Frequently Asked Questions (FAQs) About
Real Estate Management and Real Estate Managers
Q: How would you define professional real estate management?
A: Professional real estate management is the administrative operation and maintenance of properties to meet the objectives of their owners. It also involves planning for the future of the properties by proposing physical and fiscal programs that will enhance the value of the real estate.
Q: What are the primary responsibilities of real estate managers?
A: Their primary responsibilities are: (1) management of the physical site, (2) management of on-site and off-site personnel, (3) management of funds and accounts, and (4) management of leasing activities and tenant services.
Q: What sparked the development of real estate management as a function within the real estate industry?
A: The function resulted from a number of factors, but a major trigger occurred in the 1930s after lenders foreclosed on thousands of mortgages and discovered that real estate management required specialized skills.
Q: Is real estate management growing as a profession?
A: Yes, it is growing steadily because of these three concurrent trends: (1) simultaneous growth of the population and its requirements for space has increased the total number of all types of buildings, (2) a larger percentage of real estate is considered investment property and (3) there is increasingly wide acceptance of the fact that real estate management requires special training and education.
Q: Generally speaking, what is the primary goal that property owners – and therefore their real estate managers -- strive to achieve?
A: That goal is usually for the property to reach its highest and best use, meaning that it generates the highest net operating income (NOI) possible and is being used in the best possible way based on its location, size and design.
Q: How do real estate managers determine the direction they will take to achieve the owners’ goals?
A: They typically start by developing a management plan – an analysis of the current physical, fiscal, competitive and operational conditions of a property expressed in relation to the owners’ goals. If these conditions are not compatible with attaining those goals, real estate managers generally use the management plan to recommend and support physical, financial or operational changes. Management plans also may be developed to evaluate the feasibility or practicality of plans owners have for their property.
Q: Can you describe the management agreement that formalizes the relationship between real estate managers and property owners?
A: A management agreement is a binding contract that establishes the manager’s legal authority over the operation of a given property. The manager usually is an agent for the owner, serving as the owner’s fiduciary or trustee of the owner’s funds and assets associated with the property. The agreement establishes the relationship between the owner and the manager for a fixed period, defines the manager’s authority and compensation for services provided, outlines procedures, specifies limits of the manager’s authority and actions, and states financial and other obligations of the property owner.
Q: What are the ramifications of the real estate manager’s role as an agent of — and therefore fiduciary responsibility to — the property owner?
A: In the role of agent, the real estate manager must exercise a high standard of care in managing both money and property for the owner (fiduciary capacity). Being a fiduciary creates certain legal obligations. The manager must be loyal to the interests of the client and not engage in activities contrary to that loyalty. This means scrupulous attention to the handling of the owner’s funds and not accepting any fee, commission, discount, gift, or other benefit that has not been disclosed to and approved by the owner client.
