When owning, managing, and supervising a real estate office it is important to describe what considerations are involved in developing a business plan and what types of initial start-up costs are involved in opening a real estate business. It is important to describe factors to consider when projecting income and expenses of a real estate business and list typical fixed and variable expenses incurred by a real estate business.

Comparing the advantages of purchasing a franchise versus remaining an independent broker is also an important aspect while also distinguishing between cash-basis accounting and accrual-basis accounting. Describing considerations when hiring sales managers and personal assistants and when recruiting sales associates, and identify IRS treatment concerning employees versus independent contractors is imperativr when operating a real estate office.

The considerations regarding development of employment agreements, including the various commission structure plans and what fees and payments typically are deducted from the associate’s commission are all pertinent apsects of operating a brokerage. Identifying important topics to include in a training program for sales associates and what should be included in a policy and procedures manual are very beneficial to a real estate brokerage.

Q. A broker will be opening a new brokerage firm and is working on her business plan. She projects that her start-up costs will be about $34,000. She expects monthly revenue for the first year will be $15,000 and that her monthly expenses will be $12,000. What minimum amount of cash should she have available before starting up? A. $106,000

Q. Brokers must give their employees W-2 forms and give their associates Form 1099 for the previous year A. no later than January 31.

Q. Which BEST illustrates institutional advertising? A. “For the best customer service, list with Jones Realty”

Q. If a brokerage firm projects that next year it needs cash of $175,000, including the broker’s salary and profit, and if each sales associate typically brings in $35,000 in company dollar per year, how many associates will be needed? A. 5

Q. A broker projects that her office expenses will be $346,000 this year. Her office has six employees and nine sales associates. In order for her to break even this year, how much must each sales associate bring in gross receipts? A. $38,444

Q. Which item on the balance sheet BEST indicates that a firm uses accrual-basis accounting? A. Accounts receivable

Q. The Internal Revenue Service (IRS) is NOT likely to disqualify an independent contractor status if a broker: A. pays a higher commission to a sales associate than is customary.

Q. Failure to pay for the annual business tax is A. Misdemeanor

Q. Which document provides the direction for an organization, as well as all the steps and procedures involved in accomplishing its goals? A. Business plan

Q. A broker purchased a hazard insurance policy for his office building last year when he had many vacancies. This year he rented nearly all the space and got much more rental income, but the insurance premium did NOT increase. The insurance expense can be considered A. Fixed cost

Q. Which is the BEST example of a variable expense? A. Commissions paid to sales associates

Q. A sales associate employs a licensed personal assistant. He agrees to pay $15.25 per hour for administrative work, plus 25% of all commissions for work requiring a license. Based on this information, which statement is TRUE? A. The sales associate may not pay the licensed assistant; the broker must make all payments.

Q. Last year, a brokerage office had 250 sales. After paying sales commissions to the associates, the broker had $245,000 remaining. The office’s monthly expenses are expected to be $19,000 for the next year, and the broker wants to make an $8,000 monthly profit. Assuming no change in the company dollar percentage, how many transactions must she have each month to meet her goal? A. 27.55