n g t h of y o u r t r a i n i n g p r o g r a m ; i f y o u r p r o g r a m ) is a " o n c e o v e r " or c o n t i n u o u s p r o g r a m . ) 3 - 180 -3 . ( 2) How o f t e n do y o u h o l d sa les meet ings :? . (3) Do y o u have a w r i t t e n " p o l i c y m a n u a l " ? (4) W h e n was y o u r " p o l i c y m a n u a l last r e v i s e d ? 19 ;.{*5) Do y o u p r o v i d e a w r i t t e n " j o b d e s c r i p t i o n " to new s a l e s m e n ? (If y o u use a wri t ten , " j o b d e s c r i p t i o n " , w o u l d you p l e a s e a t t a c h a s a m p l e c o p y ) G<5) Do y o u g i v e " i n o f f i c e " t r a i n i n g to s a l e s m e n w h i l e they are t a k i n g the pre - i i c en s ing cowsse ? » (B) E x t e r n a l (1) Do y o u e n c o u r a g e y o u r s a l e s m e n to take courses i n R e a l Esta te or S a l e s m a n s h i p ? ('2) Does the. f i r m pay p a r t , a l l or nose cf the costs of o u t s i d e c o u r s e s ? C o m p e n s a t i o n and O t h e r B e n e f i t s - S a l e s m e n (1) Do y o u have a " w r i t t e n c o n t r a c t " for y o u r s a l e s m e n ? (If y o u use a w r i t t e n c o n t r a c t , w o u l d y o u p l e a s e a t t a c h a s a m p l e copy . } ( 2) E x p l a i n , i n d e t a i l , the m e t h o d of r e m u n e r a t i o n for s a l e s m e n . ( ( I n c l u d e s u c h i t e m s as: a d r a w i n g a c e c u n't, a m i n i m u m s a l a r y , any p r o f i t s h a r i n g p l a a s , car a l l o w a n c e and c o m m i s s i o n s p l i t s . ) - l e i -'s:. Do y o u h o l d sales c o n t e s t s ? . . (A) How o f t e n do y o u h o l d these c o n t e s t s ? (B) What are the p r i z e s ? ; ; What o t h e r m e t h o d s do y o u use to m o t i v a t e y o u r s a l e s m e n ? { O t h e r t h a n f i n a n c i a l ) A r e y o u in f a v o u r cf a m i n i m u m s a l a r y ? W h a t w o u l d y o u c o n s i d e r to- be a s u i t a b l e m i n i m u m m o n t h l y s a l a r y ? Does y o u r f i r m h a v e : A group medical plan? A group insurance plan? „ A group pension plan? _ W h a t par t of the a d v e r t i s i n g costs are p a i d by the f i r m ? ( E x c l u d e , e m p l o y m e n t a d v e r t i s e m e n t s ) W h a t per cent of a s a l e s m a n ' s gross e a r n i n g s s h o u l d be spent on a d v e r t i s i n g ? , . — - — For the y e a r J a n u a r y 1st to D e c e m b e r . 31st> 1.9 63 , i n d i c a t e the n u m b e r of s a l e s m e n , e m p l o y e d for the w h o l e y e a r , i n e a c h e a r n i n g s c a t e g o r y . For s a l e s m e n e m p l o y e d for part of the year, i n d i c a t e the a v e r a g e e a r n i n g s per m o n t h w h i l e e m p l o y e d by y o u . (A) S A L E S M E N E M P L O Y E D F O R T H E W H O L E Y E A R Salesmen Salesmen Salesmen Salesmen Salesmen Salesmen Salesmen Salesmen $ 0 - $ 2,999 per year 3,000 - 3,999 per year 4,000 - 4,999 per year 5,000 - 5,999 per year 6,000 - 6,999 per year 7,000 - 7,999 per year 8,000 - 9,999 per year 10,000 and up per year - 1 8 2 - o 5 . (B) S A L E S M E N E M P L O Y E D P A R T OF T H E Y E A R 0 - $ 2S0 -300 -3S0 -400 -500 -600 -700 and up 249 per month 299 per month 349 per month 399 per month 499 per month. 599 per month 699 per month per month Salesmen Salesmen Salesmen Salesmen Salesmen Salesmen Salesmen Salesmen (11) C a n y o u g i v e any e x p l a n a t i o n for the low e a r n i n g s ( u n d e r $ 4 , 0 0 0 per annum) and the h i g h e a r n i n g s (over $ 8 , 0 0 0 per a n n u m ) . (12) C o u l d y o u suggest how the a v e r a g e e a r n i n g s i n the R e a l Es ta te Business c o u l d be i n c r e a s e d ? - 1 8 3 5 : C o m p e n s a t i o n and O t h e r B e n e f i t s - Sales M a n a g e r s (1) E x p l a i n , i n d e t a i l , how y o u r sales m a n a g e r s are p a i d . ( I n c l u d e s u c h i t e m s as : s a l a r y , c o m m i s s i o n s p l i t , p r o f i t s h a r i n g p l a n s , car a l l o w a nc e . ) O r g a n i z a t i o n (A) L e g a l O r g a n i z a t i o n (1) Is y o u r f i r m : ' A company? A partnership? A proprietorship? • j(2) If y o u r f i r m is a c o m p a n y , who c o n t r o l s the v o t i n g shares? Salesmen? ^ Nominees? Others ? . •(B) I n t e r n a l O r g a n i z a t i o n (1) How m a n y s e p a r a t e d e p a r t m e n t s are there in y o u r f i r m ? (a) L i s t the d e p a r t m e n t s i n y o u r f i r m : •  - 184 -7. (2) How many o f f i c e s do y o u have i n the l o w e r m a i n l a n d a r e a ? (3) How m a n y s a l e s m e n do y o u e m p l o y at p r e s e n t ? (4) How m a n y sales m a n a g e r s do y o u e m p l o y at p r e s e n t ? (5) W h a t is the size of y o u r f u l l time, c l e r i c a l s t a f f ? (6) A r e y o u r s a l e s m e n b o n d e d by the firm, i n d e p e n d e n t l y of the r e q u i r e m e n t s of the A c t ? T e r m i n a t i o n of S a l e s m e n ' s E m p l o y m e n t ( 1 ) How m a n y s a l e s m e n d i d y o u h i r e i n 1963 ? . 1962? (2) How m a n y s a l e s m e n gave n o t i c e to the f i r m i n 1963 ? (3) T o h o w m a n y s a l e s m e n d i d the f i r m g i v e n o t i c e i n 1963? (4) W h a t are the m,ajor causes of t e r m i n a t i o n ? (5) In y o u r o p i n i o n , how c o u l d the R e a l Estate Business be i m p r o v e d ? \ (over i f n e c e s s a r y ) - 155 -S A L E S M E N ' S Q U E S T I O N N A I R E APPEr-DIX c 1. S e x : M a l e F e m a l e 2. A g e : ; . 3 . M a r i t a l S t a t u s : M a r r i e d _ _ _ _ _ _ _ _ _ _ _ _ _ _ S i n g l e D i v o r c e d S e p a r a t e d ^ W i d o w ( er) If m a r r i e d , what t y p e of work does y o u r w i f e (husband) do? 5 . N u m b e r of D e p e n d e n t s : 6. E d u c a t i o n : Junior Matriculation Senior Matriculation Part University Complete University W h a t was the n a t u r e of y o u r work b e f o r e e n t e r i n g the R e a l Es ta te B u s i n e s s ? 8. Why d i d y o u c h o o s e to go i n t o the R e a l Es ta te Business? 9 . How l o n g have y o u b e e n s e l l i n g R e a l F . s t - a t p ? , y p . a r s . 10 . How m a n y R e a l Estate f i r m s have y o u w o r k e d w i t h i n the p r e v i o u s f o u r y e a r s ? f i r m s . 11. W h y d i d y o u l e a v e the last f i r m ? - 186 -2. Q 12 . L e n g t h of s e r v i c e w i t h present e m p l o y e r ; y e a r s . 13 . Why d i d y o u j o i n y o u r present f i r m ? 14. Do y o u c o n s i d e r y o u r s e l f to b e : A R e s i d e n t i a l S a l e s m a n ? A C o m m e r c i a l and I n d u s t r i a l S a l e s m a n ? , 15 . W h a t per cent of y o u r 1963 i n c o m e c a m e f r o m : T h e sa le of R e s i d e n t i a l R e a l E s t a t e ? T h e sa le of l ease of C o m m e r c i a l and I n d u s t r i a l R e a l E s t a t e ? ________________ 16. L i s t any r e a l estate courses or s e l l i n g c o u r s e s , o t h e r t h a n the pre-l i c e n s i n g c o u r s e , w h i c h y o u are t a k i n g or h a v e c o m p l e t e d . 17 . Do y o u . c o n s i d e r the p r e - l i c e n s i n g course is a d e q u a t e ? to o ;dli'.ffi cu 11 ? _ not idi'ff i.c'ultVenough.?. _ _ _ _ _ _ _ _ 18. W h a t p u b l i c a t i o n s , o t h e r t h a n the l o c a l n e w s p a p e r s , do y o u r e a d r e g u l a r l y ? 19 . W h a t t i m e do y o u n o r m a l l y go to the o f f i c e i n the m o r n i n g ? If y o u do not repor t to the o f f i c e e a c h m o r n i n g , what t i m e do y o u start w o r k ? - 187 -3. 20. What t i m e do y o u n o r m a l l y go home i n the e v e n i n g ? 21. As an a v e r a g e , how m a n y days do y o u have o f f per w e e k ? d a y s . 22. As an a v e r a g e , how m a n y e v e n i n g s do y o u have off per w e e k ? cvenings . 23. How m a n y days h o l i d a y d i d y o u take i n 196 3 ? ( E x c l u d e s t a t u t o r y h o l i d a y s ) _ d a y s . 24. What c l u b s a n d / o r o t h e r o r g a n i z a t i o n s do y o u b e l o n g to at p r e s e n t ? ( I n c l u d e s e r v i c e c l u b s , sports c l u b s , and c o m m u n i t y or s c h o o l c l u b s ) . 25. W h a t was y o u r gross i n c o m e f r o m s e l l i n g or l e a s i n g R e a l Estate i n 1963? $ 1962? $ 1961? $ 26. W h a t :do y o u c o n s i d e r to be y o u r m i n i m u m m o n t h l y f i n a n c i a l r e q u i r e m e n t ? ' $ per' m o n t h . 27. Does y o u r w i f e (husband) l i k e y o u w o r k i n g i n the R e a l Esta te B u s i n e s s ? 28. In y o u r o p i n i o n , ' how c o u l d the R e a l Esta te Business be i m p r o v e d ? ( i f n e c e s s a r y , use an e x t r a sheet of p a p e r and a t t a c h . ) President JOHN L. BOULTBEE BOULTBEE SWEET 4 CO. LTD. Vice-Presidents WALTER A. BROWN. COLUMBIA WESTERN REALTY LTD. J . HAROLD DAVIES SASAMAT INSURANCE & REALTY CO. J . S. WOOD J . S. WOOD REALTY LTD. - 188 -f i e U4Mtc€4m&K APPENDIX D Directors A. B U T T R E S S HASK1NS R E A L T Y L T D . S. E. C L A R K E SUN LIFE A S S U R A N C E CO. OF C A N A D A B E R T E D W A R D S BELL - I R V I N G R E A L T Y L T D . J . S. F R A S E R M O N T R E A L T R U S T C O M P A N Y A. LES I R W I N A. LES IRWIN R E A L T Y - L T D . D O U G L A S C. LEE G R I F F I T H LEE _ W I L S O N L T D . D. c . M C P H E R S O N P E M B E R T O N R E A L T Y CORP. L T D . JOHN B. P R I N G L E R U T H E R F O R D McRAE L T D . M. J . W E N A U S A. 8 . W E N A U S & SONS LTD. Past President J . P. ROBERTS H. A. ROBERTS LTD. In the next few days y o u w i l l be r e c e i v i n g a ser ies of q u e s t i o n n a i r e s d i r e c t e d to y o u r s e l f and to the s a l e s m e n i n y o u r o r g a n i z a t i o n . T h e B o a r d e a r n e s t l y s o l i c i t s your ' c o - o p e r a -t i o n i n the p r o p e r c o m p l e t i o n of these q u e s t i o n n a i r e s as your D i r e c t o r s f e e l that these q u e s t i o n s p r o p e r l y a n a l y z e d c a n g i v e us answers to some of the v e r y r e a l p r o b l e m s that we are f a c e d w i t h in the R e a l Es ta te Industry t o d a y . T h e s e q u e s t i o n n a i r e s have b e e n p r e p a r e d by the J o i n t B r o k e r -S a l e s m a n C o m m i t t e e i n c o - o p e r a t i o n w i t h P r o f e s s o r P h i l i p H . W h i t e and M r . S tan H a m i l t o n of the U n i v e r s i t y of B r i t i s h C o l u m b i a . President—BURNABY DIV. W. W. SINSER WM. SINSER REALTY LTO. President—NORTH VANCOUVER DIV. H. L. WADDELL H. L. WADDELL & ASSOCIATES LTD. President—WEST VANCOUVER DIV. L. E. KYLE L. E. KYLE REAL ESTATE M r . H a m i l t o n , who is a g r a d u a t e s t u d e n t w o r k i n g on his M a s t e r ' s T h e s i s at the U n i v e r s i t y , w i l l be a s s e m b l i n g and p r o c e s s i n g the resul ts of th is s u r v e y o v e r the next three m o n t h s . I w o u l d i m p r e s s u p o n y o u that w h i l e the resul ts of the s u r v e y w i l l be a v a i l a b l e to the B o a r d on a s t a t i s t i c a l b a s i s , the i n f o r m a t i o n c o n t a i n e d i n the q u e s t i o n -n a i r e s is and w i l l r e m a i n c o m p l e t e l y a n o n y m o u s . SALESMEN'S DIV. President—W. E. CLARKE J . S. WOOD REALTY LTO. Vice-President—R. H. SHERWOOD BELL-IRVING REALTY LTD. M r . H a m i l t o n w i l l be c a l l i n g u p o n e v e r y m e m b e r of the V a n c o u v e r R e a l Esta te B o a r d o v e r the next t h r e e months and y o u r D i r e c t o r s e a r n e s t l y s o l i c i t y o u r c o -o p e r a t i o n i n this v e n t u r e . Socrotary ALAN G . C R E E R Acs't. Secretary G E O R G E M U I R J L B : a Y o u r s v e r y t r u l y , J o h n L . B o u l t b e e , P r e s i d e n t . Member of Canadian Association of Real Estate Boards Preildont JOHN L. B O U L T B E E DOULTBEE SWEET 1 CO. LTD. - 189 -APPENDIX E June 16th, 1964. VIce.Pre.Idonts WALTER A. BROWN. COLOMBIA WESTERN REALTY LTD. J . HAROLD DAVIES 8ASAMAT INSURANCE 4. REALTY CO. J . S. WOOD J . & WOOD REALTY LTD* Dircotort A. BUTTRESS HASKINS R E A L T Y LTD . S. E. C L A R K E SUN L I F E ASSURANCE CO. OF C A N A D A • BERT EDWARDS BELL.1RVINQ R E A L T Y LTD. J . S. F R A S E R MONTREAL TRUST COMPANY A. L E S IRWIN A. LES IRWIN R E A L T Y L T D . DOUGLAS C. LEE GRIFFITH L E E - WILSON L T D . D. c. MCPHERSON PEMBERTON R E A L T Y CORP. LTD . JOHN B. PRINQLE RUTHERFORD McRAE LTD . M. J . W E N A U S A. B. WENAUS L SONS LTD . Past Preildont J . P. ROBERTS H. A. ROBERTS LTD. Dear Member: As you are probably aware a Joint Broker-Salesman Committee was formed e a r l i e r this year to thoroughly investigate and attempt to resolve some of the problems affecting both broker and salesman. This committee i s presently engaged i n a comprehensive study of the factors affecting the average income of Real Estate salesmen which i s alarmingly low. Mr. Stan Hamilton, a graduate student, working on his Masters thesis has been employed, through the University.of B r i t i s h Columbia, f o r the purpose of conducting this study. In order to do this i t i s necessary that he secure certain information and with that idea i n mind a questionnaire i s being circulated to a l l salesmen and agents. I would strongly urge that you answer this questionnaire f u l l y and accurately when i t i s presented to you. Your name i s i n no way connected with your answers and the information obtained i s for general purposes only. I t w i l l be priviledged information to Mr.. Hamilton whose job i t will, bp to • Tiro vide a general analysis of a l l the information obtained to our Joint Broker-Salesman Committee. Preildont—BURNABY DIV. W. W. SINSER WM. SINSER REALTY LTD. Preildont—NORTH VANCOUVER DIV. H. L. WADDELL H. L. WADDELL 1 ASSOCIATES LTD. President—WEST VANCOUVER DIV. L. E. KYLE L. E. KYLE REAL ESTATE I am confident that the results of th i s survey w i l l lead to a greatly improved position for the salesman who intends to make Real Estate his career. I know I can count on your f u l l cooperation. Tours truly, SALESMEN'S DIV. Preildont—W. E. CLARKE J . S. WOOD REALTY LTD. Vloe-Preildont—R. H. SHERWOOD BELL-IRVING REALTY LTD. W. E. Clarke, President Salesmen's Division. Soorotery ALAN Q. CREER Au ' t . Boorotary G E O R G E MUIR Mombcr of Canadian Association -of Real Estate Boards ¥EC:re - 190 -MISSOURI REAL ESTATE ASSOCIATON A P P E N D I X F M@hl k^limUm Hm fat iscaS Esftato SsfllesBEmesa 1. N a m e - . D a , e  2 . A d d r e s s 3 . D a t e ot B i r t h 4. S o c i a l S e c u r i t y N u m b e r 5 . Y e a r s of f o r m a l e d u c a t i o n 6 . M a r r i e d ? S i n g l e ! W i d o w e d ! D i v o r c e d ! 7 . N u m b e r of c h i l d r e n O t h e r d e p e n d e n t s : 8 . Do y o u o w n r e a l e s t a t e ! ( F e m a l e a p p l i c a n t s m a y o m i t q u e s t i o n 9 ) 9 . D o y o u c a r r y i n s u r a n c e ! W h a t k i n d s a n d a m o u n t s ' 1 0 . Do y o u o w n o n e o r m o r e a u t o m o b i l e s ! M a k e Y e a r M a k e : Y e a r : 1 1 . I h a v e l i v e d m o s t o f m y l i f e i n a : C i t y o f o v e r 7 5 , 0 0 0 C i t y b e t w e e n 2 0 , 0 0 0 a n d 7 5 , 0 0 0 T o w n o f l e s s t h a n 2 0 , 0 0 0 R u r a l a r e a , ( M a l e a p p l i c a n t s a n s w e r 1 2 — F e m a l e a p p l i c a n t s a n s w e r 1 2 a ) 1 2 . W h a t i n c o m e p e r m o n t h is t h e m i n i m u m y o u b e l i e v e n e c e s s a r y f o r y o u a n d y o u r f a m i l y ? 1 2 a . W h a t a r e y o u r r e a s o n s f o r w o r k i n g ? 1 3 . W h a t i n c o m e p e r m o n t h is t h e m a x i m u m y o u e x p e c t to e a r n i n y o u r l i f e t i m e ? 1 4 . W h a t a r e y o u r h o b b i e s ? 1 5 . Do y o u h a v e m o r e b o o k s o r f e w e r b o o k s i n y o u r h o m e t h a n y o u r f r i e n d s ? / " 1 6 . G i v e a b r i e f d e s c r i p t i o n o f y o u r e m p l o y m e n t f o r t h e l a s t f i v e y e a r s . I n c l u d e : j o b t i t l e , d u t i e s , n a m e o f s u p e r v i s o r a n d r e a s o n f o r l e a v i n g . 1 7 . L ist n a m e s a n d a d d r e s s e s o f t h r e e p e o p l e ( p r e f e r a b l y l o c a l ) w h o m w e m a y c o n t a c t r e g a r d i n g y o u r q u a l i f i c a t i o n s . I u n d e r s t a n d t h a t p e r s o n s l i s t e d i n i t e m s 1 6 a n d 1 7 m a y b e c o n t a c t e d c o n c e r n i n g m y e m p l o y m e n t r e c o r d a n d q u a l i f i c a t i o n s , a n d I h e r e b y r e l e a s e f r o m a l l l i a b i l i t y o r d a m a g e t h o s e i n d i v i d u a l s - o r c o r p o r a t i o n s w h o p r o v i d e s u c h i n f o r m a t i o n . ©MISSOURI REAL ESTATE ASSOCIATION, 1964 S i g n a t u r e . - 191 -The Officers and Directors of the Missouri Real Estate Association have realized that for some time the high rate of turnover of salesmen and women has been a serious problem in the industry. In an attempt to remedy this situation and help both brokers and salesmen, a study was under-taken. The result of this study has led to the creation of an aptitude interview form. This Missouri Real Estate Association gratefully acknowledges the use of material prepared by the Florida Association of Realtors who have done pioneer work in aptitude testing for salesmen. We acknowledge the capable work of Charles J. Krauskopf, Ph.D., University of Missouri. INSTRUCTIONS FOR USE OF APPLICATION FORM FOR REAL ESTATE SALESMEN 1. Read all of the information in this folder before the interview. Become familiar with the material to be used. 2. Plan the interview to gain the most from it for the benefit of yourself and the applicant. 3. This is a three page form. The first page is to be filled in by the applicant for you. The next page provides a set of evaluating guides to be checked by you as you use the questions of the third page. By using the same ques-tions with each person interviewed you are able to use the same standards with each applicant. There is a reason for each question in the application form. The following commentary will help you to under-stand the value and meaning of the answers given by the applicant. ©_ide fi® tf-J® iraterpiretegtfeoii ©f HjpjpSkmf F@™ f©o* Red EsMe Salesmen The following comments are intended only as a guide for evaluating the model application form for real estate salesmen. The interviewer should remember at all times judgment of the applicant should be based on the total picture of the person and not on any one characteristic, or not on any one answer. If the applicant consistently gives answers at variance to those of people who are successful in this business, the interviewer should realize that to employ such a person is to go contrary to experience. The interviewer' should also realize that in all cases there are exceptions and that one or two nonconforming answers should not govern the choice. With this general premise in mind, the following comments can serve as guides to interpreting answers that the applicant will give on the form he fills out. Questions 1 to 4 are simply identifying data and require no explanation. Question 5 will help you judge with what group of people the salesperson is most likely to succeed. The chances of success ,-ire greater when the educational achievements of the sales-person and his clients are reasonably close together. Question 6 shows the marital status of the applicant, and it is generally true that a person is more likely to succeed if the marital status is stable. In the verbal interview there might be some merit in learning the person's attitude toward his divorce, if there has been one. Question 7 is in the application for the purpose of showing the obligations of the applicant. Generally speaking, people with dependents have a greater sense of responsibility and a greater need for earnings. Question 8 does not necessarily require a "yes" answer, but an applicant should certainly believe in real estate ownership. Question 9 is intended primarily for male applicants. There should be a relationship between the amount of insurance and the family obligations of the applicant. A person with a family and no insurance is rather unusual, and the person who is in-surance poor may be lacking in confidence, which is usually a handicap to a salesperson. (Please note this is not as true of the working wife and therefore the question is omitted by female applicants. Some inquiry might be justified on this point in the case of a woman who is the head of a household.) Question 10 is to show to you the availability of trans-portation of the individual. The individual with a large family and but one car may have limited access to his transportation. In the verbal part of the interview, you might explore with the applicant the type of car that he has. As an interviewer you might want to consider relationship to the availability, depend-ability, model and condition of the kind of transportation the applicant has in relation to the class of people with whom you expect him to work. Question 11 should be considered by the interviewer in this light. Generally speaking, an applicant will be most successful working in a situation with which he is most familiar. The ob-jective to be determined is whether or not the applicant knows the type and value of property where you do most of your business. Question 12 shows there is a relationship to the standard of living a family will have, the number of dependents a man has, and the minimum income he believes is necessary. The answer should show you what standard of living he desires. Question 12a applies to women applicants. You will be able to judge from the reasons for seeking employment the amount of drive and initiative the applicant will have in relation to her employment. Question 13 is somewhat along the same line, but the inter-viewer should remember that unless a person desires to be financially successful the likelihood of that success is limited. Question 14 should be interpreted in the light of evidence that successful real estate people are generally not interested in mechanical hobbies or the more strenuous sports, but are more interested in drama, literature, and sports as spectators. Question 15 should be compared to the fact that successful real estate people apparently have more books in their home than most of their friends. Question 16 has been deliberately left blank, but it requires a narrative answer. Beside learning the activities of the in-dividual, you will have an opportunity to see their ability to organize material and express themselves concisely and clearly. Question 17 places on the interviewer the positive obligation to make some inquiry from the people you have been given as references. One of the greatest failings of interviewers is the un-willingness to make these checks regarding applicants. - 192 APPENDIX G .Heal Estate Interviewer Guide By Charles J. Krauskopf, Ph.D. ubMed &y W S M A Ukal Estate Association PRESIDENT: BRADY STEVENS EXECUTIVE VICE PRESIDENT: CHESTER L . WOLFE RESEARCH COMMITTEE: VERNON MILES, Chairman BRUCE J . BRANCH ORVILLE G . CLARK PAUL HAMILTON RAYMOND W. LANSFORD M A Y , 1 9 6 4 - 193 -Getting Information Books on interviewing often talk about leading questions or general leads. This means questions de-signed to bring out narrative answers, rather than single word or short phrase answers. This is not the leading question on the Perry Mason show which is designed to get a specific answer. A good leading ques-tion in interviewing stimulates the candidate to talk, is limited to one area and gives no hint of the answer the interviewer would consider favorable. For ex-ample: How do you feel about rent control? Now you. wouldn't say you were in favor of rent control, would you? People who sell for a living in particular should watch this. Their usual business conversations often have the opposite goal. Listen to the answers. You cannot use information, you did not hear. No matter how skillful an interviewer is in getting others to talk it is useless if he does not listen. Patterned interviews have several advantages for selection interviewing. They make comparing candi-dates easier than a free interview. They make it easier for an interviewer to listen since he does not have to think so much about what to say next. At a minimum some questions should be prepared and asked of all candidates. It is generally better to use a common form for all. Many interviewers are uncomfortable in silence. Remember, the candidate is usually less comfortable. Also, his reaction to silence is often indicative of his general self assurance. Silence can be used as a tech-nique to get more information. Often, if the interviewer does not ask the next question immediately the can-didate will continue talking. It is easy to overuse this technique since it usually makes people uncomfortable. Reflection is a technical label for a type of state-ment which usually leads people to talk more or ex-pand on a previous statement. It is a quick summary formed as a question. For example, after a candidate has given two or three situations where the foreman on his present job favored another man, "The foreman plays favorites?" There are varying degrees of this, each with its own technical name, in the same situation one could say, "You really don't like the foreman!" Or, "You hate the foreman, don't you?" The difference is in how much of the feeling tone is reflected in relation to the actual content or meaning of the words the^  per-son says. If you reflect too much of the feeling ex-pressed you are actually interpreting his expression more than his words. This can be easily overdone. The selection interviewer should stick fairly close to the content meaning of the words. Reflecting expressed emotion is a technique of the psychologist and psy-chiatrist and if overused can lead to very unhappy "situations. Tentative analysis is another technique often used to get information. This is a statement to indicate to the candidate that you are really listening and are in-terested. You summarize what he has said about a particular topic, then ask if you are right. One of the main differences from reflection is that it covers a longer time period. If the candidate has said all he wants to at this point he will say so and you can ask the next question, but if he was waiting for some re-action he may say much more. Evaluating the information This is probably the interviewers most difficult task. At the end of the interview he should have some idea of the candidates: 1. Ability to do the work involved, including knowledge of the field. 2. Ability to meet people easily without antagoniz-ing them. 3. Interest in real estate and sales. 4. Likelihood of remaining with the firm. 5. Likelihood of acceptance by other members of the organization. This requires that he keep these things in mind throughout the entire interview. The model selection interview form was designed to help the interviewer with questions to ask to get the needed information and to help in collecting impressions after the interview. It should also help in covering the same kinds of infor-mation with each applicant, making comparability easier. Suggested Further Reading on Interviewing 1. Balinsky, B. The Selection Interview. 2. Bingham, W. V., Moore, B. V., and Gustad, J. How to Interview: 3. Kahn, R. L. and Cannell, C. F., The Dynamics of Interviewing. © MISSOURI REAL ESTATE ASSOCIATION, 1964 - 194 -nteri/iewerd What Is an Interview? An interview is nothing more than a conversation with a purpose. Selection Interview A selection interview has several purposes. The first is to obtain information about a person applying for a job. It is used to supplement information obtained from written application blanks and information from references. It has a second purpose of selling likely candidates on accepting the job. It does no good to pick out the most likely candidates if the procedure used is offensive to them. A third purpose from the candidate's point of view is to find out all he can about the people he might be working with and what they will expect him to do. Patterned Interview A patterned interview is one where the same, or nearly the same, questions are asked of several people so that they can be compared.. Usually some sort of form or interview guide is used. Sometimes the inter-viewer memorizes a set of questions to ask or topics to cover. Parts of an Interview This depends partly on the purpose, but all inter-views have at least three. The first is a warm up. The second is a working section. The third is an ending. The second section is where the purposes mentioned above are most evident, but their success depends a great deal on the other two parts. Warm Up The one thing a section interviewer wants most is information about the person he is talking to. He will not get much if the person is uncomfortable and ill at ease. He needs to warm up to talking about himself. Baseball, the weather, local affairs, or some more neutral subject is usually used to get the person used to the situation and the interviewer and just to get him started talking. Ending An abrupt or completely impersonal ending to an interview will defeat one of the purposes of selection interviewing. It will give the candidate a poor impres-sion. Other things being equal this could be the factor which will send a good candidate to some other em-ployer. Note taking As long as you do not keep your head buried in paper, most job applicants expect you to make some notes and are not uncomfortable when you do. Sources of Error and Interference Errors and interference in interviews come from many places. Here are three of the most important and basic ones. Additional ones may be found in the refer-ence given at the end. The halo effect is very common. This is the generalization of one characteristic of a per-son, good or bad, to the point where the whole evalu-ation of a person is made on that characteristic. For example, a person who is sloppily dressed on first meet-ing may be rated low on many things no matter what he says. A Cardinal fan may get a very good impression of another Cardinal fan during warm up where an in-terviewer who hates baseball may decide the candidate is showing poor judgment spending so much time at the ball park. Above average height is another character-istic which creates positive halo. Verbal facility, the "gift of gab" is probably the most common halo creator. Interviewer prejudice is another common inter-ference in selection interviewing. Some employment interviewers do not like people who smoke pipes. I have met one who would not hire anyone who salted food before tasting it. Some feel that women cannot sell, or be mechanics. Make sure the things you are rating are related to the job. Do you know anyone with this trait who is a success in selling? A third, very important, source of error in inter-viewing is not listening. Many interviewers, particu-larly inexperienced ones, do not listen to what the other person says. Good interviewing consists mostly of getting the person to talk about the job or other perti-nent questions and then listening carefully to what the person says. - 1 9 5 -MISSOURI REM ESOTE ASSOCIATION Ins t ruct ions to i n t e r v i e w e r : Th is f o r m c o n t a i n s f o u r a r e a s o f q u e s t i o n i n g a n d s o m e s u g g e s t e d q u e s t i o n s in e a c h . Y o u s h o u l d n o t f e e l b o u n d t o t h e e x a c t w o r d i n g o r n u m b e r o f q u e s t i o n s . U s e t h e s e q u e s t i o n s as i d e a s a n d w o r d y o u r q u e s t i o n s i n a w a y w h i c h f e e l s c o m f o r t a b l e t o y o u . M a k e t h e s u m m a r y r a t i n g s at the e n d i m m e d i a t e l y . It is a l s o a g o o d i d e a to j o t d o w n a d d i t i o n a l n o t e s t h e n a b o u t w h y y o u m a k e e a c h r a t i n g as y o u d o . P r e v i o u s E x p e r i e n c e ) . W h a t d o y o u e x p e c t to g e t o u t o f s e l l i n g r e a l e s t a t e t h a t y o u d o n ' t g e t i n y o u r p r e s e n t j o b ? 2 . B a r g a i n i n g is i m p o r t a n t i n t h i s b u s i n e s s . H a v e y o u e v e r d o n e a n y b a r g a i n i n g ? F o r a n y o n e e l s e ? H o w d i d i t g o ? (ask c a n d i d a t e to t e l l a b o u t a s p e c i f i c s i t u a t i o n ) . 3. Can y o u g i v e m e e x a m p l e s o f o n e o r t w o s i t u a t i o n s w h e r e y o u h a d to p e r s u a d e o t h e r p e o p l e to d o s o m e t h i n g ? 4 . Do y o u h a v e a n y q u e s t i o n s a b o u t t h i s j o b o r a b o u t s e l l i n g r e a l e s t a t e ? 5 . W h a t e x p e r i e n c e s h a v e y o u h a d w h i c h l e d y o u to a p p l y f o r a j o b a s a s a l e s m a n ? 6 . W h a t a r e t h e m o s t i m p o r t a n t t h i n g s y o u l e a r n e d o n y o u r f i r s t j ob? 7 . If y o u r s u p e r v i s o r (on y o u r p r e s e n t j o b , o r s c h o o l p r i n c i p a l , e t c . ) w e r e a s k e d w h a t a r e y o u r m o s t i m p o r t a n t a s s e t s , w h a t w o u l d h e say? 8. C a n y o u f e l l m e j u s t w h a t y o u r d u t i e s a r e i n y o u r p r e s e n t j o b ? (or o t h e r j o b w h i c h h e c i t e s as r e l e v a n t e x p e r i e n c e ) . S c h o o l a n d T r a i n i n g 1. H o w w o u l d y o u d e s c r i b e y o u r s e l f as a s t u d e n t ? 2 . W h a t w e r e y o u r f a v o r i t e (most d i s l i k e d ) s u b j e c t s ? W h y ? 3. W h a t p o s i t i o n s d i d y o u h o l d ( a c t i v i t i e s , p o s i t i o n s o f l e a d e r s h i p ) a n d jus t w h a t d i d y o u d o i n t h e m ? F a m i l y 1 . If I a s k e d y o u r w i f e w h a t s h e t h o u g h t a b o u t t h i s j o b , w h a t w o u l d s h e say? 1. If y o u h a d a l l t h e m o n e y y o u n e e d , w h a t o c c u p a t i o n w o u l d y o u c h o o s e ? 2 . H o w l o n g w e r e y o u i n y o u r p r e v i o u s job? (get s p e c i f i c i n f o r m a t i o n f o r p o s s i b l e c h e c k w i t h r e f e r e n c e s ) . 3. H a v e y o u e v e r b e e n r e f u s e d a b o n d ? 4 . A n y o t h e r s p e c i f i c i n f o r m a t i o n n e e d e d . P e r h a p s t h e r e is s o m e t h i n g o n t h e w r i t t e n a p p l i c a t i o n o r i n c o r r e s p o n d e n c e w i t h t h e c a n d i d a t e y o u w a n t t o ask a b o u t . 5. G i v e t h e c a n d i d a t e s o m e p a r t of t h e i n t e r v i e w to ask a n y q u e s t i o n s h e m a y h a v e . ©MISSOURI REAL ESTATE ASSOCIATION, 1964 v G e n e r a l M A Y 1964 JfflfiSSOQJlRI UHkl ESTATE A S S O C Candidate's Name_ 1. General appearance: First impression good? Pleasant or irritating voice? Unusual habits? Well groomed! I I I Date-unsatisfactory for salesman rather unfavorable impression acceptable 2. Expressive ability: Speak well! Easily grasp question meaning? Confused in presenting ideas? I ! I very favorable commands admiration unusually clear and convincing 3. Self confidence: At ease in the interview? Seems to know what he wants? very good ability to express himself about average for salesmen hesitant or gets involved in detail confused superb poise, good humor under stress 4 . Friendliness: Does he like people? Do they like him? I wholesomely self confident well poised most of time I impatient or shows some impulsiveness irritable or over sensitive, easily disconcerted or timid keeps people at distance 5. Knowledge of real estate business: I does not attract friends easily approachable, likeable has many friends inspires personal loyalty none at all as much as the average houseowner could pass salesmen exam could pass broker exam Additional comments-. ©MISSOURI REAL ESTATE ASSOCIATION, 1964 - 197 -APPENDIX H REAL ESTATE COUNCIL OF BRITISH COLUMBIA PRE-LICENSING COURSE FOR REAL ESTATE SALESMEN Lessons Business Practice Introduction to Real Estate Law of Contract 1 and 11 Estates and Interests i n Land 1 Estates and Interests i n Land 11 Elements of Appraisal 1 Law of Mortgages Mortgage Market Rights and Limitations i n Land Elements of Appraisal 11 T i t l e Registration Law of Agency Financial Statements 1 Real Estate Act and Code of Ethics 1 Building Construction 1 Financial Statements 11 Real Estate Act and Code of Ethics 11 Building Construction 11 Local Taxes on Real Estate Appendices Sample examination (not to be submitted f o r marking) Analysis of Specimen Houses L i s t of Course Material Supplied Syllabus of Office Training A Collection of Real Estate Forms NOTE: An assignment follows each lesson, except that there i s only one assignment f o r Law of Contract 1 and 11, and only one for Estates and Interests i n Land 1 and 11. Faculty of Commerce and Business Administration University of B r i t i s h Columbia* - 198 -APPENDIX I REAL ESTATE AND APPRAISAL DIPLOMA COURSE COURSE OUTLINE 196^ /65 Course Number of Lessons FIRST YEAR Land Law I 9 Economics 10 Building Construction 10 SECOND YEAR Land Law I I 6 Urban Land Economics k P r i n c i p l e s of Appraisal 10 Accounting 10 THIRD YEAR (Appraisal Option) Assessment and Taxation 10 Law of Expropriation 10 Advanced Appraisal 10 THIRD YEAR (Real Estate Option) Mortgage Financing 13 Real Estate Practice 7 Land Developnent and Community Planning 10 EXAMINATIONS Examinations are held approximately one week af t e r the l a s t lesson i n each subjecti Supplemental examinations are held i n June I965. - 199 -T i t l e of Lesson and Contents APPENDIX J  Syllabus of Office Training Business Practice Introduction to Real Estate Law of Contract I Law of Contract I I Estates & Interest i n Land I General o f f i c e procedure and organization. Operation of the business. Forms of l e t t e r . Measurement of houses. Explanation oft general, exclusive and multiple l i s t i n g s as they affect the p a r t i c u l a r o f f i c e . Method of dealing with each type of l i s t i n g . (In o f f i c e s where multiple l i s t i n g s are not used, r e f -erence to i t may be ignored). Actual examples of transactions completed under di f f e r e n t types of l i s t i n g s would be use-f u l , methods used to obtain l i s t i n g s . Methods of making the sales; obtaining the prospects signature. Examples of Interim Agreement forms; points to notice i n completion of the form. See syllabus of o f f i c e t r a i n i n g above. Explanation of: transactions r e l a t i n g to properties which were or had been subject to tenancies; terms of tenancies; chattels and f i x t u r e s passing on sale of a house; pa r t i c u l a r s required on ob-t a i n i n g a l i s t i n g i n respect of t i t l e and f i x t u r e s and chattels included or excluded from the transaction! Inspection of houses! 200 Estates & Interests i n Land I I Elements of Appraisal I Law of Mortgages Mortgage Market Rights & Limitations of Land Ownership. Elements of Appraisal I I T i t l e Registration of Land i n B.Ci Law of Agency See syllabus of o f f i c e t r a i n i n g above. Explanation of o f f i c e method of appraisal; c o l l e c t i n g market data r e l a t i n g to r e s i d e n t i a l property. Explanation of any mortgage deeds or agreements f o r sale which are available i n the o f f i c e . Explanation of various types of mortgage transactions contained i n o f f i c e f i l e s . As a point i n s e l l i n g , emphasize the contribution of r e s t r i c t i v e covenants i n the maintenance of values. P r a c t i c a l effect of main bylaws affecting r e s i d e n t i a l r e a l estate, e;g., l e g a l suites. See syllabus of o f f i c e t r a i n i n g f o r Elements of Appraisal I . Conveyancing procedure used i n the o f f i c e . Information required f o r purpose of conveyance. Where possible, a v i s i t to the l o c a l Land Registry with an ex-planation of the information obtainable there would be useful to the student. Explanation of l i s t i n g forms used i n the o f f i c e ; commissions payable on different types of l i s t i n g ; l i m i t a t i o n s imposed by diff e r e n t types of l i s t i n g . - 201 -Financial Statements I Real Estate Act & Code of Ethics I Building Construction I Financial Statements I I Real Estate Act & Code of Ethics I I Building Construction I I Local Taxes on Real Estate Explanation of Statements and i n f o r -mation. General explanation of requirements of the Act insofar as i t affects o f f i c e practice, e.g!, display of licen s e , renewal of license, bonding provisions, returns to the Superintendent of Insurance! Inspection of houses with demonstrations of di f f e r e n t types of standards of construction! Explanation of closing statements on o f f i c e f i l e s . Method of obtaining information required to compile a closing statement. Scale of commission charges. See Syllabus of o f f i c e t r a i n i n g for Real Estate Act & Code of Ethics I . See Syllabus of o f f i c e t r a i n i n g for Building Construction I . Practice at obtaining figures of assess-ment on actual properties! Instruction on tax rates prevailing i n the area of the o f f i c e ! Effect of l e v e l s of assess-ment and effect of home improvements on assessment! Average figures of assessment for homes of dif f e r e n t value! 

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