Over
the
course
of
our
40+
years
at

RTC
Consulting,
we’ve

brokered
and/or
advised
on
over
900
transactions
in
the

residential
real
estate
industry. 
We
usually
represent
the
sell
side
of
the
deal
and
work
with
firms
that
range
in
size
from
small,
one-office,
10-agent
shops
to
the
largest
in
the
nation. 

We’ve
learned
a
few
things
along
the
way,
and
if
you’re
thinking
about
selling
your
real
estate
brokerage
firm,
whether
next
month
or
five
years
from
now,
one
of
our
biggest
pieces
of
advice
can
be
captured
in
two
words:
clean
data.

Clean
data
vs.
dirty
data

So
what
data
should
be
clean? All
of
it! This
includes
financials,
organizational
documents,
agent
productivity
reports,
operating
metrics,
vendor
contracts,
lease
agreements,
employment
agreements,
insurance
documents
and
more. 

This
data
becomes
important
at
various
stages
of
a
transaction,
and
when
it’s
time
to
produce
it,
the
process
is
radically
easier
if
it
is
clean
and
organized. Dirty
data
is
either
unorganized,
incomplete,
incorrect
or
flat-out
missing,
and
we’ve
seen
dirty
data
prolong,
complicate
and,
in
some
cases,
kill
too
many
transactions.

Be
data-ready
at
all
stages
of
the
transaction

Different
stages
of
the
transaction
will
require
different
levels
of
data,
usually
ramping
up
the
load
and
getting
more
granular
as
you
run
through
the
process. From
a
data
lens,
transactions
can
be
broken
out
into
three
different
stages: valuation,

due
diligence
and
contract.

1. 
   Valuation
   –
   The
   valuation
   stage
   can
   also
   be
   considered
   the
   preliminary
   due
   diligence
   stage. The
   valuator
   needs
   to
   understand
   ownership
   structure,
   ownership
   compensation,
   corporation
   type,
   operational
   metrics,
   agent
   productivity,
   lease
   obligations,
   employee
   roster,
   affiliated
   services
   relationships,
   market
   share
   and,
   most
   importantly,
   financials
   among
   a
   comprehensive
   list
   of
   items
   and
   information. 

   Firms
   must
   be
   prepared
   to
   present
   this
   data
   in
   an
   organized
   fashion,
   and
   it’s
   imperative
   to
   have
   historical
   support
   on
   certain
   items
   so
   the
   valuator
   may
   understand
   operational
   and
   financial
   trends.

2. 
   Due
   diligence
   –
   Most
   of
   the
   data
   on
   hand
   from
   the
   valuation
   should
   be
   sufficient
   for
   purchasers
   to
   complete
   their
   preliminary
   due
   diligence
   and
   put
   an
   offer
   on
   the
   table. 
   Once
   an
   offer
   is
   accepted,
   the
   full
   due
   diligence
   stage
   commences. Sellers
   must
   be
   prepared
   for
   complete
   transparency
   and
   to
   provide
   the
   innermost
   details
   of
   their
   company.

   In
   addition
   to
   what’s
   already
   been
   provided
   buyers
   may
   ask
   for
   such
   items
   as
   company
   operating
   manuals,
   agent
   level
   commission/fee
   breakdowns,
   tax
   filings,
   litigation
   information
   (if
   applicable),
   debt/bank
   details
   (if
   applicable),
   segmented
   income
   statements
   by
   month
   and
   by
   office,
   trial
   balances,
   capex
   schedules
   and
   much
   more. 

   Be
   prepared
   to
   answer
   questions
   and
   provide
   support
   on
   specific
   line
   items
   on
   your
   income
   statements,
   balance
   sheets
   and
   even
   the
   general
   ledger. Having
   this
   data
   at
   your
   fingertips
   will
   help
   keep
   the
   process
   streamlined
   and
   keep
   you
   on
   schedule
   for
   your
   targeted
   closing
   date

3. 
   Contract
   –
   Once
   due
   diligence
   is
   completed,
   it’s
   time
   to
   provide
   whatever
   data
   may
   be
   missing
   and/or
   required
   in
   the
   ‘Disclosure
   Schedules’
   attached
   to
   the
   purchase
   agreement. Disclosure
   schedules
   essentially
   memorialize
   or
   qualify
   key
   aspects
   of
   the
   business.
   Included
   would
   be
   vendor
   contracts
   that
   exceed
   a
   certain
   dollar
   amount,
   detailed
   descriptions
   of
   real
   property
   and
   fixed
   assets,
   intellectual
   property
   information,
   current
   listings
   and
   pendings,
   insurance
   documents
   and
   more.

The
bottom
line
is
whether
you’re
a

broker/owner
of
a
small
firm
who
does
everything
yourself
or
the
owner
of
a
larger
firm
with
a
support
staff,
I
would
encourage
you
to
ensure
that
your
data
is
clean,
organized,
easily
accessible
and
as
accurate
as
humanly
possible. 
Data
cleanliness
can
make
or
break
a
transaction!

Scott
Wright
is
a
partner
with


RTC
Consulting,
a
real
estate
brokerage
valuation
and
M&A
consulting
firm.