Saturday, December 20, 2014

The Climer School's Last 2 Day State Sales Exam Review Class of 2014!

The Climer School of Real Estate is holding its very last "2 Day, Accelerated, State Sales Associate Exam Review Class" Monday and Tuesday, December 22nd and 23rd, from 8:00 AM to 5:00 PM at

The Climer School of Real Estate, 5104 North Orange Blossom Trail, Suite 103, Orlando, Fl 32810, The Rosemont Building.

This is the only class of its kind in all of central Florida. One third to One half of our students in this class are from other schools. Andy Brown, Director of Education and Training, and the Head Instructor, will be teaching this class. Andy Brown is the Best Real Estate Instructor in Florida. Check out his Google Reviews.

This is the class you want to take if you intend on passing the Florida Real Estate Sales Associate License Exam on your next try at Pearson Vue.

It is only $100.00 including the manual, or $80.00 if you have the Review Manual already.

You can attend our 2 Day review for 90 Days for FREE also. We just want you to pass your state exam and get licensed.

Call The Climer School of Real Estate at 407-822-3926. There are only a very few spaces left, so call now.

Find out why The Climer School of Real Estate is the Best Real Estate License School in central Florida.

Andy Brown is the very best real estate license instructor in Florida.

Friday, December 12, 2014

The November 2014 Florida Department of Business and Professional Regulation Real Estate Pass Fail Exam Performance Statistics

The November 2014 Florida Department of Business and Professional Regulation Real Estate Pass Fail Exam Performance Statistics

Take your Florida Real Estate Sales Associate 63 Hour Pre License Class at The Climer School, the Best Real Estate License School in Florida.
The Climer School of Real Estate wants you to pass on your first try!

By now you know, if you follow and read my blog, that the Florida Real Estate Commission has changed and updated the Real Estate Sales Associate 63 Hour Pre License Class Syllabus beginning on January 1st, 2015. 

It is going to be interesting to review the monthly Pass Fail Statistics from the Exam Performance Summary Reports to watch and see if the historical Pass Fail rates change in an appreciable and measurable way. In the meantime, Pearson Vue and the Florida DBPR have released the November 2014 Pass Fail statistics. 

In November of 2014, two thousand, two hundred, and seventy six individuals took the Florida Real Estate Sales Associate state test for the first time. One thousand, two hundred and twenty eight (1228) passed. This is a fifty four per cent pass rate (54%). One thousand and forty eight (1048) failed. This is a forty six per cent fail rate (46%). 

While it seems that the pass percentage rate seems to be creeping up, the increase and the number is too small to indicate a trend. More data is needed. 

The number of individuals who took the Florida Real Estate Sales Associate state test for the second or for a repeated time was two thousand, two hundred, and seventy six (2276). Of that number, eight hundred and four passed (804) or thirty five per cent (35%). The other one thousand, four hundred and seventy two failed (1472) or sixty five per cent (65%). 

Two hundred and seven people (207) took the Florida Real Estate Broker’s state exam for the first time. One hundred and fifteen (115) or fifty six per cent (56%) passed and ninety two (92) or forty four per cent (44%) failed. 

 One hundred and ninety nine (199) people took the Florida Real Estate Broker’s state exam for a second of repeated time. Eighty four (84) or forty two per cent (42%) passed it and one hundred and fifteen (115) or fifty eight per cent (58%) failed it. 

What is it about this exam that makes it so difficult? How come a higher percentage of test takers do not pass it? The state of Florida wants it this way. They construct their questions to purposefully fatigue and confuse the test taker. It is not necessarily the material and the content that is so hard. 

I have heard from some many test takers that they felt that they absolutely knew the material but when they sat down at the Pearson Vue Testing Center, they thought they were reading a foreign language. Again, this is because the questions are designed to help you get it wrong. 

This is why The Climer School of Real Estate works so hard and dedicates itself to helping you pass the state exam. Once you pass the state test, your whole life will change. And the best news of all, you will never have to worry about the weird stuff that you learn and have to study in your pre license class. This is a one time use skill set. Pass your exam and ninety nine per cent (99%) of everything you learned in the class will never come up again. Your real learning comes after you have your Real Estate Sales Associate License. 

Until then, The Climer School has many tools to help you pass your exam on the first try. Check out our ClimerSchool Youtube video. The channel is ClimerSchool. We have a lot of Real Estate math videos and we have even more coming. 

We have a new, FREE practice exam on our website, and we have even more new FREE practice exams coming also. 

We have a fantastic 2 Day State Sales Associate Exam Review Class. This is a highly sought after class. Typically it is full and one third to one half of the students are from other schools. It is the only one of its kind in all of Florida much less central Florida. 

We have an audio CD version of our 2 Day review class for those of you who spend a lot of time in the car and have plenty of spare time for a listening review. 

We have a online video version of our 2 Day review class on . This is the same as our old DVD version only it is now offered only on an online platform. 

By now you can see that The Climer School of Real Estate wants you to pass your Real Estate exam. Check out the tools that I have listed and if you have any questions, contact the school at 407-822-3926 or email Andy Brown, the Head Instructor at and send him your questions or concerns anytime. And Good Luck!

The Climer School Of Real Estate is where friends send their friends. We are the Best Real Estate School in Orlando.

The Climer School of Real Estate is the Best Real Estate License School In Orlando. Call us at 407-822-3926, or stop by our website at 

Andy Brown is the very best real estate licensing instructor in Florida.

Thursday, November 27, 2014

Why The Climer School of Real Estate is the Best Real Estate School in Florida

Plan your new Real Estate Career in 2015 with The Climer School of Real Estate

Take your Florida Real Estate Sales Associate 63 Hour Pre License Class at The Climer School, the Best Real Estate License School in Orlando

There are so many reasons why The Climer School is the consumer rated number one real estate license school in Orlando, in central Florida, and in all of Florida for that matter. We are so focused on making sure that you pass your state exam. That is our number one goal and mission. We do not try to make you a real estate expert. That will come later, well after you pass the state exam. 

Climer School of Real Estate, The Best Real Estate School in all of Florida

Andy Brown, the new Head Instructor at The Climer School, has created an environment of fun, comradery, and learning that will prepare you to pass your state exam better than at any other school in the entire state of Florida. 

We have 3 different day and time formats, specifically to accommodate all schedules and lifestyles. The Climer School now even offers all of its real estate classes in Spanish too! 

Our first Spanish Real Estate Sales Associate 63 Hour Pre License Class begins on January 12th, 2015. It is our 2 week, 10 day, Monday through Friday, 6 hours a day format. Each day is from 9:00 AM to 3:00 PM and ends on Friday, January 23rd, 2015. You can sign up right now by going to!climber-school-sign-up/ccdy . 

We have a powerful 2 Day State Sales Exam Review Class, referred to by many as our “Cram Course”. It is the best State Exam Review Class in the whole state of Florida. Andy Brown teaches many test beating, exam taking strategies as well as reviewing the course content. 

The Climer School has Free real estate math tutorial videos on its Youtube channel, Climer School, and we have many more coming. We have a Free Practice Exam on our website, and more coming here as well. 

We have an Online Video 2 Day State Sales Exam Review Class. If you can not make our classroom version, take advantage of our online version. It is of an actual class, just with no live class so there is not any questions and conversation. 

We are about to have a Pearson Vue Computer Based Testing Exam – Exam Simulator with at least 1000 questions. And, we will have three versions. The full version, the just math version, and the just everything but math version if you buy the math only version and change your mind and decide you want the rest of it. 

 We are so dedicated to doing everything we possibly can to help you pass your state exam. Andy Brown has been in the real estate industry for well over 20 years. He has been a licensed real estate agent, a Realtor, a licensed mortgage broker, a licensed state loan originator, a licensed national loan originator, a licensed insurance agent, a licensed title insurance agent, and now he is also a licensed state of Florida Real Estate Instructor. 

We talked with him about why he created the Introduction To Life As A Professional Real Estate Agent class, or as he calls it, the “What Do I Do Now?” class. 

Andy told us that it has always bothered him how the state required classes are only there to teach you what is on the state required test. He feels that there is nothing in any of the classes, especially the real estate classes, that teach you or inform you about anything that actually helps you as a professional once you have your state issued license. You are sort of thrown to the wolves, starting with the fact that Most agents pick their first broker based on what the commission split is and who they know. 

While these two factors may lead you to a great decision, they are not usually the best two factors to make your first life changing, career decision with. There are so many other factors to evaluate, and Andy goes over them all, in great detail. 

By the time you are through this class, you will know all of the factors to consider that are important to you, and you will know all of the right questions to ask your potential new brokers as you are interviewing them. Andy and the What Do I Do Now? Class not only cover brokers and companies but also all of the areas of your life that are affected and how to make sure that you do not burn out or ignore important areas such as your relationships. 

The reviews on this class have all been astounding and amazing! Check out our Youtube ClimerSchool Channel testimonials.  And, if you have a little more time, check out our 5 Star Google Reviews! And we even have many 5 Star Yelp Reviews! These reviews are not by accident.

From all of us at The Climer School of Real Estate, we thank you for your support and we hope that we see you very soon!

Make sure you let your friends know about The Climer School Of Real Estate. We are the Best Real Estate School in central Florida.

The Climer School of Real Estate is the Best Real Estate License School In Florida. Call us at 407-822-3926, and visit our website at . 

Andy Brown is the best real estate licensing instructor in Florida.

Saturday, November 15, 2014

The Future of Online Education at The Climer School

Climer School Online Real Estate Education

The Climer School of Real Estate is working to be the best Online Real Estate Education School and Resource in all of Florida.

Online education is not only here to stay, the future growth is huge and powerful. Between the rapid increase in the use of the internet as a regular part of daily life and the fact that the Gen X’ers and Gen Y’ers, or The Millenials, do not know much else other than life on the internet, Online Education is poised to see huge and continued growth for the foreseeable future. 

 Some estimates put the online student population at around 10 million. The Climer School of Real Estate is currently gearing up to be the Number One Real Estate Education Resource for Real Estate Professionals in the entire state of Florida. We already partner with Dearborn - Kaplan RECampus and we will be creating a Real Estate Industry Professional Resource Library that will rival none. 
Florida Real Estate Principles, Practices, and Law

 I am a huge proponent and advocate of “Life Long Learning”. All of my students hear my soap box about this concept at least once if not 10 times during the course of their stay with me. I have been researching and studying the expected growth of online education, including online real estate education. The growth expectations are enormous. As such, The Climer School of Real Estate, and Andy Brown, are positioning themselves to be the leader, the number one, the best online resource in the state of Florida for the Real Estate Industry Profession. We are in the process of gearing up now and it will take some time to complete our vision and to do it correctly. 

However, it will be worth the wait. One of the major factors towards the expected future growth of online real estate education is the fact that students, whoever they may be and wherever they may be, can learn at their own pace, their own timeline, and their own needs. Real Estate is the perfect industry for anyone to study for and receive their professional real estate license, in and around their current lifestyle and job and on their own timetable, and to start building their business and network of referral sources, again in and around their current lifestyle, timeline, and even full time job. 

Many individuals begin their real estate career by burning the candle at both ends, dreaming of the day when they get their first big closing check and can walk into their boss’ office and joyfully deliver their two week notice! Their license and their career may have been hastened via online education. 

Believe it or not, Thirty five billion, six hundred million dollars was spent on self paced online learning world wide. Currently, the online education industry is at fifty six billion, two hundred million and that number is expected to double in 2015. 

 Almost fifty per cent of Fortune 500 companies use educational online systems to teach and train employees. That number is expected to rise at a significant pace in upcoming years. 

 The Climer School of Real Estate is preparing itself to one of the leaders in online education and online professional resources for the real estate professional in Florida. The Climer School will be the best online educational resource school in Orlando, in central Florida, and in all of Florida. 

 All of the other school’s online education is boring, simplistic and predictable. The Climer School’s Online Educational platform is going to be new, proactive, and exciting. 

There will be new online professional training courses, and a huge library with hundreds of continuing educational and continued learning resources for all professionals in the real estate industry sector. There will be commercial real estate resources such as management, investment, leasing, development, and property management. There will be valuation and appraising, home inspection, sales, marketing, social media, letter writing, direct mail marketing, email marketing, and speaking, just to name but a few. There will be resources on real estate investment, real estate investment analysis, residential property management, running a business, subliminal communication, psychology, and much more. 

 In just a relatively short amount of time, The Climer School will be the first school that real estate industry professionals think of when they think of professional development and online education and resources. 

 In a recent interview, the Climer School Director of Education and Training, Andy Brown, said, “Our goal is for The Climer School to be the very best.” From the looks of things, this is only a matter of time.

Tell All Your Friends About The Climer School Of Real Estate

”The Climer School of Real Estate.” The Climer School of Real Estate is the Consumer Rated Number One Real Estate Licensing School in Florida. We truly believe that we are the Best Real Estate License School In Orlando Central Florida and all of Florida. Call us at 407-822-3926, and visit our website at . Ask for Andy Brown the Head Instructor. Andy Brown is the Best Real Estate School Instructor in Florida.

Friday, November 7, 2014

State of Florida Real Estate Sales Associate and Broker Examination Pass Fail Performance for October, 2014

Florida Real Estate Sales Associates and Brokers Pass Fail Exam Performance Summary for October 2014

The Florida Real Estate Sales Associate License Examination Pass Rate For First Time Test Takers Eases Up to 53%

Pearson Vue, the Bureau of Education and Testing, and the DBPR (Department of Business and Professional Regulation) for the state of Florida, released their Pass Fail Exam Performance Summary for October 2014 for the candidates who sat for the Florida Real Estate Sales Associate licenses and the candidates who sat for their Florida Real Estate Brokers licenses. This is public record information, and they release and distribute monthly statistics for first time test takers and for second and repeated time test takers. 

The Florida Division of Real Estate

 The results are not still not spectacular. The results continue to fall within the ranges where they always seem to fall. Two thousand, seven hundred and fifty one hopefuls (2751) took their Florida Real Estate Sales Associate license exam at a Pearson Vue testing center for the first time. One thousand, four hundred and sixty one (1461), or only fifty three per cent (53%), passed. One thousand, two hundred and ninety (1290), or forty seven per cent (47%) failed. 

Two thousand, seven hundred and eighty four (2784) people took their Florida Real Estate Sales Associate license exam at a Pearson Vue testing center for a second or more, repeated time. Nine hundred and eighty (980), or only thirty five per cent (35%), passed. One thousand, eight hundred and four (1804), or sixty five per cent (65%) failed. 

 If you read my blog on this monthly release, you know that I don’t think this is coincidence or an accident. These numbers and percentages are roughly the same every single month. The mere fact that 53% is a teeny bit higher than normal is due to the number of Climer School of Real Estate students who pass the state exam on the first try so overwhelmingly high, that they skew the state statistics. 

Check this out: Two hundred and one (201) people took their Florida Real Estate Broker’s license exam at a Pearson Vue testing center for the very first time. Of that number, ninety six (96), or only forty eight per cent (48%) passed. One hundred and five (105) or fifty two per cent (52%) failed. 

 Two hundred and thirteen (213) people took their Florida Real Estate Broker’s license exam at a Pearson Vue testing center for a second or more, repeated time. Of that number, only sixty eight (68) or thirty two per cent (32%), passed. The remaining one hundred and forty five (145), or sixty eight per cent (68%) failed. 

The Pass Fail Statistics for Florida Real Estate Instructors is even worse by the way. In October 2014, five (5) people took the FL Real Estate Instructor Exam for the first time. 

ZERO (0) Passed! All Five Failed. 

 These exams are not easy. Do not take them lightly. (Disclaimer: This is just Andy Brown’s opinion, and Andy Brown’s opinion only) I still believe that the students from The Climer School of Real Estate score higher on average and experience a much greater Pass rate percentage on the state of Florida exams than do the students at any and all of the other real estate licensing schools in the entire state. 

Read our Google reviews! Our students consistently rate the product that we put out regarding our State of Florida DBPR 63 Hour Sales Associate Pre License Class as a “Five Star Google Rating”. We are closing in on 300 Google Review and all but two are ‘5 Star’ Ratings and one of those two is a ‘4 Star’ Rating. 

 At The Climer School of Real Estate, we go out of our way, we bend over backwards, our top priority is, all we care about is making sure that you pass the state exam. And, I don’t care if you get a 75 or a 100. They are exactly the same to me – a ‘PASS’. 

 We have FREE Youtube Math Videos. We have an outstanding 2 day Sales Associate Exam Review Class. One third to one half of our students in this review class are from the other schools in the area, and we hear them venting, publicly, to the class, about how disappointed and disgusted they are and were with the other schools. We believe it but we won’t say it publicly. 

We will however, that The Climer School of Real Estate is The Best Real Estate School in all of Florida, much less central Florida and Orlando. And, wait until you see our new, upcoming Online Professional Resource Library page. It will blow you away. Come and experience The Climer School of Real Estate Difference!

Friends don’t let Friends attend any school except The Climer School

Tell Your Friends About The Climer School Of Real Estate

Call us at 407-822-3926, and visit our website at All of our classes, and our course calendar is available on our website. You can sign up right online.

Ask for Andy Brown the Head Instructor. Andy Brown is the very Best Real Estate School Instructor in Florida.

Thursday, October 30, 2014

Answer Key to the Climer School of Real Estate's New Online "Free Practice Exam 1"

Updated Climer School of Real Estate’s Online Free Practice Exam 1 Answer Key Including New Math Questions

Look for Andy Brown's brand new YouTube Math Videos on our 10 new Math Problems on the ClimerSchool Channel

Here are your answers to The Climer School of Real Estate's Free Practice Exam 1 with a few updated questions and All New Math Questions! Try not to look at these answers until you have taken the test at 

If you score at least an 85, you are ready! If you score less than an 85, you need to be studying a lot more! The pass rate on the Florida state exam averages 50% for a reason. The State of Florida wants it that way. 

We at The Climer School want you to pass on your very first time. Here is how we can help if you need help:

We have our math videos on You Tube, Our YouTube channel is ClimerSchool. They are 100% FREE. 

We have our Florida state exam review cram course on audio CD. 

We also have a live 2-Day state of Florida Exam “2-Day” Review at our school located at 5104 N. Orange Blossom Trail in Orlando. 

Please go take the test if you have not already. Take it like a real test and come back here to grade yourself. The Climer School of Real Estate's phone number is 407-822-3926. 

Here are your answers

1-D 2-A 3-B 4-C 5-B 6-A 7-C 8-D 9-B 10-A 

11-A 12-A 13-D 14-B 15-D 16-A 17-A 18-D 19-B 20-B 

21-B 22-B 23-A 24-A 25-C 26-B 27-B 28-D 29-A 30-B 

31-C 32-D 33-B 34-C 35-A 36-B 37-B 38-D 39-A 40-C 

41-B 42-B 43-C 44-B 45-A 46-D 47-C 48-B 49-B 50-A 

51-C 52-B 53-C 54-B 55-D 56-A 57-C 58-B 59-C 60-D 

61-A 62-B 63-D 64-B 65-D 66-B 67-C 68-B 69-C 70-B 

71-B 72-D 73-B 74-C 75-D 76-A 77-B 78-B 79-A 80-D 

81-A 82-B 83-B 84-D 85-D 86-B 87-B 88-D 89-C 90-C 

91-C 92-A 93-D 94-D 95-A 96-A 97-C 98-D 99-D 100-D 101-A

Tell Everyone About The Climer School Of Real Estate. We are the Best Real Estate School in Central Florida, Orlando, and all of Florida!

Call us at 407-822-3926, and visit our website at .

Ask for Andy Brown the Head Instructor. Andy Brown is the very Best Real Estate Licensing School Instructor in Florida.

Sunday, October 19, 2014

The Florida Real Estate Commission’s New 63 Hour Florida Real Estate License Pre-License Class Syllabus

The Florida Real Estate Commission’s New 63 Hour Florida Real Estate License Pre License Class Syllabus Effective As Of January 1, 2015

The Climer School of Real Estate

The Florida Real Estate Commission has updated and changed its 63 Hour Florida Real Estate License Pre License Class Syllabus, also known as FREC Course I, effective as of January 1, 2015. 

The Current Membership of The Florida Real Estate Commission

If you are interested, I have posted the entire new Sales Associate Course Syllabus for you below:

 Florida Real Estate Commission SALES ASSOCIATE COURSE SYLLABUS (FREC COURSE I) January 1, 2015 (effective date) TABLE OF CONTENTS SECTION 1: Administrative Matters And Course Overview; The Real Estate Business SECTION 2: Real Estate License Law And Qualifications For Licensure SECTION 3: Real Estate License Law And Commission Rules SECTION 4: Authorized Relationships, Duties And Disclosure SECTION 5: Real Estate Brokerage Activities: Guides For Sales Associates SECTION 6: Violations Of License Law, Penalties And Procedures SECTION 7: Federal And State Laws Pertaining To Real Estate SECTION 8: Property Rights: Estates And Tenancies; Condominiums, Cooperatives, And Time-Sharing SECTION 9: Title, Deeds And Ownership Restrictions SECTION 10: Legal Descriptions SECTION 11: Real Estate Contracts SECTION 12: Residential Mortgages SECTION 13: Types Of Mortgages And Sources Of Financing SECTION 14: Real Estate Related Computations And Closing Of Transactions SECTION 15: The Real Estate Market SECTION 16: Real Estate Appraisal SECTION 17: Introduction To Residential Product Knowledge SECTION 18: Real Estate Investments And Business Opportunity Brokerage SECTION 19: Taxes Affecting Real Estate SECTION 20: Planning And Zoning 1 Suggested formatting and instructional techniques: • When discussing the application and examination process refer students to the Candidate Information Booklet • Use application based instruction • When available utilize case studies • Emphasize the role of ethics in the practice of real estate • Where applicable refer students to the Florida Administrative Code and Florida Statute. • Section times are not required to be three hours in duration provided the overall course is 60-hours of instruction with 3-hour end-of-course examination. Allocate your time based upon the complexity of the material. • Refer students to available online services offered by the Department of Business and Professional Regulation when discussing application, license renewal and general account information. • Where appropriate incorporate the most timely forms and applications used in the field • While the syllabus contains structured areas of study if you find that subject matter from different sections applies to the topics you are covering you may incorporate the material into that section. 2 SECTION 1 COURSE OVERVIEW: THE REAL ESTATE BUSINESS Learning Objectives: • Describe the various activities of real estate brokerage • Distinguish among the five major sales specialties • Identify the role of property managers • Explain the appraisal process and the role of the appraiser • Understand the mortgage process and the role of mortgage loan originator • Explain the three phases of development and construction • Distinguish among the three categories of residential construction Key Terms: absentee owner appraisal appraiser broker price opinion (BPO) business opportunity comparative market analysis (CMA) dedication farm area (target market) follow-up property management real estate brokerage special-purpose property subdivision plat map USPAP • MLS Outline I) Introduction to the Real Estate Business A Overview of the real estate industry 1) The real estate industry's role in the nation's economy 2) Many industries are dependent on real estate activity B Real estate is a business of many specializations 1) Expert information is the product that a broker or a sales associate must market (a) Knowledge of property transfer (b) Knowledge of market conditions (c) Knowledge of how to market real estate II) Real Estate Brokerage A Sales and Leasing 1) A business in which real estate license-related activities are performed under the authority of a real estate broker 2) The broker acts as an agent or intermediary between two or more people in the negotiation of the sale, purchase or rental of real estate 3) A sales associate works for the broker, providing services to prospective buyers and sellers 3 4) Requires expert information that the average layperson does not possess 5) More efficient to acquire this information through a real estate professional 6) Real estate brokers and sales associates often specialize in a particular geographic area or property type. This method of target marketing is often called "farming" 7) Five major sales specialties (a) Residential (b) Commercial (c) Industrial (d) Agricultural (e) Businesses B Property Management 1) Need for property managers (a) Absentee ownership 2) Services typically provided by a property manger (a) Distinguish between Community Association Manager (CAM) 3) Scope of work detailed in a management agreement 4) Property manager's charge is to protect the owner's investment and maximize owner's returns C Appraising 1) The process of estimating the value of real estate 2) Types of real estate activities that require appraisal services 3) State-certified, licensed and registered appraisers are regulated by the Florida Real Estate Appraisal Board 4) Real estate licensees may appraise real property provided they do not represent themselves as state-certified, registered or licensed appraisers 5) Real estate licensees must comport to USPAP when conducting appraisals of real property--define USPAP 6) Comparative market analysis versus appraisal--define CMA (a) CMAs exempt from USPAP 8) Broker Price Opinion (BPO) 7) USPAP's Ethics Rule regarding compensation D Financing 1) The business of providing funds for real estate transactions 2) Sources of funds to finance real estate transactions 3) Importance of expertise in financing matters and knowledge of how to solve financing problems 4) Mortgage loan originator and mortgage bankers must be licensed as such E Counseling 1) The service of analyzing existing or potential projects and providing advice 2) Extensive knowledge and expertise is required III) Development and Construction A Land acquisition B Subdividing and development C Subdivision plat map is recorded D Developer often dedicates land to a governmental body for public use E Construction 1) Types of residential construction 4 (a) Spec homes (b) Tract homes (c) Custom homes IV) The Role of Government A Local government B State government C Federal government V) Professional Organizations A Variety of professional organizations are in existence B National Association of REALTORS (NAR) C Florida REALTORS D Local Board (Association) of REALTORS E Distinguishing between holding a Real Estate license vs. being a Realtor 5 SECTION 2 REAL ESTATE LICENSE LAW AND QUALIFICATIONS FOR LICENSURE Learning Objectives: • Identify the qualifications for a sales associate's license • Describe the application requirements for licensure including nonresident application requirements • Explain the importance of responding accurately and completely to the background information questions on the licensure application • Illustrate the background check procedure conducted by the DBPR • Describe the education requirement for pre- and post-license education and continuing education • Distinguish among the various license categories • Identify services of real estate where licensure is required • Recognize actions that constitute unlicensed activity • Recognize exemptions from real estate licensure • Distinguish between registration and licensure • Explain mutual recognition agreements Key Terms: adjudication withheld broker broker associate caveat emptor compensation Florida resident license/registration nolo contendere / no contest prima facie evidence real estate services sales associate • expungement vs. sealing Outline I) History and purposes of real estate license laws A History of Florida's real estate license law 1) Department of Business and Professional Regulation 2) Division of Real Estate 3) Florida Real Estate Commission B Need for regulation 1) Caveat emptor C Purpose of regulation 1) Consumer protection D Important real estate statutes and rules II) License Categories 6 A Broker B Sales associate C Broker associate III) General Licensure Provisions A Age B High school diploma or its equivalent C Honest, trustworthy, of good moral character D Disclose if under investigation, convicted of a crime or ever entered a plea of nolo contendere / no contest or guilty E Aliases−A/K/A F Disclose if denied, or had a license disciplined or pending discipline in another jurisdiction G Disclose if Denied, surrendered, or revoked license or registration to practice a regulated profession in any jurisdiction H Guilty of any conduct or practice that would have been grounds for suspension or revocation under Chapter 475, F.S. I U.S. citizenship (Chapter 455.10) J Qualification of immigrants for examination (Chapter 455.11, F.S.) K Requirement for United States social security number (Chapter 559, F.S.) IV)Application Requirements A Fees B Application form 1) Responding accurately and completely to background information on the application C Background check procedure D Period to check for errors and omissions E Period to inform applicant of approval or denial of application F Rights of an applicant G The length of time a licensure application is valid 1) Initial application 2) Exam eligible H Nonresident application requirements I Regulations pertaining to pre-license courses J Identify what is public record V) Sales Associate License Requirements A Education exemptions B Sales associate pre license course C State licensure examination VI)Broker License Requirements A Education exemptions B Experience requirement C Broker pre license course D State licensure examination VII) Mutual Recognition Agreements with Other States A Florida resident defined B Distinguish between mutual recognition and reciprocity VIII) Information included on the real estate license 7 A Prima facia evidence that holder of a real estate license possesses current and valid licensure IX) Registration vs. Licensure X) License Renewal Education A Post licensure requirement B Continuing education C Reactivation education XI)Real Estate Services A Individuals who are required to be licensed B Individuals who are exempt from licensure XII) Unauthorized Practice of Law SECTION 3 REAL ESTATE LICENSE LAW AND COMMISSION RULES Learning Objectives: • Describe the composition, appointment and member qualifications of the Florida Real Estate Commission • Define the powers and duties of the Commission • Explain the different licensure statuses • Distinguish between active and inactive license status • Describe the regulations regarding involuntarily inactive status • Distinguish between multiple and group licenses Key Terms: active/inactive canceled cease to be in force current group license involuntarily inactive license authority voided multiple licenses null and void voluntarily inactive Outline I) Regulation by Department of Business and Professional Regulation A Organizational structure B Definitions; F.S. 455.01 C Legislative intent; requirements; F.S. 455.02 D Department powers and duties; F.S. 455.203 E Licensing examinations F Licenses, fees, statuses, and renewal 1) Active status 2) Inactive status (a) Voluntarily inactive status (b) Involuntarily inactive status 8 3) License ceases to be in force (F.S. 475.23) 4) Members of armed forces (F.S. 455.02) G Types of real estate license 1) Multiple and group licenses II) Division of Real Estate A Organizational structure III) The Florida Real Estate Commission; Rules Governing Internal Organization and Operation; 61J2-20 A Purpose of regulation B General structure 1) Composition and qualifications of members 2) Legal counsel 3) Meetings and minutes C Duties and powers of the Commission 1) Specific areas of responsibility 2) Rule making 3) Education 4) Discipline 9 SECTION 4 AUTHORIZED RELATIONSHIPS, DUTIES AND DISCLOSURE Learning Objectives: • Describe which provisions of the Brokerage Relationship Disclosure Act apply only to residential real estate sales and list types of real estate activities that are exempt from the disclosure requirements • Define residential transaction • Distinguish among nonrepresentation, single agent and transaction broker • List and describe the duties owed in the various authorized relationships • Compare and contrast the fiduciary duties owed in a single agent relationship and the duties owed in a transaction broker relationship • Describe the disclosure procedures for the various authorized relationships • Describe the required content and format of the various disclosure forms • Explain the procedure for transition from a single agent to a transaction broker • Describe the disclosure requirements for non-residential transactions where the buyer and seller have assets of $1 million or more • List the events that will cause an agency relationship to be terminated • Distinguish between and explain the disclosure requirements and forms pursuant to Florida Statute • Identify Information That is Subject to Public Record Key Terms: agent caveat emptor consent to transition customer designated sales associate dual agent fiduciary general agent limited representation nonrepresentation principal residential sale single agent special agent subagency transaction broker Outline I) Concept of agency A Historical perspective of agency relationships 1) Statutory law 2) Common law B Types of agents 1) General agent 2) Special agent C Fiduciary relationships 10 1) Dealing at arm's length 2) Caveat emptor 3) Dual agency 4) Subagency 5) Customer vs. client D Agency relationships determined by broker II) Disclosure Requirements A Applies to residential sales only B Disclosure requirements do not apply to: 1) Non residential transactions 2) The rental or leasing of real property, unless an option to purchase all or a portion of the property improved with four or fewer residential units is given 3) Auctions 4) Appraisals 5) Dispositions of any interest in business enterprises or business opportunities, except for property with four or fewer residential units III) Authorized Brokerage Relationships A Nonrepresentation 1) Customer means a member of the public who is or may be a buyer or seller of real property and may or may not be represented by a real estate licensee in an authorized brokerage relationship 2) Duties (a) Dealing honestly and fairly (b) Disclose all known facts that materially affect the value of residential property which are not readily observable to the buyer (c) Accounting for all funds entrusted to the licensee 3) Disclose the no brokerage relationship (nonrepresentation) notice in writing before the showing of property (Section 475.278(4)(b), F.S.) B Single agent relationship 1) Single agent is a broker who represents, as a fiduciary, either the buyer or seller but not both in the same transaction 2) The party with whom a real estate licensee has entered into a single agent relationship is the principal 3) Duties (a) Dealing honestly and fairly (b) Loyalty (c) Confidentiality (d) Obedience (e) Full disclosure (f) Accounting for all funds (g) Skill, care and diligence in the transaction (h) Presenting all offers and counteroffers in a timely manner (i) Disclosing all known facts that materially affect the value of residential real property that are not readily observable 4) Give the single agent disclosure before, or at the time of, entering into a listing agreement or an agreement for representation or before showing the property, whichever occurs first 5) Required information on the disclosure per Statute 6) Required format of the disclosure per Statute 11 C Transaction broker relationship 1) Presumption of transaction brokerage relationship 2) Transaction broker means a broker who provides limited representation to a buyer, a seller, or both, in a real estate transaction, but does not represent either in a fiduciary capacity or as a single agent 3) Transaction brokers provide a limited form of nonfiduciary representation to a buyer, a seller, or both in a real estate transaction 4) Duties include: (a) Dealing honestly and fairly (b) Accounting for all funds (c) Using skill, care, and diligence in the transaction; (d) Disclosing all known facts that materially affect the value of residential real property and are not readily observable to the buyer (e) Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing (f) Limited confidentiality, unless waived in writing by a party. This limited confidentiality will prevent disclosure that the seller will accept a price less than the asking or listed price, that the buyer will pay a price greater than the price submitted in a written offer, of the motivation of any party for selling or buying property, that a seller or buyer will agree to financing terms other than those offered, or any other information requested by a party to remain confidential (g) Any additional duties that are mutually agreed to with a party IV) Consent to Transition From Single Agent to Transaction Broker A A single agent relationship may be changed to a transaction broker relationship at any time during the relationship between an agent and principal, provided the agent gives the transition disclosure and the principal consents to the transition before a change in relationship B Procedure 1) Give the single agent disclosure before, or at the time of, entering into a listing agreement or an agreement for representation or before showing of property, whichever occurs first 2) Give transition disclosure and secure consent (signature) from party C Required information on the disclosure per Statute D Required format of the disclosure per Statute V) Designated sales associate A Non-residential transaction limitations B Disclosure requirements C Single agent duties VI)Discipline A Violations and penalties VII) Record keeping and retention A Documenting agency disclosure 12 SECTION 5 REAL ESTATE BROKERAGE ACTIVITIES AND PROCEDURES Learning Objectives: • Identify the requirements for real estate brokerage office(s) and the types of business entities that may register • Explain what determines whether a temporary shelter must be registered as a branch office • List the requirements related to sign regulation • List the requirements related to the regulation of advertising by real estate brokers • Explain the term immediately as it applies to earnest money deposits • Describe the four settlement procedures available to a broker who has received conflicting demands or who has a good-faith doubt as to who is entitled to disputed funds • Explain the rule regarding the advertisement of rental property information or lists or negotiation of rentals • Describe the obligations placed on a sales associate who changes employers and/or address Key Terms: arbitration blind advertisement commingle conflicting demands conversion corporation (INC) deposit earnest money escrow account escrow disbursement order general partnership good-faith doubt interpleader kickback limited liability company (LLC) limited liability partnership (LLP) limited partnership litigation mediation ostensible partnership professional association (PA) point of contact information sole proprietorship trade name Outline I) Brokerage offices A Sales associates must be registered and work under direction and control of broker's office or branch office 13 B Entrance Sign Requirements C Temporary shelters II) Guidelines for advertising A False or misleading advertising 1) Penalties for false advertising B Any advertising must be worded so that a reasonable person knows that the advertiser is a real estate licensee C "Blind" advertising is prohibited; it must always reveal the licensed name of the brokerage firm D Any person advertising real estate services is interpreted as acting as a broker E Sales associates cannot advertise or conduct business in his or her own name F All types of Internet advertising 1) Point of contact information III) Handling of deposits A Requirement to deposit in an escrow account monies received from a client or customer 1) Definition of escrow account 2) Sales associate Must deliver funds by end of next business day 3) Meaning of "immediately" for a broker 4) Deposit notification if deposited with title company or attorney within 15 days B Management of escrow accounts 1) If the account is interest bearing, requirement for written authorization for distribution of interest 2) Requirement to inform broker immediately of any conflicting demands concerning disbursement of escrowed funds 3) Good-faith doubt procedure when it is not clear which party should receive the escrowed property (a) Situations that are considered good-faith doubt 4) Settlement procedures (a) Mediation (b) Arbitration (c) Litigation (1) Interpleader (2) Declaratory judgment (d) Escrow disbursement order IV)Rental Lists and Rental Companies A Requirement 1) Provide a receipt when offering rental information for a fee (a) Required language under Rule 61J2-10.030, F.A.C. 2) Refund procedures (a) Fail to attain rental (b) Material misrepresentation (c) Request must be made within 30 days B Penalties for advertising obsolete or otherwise inaccurate rental lists 1) License suspension or revocation 2) First degree misdemeanor (a) Punishable by up to one year of imprisonment and/or fine of up to $1,000 14 V) Broker/Sales associate licensee as an expert in specific aspects of property transfer A Requirement to avoid offering an opinion of title since it can be relied on as expert opinion. B Ability to offer a representation of value, avoiding misrepresentation through exaggeration, etc. C Misrepresentation of value by a licensee as fraud, breach of contract, or breach of trust D Unauthorized practice of law VI)Commissions A "Fixing" commissions or fees is illegal B A Sales associate cannot contract directly with a principal 1) The sales associate's commission is by agreement with the broker 2) A sales associate cannot sue a principal over a commission C "Kickbacks" are legal only under limited conditions 1) All parties to the transaction must be fully informed of the kickback 2) It must not be prohibited by other law 3) It is unlawful to share a commission with an unlicensed person, except for the seller or buyer of the property 4) It is unlawful for a licensee to pay any unlicensed person for performing real estate services D The details of commission agreements with sales associates should be part of a broker's policy manual VII) Change of Employer A A sales associate must inform FREC about a change of employer 1) Within ten days 2) On a prescribed form B A Sales associate's obligation of confidentiality with respect to principals or the broker does not end with termination of employment C Duplication of records from a previous employer constitutes breach of trust, even if the one copying the records originated them, if done for the purpose of taking listings to the new employer D Removal of records from a previous employer's office constitutes theft VIII) Unauthorized display of names or insignia of real estate organizations or associations is prohibited by FREC rules IX) Change of address procedure and penalty for failure to notify FREC X) Types of Business Entities A Entities that may register as a brokerage 1) Sole proprietorship 2) General partnership 3) Limited partnership (a) Ostensible partnerships are prohibited 4) Corporation (a) For profit (b) Not for profit 5) Limited liability company 6) Limited liability partnership B Entities that may not register as a brokerage 1) Corporation sole 2) Joint venture 15 3) Business trust 4) Cooperative association 5) Unincorporated associations C A sales associate is prohibited from being an officer or director in a real estate brokerage corporation, or a general partner in a brokerage limited partnership XI) Trade names A No trade name (fictitious name) may be used by a sales associate; sales associates must register under their true name only 16 SECTION 6 VIOLATIONS OF LICENSE LAW, PENALTIES AND PROCEDURES Learning Objectives: • Explain the procedures involved in the reporting of violations, the investigation of complaints and the conduct of hearings • Define the elements of a valid complaint • Discuss the composition of the probable-cause panel • Recognize events that would cause a license application to be denied • Distinguish actions that would cause a license to be subject to suspension or revocation • Identify individuals who would be eligible and the procedure to seek reimbursement from the Real Estate Recovery Fund • Identify individuals who are not qualified to make a claim from the Real Estate Recovery Fund • Describe the monetary limits imposed by law on the Real Estate Recovery Fund • Explain the penalty for a first and second degree misdemeanor and what real estate activities are first degree misdemeanors • Provide Examples of Unlicensed Practice of Law • Illustrate Presumptions for a Party Performing Real Estate Services Key Terms: breach of trust citation complaint commingle concealment conversion culpable negligencefailure to account for and deliver formal or administrative complaint fraud legally sufficient mediation misrepresentation moral turpitude notice of noncompliance probable cause recommended order stipulation subpoena summary/emergency suspension order voluntary relinquishment for permanent revocation Outline I) Disciplinary Procedure (Chapters 120, F.S.; 455, F.S.; 475, F.S.; 60Q and 61J2 of the Florida Administrative Code) A The complaint 1) Filed with DBPR 2) The complaint must be legally sufficient 17 3) Notice of noncompliance for first-time offense of a minor violation B DBPR conducts investigation 1) Anonymous complaints 2) Withdrawal of complaints 3) When an investigation of a subject is undertaken the DBPR forwards a copy of the complaint to the subject (notice exception for criminal violation) 4) Investigative report is submitted by legal to the probable-cause panel C Probable-cause Panel 1) Composition of probable-cause panel 2) Purpose is to determine whether probable cause exists 3) Letter of guidance D If probable cause is found, a formal/administrative complaint is filed E Licensee is entitled to an informal or a formal hearing 1) Election of rights form 2) If no dispute of material fact the case can be presented in an informal hearing before the FREC F Stipulation G Voluntary Relinquishment for Permanent Revocation II) Commission meeting (probable-cause panel members are excused) A Formal hearings are conducted by administrative law judges 1) hears evidence 2) makes findings of fact 3) submits who prepare a recommended order to FREC B FREC (probable-cause members excused) consider the administrative law judge's report and recommended order and then issues a final order 1) Summary/Emergency suspension order C Judicial Review (appeal process) 1) Stay of enforcement 2) Writ of supersedeas III) Violations and Penalties A The Florida Real Estate Commission is authorized to: 1) Deny a license application (a) Grounds for denial 2) Refuse to renew a license 3) Suspend a license up to 10 years 4) Revoke a license (a) Exceptions to permanent revocation (1) Filed for renewal without complying with the continuing or post-licensing education requirement (2) Filed an application for licensure which contained false or fraudulent information (b) Revoke without prejudice 5) Issue citations 6) Impose a fine (a) Maximum $5,000 per violation of Chapter 455, F.S. (b) Maximum $5,000 per violation of Chapter 475, F.S. 7) Impose probation 8) Issue notice of noncompliance 9) Mediation 18 B Violations and recommended penalties (see Disciplinary Guidelines, 61J2-24.001, F.A.C.) C Penalties that may be issued by a court of law 1) Second degree misdemeanor 2) First degree misdemeanor (a) Failing to provide accurate and current rental information for a fee 3) Civil penalties (a) Denial and recovery of compensation 4) Third degree felony (a) Unlicensed activity (1) Fine of not more then $5,000 and/or up to 5 years in jail (b) Falsifying an application IV)Real Estate Recovery Fund A Applies to real estate brokerage transactions: 1) Involving Florida real estate 2) Involving a licensee under Chapter 475, F.S 3) Violating any part of Chapter 475, F.S. B Persons not qualified to make a claim C Payment for claims from the fund D Authorized fund limit and fees 19 SECTION 7 FEDERAL AND STATE LAWS PERTAINING TO REAL ESTATE Learning Objectives: • Explain the significance of the Jones vs. Mayer court case • List the real estate included under the different fair housing acts • Recognize the groups protected under the 1968 Fair Housing Act • List the property exempt from the 1968 Fair Housing Act • Understand the provisions of the 1988 Fair Housing Amendment • Describe the types of discriminatory acts that are prohibited under the 1968 Fair Housing Act • Describe the HUD process for handling a complaint under the 1968 Fair Housing Act • Describe the objectives and major provisions of the Americans with Disabilities Act • Describe the major provisions of the Florida Residential Landlord and Tenant Act • Describe the major provisions of the Interstate Land Sales Disclosure Act Key Terms: blockbusting familial status handicap status property report public accommodation redlining subdivided land steering Outline I) Federal Laws A Civil Rights Act of 1866 1) Jones v. Mayer case B Civil Rights Act of 1964 C Civil Rights Act of 1968 1) Fair Housing Act of 1968 and amendments (a) Prohibits discrimination in sales, leasing, advertising sales or rentals, financing or brokerage services (b) Protection from discrimination based on race, color, religion, sex, national origin, handicap or familial status (1) Familial status defined (2) Handicap defined (c) Groups not covered (1) Marital status (2) Age (3) Occupation (d) Two categories of housing covered by the 1968 Fair Housing Act: (1) Single-family (2) Multifamily (e) Real estate transactions exempted under the Act (f) Acts prohibited: (1) Refusing to rent 20 (2) Quoting different terms (3) Discriminatory advertising (4) Steering (5) Blockbusting (6) Redlining (7) Denying membership (8) False statements regarding availability (g) Housing for older persons (h) Equal housing opportunity poster (i) Enforcement of the Fair Housing laws (1) Complaints filed with HUD under the 1968 Fair Housing Act (as amended) (2) Civil suits filed in Federal district court (3) Action taken by the Department of Justice (j) Responsibility and liability of real estate licensees D Americans with Disabilities Act of 1990 (1) Access to public transportation, public accommodation and commercial facilities (2) New construction and renovation of public accommodations and commercial facilities E Interstate Land Sales Full Disclosure Act II) State Laws A Florida Fair Housing Law B Florida Americans with Disabilities Accessibility Implementation Act C Florida Residential Landlord and Tenant Act (1) Overview of the law (2) Deposits and advance rents (3) Landlord's obligation to maintain premises (4) Tenant's obligations (5) Landlord's access to premises (6) Vacating premises (7) Termination of rental agreements by the tenant (8) Termination of rental agreements by the landlord (9) Eviction procedure 21 SECTION 8 PROPERTY RIGHTS: ESTATES AND TENANCIES; CONDOMINIUMS, COOPERATIVES, COMMUNITY DEVELOPMENT DISTRICTS, HOMEOWNER ASSOCIATIONS, AND TIME-SHARING Learning Objectives: • Define real property based on the definition in Chapter 475, F.S. • List and explain the physical components of real property • Explain the four tests courts use to determine if an item is a fixture • Distinguish between real and personal property • Describe the bundle of rights associated with real property ownership • List the principal types of estates (tenancies) and describe their characteristics • Describe the features associated with the Florida homestead law • Distinguish between cooperatives, condominiums and time-shares and describe the four main documents associated with condominiums Key Terms: community development districts condominium cooperative declaration estate for years exempt property fee simple estate fixture freehold estate homeowner associations homestead joint tenancy land leasehold estate life estate personal property proprietary lease Prospectus real estate real property remainderman right of survivorship separate property tenancy at sufferance tenancy at will tenancy by entireties tenancy in common time-share 22 Outline I) Land, Real Estate and Real Property A Definition of real property (Section 475.01, F.S.) B Physical components of real property 1) Surface rights 2) Subsurface rights 3) Air rights C Water rights 1) Riparian rights 2) Littoral rights 3) Accretion and erosion 4) Alluvion and Reliction II) Real Versus Personal Property A Real property is basically land and improvements on the land B Personal property usually consists of items having a limited life, which are easily movable from one place to another 1) Personal property (or chattel, or personalty) includes any property that is not real property C Fixtures 1) A fixture is an item that was once personal property, but is now legally considered to be real property 2) Legal tests of determination: (a) Intent of the parties (b) Method or degree of attachment (c) Agreement and/or relationship of the parties (d) Adaptation of the item 3) Listing and sale contracts should clearly specify which items are considered real property in the transaction and any personal property that is to be included D Definition of a trade fixture 1) Fixture versus trade fixture III) Basic Property Rights A "Bundle of Rights" include the rights of: 1) Possession 2) Enjoyment 3) Disposition 4) Control 5) Exclusion IV) Freehold Estates A An estate refers to the degree, quantity, nature and extent of interest (ownership rights) a person can have in real property B Estates are divided into two general groups: 1) Freehold estates which are for an indefinite length 2) Leasehold estates (or nonfreehold) which are for a fixed term C Freehold estates include: 1) Fee simple estate (a) Fee, fee simple, fee simple absolute. . .defined as the largest bundle of rights we have. All three terms mean the same thing. Most titles are held in fee. 23 2) Life estate (a) Conventional life estates are created by action of the grantor (1) Use during life of holder or whoever’s life the interest is based on. Often used by husband for wife with children as remaindermen (2) Remainder estate (3) Reversion estate (b) Legal life estates are created automatically by law (1) Homestead is a legal life estate (i) Homeowner's principal residence is protected from certain creditors (ii) Not protected from real estate property taxes or from a mortgage for purchase or cost of improvements V) How Ownership Can Be Held A Severalty−sole ownership. Only one party is needed to sign deed (Spouse must sign if homesteaded) B Co-ownership 1) Tenancy in common 2) Joint tenancy with right of survivorship (a) Creating a joint tenancy 3) Tenancy by the entireties VI) Leasehold (Nonfreehold) Estates A An interest in real property for a definite period (measured in calendar time) B Types of leasehold estates 1) Estate for years 2) Tenancy at will 3) Tenancy at sufferance VII) Cooperatives, Condominiums, Community Development Districts (CDD), Homeowner Associations (HOA) and Time-Sharing A Cooperatives 1) Own stock in a corporation 2) Stock ownership carries right of occupancy through a proprietary lease 3) Corporation pays property tax; each shareholder pays prorata 4) Transfer is accomplished by sale of stock 5) Disclosures required by The Cooperative Act (F.S. 719) B Condominiums 1) Own individual unit in fee simple 2) Undivided interest in common areas 3) Property tax levied on individual unit 4) Transfer by deed 5) Declaration and bylaws (a) Rights and obligations of condominium owners 6) Disclosures required by The Condominium Act (F.S. 718) C Time-Share 1) Share ownership or right of occupancy for a time interval in a unit 2) Legal formats (a) Interval ownership (b) Right-to-use 3) Disclosures required under Florida Vacation Plan and Time-Sharing Act (F.S. 721) and Rule 61J2, F.A.C. 24 D HOA (Chapter 720, F.S.) 1) Define 2) Disclose E CDD (Chapter 190, F.S.) 1) Define 2) Disclose 25 SECTION 9 TITLE, DEEDS AND OWNERSHIP RESTRICTIONS Learning Objectives: • Differentiate between voluntary and involuntary alienation • Explain the various methods of acquiring title to real property and describe the conditions necessary to acquire real property by adverse possession • Distinguish between actual notice and constructive notice • Distinguish between an abstract of title and a chain of title • Explain the different types of title insurance • Describe the parts of a deed and the requirements of a valid deed • List and describe the four types of statutory deeds and the legal requirements for deeds • List and describe the various types of governmental and private restrictions on ownership of real property • Distinguish among the various types of leases Key Terms: abstract of title acknowledgment actual notice adverse possession alienation assignment chain of title condemnation construction lien constructive notice deed deed restriction easement eminent domain encroachment escheat further assistance general warranty deed grantee granting clause grantor gross lease ground lease habendum clause intestate lien net leases percentage lease police power quiet enjoyment quitclaim deed seisin 26 sublease testate title variable lease warranty forever Outline I) Concept of Title A Ownership in a bundle of rights B Equitable title C Transferred voluntarily or involuntarily by operation of law II) Transfer by Voluntary Alienation A Deed 1) When real property is sold or conveyed by gift B Will 1) Parties to a will a) Deceased person who made the will is called a testator (if a male) or a testatrix (if female) b) Devisee is the person receiving real property, or beneficiary if it is personal property 2) Property conveyed by will a) Devise if its real property b) Bequest if its personal property III) Transfer by Involuntary Alienation A Transfer by descent 1) Person who dies without a will died intestate 2) A form of involuntary alienation because the state (not the deceased) determines the disposition of property 3) Passes to legal descendants known as heirs B Escheat 1) Provides for the property of a person who dies intestate and who has no known heirs to pass to the state C Eminent domain 1) Governmental power to take land from an owner through the legal process called condemnation D Adverse possession 1) Conditions for alienation by adverse possession IV)Notice to Legal Title A Actual notice B Constructive notice 1) Acknowledgment 2) Lis Pendens V) Protection of Title A Title companies B Chain of title vs. Abstract of title C Title opinion D Title insurance 1) Owner's policy 2) Lender's policy 27 VI) Deeds A Parties to the deed 1) Grantor 2) Grantee B Parts of a deed 1) Grantor and grantee 2) Consideration 3) Words of conveyance (granting clause) 4) Interest or estate being conveyed (habendum clause) 5) Deed restrictions 6) Exceptions and reservations 7) Appurtenances 8) Legal description of property 9) Voluntary delivery and acceptance 10) Signature of the grantor and two witnesses C Requirements for a valid deed 1) The deed must be in writing (Statute of Frauds) 2) The names of grantor and grantee 3) Grantor must have legal capacity 4) Consideration must be described 5) A granting clause or words of conveyance 6) A habendum clause must define the quality of the ownership interest being conveyed 7) Legal description of the property being transferred 8) Grantor must sign 9) Delivery and acceptance D Types of statutory deeds 1) General warranty deed 2) Special warranty deed 3) Bargain and sale deed 4) Quitclaim deed 5) Special purpose deeds (a) Personal representative’s deed (b) Guardian’s deed (c) Committee’s deed (d) Tax deed E Deed Clauses 1) Covenant of seisin 2) Covenant against encumbrances 3) Covenant of quiet enjoyment 4) Covenant of further assurance 5) Covenant of warranty forever F Legal requirements VII) Ownership Limitations and Restrictions A Government restrictions 1) Police power 2) Eminent domain 3) Taxation B Private restrictions 28 1) Deed restrictions (a) Restrictive covenants 2) Easements (a) Appurtenant (b) In gross (c) By prescription (d) By necessity (e) Implied easement (1) encroachment 3) Leases (a)Types of leases (1) Gross (2) Net (3) Percentage (4) Variable/Index (5) Ground b) Assignment c) Sublease d) Sale subject to lease 4) Liens (a) What is a lien (b) Types (1) Voluntary (2) Involuntary (c) Classifications (1) General (i) Judgment (ii) Income tax (iii)Estate tax (2)Specific (i) Property tax & special assessment (ii) Mortgage (iii)Vendors (iv)Construction (mechanics/materialman’s) (d) Lien priority (1) Satisfaction (i) Superior (ii) Junior 29 SECTION 10 LEGAL DESCRIPTIONS Learning Objectives: • Describe the purpose for legal descriptions • Understand the licensee’s role and responsibilities as it pertains to legal descriptions • Explain and distinguish among the three types of legal descriptions • Describe the process of creating a legal description using the metes-and-bounds method • Locate a township by township line and range • Locate a particular section within a township • Understand how to subdivide a section • Calculate the number of acres in a parcel based on the legal description, and convert to square feet • Explain the use of assessor's parcel numbers • Apply the measurements associated with checks, townships and sections Key Terms: base line benchmark check datum government survey system legal description lot and block metes and bounds monument point of beginning principal meridian range section survey terminus township township line/tier Outline I) Purpose of Legal Descriptions A A legal description is a method of describing the location of real estate that will be accepted by a court 1) Established boundary lines II) Types of Legal Descriptions A Metes-and-Bounds 1) Oldest method of land description 2) Metes refers to distance (measured in feet) and bounds refers to direction 3) Begin with reference point called a point of beginning (POB) 4) Monuments are fixed objects used to establish boundaries 30 5) Compass bearings are used to describe the direction of the boundary lines (a) Circle = 360° (b) Directions given in degrees (°), minutes (′) and seconds (″) (c) For example, N 45°25′20″E = North 45 degrees, twenty-five minutes, 20 seconds East B Government Survey System 1) Based on the logic that you can identify any point on a plane by reference to two axes 2) Primary reference lines running in a north-south direction are called principal meridians and lines running in an east-west direction are called base lines 3) Range lines run north-south every 6 miles. The north-south strip of land formed by two range lines is called a range 4) Township lines run east-west every 6 miles. The east-west strip of land formed by two township lines is called a tier or township (a) Numbering system of township lines and ranges 5) Intersection of two range lines and two township lines form a 6-mile square called a township (a) There are 36 sections in a township (b) Numbering system of sections within townships 6) Correction lines 7) Using the government survey system (a) Locating sections (b) Subdividing sections (c) Calculating size (d) "And" in legal description 8) Fractional sections and government lots C Lot and block survey method 1) Also called recorded plat method 2) Recorded survey called a plat map 3) Platted subdivision divided into blocks and lots III) Assessor's Parcel Number A To aid in the assessment of property for tax collection B Tax maps based on recorded plat maps 1) Other land in county C Assessment roll 1) Every parcel in county listed by parcel number 2) Shows owner's name and address of record 3) Assessed value of land and structures IV)Preparation and Use of Surveys A Benchmarks 31 SECTION 11 REAL ESTATE CONTRACTS Learning Objectives: • List and describe the essentials of a contract • Distinguish among formal, parol, bilateral, unilateral, implied, expressed, executory and executed contracts • Describe the various ways in which an offer is terminated • Describe the various methods of terminating a contract • Explain the remedies for breach of a contract • Describe the effect of the Statute of Frauds and the Statute of Limitations • Describe the elements of an option • Differentiate among the various types of listings • Explain and describe the various disclosures required in a real estate contract • Recognize what constitutes fraud • Recognize what constitutes culpable negligence Key Terms: assignment attorney-in-fact bilateral contract competent contract culpable negligence exclusive-agency listing exclusive-right-of-sale listing fraud liquidated damages meeting of the minds net listing novation open listing option contract Statute of Frauds Statute of Limitations unenforceable unilateral contract valid contract void contract voidable contract Outline I) Contracts in General A Definition of a contract B Preparation of contracts C Statute of Frauds D Statute of Limitations E Void, voidable and unenforceable contracts 32 II) Essentials of a Contract A Contractual capacity of the parties B Offer and acceptance C Legality of object D Consideration III) Authority of Real Estate Licensees to Prepare Contracts IV)Classification of Contracts A Bilateral or unilateral contracts B Expressed or implied contracts C Executory or executed contracts D Formal or informal contracts V) Contract Negotiation A Parties to offer 1) Offeror 2) Offeree B Ways an offer is terminated VI)Termination of Contracts A Methods of terminating contracts B Remedies for breach C Assignment of contracts VII) Contracts Important to Real Estate A Employment Agreements 1) Conditions created by listing agreements 2) Information included in listing agreements 3) Types of listings: (a) Open listing (b) Exclusive-agency listing (c) Exclusive-right-of-sale listing (d) Net listing 4) Buyer broker agreement B Sales contracts 1) Contract negotiation (a) Offers and counteroffers (b) Acceptance 2) Earnest money deposits 3) Equitable title 4) Information included in sales contracts (a) Date, time and place of closing (b) Purchase price (c) Financing terms (d) Quality of title to be conveyed (e) Type of deed (f) Items of personal property included (g) Type of evidence of title to be provided (h) Items to be prorated 5) Required disclosures (a) Radon gas disclosure (b) Energy efficiency disclosure 33 (c) Lead-based paint disclosure (d) Homeowner association disclosure (e) Flood insurance disclosure (f) Condominium and cooperative disclosures (g) Property tax disclosure (h) Building code violation disclosure 6) FAR/BAR contract forms 7) Disclosure of defects that materially affect the value of residential property 1) Johnson vs. Davis 2) “As is” provision 3) Duty for licensees to disclose C Option contracts D Installment sale contract VIII Miscellaneous Real Estate Contract Considerations A Procuring cause B Telephone solicitation laws C Multiple listing service D Ethical practices 1) When in doubt disclose 2) Fraud 3) Culpable negligence 34 SECTION 12 RESIDENTIAL MORTGAGES Learning Objectives: • Distinguish between title theory and lien theory • Describe the essential elements of the mortgage instrument and the note • Describe the various features of a mortgage including down payment, loan-to-value ratio, equity, interest, loan servicing, escrow account, PITI, discount points and loan origination fee • Explain assignment of a mortgage and the purpose of an estoppel certificate • Explain the foreclosure process and distinguish between judicial and nonjudicial foreclosure • Describe the mortgagor’s and mortgagee’s rights in a foreclosure • Calculate loan-to-value ratio • Explain the use of discount points and calculate approximate yield on a loan • Distinguish among the various methods of purchasing mortgaged property Key Terms: acceleration clause assumption blanket mortgage buydown contract for deed (land contract) defeasance clause deed in lieu of foreclosure discount points due on sale clause equity equity of redemption escrow estoppel certificate hypothecation interest lien theory lis pendens land development loans loan origination fee loan servicing loan-to-value ratio mortgage mortgagee mortgagor note novation partial release clause PITI prepayment clause prepayment penalty 35 receivership clause right to reinstate satisfaction of mortgage short sales subject to subordination agreement take-out commitment title theory Outline I) Mortgage concepts A Mortgage law 1) Title theory 2) Lien theory B Loan instruments 1) Promissory note (essential elements) 2) Mortgage instrument (a) Parties to a mortgage (b) Satisfaction of mortgage 3) Hypothecation C First mortgages versus junior mortgages 1) Determining what priority a mortgage lien has 2) Subordination agreements II) Essential elements of the mortgage A Important mortgage provisions 1) Promise to repay 2) Taxes and insurance 3) Covenant of good repair B Other mortgage provisions 1) Prepayment clause (a) Prepayment penalty clause 2) Acceleration clause 3) Right to reinstate 4) Due on sale clause 5) Defeasance clause III) Common mortgage features A Down payment B Loan-to-value-ratio 1) Equity C Interest D Loan servicing E Escrow (impound) account 1) PITI F Discount points G Loan origination fee H Take out commitment IV)Assignment of the mortgage A Estoppel certificate V) Methods of Purchasing Mortgaged Property 36 A Provisions under subject to the mortgage B Provisions under assumed mortgage 1) Effects of due on sale clause 2) Novation C Contract for deed (land contract) 1) Distinguish a contract from deed from a normal sales contract and a mortgage 2) Advantages and disadvantages of contract for deeds 3) How a contract for deed is typically used VI)Default A Consequence of default B Judicial versus nonjudicial foreclosure 1) Deed in lieu of foreclosure 2) Lis pendens C Rights of mortgagor in foreclosure 1) Equity of redemption D Rights of mortgagee 1) Surplus money action E Results of foreclosure 1) Effect on mortgagor/owner (a) Deficiency judgments (b) Effect on creditors or other claimants to title (c) Effect on mortgagee (d) Effect on title F Short sales 37 SECTION 13 TYPES OF MORTGAGES AND SOURCES OF FINANCING Learning Objectives: • Describe the mechanics of an adjustable rate mortgage and the components of an ARM • Describe the features of an amortized mortgage and amortize a level-payment plan mortgage when given the principal amount, the interest rate and the monthly payment amount • Distinguish among the various types of mortgages • Describe the characteristics of FHA mortgages and common FHA loan programs • Identify the guarantee feature of VA mortgage loans and the characteristics of VA loan programs • Explain the process of qualifying for a loan and how to calculate qualifying ratios • Distinguish among the primary sources of home financing • Describe the role of the secondary mortgage market and know the features of the major agencies active in the secondary market • Describe the major provisions of the federal laws regarding fair credit and lending procedures • Recognize and avoid mortgage fraud Key Terms: adjustable rate mortgage (ARM) amortized mortgage balloon payment biweekly mortgage conforming loan disintermediation home equity loan index intermediation level payment plan lifetime cap margin MIP mortgage broker mortgage fraud mortgage loan originator negative amortization nonconforming loans package mortgage partially amortized/balloon mortgage payment cap periodic cap purchase money mortgage reverse annuity mortgage teaser rate UFMIP 38 Outline I) Conventional mortgages A Neither government insured nor guaranteed 1) Down payment and LTV ratio B PMI1) Qualifying ratios 2) Interest rate 3) Assumption 4) Prepayment II) Common Types of Mortgages A Amortized mortgage 1) Monthly payment is constant for term of mortgage 2) As loan is paid off, amount applied to principal increases as amount applied to interest decreases 3) 30-year and 15-year terms 4) Amortizing a level-payment plan mortgage B Adjustable rate 1) Mechanics of an adjustable rate mortgage 2) Components of an ARM (a) Index (b) Margin (c) Adjustment interval (d) Interest rate caps (1) Periodic caps (2) Lifetime cap (e) Payment caps (1) Negative amortization (2) How negative amortization can result from payment caps (f) Teaser rates III) Custom mortgages A Partially amortized mortgage 1) Balloon payment B Biweekly mortgage C Package mortgage D Home equity loans E Purchase money mortgage F Reverse annuity mortgage IV)Government Insured FHA Program A Purpose of FHA B Characteristics of FHA mortgage loans 1) Loan insurance 2) Lending source 3) Discount points 4) Amount of down payment 5) Loan limit 6) Insured commitment 7) Insurance premium (a) UFMIP (b) MIP 39 8) Qualifying ratios 9) Interest rate 10)Appraisal 11) Closing costs 12)Assumption 13) Prepayment C Common FHA loan programs 1) Section 203(b); homeownership; fixed rate (a) Loan assumption criteria 2) Condominium units 3) Homeownership; adjustable rate V) VA loan guarantee program A The guarantee feature B Characteristics of VA mortgage loans 1) Qualifications 2) Eligibility (a) Licensees should rely on the VA lender to determine eligibility 3) Lending source 4) Eligible property 5) Discount points 6) Qualifying ratios 7) Loan limits 8) Loan guarantee 9) Amount of down payment 10) Entitlement 11)Reusing the entitlement 12)Appraisal 13)VA funding fee 14) Loan origination fee 15) Prepayment 16)Assumption 17) Interest rate VI)Qualifying for a loan A Qualifying the Buyer 1) The loan application process−Uniform Residential Loan Application 2) Credit evaluation and credit scoring 3) Qualifying ratios (a) Housing expense ratio (b) Total obligations ratio 4) Qualifying the property 5) Information required by lender VII) Primary sources of home financing A Mortgage Lenders 1) Savings associations (a) Types of loans offered 2) Commercial banks (a) Types of loans offered 3) Credit unions (a) Types of loans offered 40 B Mortgage broker 1) Their role - how they operate C Mortgage loan originator D Seller financing 1) Contract for deed (land contract) 2) Amortized mortgage E Government programs 1) Mortgage bond financing VIII) Secondary Mortgage Market A Effects of the mortgage market 1) Circulate the mortgage money supply (a) Intermediation and disintermediation 2) Standardize loan requirements (a) Conforming loans (b) Portfolio lenders B Fannie Mae 1) Private (not a government agency) corporation that trades on NYSE 2) Secondary market for VA, FHA and conventional loans 3) Issues mortgage-back securities to investors 4) Largest single private mortgage purchaser C Government National Mortgage Association (GNMA) 1) Wholly owned government corporation under HUD 2) Provides a secondary market for VA and FHA loans 3) Mortgage-backed securities program D Freddie Mac 1) Created by Congress in 1970 2) Shares sold publicly 3) Buy conventional loans E Nonconforming loans 1) Broker and correspondent loans 2) Private investors through mortgage brokers and bankers IX)Mortgage Fraud A Common types of mortgage fraud 1) Straw borrowers 2) No document loans B Red flags 1) Inflated appraisal 2) Inflated contract prices C Ethical practices X) Laws regarding fair credit and lending procedures A Equal Credit Opportunity Act (ECOA) 1) Prohibits discrimination in loan underwriting on the basis of sex, marital status, race, religion, age, or national origin. (A lender cannot require an applicant's spouse to join in (sign) a loan application) 2) Prohibits discriminatory treatment of income from alimony, child support, public assistance, or part-time employment 3) Prohibits inquiry about, or consideration of, child bearing plans or potential for child bearing B Consumer Credit Protection Act (Truth in Lending Act) 41 1) Implemented by Federal Reserve Regulation Z 2) Requires disclosure of full credit costs 3) Requires disclosure of annual percentage rate (APR) C Real Estate Settlement Procedures Act (RESPA) 1) Applies to virtually any closing involving a "standard" home mortgage loan from a financial institution or mortgage banker 2) Requires that the borrower be provided a booklet of information regarding closing costs 3) Requires advanced estimates of closing costs 4) Requires that the borrower be able to examine the RESPA-specified closing statement in advance 5) Prohibits kick-backs to a lender from vendors of closing related services 42 SECTION 14 REAL ESTATE RELATED COMPUTATIONS AND CLOSING OF TRANSACTIONS Learning Objectives: • Compute the sales commission • Calculate the percent of profit or loss, given the original cost of the investment, the sale price and the dollar amount of profit or loss • Define settlement and title closing • List the preliminary steps to a closing • Prorate the buyer's and seller's expenses • Calculate the dollar amount of transfer taxes on deeds, mortgages and notes • Allocate taxes and fees to the proper parties and compute individual costs • Explain the rules of thumb for closing statement entries • Explain the major sections of the Uniform Settlement Statement • Demonstrate ability to read and check the Uniform Settlement Statement for errors Key Terms: arrears credit debit level payment plan preclosing inspection principal profit proration Outline I) Basic Real Estate Computations A Sales commissions B Calculating selling price, cost and profit II) Preliminary steps to a closing A Earnest money deposited B Additional deposit, if required C Loan application D Contingencies E Appraisal F Loan approval G Title insurance H Termite inspection I Required repairs ordered J Survey ordered K Buyer hazard insurance 1) Hazard insurance policy to closing agent 2) Flood insurance L Buyer/seller contact for closing appointment M Preclosing inspection N Closing documents reviewed by parties prior to closing 43 O Buyer informed of funds needed to close P Earnest money transferred to closing agent III) Prorated Expenses A Prepaid rent B County and/or city property taxes C Mortgage interest on assumed mortgages D Prorating considerations 1) Period over which item is prorated 2) Period allocated to buyer and period allocated to seller 3) Prorating methods: 360 vs. 365 IV) State Transfer Taxes A State documentary stamp tax on deeds B State intangible tax on mortgages C State documentary stamp tax on notes V) Other Charges A Preparation of document B Recording fees C Broker's commission D Title insurance VI) Rules of Thumb A General rule of thumb 1) Items credited to seller 2) Items debited to seller 3) Items credited to buyer 4) Items debited to buyer VII) Uniform Settlement Statement A Buyer's Transaction Entries B Seller's Transaction Entries C Settlement Charges for both Buyer and Seller D Real Estate settlement example 44 SECTION 15 THE REAL ESTATE MARKETS AND ANALYSIS Learning Objectives: • Describe the physical characteristics of real estate • Describe the economic characteristics of real estate • Identify the factors that influence demand • Identify the factors that influence supply • Distinguish among different ways of interpreting market conditions • Demonstrate understanding of the different market indicators Key Terms: buyer's market demand household seller's market situs supply vacancy rate Outline I) Physical Characteristics of Real Estate A Immobility and importance of location in determining value 1) The value of real estate is heavily influenced by changes in the surrounding area 2) Highest and best use is fundamentally determined by alternate types of potential users bidding for a site in accordance with the locational and environmental value of the site in each use 3) If the value of a site in its current highest and best use declines relative to competing uses, highest and best use may change and land use transition will begin B Indestructibility (durability) of land and fixed location 1) Real estate investment tends to be long term 2) Land does not depreciate 3) Property insurance insures improvements only, not land C Nonstandardized; nonhomogeneous 1) No two parcels are exactly alike D Governmental controls influence the market through zoning, building codes, taxes, etc. II) Economic Characteristics of Real Estate A Relationship between supply, demand and price B Slow to respond to change in supply and demand C Demand factors: 1) Price of real estate 2) Population and household composition 3) Income of consumers 4) Availability of mortgage credit 5) Consumer tastes or preferences D Supply factors: 45 1) Availability of skilled labor 2) Availability of construction loans and financing 3) Availability of land 4) Availability of materials E Interpreting market conditions 1) Price levels 2) Vacancy rates 3) Sales volume 4) Area preference−situs 5) Market adjustment (a) Buyer's market (b) Seller's market III)Market Indicators A Vacancy rates B Price/sales information C Building permits 46 SECTION 16 REAL ESTATE APPRAISAL Learning Objectives: • Describe federal and state regulations pertaining to appraising • Identify the appraisers fiduciary relationship • Identify the economic and physical characteristics of real estate that affect market value • Explain what the Uniform Standards of Professional Appraisal Practice (USPAP) is and how it affects the appraisal process of real property • Distinguish among the various types of value • Define market value and describe its underlying assumptions • Distinguish among value, price and cost • Describe the four characteristics of value • Distinguish among the principles of value • Differentiate among the three approaches to estimating the value of real property • Estimate value of subject property using Comparable Sales Approach • Estimate value of subject property using Cost Approach • Estimate value of subject property using Income Approach • Reconcile three approaches to establish final value estimate • Calculate value using gross multiplier analysis • Explain how to prepare a Comparative Market Analysis (CMA), comparing and contrasting with sales comparison approach Key Terms: appraisal assemblage automated valuation models comparative market analysis (CMA) cost-depreciation approach curable depreciation economic life federally related transaction gross income multiplier (GIM) gross rent multiplier (GRM) highest and best use income approach incurable market value over-improvement plottage principle of substitution progression reconciliation regression replacement cost reproduction cost 47 sales comparison approach situs subject property Uniform Standards of Professional Appraisal Practice (USPAP) valuation Outline I) Regulation of Appraising – FIRREA A Appraisal Foundation B Appraisal Qualifications Board C Appraisal Standards Board D Appraisal Subcommittee E State licensed and certified appraisers 1) Requirements for federally related transactions 2) Certified appraisal reports F Appraisal service of real estate 1) Part I, Chapter 475 2) Appraisal reports must conform to USPAP 3) Comparative Market Analysis (CMA) 4) Broker Price Opinion (BPO) II) Concept of Value A Concepts of market cost/price/value B Many types of value apply to real estate 1) Assess value for property tax purposes 2) Insurance value 3) Value in use 4) Liquidation value 5) Investment value 6) Salvage value C Market value 1) Definition of market value 2) Assumptions associated with market value D Characteristics of value 1) Demand 2) Utility 3) Scarcity 4) Transferability III) Principles of Value A Substitution B Highest and best use 1) As if vacant 2) As improved C Increasing and decreasing returns 1) Over-improvement D Conformity E Other valuation terminology 1) Assemblage 2) Plottage 48 3) Progression 4) Regression IV) Introduction to the Three Approaches to Value A Sales comparison approach 1) Theory of method 2) Steps in the approach (a) Making adjustments (b) Adjusted sale price 3) Types of property best suited for this approach B Cost-depreciation approach 1) Theory of method 2) Steps in the approach (a) Reproduction vs. replacement cost (1) Cost estimating manuals (b) Three types of depreciation (c) Calculating accrued depreciation using age-life method 3) Applications of approach C Income approach 1) Theory of method 2) Steps in the approach (a) Potential gross income (b) Effective gross income (c) Net operating income (1) Fixed variable, reserve for replacements (d) Cap rates 3) Applications of approach 4) Gross rent multiplier (GRM) (a) Steps in the multiplier analysis (b) Does not act as a substitute for the income approach to valuation V) Preparing a Comparative Market Analysis (CMA) A Gathering appropriate data 1) MLS 2) Property appraisers office 3) Clerk of Courts B Selecting similar comparables 1) Recently sold 2) Currently on the market 3) Recently expired listings C Common elements of comparison D Adjusting for differences E Computer generated CMAs F Automated Valuation Models (AVM) 49 SECTION 17 REAL ESTATE INVESTMENTS AND BUSINESS OPPORTUNITY BROKERAGE Learning Objectives: • Distinguish among the different types of real estate investments • Identify the advantages and disadvantages of investing in real estate • Distinguish among the various types of risk • Explain the importance of investment analysis • Describe the similarities and differences between real estate brokerage and business brokerage • Describe the types of expertise required in business brokerage • Distinguish among the methods of appraising businesses • Describe the steps in the sale of a business Key Terms: appreciation asset basis capital gain (loss) cash flow equity going concern value goodwill leverage liquidation analysis liquidity personal property risk tax shelter Outline I) Investment Real Estate Terminology A Cash flow B Leverage C Capital gain (loss) D Basis E Appreciation F Equity G Liquidity H Risk I Tax shelter II) Types of investments A Residential B Commercial C Industrial D Agricultural E Business opportunities III) Advantages of Real Estate Investments 50 A Rate of return B Tax advantages C Hedge against inflation D Leverage E Equity build up IV)Disadvantages of Investing in Real Estate A Illiquidity B Market is local in nature C Need for expert help D Management E Risk V) Assessment of Risk A Risks associated with general business conditions 1) Business risk 2) Financial risk 3) Purchasing-power risk 4) Interest-rate risk B Risks that affect return 1) Liquidity risk 2) Safety risk (a) Market risk (b) Risk of default VI)Nature of Business Brokerage A Similarities to real estate brokerage 1) Almost always a sale of real property or an assignment of a long-term lease is involved 2) Must be licensed pursuant to Chapter 475, F.S., Part I B Differences from real estate brokerage 1) Usually involve transactions containing assets other than real estate (a) Personal property (b) Goodwill 2) The value of the business may be less than, equal to, or greater than the value of the real estate. That is, the “going concern” value may be different than the real estate value 3) Markets for business enterprises are typically wider in geographic scope than markets for individual parcels of real estate C Expertise required in business brokerage 1) Corporate finance 2) Business accounting 3) Valuation of businesses (a) Comparable sales analysis (b)Cost approach (c)Incomes analysis (d)Liquidation analysis D Steps in the sale of a business 51 SECTION 18 TAXES AFFECTING REAL ESTATE Learning Objectives: • Distinguish among immune, exempt and partially exempt property • Describe the various personal exemptions available to qualified owners of homestead property • Compute the property tax on a specific parcel, given the current tax rate, assessed value, eligible exemptions and transfer of assessment limitation difference (save our homes portability) if applicable • List the steps involved in the tax appeal procedure • Describe the purpose of Florida’s Green Belt Law • Calculate the cost of a special assessment, given the conditions and amounts involved • Describe the tax advantages of home ownership • Explain how to determine taxable income of investment real estate • Distinguish between installment sales and like-kind exchange Key Terms: ad valorem assessment limitation (save our homes benefit) assessed value capital gains community development districts debt service exempt properties installment sale immune properties just value like-kind exchange mill special assessment tax rate taxable income taxable value Outline I) Real Property Taxation A Local importance 1) Primary source of revenue B Determining "just value" 1) General procedure (a) Provisions under Amendment I 2) Protest procedure (a) Property owner contacts property appraiser within legislated time frame (b) File an appeal with the Value Adjustment Board (c) Litigation in the courts (1) Certiorari proceeding C Exemptions from property taxes 1) Immune property 52 2) Exempt or partially exempt property 3) Homestead exemption (a) Assessment limitation (save our homes benefit, portability) (b) Surviving spouse exemption (c) Disability exemption (d) Blind persons exemption (e) Cumulative homestead tax exemption (f) Military service-connected total and permanent disability tax exemption (g) Tax exemption for certain totally and permanently disabled persons 4) Greenbelt law exemption (a) Nature (b) Purpose (c) Provisions D Calculating taxable value E Calculating property taxes F Special Assessments 1) Purpose of special assessments 2) Limitations on use 3) Computation of assessment rate 4) Special assessment liens G Nonpayment of real property taxes H Purchasing tax certificates II) Federal Income Taxes A Sale of real property 1) Amount realized 2) Capital gain (loss) B Principal residence 1) Tax advantages (a) Mortgage interest deduction on principal residence and second home (b) Deduction of property taxes on principal residence and second home (c) IRA withdrawal for first time home buyers (d) Exclusion of gain from sale of principal residence C Investment real estate 1) Types of income and cash flows (a) Potential gross income (b) Effective gross income (c) Net operating income (d) Before tax cash flow (cash throw-off) (e) After tax cash flow 2) Determining taxable income (a) Reserve for replacements (b) Interest (c) Depreciation 3) Tax from operations (a) Capital gain (loss) (1) Short-term gain (2) Long-term gain 4) Installment sales (contract for deed) 5) Like-kind exchange 53 SECTION 19 PLANNING, ZONING AND ENVIRONMENTAL HAZARDS Learning Objectives: • Describe the composition and authority of the local planning agency • Explain the purpose of land-use controls and the role of zoning ordinances • Identify the provisions of Florida’s comprehensive plan and the Growth Management Act • Distinguish among the five general zoning classifications • Distinguish among zoning ordinances, building codes and health ordinances • Explain the purpose of a variance, special exception and a nonconforming use • Calculate the number of lots available for development, given the total number of acres contained in a parcel, the percentage of land reserved for streets and other facilities and the minimum number of square feet per lot • Describe the characteristics of a planned unit development • Understand the basic provisions of the national flood insurance program • Describe the impact Comprehensive Environmental Response Compensation and Liability Act (CERCLA) • Explain the various environmental hazards associated with real estate Key Terms: asbestos buffer zone building code building inspection building permit certificate of occupancy concurrency environmental impact statement health ordinance nonconforming use planned unit development special exception special flood hazard area variance zoning ordinance Outline I) Planning and Zoning A City planning 1) Historical (a) Philosophy of laissez faire (b) Industrialization and urbanization (c) Protecting residential property 2) Goals of planning include, for example: (a) Savings of tax money by preventing sprawl (b) Adequate provision of services 54 (c) Providing for road right-of-ways and set backs (d) Protection against costly drainage, flooding or environmental problems (e) Reduction in political and equity problems in siting landfills, prisons, etc. II) Local planning agency A Composition B Authority 1) Subdivision plat approval 2) Site plan approval 3) Sign control C Support staff III) Florida's comprehensive plan A Chapter 163, F.S. Growth Policy; County And Municipal Planning; Land Development Regulation 1) Department of Community Affairs (DCA) B Plan must contain certain elements to be coordinated with plans of surrounding areas 1) Future land use 2) Traffic circulation 3) Water, sanitary and storm sewers, and solid waste 4) Conservation of natural resources 5) Recreation 6) Housing 7) Coastal zone protection, where relevant 8) Intergovernmental coordination 9) Utilities (a) Plan must be implemented by adopting sufficient land use control ordinances and capital improvement programs (concurrency requirements) (b) Optional elements may include: historical, scenic preservation, economic and public buildings (c) Concurrency allows new development only after a minimum level of public infrastructure is in place around the development site IV)Zoning, land use restrictions and building codes A Zoning ordinance and classifications 1) Residential−control of density (a) Lot size (b) Set backs (c) Lot coverage 2) Commercial−control of intensity of use (a) Parking requirements (b) Height and size limitations 3) Industrial−control of emission and effluents (a) Control of by-products such as noise, odor, smoke congestion and chemicals 4) Agricultural 5) Special use B Building codes 1) Building permits 2) Building inspections 3) R-Value 55 4) Certificate of occupancy C Health ordinances V) Appeals and Exceptions A Zoning Board of Adjustment 1) Variance 2) Special exception 3) Legally nonconforming use B Developments of Regional Impact 1) Planned unit development 2) Environmental impact statement VI)Flood zones A National Flood Insurance Program (NFIP) 1) Can qualify for Federal Flood insurance program 2) “Special Flood Hazard Areas" are delineated according to NFIP criteria 3) Development within SFHAs must be restricted in a manner so as not to obstruct the natural flow of flood waters B Residential structures in the SFHA must have the first floor above the "Base Flood Elevation" C Non-residential structures must meet the residential requirement, or be water-tight below the Base Flood Elevation D Over 40 percent of purchasers of National Flood Insurance are in Florida VII Indoor and outdoor environmental hazards A Water supply 1) Well (adequacy, quality) 2) Public (quality) B Septic tank C Asbestos D Radon E Toxic waste in soil F Underground storage tanks G Lead paint H Mold I Chemical contamination J Structural damage 1) Wood-destroying organisms (a)Termites (b)Carpenter ants (c)Decay VIII CERCLA 56 I will be blogging about the significant difference in the weeks to come so stay tuned!

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