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Lecture 3

LECTURE 3 MARKETING, BROKERAGE, AND MANAGEMENT.docx

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Department
Administrative Studies
Course Code
ADMS 3810
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LECTURE 3: MARKETING, BROKERAGE, AND MANAGEMENT Types of Real Estate Marketing Studies 1. Market Research (market study) – Involves the collection of all relevant data relating to the product or service being studied. There are two kinds of date: Primary Data are developed directly by the market researcher, for example, by conducting surveys or making personal observations. Secondary Data are gathered from existing studies, for example, census figures and trade association data. In Real Estate, a market study analyzes general market demand for a single type of real estate product at a particular location. The market study considers both the present and future supply of competitive facilities. E.g. Study of the demand and supply of office space in downtown Toronto over the period of the next 24 months. Normally, a market study ends with the creation of an absorption schedule. Such a schedule shows the time required for the market to absorb the expected supply of a particular type of real estate space that will be offered in the near future, as well as the expected price range for the space. 2. Market Analysis (feasibility study) – Once having as much data as possible, the marketing specialists will analyze the data and interpret the results to determine whether a proposed product or service can in fact be sold successfully. In the case of real estate, the feasibility study seeks to determine whether a specific real estate can be carried out successfully in a financial or investment sense. Thus, market analyses nearly always involve computing likely rates of return on investment for a particular product. 3. Market Plan (marketing study) – The course a particular company will follow in selling its goods and services. Many companies prepare both long-range and short-range marketing plans; the former is really a general framework for the company’s activities in the future, and the latter is a more specific program for selling goods and services in the context of the current economic picture. A marketing study usually is a short-term program devoted to selling or leasing space in the particular project that is the focus of the study. In the case of motels, hotels and other hospitality facilities, marketing is done virtually continuously because space must be sold each day of the week. Elements of a Marketing Plan • Marketing Strategy – Involves defining the objective. • Profit Maximization – in the shortest possible time or does the seller have some interest form of residual interest in the property? • Potential Pool of Tenants and Buyers must be identified – The marketing plan must specify the rent or price levels that are projected to attract tenants or purchasers. The result of this identification of tenants and price levels is the definition of a primarily geographic market that will be the focus of the marketing strategy. This process of market segmentation is critical for the remainder of the marketing plan, because the plan is largely a function of the needs, desires, and characteristics of the defined market segment. • Marketing Techniques – A list of techniques that will be utilized: o A sign at the property o Classified or space advertisements o Billboards o Printed brochures o Radio or television time o Direct mail In choosing the particular marketing techniques, the seller must bear two considerations in mind: One is the financial resource available for marketing, since marketing is often significant cost of the budget. Second is the sales or leasing schedule, which is necessary for the project to succeed financially. The sales or leasing schedule is important because the longer it takes to market the properties, the higher will be such carrying costs as interest, real estate taxes, and selling costs. MARKETING RESIDENTIAL PROPERTIES The overwhelming percentage of marketing transactions in real estate involve the sale or rental of residential space, whether single-family houses, condominiums, or apartment units. New Single Family Houses – a marketing plan for a new residential subdivision encompasses the following steps: Choosing the site – In the case of one-family houses, proximity to schools, shopping and transportation to work are essential. Size and design of houses – Home styles vary among different parts of the country, for different income groups at different period of time. Choosing Marketing Strategies – The builder chooses his location, style, and size of the homes in terms of a particular type of user: young married couples without children, already established families, or older couples whose children have left home. At this stage, a specific marketing strategy must be developed for successfully reaching the target group. Preparing Publicity and Advertising – This involves preparation of a detailed brochure that can be given out at the site, classified and space advertising in local newspapers, and possible a radio and TV campaign. Selecting and/or training a sales force – The sales force, which will deal with prospective buyers and “close” the sale, need to be retrained. Resale of Single-Family Houses – The great majority of resale transactions are consummated through real estate brokers, who find their major source of commissions in this type of marketing. Condominium Projects – The rapid growth of condominiums as a form of housing is due to the fact that they combine the status of ownership and tax advantages with “maintenance-free living.” Cooperative ownership, in those areas of the nation where it is popular offers some of the same advantages. Apartment Rentals – The final major category of marketing residential space is the leasing of units in rental buildings. This is often the function of the property. MARKETING INCOME PROPERTIES Marketing income properties involve two quite different types of transactions, as follows: 1. The sale of an income property (office building, apartment building, or shopping centre, etc.) to investors who expect to hold the property for rental income or to space users who prefer to buy rather than rent space needed to carry on their trade or business. 2. The rental of space in an income property, almost always to space users such as business tenants, retail operations or service firms. Income Property Sales – a purchaser of an income property is more sophisticated than the single-family buyer, and tax consequences become much more important in this type of transaction. The income property agent often will use a “rifle approach” rather than a “shotgun approach” in seeking out prospects. Purchasers of income properties can be grouped into three general categories: 1. The individual or small business firm seeking a property for use in a trade or business. 2. The institutional purchaser seeking to develop a portfolio of income properties. (E.g. life insurance companies, real estate investment trusts, large public partnerships, and pension funds.) 3. Falling somewhere between the first two categories, are individuals and smaller syndicates that are made up of a number of investors, frequently local professionals and business people. Income Property Rentals – Marketing strategies to rent space in an income property will depend largely on the type of tenant that is required. When retail space is sought to be leased, the broker must determine the kinds of retail operations that might be suitable and make an effort to locate business concerns within the area that might be interested in moving or expanding to a new location. In the office-building situation, the quality of the constructed space is more likely to be able to offset a location disadvantage. The retailer, conversely, demands a location that is convenient to trade clients. LOCATING PROSPECTIVE TENANTS The agent can use the following techniques to develop a pool of prospective tenants as follows: • Door to door canvass • Telephone canvass • Distant prospects • Letter of intent T • The space study SPECIAL PROPERTIES Some types of property sales are handled by specialists, since they require special skills on the agent’s part, or because only a limited market exists for the property. The selling fee or commission in these situations often is negotiated for each particular transaction in recognition of the marketing expertise required and because of the extra time, effort and expense usually involved. • Vacation Homes • Building Lots • Timesharing • Farms and Ranches Farms and Ranch brokerage is an important specialty because of the large amount of farm and ranch property and its importance in the overall economy. SELLING BIG-TICKET REAL ESTATE Marketing alternatives open to the seller are as follows: • Wide distribution through real estate brokers; • Auction; • Sealed bids; • Direct offering to principals; • Limited distribution to brokers. MARKETING DISTRESSED PROPERTIES The term is sued to describe a for-sale project in which the developer is having difficulty with sales or any income property that is failing to show a positive cash flow or that has already been foreclosed by an unpaid lender. Three examples of how creative thinking can help a property in trouble: • Lower carrying costs • Equity buildup • Redesign units REAL ESTATE BROKERAGE This section focuses on the people involved in real estate transactions – either the principals (buyers and sellers) or their agents (brokers and associated salespersons). The Key Role Played By Brokers – The term marketing process refers to the methods used to enable, assist or encourage the sale of property and goods in the marketplace. Sales Between Principals Directly • In the real estate industry, sales between the seller and the buyer directly are fairly common in the resale of private homes. • Residential real estate advertisements frequently specify “for sale by owner” or “principals only”. Sales By Dealers • Sales by dealers are by far the most common form of commercial transaction found in the general economy. A dealer performs an intermediary role between the producer of goods and the final consumer. Sales By Brokers • A broker is an intermediary who brings together buyers and sellers of the same commodity or product and who receives a commission for his/her services. Why Brokerage For Real Estate Transactions? • High cost of property • Unique Asset • Need for financing the property • Complex and difficult market DEFINING BROKERAGE A broker is anyone who, acting for valuable consideration, sells, buys, rents or exchanges real estate. A broker requires a license to receive any commission of fees: Two types of licenses: 1. The Broker’s License 2. The salesperson’s license. The broker’s license permits the holder to carry on any brokerage activities independently. The salesperson’s license permits the holder to render brokerage services only in association with a fully licensed broker. Certain Categories of People are exempt from the licensing requirements: • Individuals Acting on their own behalf • Attorneys acting in the course of their law practice • Court-appointed administrators, executors, or trustees • Public officials in the course of their official duties • Employees or regulated utilities acting the course of the firm’s business. THE BROKER AS AGENT The agent is anyone who represents or acts for another person in dealing with third parties. The agent is in a fiduciary relationship with a principal. An agent acts only with the principal’s consent and is subject to his discretion and control. Special Agent – are authorized to perform one or more specific acts for the principal and no other. Real estate brokers normally are special
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