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The dreaded real estate commission audit

“We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses.”
― Abraham Lincoln

Most states have an auditing requirement for the real estate industry, which anecdotally is not something people look forward to, but change your perspective just a little bit and it’s a good thing. A very good thing.

We just had our audit the other day (It went splendidly), and here in Nebraska a management company our size can expect to have an auditor camped out at least a couple of days. And let’s face it, besides being a little inconvenient it is also uncomfortable knowing that the relationship really is built on distrust. Would they be there if they thought there was no way you’d lie, cheat or steal (accidently or wittingly) from a client?

But, by embracing the audit you can gain in several ways:

  1. It can force you to have processes that shorten the time an auditor is in your office. Know what they want and have it available all the time. For instance, imagine the time savings of not having to open file drawers and rifle through client, tenant and vendor files because you’ve already input everything into your software digitally. It’s right there for you to present to the auditor.
  2. The things you do to make an audit easier will translate into a smoother operation. Using the above example of digitizing everything, it’s not just the auditors who gain. Having a copy of an invoice, for example, available to anyone in the company means anybody who answers the phone can help the caller out. One less transfer, one less callback, one less any touchpoint means better value from your staff (or yourself).
  3. When you are pitching your services make sure to mention that your company is audited by the state. And while an owner may trust you completely there is something comforting to them knowing there is another set of eyes double checking to see that the management company is being watched.
  4. Learn from the auditors. The people that audit books have seen it all and their procedures are honed in such a way that they are able to identify when best practices are not being used. They prefer doing things one way because their system helps them to find things that are suspicious. Your goals as a manager are exactly the same as the auditors, to do right by the client. Having an auditor’s perspective will help you understand what could make your client more comfortable and you to design your systems to actually make the client more comfortable.

And to help you transition to appreciating the audit just remember that the auditor’s objective is exactly the same as yours. They are there to protect your client and frankly anything you can do to help promote your clients financial health is something you should embrace. And actually you should be ecstatic to have an ally in that mutual goal.


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