Chapter 1 The Real Estate Business

The Real Estate Business Chapter 1 Florida Real Estate Principles, Practices & Law

Introduction to the Real Estate Business 

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The industry or occupation whose activities involve real property transactions handled by licensed real estate professionals. It’s more than just buying and selling of properties. 2

Real Estate Business Include: Property Management  Subdivision and Development  Appraisal  Financing  Counseling  Sale and Leasing 

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Real Estate Brokers 

Provide specialized service for others in return for compensation in the form of a commission, fee or other valuable consideration. Commission as a percentage of the sales price.  Upfront flat fee.  Flat fee upon sale.  Anything that is considered valuable. 

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Specialized Services:   

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Details of Property Transfer Knowledge of Market Condition Knowledge of How to Market Real Estate Knowledge of How to Analyze Buyer’s Needs Knowledge of laws that pertain to Real Estate 5

Farm Area 

A licensee has expert knowledge of a specific portion of a city

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Sales and Leasing 

5 major sales specialties     

Residential Commercial Industrial Agricultural Businesses 

Business opportunity brokerage

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Chapter 475 Definitions 

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Residential: four or fewer residential units, vacant land zoned for four or fewer residential units, and agricultural property of 10 or fewer acres. Agricultural: agricultural property of more than 10 acres.

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Chapter 475 Definitions Commercial – Improved residential property of more than four units, retail stores, office buildings, and shopping centers.  Industrial – Sites in industrial parks or subdivisions; redeveloped industrial parcels in central area; and industrial acreage.  Businesses – Sale, purchase or lease of 9 businesses. 

Absentee Owner 

An absentee owner is a property owner who does not reside on the property and who often relies on a professional property manager to manage the investment

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Follow - up Is what a sales associate does for buyers and sellers after the sale.  Very important because it results in a good reputation. 

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Property Management 

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Absentee owners – because of their increase in numbers this field has grown Objective is to produce greatest possible income over the longest possible time Responsibilities Compensation 

Usually percentage of effective gross income

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Appraising 

Process of estimating value of property, considered an art.   

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Real Estate Appraisal Board Must abide by USPAP rules Federally related transactions: financial transactions involving a federal financial institution as defined by FIRREA Compensated by flat fee 13

Appraisals and Real Estate Licensees Federally financed institutions require that appraisals be prepared by licensed or certified appraisers.  Real Estate licensees can prepare appraisals for non-federally financed transactions. 

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Ex: Insurance, estate valuation, etc.

When creating appraisals RE licensees have to abide by USPAP rules. 14

Comparative Market Analysis Help determine an asking price.  Created by collecting information concerning real estate activity. 

Recent sales of similar properties  Properties currently offered for sale  Expired Listings 

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Financing and Counseling 

90% of all real estate purchases involve financing 

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mortgage broker license

Counseling 

Analyze existing or potential problems and recommend courses of action 16

Development and Construction •3 phases –Land acquisition –Subdividing and development –Construction •Spec homes •Custom homes •Tract homes

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Subdivision Plat Map 

Developers submit plat to local government 

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Indicates the size and location of individuals lots, streets, and utilities

Dedication 

Gift of land by an owner to a government body for a public purpose 18

Deed Restrictions Deed restrictions apply to a specific parcel of real estate  An owner has created a restriction on future owners of the parcel of real estate 

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Ex: Future landowners may not sell alcoholic beverages on the site

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Restrictive Covenants Developers of residential subdivisions typically record restrictive covenants  Affect how the land can be used and establish criteria such as 

Minimum square footage  Type of construction  Architectural design 

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Role of Government 

Local Government 

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State Government 

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Moratoriums, building permits, zoning

Documentary taxes

Federal Government 

HUD, FHA, VA, IRS 21

Professional Organization 

NAR – National Association of Realtors Trade organization  Promotes ethics and education  Each RE office makes the decision regarding whether to join a local association. 

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a particular RE office belongs to an association, all of the associates in that office must also join the association  If the RE office does not join, individual licensees within that office cannot join 22

Chapter Review 

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A CMA is a comparative market analysis. They are created by preparing a summary of recent sales of similar properties, properties currently offered for sale and recently expired listing in a particular area, CMA’s do not abide by the USPAP rules. Remember licensees can charge for a CMA, however, they CANNOT refer to them as an appraisal. Appraisals are needed when purchasing or leasing, selling, exchanging, investment, refinancing any property that is going to serve a security for a loan that has a transaction value greater than $250,000, these are type of appraisals that involve a federally related transaction, and this case you need a certified or licensed appraiser. Speculative Homes: is a type of construction. The developer builds on “speculation” which involves purchasing one or more lots and constructing homes without securing a buyer in advance of construction. You would then need to advertise the sale to prospective buyers. This type of construction is Spec homes. 23