By far the most notable problems the Real Estate Commission Enforcement
Department encountered in 2011 revolved around property management.
Several firms that have been primarily involved in
residential sales have evolved into property management in the past several
months in an effort to create an additional revenue source and to maintain
contacts with those owners who are interested in selling but haven’t found the
market cooperating with their desires. Consequently, several have decided to
rent their properties.
While property management seems to be a natural addition as
a new profit center for a residential firm, the fit does not always work out as
well as one would expect. One of the aspects of property management that often
lacks adequate management control in these situations is the additional cash
flow generated by rental properties. This is an area that requires substantial
checks and balances – more than most residential sale operations are accustomed
Monthly reconciliations are a must for property management.
The bank statement, checkbook balance and general ledger for rental properties
all need to balance. And while we all want to trust those we employ or work
beside, it is just good business to have a second set of eyes looking over the
reconciliations. Anyone involved in managing the cash flow of property
management has to appreciate this and should actually welcome such oversight as
we all make mistakes from time to time.
For those supervising brokers who have turned over property
management to someone in your offices, we highly suggest you have a second
person, yourself if necessary, to get involved in the monthly reconciliation.
If you haven’t done this for a while, we suggest you make it a high priority
immediately. Our investigators have had way too many experiences where they
find substantial amounts of trust funds missing from property management
You can find a useful Microsoft Excel tool to assist with
the monthly reconciliations at the AREC website www.arec.arkansas.gov. At the website, click on the “Forms &
Publications” tab, and then, under “Forms” click on “Trust Account
Reconciliation Worksheet”. If you need technical assistance with the form,
please contact Linda Alkire at 501 683-8036.
You can also find a self evaluation booklet for property
management at the website. Under “Booklets” click on “Property Management Self
For further information, please contact Deputy Executive
Director, Andrea Alford at 501 683-8032; or AREC Supervisor of Investigations,
Deb Randolph at 501 683-8042.