The Journal of Property Management (1998) reports that real estate has been freed up by certain laws in the 1990s, most importantly, the relaxation of the Glass-Steagall Act of 1933, allowing market access to real estate by banking institutions; the Taxpayer Relief Act of 1997, allowing property owners indefinite tax deferral on the sale of property (an estimated $91 billion to reinvest in real estate); and the 1998 appropriations bill which cuts housing costs by introducing \”mark-to-market\” rents (Anonymous, 1998, p. P6S).
All of these translate into financial advantages for real estate companies. Interestingly, the 1990s have already seen changes that complement these changes. Most real estate companies have become management companies. Much like an investment portfolio, they not only list and sell property, but also manage and invest in a number of properties. In addition, they are taking advantage of mergers and agreements. As if this were not enough change in a single decade, many real estate companies are changing the way they do business internally.
Although they have always operated on a contractual basis with agents, stakeholding and entrepreneurship have new meaning in the 1990s (Davies, 1995, p. 54). In addition, cultural demographics are changing quickly. This means changes in organizational structures within real estate offices. This paper will address these changes in the context of the ethical considerations for which real estate has always been accountable.
Among other things, real estate brokerage services in the 1990s includes understanding and complying with federal and state real estate laws; surveying real estate; evaluating real estate according to specific criteria; ethically representing buyers and sellers and seeing that all agents do likewise performing marketing analyses, cycles and trends; establishing public relations and advertising campaigns; conducting business according to corporate management; operating within cooperative ownership agreements; determining investment areas, and analyzing financial procedures of both the company and its agents.
Of equal importance is the new financial structure of the real estate management brokerage, which includes financial investment on a large scale. These may include listing, investment in, and sale of private, public and commercial properties; forming alliances, acquiring or merging with trusts, construction companies, security companies, and other vendors. The structure of these alliances, acquisitions and mergers will operate like a financial portfolio, used to both diversify the real estate management company and to reduce costs of operation at the same time.
Real estate laws vary from state to state, therefore, they will not be addressed except to note that laws govern real estate as well as business operations. However, real estate ethics have a great deal to do with laws. Some of the laws that affect ethical conduct include human resource/vendor payment and relationships, property valuation, appraisal, property inspections, and business management practices. Ethics for real estate agents and management require fair treatment of both the buyers and sellers of real estate whom the company represents.
Property management ethics include such issues as security, safety, nontraditional services, and related concerns. Vendor ethics include all of these issues. For this reason, legal contracts between the management company and these resources are answerable to various sets of laws. Modern real estate management firms, like other companies, must continuously conduct marketing analyses, be aware of cycles and trends, establish public relations and advertising campaigns.
Corporate management concerns will most likely include creating an entrepreneurial environment where managers, contractors and personnel will serve all of the brokerages interests as team members on specific investment and administrative projects. (This is discussed in more detail in the following section. ) Corporate finance will not only include setup, accounting and ledger practices, but property and network investments, divestiture and balancing a number of diverse financial interests.
For example, Melcher & Forest (1997) report that the biggest growing megacorporations are real estate management firms. They write: Until the early 1990s, most real estate was owned by private, family-owned companies that relied entirely on borrowed money and generated returns by flipping properties. The 1990s bust, though, caused private financing to evaporate. The mortgage-backed security market emerged to provide debt financing.
And as industrial corporations had done decades earlier, real estate firms started tapping the public market, via initial public offerings, for equity capital. The vehicle was the real estate investment trust, or REIT, which was created by Congress in 1960 but that had never attracted much interest (Melcher & Forest, 1997). It didnt attract much interest until the 1990 bust, but it is now the basis of most management firms.. Property management is concerned with a number of areas, particularly mergers, acquisitions and management of property in addition to traditional services.
For all acquisitions or investments, Jerry Belloit (1997), a professor at Clarion University states that each company goes through an acquisition phase that includes setting investment goals, defining constraints, establishing ownership rights, analyzing the market and conducting feasibility studies, financing the investment, administering the acquisition, setting up administration in the investment property, surviving an alienation phase, and creating a decision-making environment.
All of this must be accomplished with a combination of in-house personnel, contractors, and alliances formed with banks, trusts, credit unions, appraisal firms, etc. Belloit (1997) provides that during the investment analysis portion of an acquisition alone, the management firm considers diversity in terms of homes, apartments, condos, hotels/motels, nursing homes, retirement villages, recreational areas, land, warehouses, government buildings, commercial real estate, malls and retail outlets, and other types of real estate.
Additionally, these can all be based on speculation, developed entities, and trade and business trends. Like others, he recommends that management companies consider all investments in terms of long-term rather than short-term investments (Melcher & Forest, 1997), and offers the following example of a recreational/forestry site investment consideration.