S.E.C. Real Estate Observer

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Editor’s Note: This article first appeared in the September 1975 issue of the Real Estate News Observer.

Certainly, the past two years have been challenging to those involved in Real Estate. A quick review demonstrated a Real Estate market with lots of money, or no money, to a market with expensive money.

Conflicting state laws made some states more attractive to invest in loans, only to have some state Supreme Court decisions toss traditional lending into the waste basket. Hats were hung on the variable interest rates as a solution. Big Brokers like the V.I.R. programs but ere challenged by the homebuilders. Big Brokers want residential money, it would appear, at any cost, to maintain funding for multi-office operations. Many are in trouble. Builders challenge the V.I.R., claiming it isn’t in the best interest to the consumer — the buyer of single family residences, as V.I.R. curtains equity building for the home buyer.

I.R.S. has made many rulings that affect today’s real estate transactions, especially in the area of partnerships. The S.E.C. (Security Exchange Commission) has taken an interest in Real Estate Transaction making and have defined many transactions as a real property security and only those specially licensed can handle these transactions.

We could list many, many problem areas. However, much has been written about the best problems but little is being done to show a path to the solution. The solution might be in an area that we will call Technostructure.

Technostructure is the innovation of policies in your own company organization and management. John Kenneth Galbraith said, “in the world of minor lunacy the behavior of both the utterly rational end the totally insane seems equally odd.”

The fact is the Real Estate Business is largely composed of rugged independents without benefit of a heavy business background. Nothing is more disturbing in today’s Real Estate activities than to see the office machinery structured to handle the advanced technology passed to the Real Estate practitioner by Federal and State agencies, and advanced policy decisions developed by those in allied fields such as banking.

Technostructure is a program to be individually developed by each Real Estate Office to cope with the massive problems created by agencies and firms that are not in the main field of selling, leasing, or exchanging Real Estate, but established the rules with which today’s licensees have to live in order to best protect the clients and their own firms.

Yes, Real Estate profits can be acquired fast and the profits can be very large. On the other hand, just as fast can an agent, without knowing, violate a law or regulation that can result in the loss of a license, a fine, or jail sentence, or any combination of the above.

Technostructure will allow a firm to plan its activities to conform to today’s modern changes. Certainly, an attorney would be part of this team to review the contracts developed by the agent. As well as reviewing proposed documents, the attorney would be part of a strategy team of those involved in the transaction, such as a C.P.A., to detail both the legal and tax consequences involved in the proposed transaction.

Implementing a Technostructure program within a modern office will allow the office to develop sales, leases, and exchanges that will be “pre-thought” as to the massive implications. In the long run, these transactions will be of higher quality as well as transactions that will be relatively free of worry after the closing.

Naturally, the Technostructure office has an excellent listing technique over the non-Technostructure office. This benefit should not overshadow the net dollar savings of the Technostructure office, which, most likely, will not have post-closing legal costs defending transactions that would have violated the many changes in business practice.