Florida Post-License 45

Default:

(a)Buyer default: If the buyer defaults, the seller can collect the deposits as liquidated damages, agreeing to pay the broker 50% of the deposits up to the full brokerage fee. (b) Seller default: If the seller defaults, the buyer can get the binder back and cancel the contract, seek damages, or sue for specific performance—or all of these. The seller will also owe the broker a commission.

After reviewing the offer, you may:

-Accept the offer—you have a contract -Decline the offer—you do not have a contract The buyers can raise their offer. The buyers can decide to keep looking for another house. -Counteroffer If you don't like some part of the offer (price, closing date, etc.) you can change it. The buyers can accept your counteroffer—you have a contract. The buyers can reject the your counteroffer and look for another house.

Adjustments to comparable

-If the Comparable is Inferior, Add -If the Comparable is Better, Subtract Adjustments should be made for sold properties, listed properties, and expired properties; then each category should be reconciled.

Buyer Brokerage Agreement

-Parties. The parties are the buyer and the broker. This paragraph also explains that the terms "acquire" or "acquisition" include "purchase, option, exchange, lease, or other acquisition or ownership or equity interest in real property." -Term. This paragraph sets forth the dates the agreement will be effective. Notice that if a contract is pending on the expiration date of the agreement, the agreement is extended until the contract is closed or terminated. -Property. This section shows the following:Type of property—for example, residential, agricultural, office, et cetera.Location would normally be used to describe a city or a county, or another geographic area.Price range would set the minimum and maximum limits the broker should use in selecting properties to show. This section also discloses that the buyer may have already been preapproved for a mortgage.Preferred terms and conditions sets out the buyers' preferences, such as owner financing, small down payment, lease-purchase, and so forth. -Broker's obligations.Broker assistance: The broker agrees to cooperate with seller's brokers to complete a transaction. It also states that even if the broker is paid a commission split from the seller's broker, the broker's duties to the buyer are not reduced.Other buyers: This section discloses to the buyer that the broker may work with another buyer interested in the same property but must maintain confidentiality as to the terms of any offers.Fair housing: Broker states he will not participate in unlawful discrimination.Service providers: Broker will not be responsible for acts of a third party recommended by the broker, such as a home inspector or title insurance company. -Buyer's obligations. In this section, the buyer agrees to tell sellers or other brokers that he is working under contract with a broker, to conduct all negotiations through the broker, to give the broker personal financial information and allow the broker to run a credit check, to hold the broker harmless for any damages, and to consult an appropriate professional for tax, legal, and other services. -Retainer. Many licensees ask prospective buyers for a nonrefundable retainer at the time this contract is signed. It has an option for the retainer to be credited to the total compensation. -Compensation. This obligates the buyer to pay a commission to the broker, offset by any commissions the broker may receive from a seller or a broker working with the seller. The broker is entitled to a commission if the customer purchases, leases, or options the property. The commission may be stated as a percentage of the sale, lease, or option, or it can be a fixed fee. The broker is also entitled to a commission if the buyer defaults on any contract. -Protection period. If the broker has shown property to the buyer and the buyer purchases the property within the agreement period, the buyer will owe the commission unless the buyer has entered into a buyer brokerage agreement with another broker after the termination date. -Early termination. The buyer may terminate the agreement, but if the buyer buys property that she learned about during the contract term, the buyer owes the commission. The broker may terminate the agreement at any time by giving written notice. -Dispute resolution. Disputes must be mediated first. If mediation is not successful, the parties must agree to submit the dispute to binding arbitration. -Assignment; persons bound. The broker is allowed to assign the agreement to another broker. -Brokerage relationship. The form shown here is the one used by transaction brokers. There are separate buyer brokerage forms for each of the other brokerage relationships. -Special clauses. This gives the parties additional space to add other provisions to the agreement. -Acknowledgment; modifications. Indicates the buyer has read and understands the agreement. There are spaces for signatures of the buyer(s), sales associate, and broker.

The successful property manager must be able to function effectively at four different levels of maintenance operations:

-Preventive maintenance -Corrective maintenance -Routine maintenance -New construction maintenance

When buyers make an offer to purchase

-Request a preapproval offer from the buyers' lender -We will discuss all aspects of the offer, and I'll prepare a statement of your net proceeds from this offer -Seller can decide what to do with the offer

The most important sources of listings for a new sales associate

-Sphere of influence -Expired listing -Farm -For sale by owners (FSBOs) and for rent by owners (FRBOs) -Canvass

Listening skills

-You must hear. -You must understand. -You must evaluate.

Why listings expire

-market conditions (oversupply of homes available for sale), -property condition, -too short listing period, -uncooperative owner or tenant, -overpriced property, or -poor marketing effort.

The best sources for gathering CMA information include:

-multiple listing service (MLS) records, -company files, -public records, -other licensees, and -data service companies.

A residential sale is defined as:

-property with four units or fewer, -unimproved residential property intended for use of four units or fewer, or -agricultural property of 10 acres or fewer.

Doc Stamps

.70 on every 100

Mortgage The four procedures are

1) determining the borrower's ability to repay; 2) estimating the value of the collateral; 3) researching the title; and 4) preparing the documents for closing the transaction.

Tax Break for making access readily acheivable

A Tax deduction of up to 15,000 is available for removing barriers ar existing places of business.

Sales Contract

A bilateral agreement in which a buyer agrees to purchase a seller's property at a specified price and terms.

Opinion of value

A broker's price opinion, usually based on a comparative market analysis.

Arm's Length Transaction

A business transaction in which the parties are dealing in their own self-interest, not being under the control of the other party. One of the requirements before a comparable sale should be used in an appraisal.

Contraction

A component of an economic cycle that follows a recession and that experiences reduced sales, slower production, worker layoffs, and unemployment.

Seller's Net Proceeds Form

A form used to show the seller's equity, expenses, and prorations, as well as the net amount the seller is estimated to receive as proceeds from the sale of the property.

FICO score

A proprietary numeric credit score used to evaluate a prospective borrower, developed by Fair, Isaacs, & Co. The most commonly used credit score today

Florida Americans With Disabilities Act

A state law that implements and mirrors portions of the Americans with Disabilities Act. Has its own act because suing in a State Court gives the victim another remedy for violations.

Power Prospecting

A type of prospecting that seeks to make contact with many more buyers and sellers and that results in much higher income levels.

Jargon

A word or expression related to a specific vocation or profession that a layperson may not understand. Avoid using it.

Preventive Maintenance

A work program designed to preserve the physical integrity of the premises and eliminate the more costly corrective maintenance.

Other improvements

Adjust for differences between the subject property and the comparable. Adjust for landscaping, driveways, trees, and pools based on their contribution to value.

Pro and Con of 15-Year mortgage

Advantages of a 15-year mortgage Because lenders get their money back sooner than they do with traditional 30-year mortgages, they charge slightly lower rates for 15-year loans. Also, the loans are paid off faster, less money is borrowed for less time, and less total interest is paid over the lives of the loans—more than 50% less. As with a 30-year, fixed-rate loan, the interest rate on a 15-year mortgage does not change, and the monthly principal and interest payment does not go up. Finally, the higher monthly payment results in forced savings in the form of faster equity buildup. saves borrowers thousands of dollars in interest charges. Disadvantages of a 15-year mortgage The monthly payment on a 15-year loan is higher, and the borrower forgoes investment opportunities voluntarily for the extra dollars paid on the loan each month. Some income tax advantages related to home mortgages and investment opportunities are lost. The mortgage payment is not flexible, and any future increase in income tax rates could increase the 15-year mortgage's net costs.

Intake

After HUD has received the initial information, an intake specialist will contact the complainant by phone to collect facts about the alleged discrimination. The specialist will then review the allegations to determine whether the matter is within HUD's jurisdiction.

Preparing the Customer to Buy

After qualifying the buyer's needs, the sales associate should give the buyer a copy of the contract for purchase and sale and explain the more important paragraphs to the buyer. This explanation of the contract serves two important functions: -If the buyer receives important information from the sales associate at their first meeting, this works to cement the buyer's loyalty to the associate. -Because the buyer is given a copy of the contract along with an explanation, the contract becomes the buyer's property. When the buyer becomes interested in a particular property, she is not startled when the sales associate pulls out a contract form.

Aisles and Pathways

Aisles and pathways to services should be at least 36 inches wide. ***Spaces in auditoriums should be distributed throughout the hall. Tops of tables or counters should be between 28 and 34 inches high.

Know the mortgage market:

All active licensees should have current information on the local mortgage market, including data on available interest rates (fixed and adjustable), points, time for processing applications, and so on.

FHA required disclosure statement

All approved lenders making FHA adjustable-rate loans must provide each borrower with a mortgage loan information statement that includes a worst-case example form. The borrower must receive this statement and be given an opportunity to read the informative explanation before signing the borrower's certification on the loan application. Licensees are urged to obtain personal copies of the FHA adjustable-rate mortgage disclosure statement to use when counseling clients or advising customers.

change

All property is influenced by the principle of change. Because no physical or economic condition remains constant, licensees must be aware of market forces when preparing opinions of value.

Competition

All residential properties are susceptible to competition. The only house for sale in a nice, well-maintained neighborhood has a better chance of selling at or near market value than if several houses on the same street were for sale.

Buyer Brokerage Agreement

An agreement between a buyer and a broker for the broker to provide services to a buyer for compensation. The broker may be acting as a single agent, a transaction broker, or a nonrepresentative.

buyer brokerage agreement

An agreement between a buyer and a broker for the broker to provide services to a buyer for compensation. The broker may be acting as a single agent, a transaction broker, or a nonrepresentative.

contract

An agreement between two or more parties to do or not to do a specific act. Mutual promise is required.

Option Contract

An agreement that allows one party to buy, sell, or lease real property for specified terms within a specified time limit.

Rider

An attachment to a contract.

Annual Percentage Rate (APR)

An expression of credit costs over the life of a loan, taking into account the contract interest rate plus lender fees for originating, processing, and closing a mortgage loan.

Dual Agency

An illegal arrangement whereby the broker tries to represent both the buyer and the seller in the same transaction.

The ADA does not cover temporary impairements...

Broken bones, sexual or behavioral disorder. Sexual orientation is not included.

No Broker Relationship Example

Broker Helen lists the Smiths' home as a single agent. Later, Helen shows it to Mr. Jones, a prospective buyer, and gives him a no brokerage relationship notice. While Helen is writing his offer for the property, Jones says, "I'll pay the asking price of $200,000 if I have to, but I would like to start the negotiations at $185,000." When Helen presents the offer, she must tell the Smiths that Jones has said he will pay up to the listed price. Failure to make this disclosure would expose her to disciplinary action and civil liability for violation of her fiduciary duty of full disclosure.

Antitrust Laws

Brokers risk their assets and careers by conspiring with other brokers to set a standard commission. Antitrust laws prohibit any action by a party to fix prices or inhibit competition by using unfair practices. Some of the prohibited actions under antitrust laws include: conspiracy to set prices, splitting up competitive market areas, conspiring to boycott cut-rate brokers or otherwise interfering with their business, and requiring a minimum commission before allowing listings to be circulated in any service, such as through a multiple listing service (MLS).

PROPERTY TAX DISCLOSURE SUMMARY

Buyer should not rely on the seller's current property taxes as the amount of property taxes that the buyer may be obligated to pay in the year subsequent to purchase. A change of ownership or property improvements triggers reassessments of the property that could result in higher property taxes. If you have any questions concerning valuation, contact the county property appraiser's office for information.

Seasonal Variations

Changes in the economy (for example, winter tourism in Florida) that recur at regular intervals at least once a year. - school year -snowbirds

Collected Funds

Checks or wired funds that have become actually and finally collected and deposited into the escrow agent's or the closing agent's account.

Advertising and Display

Classified Ads Newspaper classified advertising for renting apartments has declined in importance. Most of the classified advertising is now online at websites like apartments.com, Realtor.com and Craigslist. Internet advertising The most important advertising medium for rentals are internet websites. Many sites, such as apartments.com and Craigslist, are much more relevant than newspaper classified advertising. The classified advertisement should include the amount of rent, apartment size, property address, and manager's phone number. Photos of the property, along with a description of the amenities, are very effective. Display ads More prestigious residential projects, especially when newly built, find it advantageous to use display advertisements. These larger ads attract immediate attention, appeal to potential tenants' desire for attractive living space, and demonstrate the many amenities a building offers. The specific rental rates often are omitted, with reference to a general range. Apartment guides Just as home magazines are one of the most effective ways to market residential homes for sale, apartment guides appeal to potential tenants. Color photos make the property's presentation attractive and interesting. Many management firms report that the excellent response to ads in the guides is beginning to rival the effectiveness of newspaper classified advertising.

ADA and Mental Disability (Threats to Others)

Doesnt protect an individual with a disability whose tenancy would constitute a direct threat to the health/safety of other individuals or result in substantial physical damage to the property of others unless the threat can be eliminated or significantly reduced by reasonable accomodation.

Be careful what you tell buyers about tax deductions

Don't tell buyers that they can deduct property taxes and interest to get them to purchase a home. You must be certain that they have enough other deductions (e.g., combined deductions exceeding $24,000 for a married couple filing jointly in 2018) so they can take full advantage of the real estate-related deductions.

accessible

Easy to approach, enter, operate, participate in, and use safely and with dignity by a person with a disability.

To reduce the risk of loss in a default situation, lenders look to the credit rating of the borrower.

False credit rating is not relevant in default. The value of the collateral becomes the most important factor.

Designated Sales Associate Example

FatBurgers, Inc., is searching for five store locations in Pompano. It engages Mary Stevens of Pompano Commerce Realty as single agent because of her knowledge and expertise in the Pompano fast-food field. Jack Wilson, of the same firm, represents the seller of one of the potential sites. Because FatBurgers, Inc., wants Mary to be its single agent, the broker appoints Mary as a single agent for FatBurgers, Inc., and Jack as single agent for the seller. Mary and Jack are now designated sales associates.

Your Leads Database

First, set up a customer relationship manager (CRM) database. There are many programs available, including Microsoft Outlook, Salesforce, and Top Producer. five database categories: Close friends and family Friends Customers Acquaintances Targeted strangers

Listing Servicing Schedule

First Day: Verify tax information and legal description. Send out mortgage status request. Write three ads. Place listing on web page. Send thank-you card to seller. Enter listing information in computer. Put copies of listing information in floor book. Distribute copies of listing information to all sales associates. Put sign and lockbox on property. Second Day: Mail notice of listing cards to at least 20 neighbors. Call or email seller to tell of above steps. End of First Week: Send letter to seller signed by broker. Day after Caravan: Collect caravan comment sheets. Visit with seller to evaluate results of caravan and comments. Second Week: Clip ads of property. Send to seller in postcard format. Check MLS information on computer, verify information, and then email to seller. Call seller to tell of progress. Ask seller to call when house is shown. Third Week: Clip ads of property. Send to seller in postcard format. Run MLS computer check for new listings and listings under contract, and then email information to seller. Call or email seller to find out who has seen home. Check with sales associates who have shown home; give feedback to seller. Fourth Week: Clip ads of property. Send to seller in postcard format. Run MLS computer check for new listings and listings under contract, and then email information to seller. Call or email seller to find out about who has seen home. Check with sales associates who have shown home; give feedback to seller. Fifth Week: Clip ads of property. Send to seller in postcard format. Run MLS computer check for new listings and listings under contract, and then email information to seller. Visit seller in the home, and go over CMA. Get price reduction if appropriate. Walk through property again. Point out areas needing attention. Sixth Week: Clip ads of property. Send to seller in postcard format. Run MLS computer check for new listings and listings under contract, then email information to seller. Call or email seller to find out who has seen home. Check with sales associates who have shown home; give feedback to seller. Schedule open house for the property, if appropriate. Send notice of open house to at least 20 neighbors. Seventh Week: Run open house, and leave a note for seller on results. Call later. Clip ads of property. Send to seller in postcard format. Run MLS computer check for new listings and listings under contract, then email information to seller. Call or email seller to find out who has seen home. Check with sales associates who have shown home; give feedback to seller. Send out notice of listing to additional 20 homes in neighborhood. Eighth Week: Clip ads of property. Send to seller in postcard format. Run MLS computer check for new listings and listings under contract, and then email information to seller. Call or email seller to find out who has seen home. Check with sales associates who have shown home; give feedback to seller. Ninth Week: Clip ads of property. Send to seller in postcard format. Run MLS computer check for new listings and listings under contract; then email information to seller. Call or email seller to find out who has seen home. Check with sales associates who have shown home; give feedback to seller. Do another CMA. Visit with seller, and get price reduction and extension. Schedule luncheon for sales agents. 10th Week: Clip ads of property. Send to seller in postcard format. Run MLS computer check for new listings and listings under contract, and then email information to seller. Call or email seller to find out who has seen home. Check with sales associates who have shown home; give feedback to seller. Continue this pattern until listing has been sold.

Intentional misrepresentation

Fraud

Adjusting for Differences

Ideally, the licensee wants to find comparable sales that are identical in characteristics to the subject property. In the real world, this doesn't always happen.

False or misleading statement

In real estate, a statement made by a licensee or a party in a real estate transaction that is not factual.

Random Changes

Irregular fluctuations of the economy that may be caused by legislative and judicial decisions, wars, weather, et cetera. Impossible to predict or analyze, may affect one or more sectors of the aggregate economy.

Size and shape of lot

Irregularities can make portions of a site unusable for building, impair privacy, or restrict onsite parking, which could require major adjustments. Street frontage and total square footage of the lot are other important considerations.

Neighborhood centers

Larger neighborhood shopping centers usually include a grocery store or a drugstore as the anchor, along with some personal service stores such as dry cleaners, Laundromats, or restaurants.

What addendum to a listing contract states that the owner has a duty to disclose any facts materially affecting the property's value?

Latent defects

Licensees should be careful that the legal description is stated correctly on the contract.

Licensees should be careful that the legal description is stated correctly on the contract.

Kitchen

Licensees should focus on certain key factors, as follows: -Location -Counter space and storage -Service triangle -Appliances

Calls Resulting From Advertising

Licensees who want their personal name to appear in a brokerage firm's ad must include their last name at least once in the ad. The brokerage firm's name must be included to avoid charges of blind advertising. For example, Joseph J. Perkins, a sales associate, could place an advertisement with "call Joe for more information," provided the ad includes the brokerage firm's name and Joe's last name somewhere in the ad (61J2-10.025(2)). When advertising online, the brokerage firm name must be placed adjacent to or immediately above or below the point of contact information. Point of contact information refers to any means for contacting the brokerage firm or individual licensee, including mailing address, physical street address, email address, telephone number, or facsimile telephone number (61J2-10.025(3)(a). Advertisement calls are an extremely important source of buyers. Buyers call for more information to determine whether a house fits their needs. Buyers seldom call to make an appointment with a sales associate, but the sales associate's objective is always to get the appointment with the buyers. Sales associates must remember two important points when answering buyer advertisement calls: It is difficult for sales associates to talk intelligently about properties that they have not seen. For this reason, sales associates should see every company listing before answering calls on ads or signs. Sales associates should review all company advertising in newspapers and homes magazines. Licensees should clip each ad and paste it on a separate piece of notebook paper or index card. A fallback list, sometimes called a switch list or pivot list, should be prepared for each ad. A fallback list comprises three to five properties that are similar to the property being advertised. The list can consist of the sales associate's personal listings, the brokerage firm's listings, or other brokers' listings. If a caller isn't satisfied after learning more about the property in question, the sales associate can refer to the fallback list of other properties that might be suitable. The fallback list becomes invaluable in getting the appointment and helping the buyer find the right property. A sample fallback list is shown in Fallback List.

Deferred Maintenance

Maintenance that needs to be done but that has not been done for some reason, usually economic.

Condition of exterior

Make an adjustment for any needed repair work.

Condition of interior

Make an adjustment for needed repairs. Luxurious finishing such as real wood paneling adds to a home's value.

The Management Contract

Management contracts have many variations, but most share the following essential elements: -Identification of the parties and the property -The term of the contract -Responsibilities of the manager -Responsibilities of the owner -Fees and leasing/sales commissions -Signatures of the parties

Measuring practice

Measurement of a house is extremely important. An error could cause problems in pricing the property if the home's square footage is given to buyers. Calculate the square footage of gross living area of the house shown in Measuring a House.

Before placing a call, you should be sure that the consumer is not on any of the following lists:

National Do Not Call Registry Florida Do Not Call list Your own in-office do-not-call list

Unintentional misrepresentation

Negligence

An open listing is created by Termination?

Negotiation Open listings may be terminated at will by either party.

Body Language

Nonverbal communication expressed by the position of the body, hands, arms, legs, or facial expressions.

Notices:

Notices may be made by mail, personal delivery, or electronic media. The paragraph emphasizes that if the buyer does not make the required notices about contingencies to the seller on time, the contingency will no longer exist.

Acceptance

Obviously, the selling sales associate hopes the response will be an acceptance. The offer is signed and becomes a contract between the buyer and the seller.

Florida Real Estate Disclosure Chart

On Desktop

targeted strangers

Persons not known to a licensee who are qualified as prospects by income, occupation, or residence address. largest group in your database

Refinance

Placing a new mortgage on a property to replace another mortgage.

Radon Gas Protection Act (Chapter 404.056, F.S.)

Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county health department.

Boundaries and land usage.

Rivers, lakes, railroad tracks, parks, or major highways may help define the neighborhood's boundaries. Transportation and utilities. Transportation and utilities are crucial to the success of income property. The investor should analyze the effect of major traffic artery changes, as well as proposed or scheduled widening of streets, opening or closing of bridges, or new highway construction, all of which may enhance or hurt a location.

Role of Sales Associate

Sales associates are agents of their registered brokers. If a seller's broker has a listing, that broker and all the sales associates in that firm represent the seller.

Power Prospecting

Setting high-income goals requires a commitment to prospect. The three keys to prospecting success are as follows: Numbers Consistency Organization

Preclosing Duties

Sold or Sale Pending sign on listed property Placing a Sold or a Sale Pending sign on the listed property is a function of the listing sales associate. Some sellers prefer a Sold sign so that prospective buyers are no longer escorted through the property, while others do not want to discourage activity until at least after the buyer's loan approval and prefer a Sale Pending sign. Notice of under contract to MLS Multiple listing services (MLSs) require that all offices be notified of a listed property's status. Failure to change the status to "under contract" can result in agents from other offices appearing at the property with customers or clients. This wastes both the sales associate's and the prospective buyers' time and reflects poorly on the listing office. Earnest money deposited in bank A sales associate must give the earnest-money deposit to the broker no later than the end of the next business day. FREC rules require that the buyer's good-faith deposit be placed in a bank no later than three business days after receipt of the funds. The broker should deposit the funds immediately. If a title-closing agent will hold the deposit, the broker must deliver the deposit to the title-closing agent within the same periods allowed by FREC for depositing the funds in a brokerage account. The broker should get a receipt for the funds. Get a receipt if the title-closing agent is holding the deposit If an attorney or title insurance company will hold the buyer's deposit, you must indicate the name and address of the entity, and get a written receipt proving you delivered the deposit on time. Additional binder received, if required If the contract requires that the buyer put up additional funds as a good-faith deposit, it is the sales associate's responsibility to ensure that the funds are received and deposited according to FREC requirements. The buyer's failure to comply with contract requirements is a default. The seller must be notified and the seller's instructions followed. Loan application made by buyer The Florida Realtors® contract requires that the buyer make application for the loan by a certain date. The buyer's failure to comply with contract terms is a default, and the seller must be notified. Contingencies cleared in writing Sales associates must ensure that contingencies are satisfied as soon as possible. An unsatisfied contingency may make the contract voidable. Some normal contingencies include a home inspection, a soil test, a roof inspection, and financing. If a problem arises with one of the contingencies, sales associates should do everything within their power to correct the problem, and all parties should be made aware of the situation. Appraisal The appraisal normally is ordered and paid for at the time of loan application. The sales associate wants to be certain that the appraiser selected by the financial institution has complete cooperation, particularly with respect to access to the property. Failure to provide access wastes the appraiser's time and may delay the closing. Loan approval The Florida Realtors® contract requires a loan commitment within a certain number of days from the contract's effective date. The licensee must monitor the lender's progress and provide to the lender immediately any information or documents requested. The lender's failure to provide the commitment within the required time may allow the buyer or the seller to void the contract. Title insurance ordered Many lenders permit the sales associate to select the title-closing agent, provided the company is on the lender's approved list. The seller or the buyer also may have a preference in making the decision, based on who will pay for the policy. Many title companies prefer that the agent deliver the contract and financing information even before loan approval is obtained so that the title search can begin. Often little time is available from loan approval to closing, and the companies like a head start. If that is the case, the licensee must verify that the title company agrees to take the risk of a failed closing and that it will not charge a fee if the sale does not close. The licensee should give the title-closing agent the following items when a title insurance order is placed: A signed and dated sales contract A previous title insurance policy on the property, if available Enough information about the sellers, the buyers, the property, and the lender to process and close the transaction, including:the sellers' and the buyers' marital status;a complete legal description—for example, lot, block, subdivision name, phase or unit, recording information, and county;street address, including ZIP code;terms of any purchase money mortgage the title company must prepare;closing date and information about whether all parties will attend; andinformation on commission to broker and commission splits between brokers. Wood-destroying organisms inspection ordered As soon as possible after loan approval, the wood-destroying organisms (WDO) inspection should be ordered. When it is completed, copies of the report should be delivered to the buyer, the lender, and the title-closing agent. If treatment or repairs are required, agents working with the buyer and the seller should communicate and agree on the details. If a structural inspection is required, a licensed contractor should be engaged to report on and estimate repair costs. Normally, the lender requires that treatment and repairs be completed satisfactorily before closing, so parties should act immediately in having the work performed. Required repairs ordered Many contracts require repairs other than those covered by termite damage. The appraisal could show the need for a new roof, or the buyer may have made the contract contingent on the seller's replacing a swimming pool vinyl liner, for example. As soon as loan approval is obtained, the work should be ordered. In Practice Don't order repairs in your name. If the transaction doesn't close, you might have to pay for the repairs ordered. The seller or the buyer, as appropriate, should contract for the work. You should limit your activities to getting estimates and putting the parties in touch. Required repairs completed and approved When the work has been completed, the appropriate party should inspect the work to be sure that it has been done properly. A licensee who takes on this responsibility is responsible if deficiencies are discovered later. Survey ordered The lender or the title-closing agent often orders the survey after loan approval. A licensee who orders the survey without written approval may be liable for the fee if the sale does not close. In case of survey problems such as encroachments, the sales associate must act quickly to help clear up the problems. Buyer purchases hazard insurance The buyer should purchase the hazard insurance policy as soon as possible in the transaction, especially during Florida's hurricane season. If a hurricane or tropical storm develops anywhere within the "box," as shown in Area of Tropical Storms and Hurricanes That Cause Insurance Delays, insurance companies stop writing insurance until the danger has passed. If there are several hurricanes at sea, the delay could be for a week or more and might cause significant delay of a closing. Contact buyer and seller for closing appointment Soon after loan approval, the title-closing agent should be able to set a closing date and time. The sales associate should coordinate with the buyer and the seller in setting a time agreeable to all. All parties should be notified of the date, time, and place of the closing as far in advance as possible. Area of Tropical Storms and Hurricanes That Cause Insurance Delays Preclosing inspection The buyer should make a preclosing walk-through inspection. The inspection is to ensure that: the property is ready for occupancy; personal property the seller is required to leave remains on the property; all required repairs and maintenance have been completed; and the property has been maintained in the condition as it existed at the time of contract, ordinary wear and tear excepted. The sales associate should not conduct such an inspection because of the liability involved. When the inspection has been completed to the buyer's satisfaction, the sales associate should ask the buyer to sign a preclosing clearance form, such as the Preclosing Walk-Through Inspection Results here. Closing papers reviewed with buyer and seller before closing Upon receiving the documents, the sales associate should arrange an appointment to visit the buyer or the seller and deliver copies of all documents that the person will sign. The sales associate should review the Closing Disclosure carefully to ensure that all items are correct and should explain each item to the buyer or the seller at the appointment. The closing will go more quickly and pleasantly for the person who has reviewed all documents the evening before. In Practice If you're working with the seller, compare the Closing Disclosure with the net proceeds statement you prepared. If the figures are materially different (especially if the seller is getting less than predicted, you should reconcile the difference and prepare to explain it. Buyer given figure for certified check for closing This settlement check figure should be provided to the buyer as soon as possible to allow time for the buyer to wire funds to the title-closing agent. Most closing agents now require that the amount due at closing be in "collected funds." Binder check prepared to take to closing At least one day before closing, the sales associate should get the binder check from the broker and clip it to the file folder that will be taken to the closing. Also included in the folder will be the contract and other related material, as well as copies of the inspection reports.

Warehousing

Some companies are hesitant to insure title until the "gap" between the time of the title commitment and the time of recording is checked. Any documents filed against the property during the gap period may affect the title. A lot depends on whether the title insurance company has any reason to suspect problems.

This course includes technical knowledge in the following areas:

State and federal laws Preparing a comparative market analysis (CMA) Preparing a listing contract Qualifying a buyer Understanding financing plans Preparing a sales contract Reviewing closing statements Analyzing real estate investments

Selective geographic advertisements.

Such selective use may involve the strategic placement of billboards, brochure advertisements distributed within a limited geographic area by hand or in the mail, or advertising in particular geographic-coverage editions of major metropolitan newspapers.

Housing starts, along with auto sales, are the first to rise in an economic recovery and the first to drop in a recession.

TRUE

Disadvantages of the FHA ARM

The FHA imposes a maximum loan amount that differs from region to region, depending on the cost of living in each region. Also, the FHA requires an up-front mortgage insurance premium (UFMIP) of 1.75%, although this cost may be financed along with the mortgage.

The National Do Not Call Registry

The National Do Not Call Registry is a list of phone numbers belonging to persons who do not want to be contacted by commercial telemarketers. It is managed by the Federal Trade Commission (FTC) and enforced by the FTC, the Federal Communications Commission (FCC), and individual states. The registry now includes more than 221 million phone numbers. Numbers placed on the registry remain on the list for five years.

Previewing Properties

The activity a licensee uses to stay abreast of the market and to find specific properties to show to a prospective buyer.

Miscellaneous

The agreement may be assigned to another listing office. Electronic signatures and facsimile communications are enforceable.

net proceeds

The amount available to a seller after paying the expenses of the sale and satisfying liens on the property.

Effective Gross Income (EGI)

The amount of rent and other income actually collected by the owner. When preparing an income statement, vacancy and collection losses are deducted from potential gross income, and other income such as vending machine collections is added.

The calculated interest rate is calculated by

The calculated (or actual) interest rate is calculated by adding the selected index to the lender's margin (index plus margin equals calculated interest rate).

Performance

The completion of a contract's requirements.

Technical Knowledge

The knowledge needed by licensees to properly conduct their business that relates to filling out contracts, preparing seller's proceeds estimates, doing comparative market analyses, et cetera.

Appraising

The process of estimating the market value of property.

Assets

Things of value owned by a person or organization.

Americans with Disabilities Act (ADA)

This act sets the standards for building accessibility, goods, services, and employment. Florida has a law that mirrors this act.

Property maintenance:

This section requires the seller to keep the property in the same condition until closing, except required repairs.

prioritize

To set up a list of activities in an order based on their importance.

Safe harbor rules

To successfully avoid penalties for violations of the law, the seller or the telemarketer must demonstrate that it: -has written procedures to comply with the do-not-call registry requirements, -trains its personnel in those procedures, monitors and enforces compliance with these procedures, -maintains a company-specific list of telephone numbers that it may not call, -accesses the National Do Not Call Registry no more than three months before calling any consumer and maintains records documenting this process, and -erred unintentionally if it did make any call in violation of the do-not-call-registry rules.

An optimal price structure assures the manager of a 95% occupancy level for all units.

True

Conventional lenders usually require that the borrower pay for private mortgage insurance (PMI) if the loan-to-value ratio is higher than 80%. Buyers who put down less than 20% will have to pay PMI.

True

FHA allows the seller to pay up to 6% of the purchase price of the home

True

Generally speaking, when the economy is strong and prices are rising, the Federal Reserve tightens the money supply to control inflation.

True

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True

Property taxes typically are paid in arrears by the buyer.

True

The 30-year amortization schedule and regular monthly payments of principal and interest serve as the framework for real estate financing.

True

The 365-day method is MOST commonly used for prorations of annual expenses.

True

The annual percentage rate (APR) must, by law, be the relationship of the total financing charge to the total amount financed, and it must be computed to the nearest one-eighth of 1%.

True

The law allows a lender three business days after loan application to inform the applicant of the APR on the Loan Estimate. The lender is required to notify the borrower within three days if the APR changes by more than one-eighth of 1%.

True

A neighborhood market analysis should assess five major factors:

Truesaa

Many times a sales associate will not set an appointment until he has previewed homes and is confident that good choices are available to show.

Two disadvantages in this approach follow: -The sales associate might spend a lot of time looking at properties, only to find that the buyer is working with another licensee. -If the sales associate can't find anything just right and puts the buyer off, the buyer might decide to work with another licensee.

Recession

Two successive quarterly declines in the gross domestic product (GDP). This is the point at which economic activity has peaked and will be followed by a contraction.

Recovery

Two successive quarterly increases in the gross domestic product (GDP). This is the point at which economic activity has bottomed and will be followed by expansion.

Maximum Seller-Paid Closing Costs That Can Be Applied to Buyer's Closing Costs, Prepaid Items, and Reserves, Expressed as a Percentage of the Purchase Price

Type of Loan - Percentage Conventional Less than 10% down payment- 3 19% or greater down - 6 FHA - 6 VA - 6

exercised

Used in connection with an option contract. An option contract is a unilateral contract until the optionee agrees to purchase and is then said to have "exercised" the option.

Loan Application

Usually the lender will want a typed loan application signed at closing, verifying the information given to the lender at the time of application.

What clause in a listing contract contains a promise by the owner certifying that all the information related to the property is true and accurate?

Warranty of owner

Specific Cycles

Wavelike movements similar to business cycles that occur in specific sectors of the general economy, such as the real estate market. Do not always coincide with cycles of the general business economy, as the business cycle actually is a weighted average of all specific cycles.

Location

What are the three most important determinants of property value? The old expression "location, location, location" is the best answer. Location is so important that only in very unusual circumstances would a licensee use a property outside the subject's neighborhood as a comparable sale. In such a case, the comparable should come from a similar neighborhood. Even within the same neighborhood, locations can result in significant variances. A property across the street from a park is more valuable than one across the street from a commercial area.

negotiating

When a seller negotiates directly with a buyer, the seller is at a disadvantage by having to answer questions like: How much lower will you go? Why are you selling? Because the licensee cannot disclose the information, in most cases, the buyer loses the advantage. When a buyer wants to make an offer, the licensee will put it in writing and ask for a good-faith deposit so that if the price offered by the buyer is acceptable, all the sellers need to do is sign it.

Contingency should be broad:

Whether the buyer or the seller is the principal, make certain that the financing contingency clause describes a mortgage that is obtainable by the buyer.

Municipal Lien Search

While a title search should disclose any recorded liens or encumbrances on a property, there can be other unrecorded charges on a property that can later result in a lien. These charges may become the responsibility of the current property owner. Unresolved code violations, building permits that have not been closed properly, or unpermitted structures are likely to cause future problems. The new owner may also become liable for unpaid utility bills. Buyers should ask the title agent to perform a municipal lien search as part of the title search.

Contracting

While some sellers may have a contract form, they probably don't feel comfortable filling it out and signing it. You might tell them about the many classes real estate licensees take that teach how to prepare a contract. Some sellers might say they'll have their attorney write the contract. You might ask whether their attorney can complete the task quickly enough to keep the buyer from looking at other properties.

New Construction Maintenance

Work done on an income property designed to enhance the property's appeal to tenants. Includes adding new wallpaper, carpeting, and light fixtures.

Nonverbal reflecting

You can also reflect nonverbal body language by repeating what they do, rather than what they say.

Contribution

any improvement to a property, whether to vacant land or a building, is worth only what it adds to the property's market value. An improvement's contribution to the value of the entire property may be greater or smaller than its cost. A licensee's opinion should be determined by a feature's contribution to value, not its actual cost.

Mirroring

displaying the same body language as the other person. EASY TO RECOGNIZE, MAY BACKFIRE.

turnover rate

dividing the number of homes sold last year by the number of homes in the neighborhood.

turnover rate for a neighborhood

dividing the number of homes sold last year by the number of homes in the neighborhood.

A broker is talking with a man about listing his home. If the man says that he is ready to list but has two people he wants to exclude (not have to pay a commission for) from the listing for three weeks, the broker should

have the man sign an exclusive right-of-sale listing with an addendum that excludes the two prospective buyers.

The Florida Do Not Call Registry

he national registry supersedes portions of the Florida law that are less strict. Sellers and telemarketers must consult both lists to ensure that a consumer is not on either list before placing a sales call. Florida's law allows licensees to contact for sale by owners (FSBOs) to solicit a listing, but this is permissible only if the owner is not in the National Do Not Call Registry. -The national registry allows you to call a FSBO if you have a buyer who wants to purchase the property, but you may not use the call to discuss listing the property. If the FSBO is not on the national registry but is on the Florida list, you may solicit the listing if the property was advertised or has a sign in front.

Comprehensive Environmental Response, Compensation, and Liability Act of 1980

imposes substantial liability on owners of real property that has been contaminated with toxic or hazardous substances. The liability also extends to other parties in a transaction, such as attorneys, developers, lenders, and real estate brokers. The liability in the act is joint and several, which means that all present or former property owners may be forced to pay (joint) or only one owner may be required to pay (several).

In June, a broker listed a couple's house for six months. In August, the couple terminated the listing, paid the broker a cancellation fee of $250, and listed their house with a friend. They accepted a contract in September, and closed the sale that month. Based on the conditional termination clause of the Florida Realtors® listing agreement, the couple

is liable to the broker for the full commission. The listing agreement states that the cancellation is in case the seller decides not to sell. If the home is sold during the period of the listing, however, the seller is liable for the full commission.

most powerful listing source of all

previous customers

The sphere of influence is the best source of new listings.

true

Recently

Most appraisers try to find sales for the previous six months. Real estate licensees should be looking for sales within the past six months as well. 6 months

Anticipation

Most buyers purchase real estate with the expectation that its value will increase, and they have been rewarded when the anticipation proves to be correct. In inflationary times, the anticipation of higher prices creates a multitude of buyers, driving prices higher than can be supported for long periods.

Multifamily residences

Most of the 110 million renters mentioned above lived in multifamily apartments. The economy of design and land usage inherent in multifamily housing allows for a lower per-family cost of construction. Thus, multifamily residences are a rapidly growing segment of the national residential real estate market. Multifamily residences can be held under various forms of ownership. Small properties of two to six units often are owner-occupied and owner-managed, whereas most large highrise apartment communities are professionally managed for their owners. Cooperative and condominium apartments usually are owner-occupied buildings governed by boards of directors that the owners elect. These boards generally hire professional managers for their properties. Multifamily residences can be classified as garden apartments, walkup buildings, or highrise apartments. Each type is unique in its location, design, construction, services, and amenities.

Getting Listings Using Social Media

Most real estate professionals who use the internet for prospecting have found that it can be the most powerful of all lead generators. Social media is a new frontier for many real estate professionals. It can be a daunting task just to decide which media to use. Most experts say you should write a daily blog, have a strong presence on Facebook and Google+, use Twitter, place pay-per-click advertising, and use email marketing. That's a lot to do. As of June 2016, Facebook is by far the most popular of all social media sites with more than 1 billion users. But what about other social networking sites like LinkedIn, Pinterest, YouTube, and Foursquare? Perhaps the best course of action is to master a few of the more important media sites before trying to be expert in all of them.

Calculating annual adjustments

Once the initial interest rate is set, annual adjustments to FHA ARMs must be calculated. The first interest-rate adjustment may not occur sooner than 12 months from the due date of the first monthly payment or later than 18 months from that first designated payment date. In other words, the first adjustment must be made during a six-month period or it is forfeited. This period permits lenders to complete the collection or pooling of many mortgages for sale to secondary-market institutions. Whatever date is designated as the initial interest-rate-adjustment date, all subsequent rate adjustments must be made on the anniversary of that first adjustment date.

A Visual Aid to the CMA

"A picture is worth a thousand words" is a timeworn expression because it is true. Sellers who review CMAs with licensees often have difficulty visualizing the comparable properties. The licensee who provides visual data can make a clearer presentation, and that may result in more realistic pricing. Owners who are motivated to sell do not set out to overprice their properties. include plat maps of the subdivision and pictures of the comparable properties

Establishing a Plan of Action

One of the first steps after both the buyer and the seller sign the contract is to set up a plan for closing. This step is even more important if another sales associate is involved because miscommunication often delays closings and causes unnecessary problems. Organization and attention to detail are keys to a successful closing.

Home Inspection

One of the most effective risk-management tools available to licensees is to suggest that the buyer order a home inspection. -intended to disclose defects in a building. --It is better to identify problems before the closing so the parties can negotiate a settlement. -If a material defect is discovered after closing, the buyer may sue the licensee rather than the seller, who may now live in a distant city. Have buyers select their own inspector so there's no question about collusion. Give your buyers a list with names and phone numbers of qualified home inspectors in your area.

The Closing Disclosure has five pages:

Page 1 shows the parties, the property description, the lender, the settlement agent, and a recap of the loan terms. Page 2 itemizes the settlement charges for each party, such as the broker's commission, loan closing costs, prepaid items, escrow account setup, title charges, and recording charges. Each item in the statement is assigned a separate number within a standardized numbering system. The totals for each party on page 2 are transferred to page 3. Page 3 summarizes the transaction and shows the amount of cash due from the buyer, as well as the seller's proceeds at closing. Page 4 shows additional information about the loan. Page 5 shows loan calculations and provides contact information for the lender, the broker, and the settlement agent.

HUD's Fair Housing Complaint Process

People have one year to file a complaint with HUD. The complaint should include: -the complainant's name and address, the name and address of the person or company who is the subject of the complaint, -the address or other identification of the housing involved, -a short description of the facts that caused the complainant to believe his rights were violated, and -the dates of the alleged violation.

Cycle

Periodic fluctuations in the overall economy, or any part of the economy, between good times and bad. The four parts of a general cycle are expansion, recession, contraction, and recovery. Economists have observed that a complete cycle in the general economy may vary from 6 to 12 years. Long-term cycles last from 15 to 22 years, and short-term cycles take about 3 years.

Federal Withholding Tax for Rental Income of Foreign Investors

Persons who disburse to any nonresident alien items such as dividends, rent, salaries, wages and other such income must withhold taxes. If the income is from passive rents, a property manager must withhold from such income a tax equal to 30%. This applies to brokers who manage property. The broker must remit the funds to the IRS by electronic transfer and file IRS Form 1042. The property manager is a "withholding agent," defined by the IRS as a real property manager who collects rent on behalf of a foreign owner of real property. A withholding agent is personally and primarily liable for any tax that must be withheld. The liability of the withholding agent includes amounts that should have been paid plus interest, penalties and, where applicable, criminal sanctions."

"Time Is of the Essence" Provision

"Time is of the essence for all provisions of this Contract," a single sentence in paragraph 18-F, has important legal effects. If a party fails to perform the duties or promises made within the exact time limits in the contract, the party has defaulted. The other party to the agreement has all the legal remedies available in the contract including damages and cancellation (voidable contract).

Principal

(1) The person who enters into a fiduciary relationship with a single agent licensee. (2) The amount of money remaining due on a mortgage loan.

Qualifying the Buyer

(1) What are the buyers' housing objectives? (2) What can the buyer afford to pay?

In Florida, two methods are used to obtain assurance of good title:

(1) the abstract and attorney's opinion of title and (2) title insurance. Title insurance is preferred. If title is later found to be bad, and an attorney's opinion was used, the buyer or the lender would have to sue the attorney to recover, but the attorney may not have the financial strength to reimburse for the loss. Lenders prefer title insurance, but whichever method is used, the title report should provide the loan officer and the lender's attorney with all available information relevant to the legal status of the subject property, as well as any interests revealed by constructive notice.

Financing:

(a) A cash transaction with no financing contingency (b) A financing commitment no later than the date specified or the closing date, whichever is sooner, by a new loan (fill in the amount or percentage of value) with a contingency of getting a specific rate, if that is inserted into the blank (c) Assumption of an existing loan (d) Seller financing

Closing costs

(a) Costs to be paid by seller: This section shows the expenses to be paid by the seller, including documentary stamp taxes on the deed; and repairs up to 1.5% for repairs on warranted items, wood-destroying organism treatment, and costs associated with permits. Either the buyer or the seller may elect to pay for title insurance and a municipal lien search. (b) Costs to be paid by buyer: Buyer agrees to pay taxes on notes and mortgages and recording fees on deed and mortgage documents. Buyer also agrees to pay for lender's title insurance, inspections, survey, and flood insurance. (c) Title evidence and insurance: This section lets the parties determine what type of title evidence is appropriate and who will pay for title insurance. (d) Survey: Buyer may have property surveyed at buyer's expense. (e) Home warranty: The parties may agree on a homeowners warranty and who will pay for it. (f) Special assessments

Property inspection and repair:

(a) Inspection period: Inspections must be completed within 15 days or at least five days before closing. If the property sale does not close, the buyer must repair property damaged by the inspections and give the seller paid receipts for all work done. (b) General property inspection and repair: (i) General inspection: The buyer will notify the seller of any items not functioning correctly as noted by a licensed home inspector. (ii) Property condition: Ceiling, roof, exterior and interior walls, doors windows, and foundation shall be free of leaks, water damage, or structural damage. Pool equipment, major appliances, heating and cooling, mechanical, electrical, security, sprinkler, septic and plumbing systems must be in working order. Torn screens, fogged windows, and missing roof tiles will be repaired or replaced by seller. Seller need not repair cosmetic items. (iii) General property repairs: The seller is to pay for repairs up to the general repairs limit as shown in the contract. If the amount is higher, the seller may elect to pay the excess; or the buyer can designate which repairs are to be done so that the total does not exceed the contractual limit; or if neither party delivers written notice to the other, then either party may terminate the contract. (c) Wood-destroying organism (WDO) inspection and repair: (i) Property may be inspected by a licensed WDO inspector. If infestation or damage is found, the buyer must notify the seller within the contract's time limits. (ii) The seller is to pay for repairs up to the general repairs limit as shown in the contract. If the amount is higher, the seller may elect to pay the excess; or the buyer can designate which repairs are to be done so that the total does not exceed the contractual limit; or if neither party delivers written notice to the other, then either party may terminate the contract. (d) Inspection and closeout of building permits (e) Walk-through inspection/re-inspection: The buyer may perform a walk-through inspection solely to confirm that all items of personal property are on the property and to verify that the seller has maintained the property as required and has made required repairs.

Extension of closing date:

(a)Closing date may be extended up to seven days to satisfy Truth in Lending Act (TILA) requirements. (b)If extreme weather or other force majeure disrupts closing, or if insurance coverage is not available, closing may be delayed up to three days after restoration of utilities and insurance coverage becomes available.

Time for Acceptance of offer and counteroffers; effective date:

(a)If the contract is not signed and delivered to all parties by the date entered in the offer, the offer is void and the deposit is to be returned to the buyer. If a date is not inserted, counteroffers will be void if not signed within two days. (b)The effective date of the contract is the date that the last of the parties initialed or signed the latest offer.

Dispute resolution:

(a)In case of a dispute over the escrow deposit, the buyer and the seller have 10 days to resolve the dispute. After that, the parties must submit to mediation. (b)In disputes other than over escrow deposits, the parties will attempt to settle the dispute by mediation, after which they may have to seek a resolution in the courts.

Occupancy and possession:

(a)Seller must deliver occupancy and possession free of tenants, occupants, and future tenancies. Seller must have removed all trash and shall deliver all keys, garage door openers, access devices, and codes to buyer. (b)If the property is subject to a lease, the seller must deliver a copy of the lease within five days of the effective date. Buyer has five days to review the lease terms and may cancel the contract during that period.

Ramps

*For every inch of height, ramps should have at least 1 foot of length (1:12) and have a railing at least 34 inches high. *There must be a 5-foot-long level landing at every 30-foot horizontal length of ramp, and at the top and bottom of the ramp and at switchbacks.

Don't make any of the following statements to a buyer:

-"No need to get a title search. I sold this house last year and title was fine." You must tell buyers to get an attorney's opinion or purchase title insurance. -"Don't worry, the seller told me by phone that I could sign the contract for her." A contract for sale of real property is not enforceable unless the person has a power of attorney. A sales associate or broker should avoid using a power of attorney because of representation issues. -"I won't be able to present your offer until the seller decides what to do about the offer I submitted yesterday." You must present all offers. -"That roof is in great condition—I can tell just by looking at it." If it's not OK, you may get to repair it at your expense.

Florida Realtors®/ Florida Bar contract The contract is NOT suitable for the following:

-A business purchase or sale -A construction or improvements contract -A contract for deed (installment contract, agreement for deed) -An exchange agreement (contract for exchange of real property) -A lease with option to buy -An option contract (to be described later in this unit) Unique or complex transactions

Fiduciary Relationship

-A relationship of trust and confidence between an agent and a principal. -Only single agent relationship creates this

Here are some important points to remember about buyers' objections:

-An objection can be an opportunity to make the sale. Many objections can be turned into immediate selling points. "The house needs paint" might provoke an argument from an unprofessional sales associate. The empathetic sales associate simply asks, "Would you paint it yourself, or would you hire someone to paint it for you?" With a positive response from the buyer, both parties are happy. -Be certain you understand the objection; restate it. For example, a buyer may say, "This house costs too much money!" You may follow with a question like, "If I understand you, you feel that the house is overpriced?" The buyer may answer, "No, I'm just not certain I want to buy a house at this price level." By clarifying with a question, you avoid being argumentative. Don't answer an objection until you have isolated it; if there are many more objections, this is not a suitable property.

While you're presenting to sellers, be sure to do the following:

-Be courteous to the cooperating sales associate—always. Nothing can derail the presentation of an offer more than distrust and dissension between the licensees. -Don't give the offer out to the sellers until you have summarized the important parts. It is hard to maintain control if the parties are looking at all different parts of the contract, interrupting by asking questions. -Cover all points of the agreement, making price last. Have all the buyers' requirements depend on "getting the price right." -Make enough copies for everyone so they don't have to read over your shoulder. -Give copies, never the original offer, so it isn't marked.

This course includes marketing knowledge in some of the following areas:

-Business planning (section on self-marketing) -Prospecting for listings -Making an effective listing presentation -Prospecting for buyers -Showing and selling the property

Expired Listing Telephone Calling Guide

-Check the do-not-call registry before calling. -Introduce yourself and your company, and say why you're calling. -Tell the sellers the listing has expired and ask if they still want to sell.If the answer is yes, get an appointment. If the answer is no, ask whether the sellers would like to know why the house didn't sell. Get an appointment, and make a CMA study.If the answer is no, say thanks and place another call.

FSBO Telephone Calling Guide

-Check the do-not-call registry before calling. -Introduce yourself, your company, and say why you're calling. -Ask to visit the home at a specific time. -If the seller declines, you might ask whether the seller would agree to pay a commission if you bring a buyer. -If the seller agrees to pay a commission, get an appointment to see the home. -If the seller doesn't agree, ask whether he'd sell if the buyer agreed to pay the commission. -If the seller says no, ask whether you can call again in the future.

The general requirements for a valid lease are similar to those for any legally enforceable contract:

-Complete and legal names of both parties (lessor and lessee) -Legal description of the property -Contractual capacity of the parties and legal purpose of the agreement -Consideration or amount of rent -Term of occupancy -Use of the premises -Rights and obligations of the lessor and lessee -In writing and signed (if for more than one year)

no brokerage relationship duties

-Dealing honestly and fairly -Disclosing all known facts that materially affect the value of the residential real property that are not readily observable to the buyer -Accounting for all funds entrusted to the licensee

Singe AGent Duties

-Dealing honestly and fairly -Loyalty -Confidentiality -Obedience -Full disclosure -Accounting for all funds -Skill, care, and diligence in the transaction -Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing -Disclosing all known facts that materially affect the value of residential real property and are not readily observable

Transaction broker duties

-Dealing honestly and fairly. -Accounting for all funds. -Using skill, care, and diligence in the transaction. -Disclosing all known facts that materially affect the value of residential real property and are not readily observable to the buyer. -Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing. -Limited confidentiality, unless waived in writing by a party. The transaction broker may not reveal to either party:that the seller might accept a price less than the asking or list price,that the buyer might pay a price greater than the price submitted in a written offer,the motivation of any party for selling or buying property,that a seller or a buyer will agree to financing terms other than those offered, andany other information requested by a party to remain confidential. -Any additional duties that are entered into by this or a separate agreement.

Showings

-Discuss present condition of the property -Plan for suggested changes—bright, clean, and neat -What the sellers should do when prospective buyers come to the property with the sales associate: Turn on all the lights Do a last-minute walk-through to remove any clutter Make it smell good Lock up the pets Leave the house during the showing, if possible Try to not get into discussions with the buyers

Following are tips in how to handle low offers carefully:

-If you are the listing associate and the selling associate brings in a very low offer, have the cooperating associate present the offer to your sellers. -If the offer is low and the sellers are angry, let them vent their frustration before starting to work on a counteroffer.

A comparable property should meet the following four conditions before it is used in a CMA:

-It should be similar to the subject property. -If this is a sale, it should have sold recently—within the past six months. -It should be located in the same market area as the subject property. -It should have changed owners as a result of an arm's-length transaction.

Sales associates often avoid prospecting the FSBO market because of the following myths:

-It takes more organizational skills to make prospecting pay. -Sometimes, FSBOs are not courteous to licensees who phone or visit (but remember, you can phone only if the owner is not on the National Do Not Call Registry). -They won't agree to add the commission to their price. -It takes significant selling skills to get a listing from a FSBO. -FSBO houses are overpriced already.

four types of communication skills

-Listening skills -Oral communication skills -Written communication skills -Nonverbal communication skills

Residential Contract for Sale and Purchase Propertydescription:

-Material term: The legal description of the property to be sold is an essential provision of the contract. A defective legal description can render the contract unenforceable. -Sufficiency test: The classic -test of the sufficiency of a legal description is whether a surveyor can locate the property by reference to the description used. -Reliable information: Do not rely on tax roll descriptions. The tax rolls are filled with errors and abbreviated descriptions that could be regarded as legally insufficient. Also, do not rely on descriptions contained in MLS listing sheets because they may only repeat errors others have made. Instead, rely on copies of prior deeds, prior title insurance policies, or prior surveys. -Description not known at time of contract: If any question remains as to the property's exact location, size, or description, and if the question cannot be resolved before the execution of the contract, agreement must be reached as to the survey of the property and as to who will bear the expense of the survey. Furthermore, agreement must reflect that the contract will be amended to conform to the legal description. The buyer also should have the right to terminate the contract if the property location and size are not substantially as represented. -Easements, other interests: The legal description should include any interest in the property being conveyed—for example, private right-of-way or common elements. This information usually is found on the deed or the title insurance policy. -Quantity: From the seller's point of view, references to exact acreage in the legal description should be avoided. This could give rise to a right on the part of the buyer either to cancel the contract or to reduce the purchase price should the actual acreage prove to be materially different. -Minimum description requirements—platted subdivision: County in which property is located Lot and block numbers Name of subdivision (include phase or unit if applicable) Plat book and page number of recorded plat -Minimum description requirements—condominium: County in which property is located Condominium unit or parcel number Name of condominium complex Identification of common elements—for example, parking spaces and storage spaces, if applicable Recording information (official record book and page number) of original declaration of condominium and any amendments Reference to ground lease or recreational lease and recording information if applicable -Minimum description requirements—unplatted property: County in which property is located Legal description provided by survey or prior deed(s) Reference to section, township, and range

How to choose the farm area

-Middle to upper price range -High turnover -Increasing property values -Not currently being farmed by any other sales associate

Self-employed people also find it difficult to obtain a mortgage without the following:

-More documentation. Now, small-business owners will need more documentation, including two years of tax returns, profit and loss statements, bank statements, and proof that they've been in business for at least two years. -More money down. They'll also need a bigger down payment. It may take 20% down to qualify. -Great credit. An application will probably be declined if the credit score is lower than 700.

The scoring models use the following information when evaluating a score:

-Of the score, 35% is determined by payment history with higher weight for recent history. Late payments, collections, and bankruptcies that appear in the credit report are subtracted from the score. -Outstanding debt is very close in importance to payment history—30% of the total score. Many scoring models evaluate the amount of debt compared with the credit limits. If the amount owed is close to the credit limit, it affects the score negatively. -Of the score, 15% is the result of credit history. A long history is better if payments are always on time. -The score assigns 10% to very recent history and "inquiries" for new credit. If the applicant has recently applied for credit in many places, it will negatively affect the score. This problem occurs when a person goes car shopping. Sales associates at each car lot will ask for the consumer's Social Security number in order to pull a credit report (at "no charge"). The shopper has no idea that as more reports are ordered, the shopper's credit rating declines. -Finally, 10% is based on the mix of credit, including car loans, credit cards, and mortgages. Too many credit cards will hurt a person's credit score. In some models, loans from finance companies or title loan companies will also hurt the score. To improve the credit score, persons should pay bills on time, pay down outstanding balances, and not take on new debt.

Access to Buildings

-People with disabilities should be able to approach a building and enter as freely as everyone else. -Curbs at the entrance should have curb cuts. -The route of travel should be at least 36 inches wide, stable, and slip-resistant. -An object must be within 27 inches of the ground in order to be detected by a person using a cane. -Overhead objects must be higher than 80 inches for head room.

suggestions that will prove helpful in presenting an offer to purchase:

-Present it with the listing agent. You are the only one who can answer questions about the buyers and give the buyers a "face" to the sellers. But this is top-priority time and your buyers' dreams and lots of your money are riding on your performance. -If you are the listing associate, have the selling associate help you present. It also stops second-guessing about the quality of your presentation if the offer is not accepted. -If the other associate is a buyers' single agent, you should tell your sellers not to show reactions that may affect their negotiating position.

Price and terms

-Price. Here the licensee records the price at which the property will be offered. -Financing terms. The terms are important to the seller and the listing broker, particularly in the way the property is marketed. If the seller agrees to seller financing, the terms of such financing are stated here. If there is an existing mortgage on the property, the seller is asked whether it can be assumed with or without lender approval. The seller is warned about liability in case of assumption. The seller also agrees that the loan is current in case of assumption. The Consumer Financial Protection Act has regulations that might require sellers who offer financing to get a mortgage originator's license. Sellers should consult a legal or mortgage professional before offering to offer financing. -Seller expenses. This section limits the amount the seller agrees to pay for discount points and other closing costs as a percentage of the sales price. This section allows the licensee to advertise that the seller might pay some closing costs.

Once the property inspection has been completed, the licensee should select the best properties for comparison. Sellers and buyers will get a better feel for the market if the sales associate includes the following:

-Properties that have sold -Properties that are now on the market -Property listings that have expired The CMA will be a good indication of value only when comparables exist in a reasonably active market and where sufficient, reliable market sales information is available.

Description of property.

-Real property street address. The property address is entered here. The legal description should be taken from the public records or from the owner's deed, if available. If it is a metes-and-bounds description, it should be attached. A description taken from the tax records or from former listing information is not satisfactory because these sources are not always reliable. -Personal property. Fixtures, as well as other personal property, must be listed here. Often a seller agrees to leave a refrigerator, drapes, or a washer/dryer; however, the licensee should discuss with the seller the possibility of holding back the offer of these items, using them as negotiating tools when an offer is made (for example, "The seller says that if you can increase your offer by $1,000, she will give you her washer-dryer."). -Some items are not included as part of the agreement. The licensee should ask the seller an important question: "Is any item attached to the property that you do not want to be included with the sale?" The agreement does not provide a section for this exclusion, but the licensee should be certain to include any such items on an addendum. If possible, the fixture should be removed before the home is shown. -Occupancy. This section covers the seller's representation about occupancy rights by another party. If a third party is in possession of the property, the buyer's rights are subject to those of the tenant. The licensee might look over the lease to see if the landlord has the right to terminate the lease upon the sale of the property. If it can't be terminated easily, a buyer may be found who will purchase the house as an investment property, leaving the tenant in place.

Who is not covered by the Act?

-Religious organizations may limit the sale, rental, or occupancy of dwellings that they own or operate for other than a commercial purpose to persons of the same religion, and they may give preference to such persons, unless membership in such religion is restricted because of race, color, or national origin. -Private clubs that provide lodgings that they own or operate for other than a commercial purpose may limit the rental of such lodgings to its members. -Owners of any single-family house may restrict the sale or rental of the house, provided the following conditions are met:The owner does not own or have any interest in more than three single-family houses at any one time.The house is sold or rented without the use of a real estate broker, agent, or salesperson. If the owner selling the house does not reside in it at the time of the sale or was not the most recent resident of the house before such sale, the exemption applies to only one such sale in any 24-month period.The rooms or units in dwellings contain living quarters occupied or intended to be occupied by no more than four families living independently of each other, if the owner actually maintains and occupies one of such living quarters as her residence. -Students and smokers are not protected. Income status, sexual orientation, marital status, and age are also not protected groups. These classes may, however, be protected under a local ordinance.

Showing the Property

-Setting the appointment -Previewing the properties -Planning the route -Entering and showing the properties -Evaluating the buyer's level of interest -Writing the contract

Taxation of gain from sale of real estate

-Short-term capital gains (for property held for one year or less) are taxed at the investor's ordinary income tax rate. Long-term capital gains (property held for more than 12 months) are taxed at different rates, depending on the taxpayer's income. -Capital gains income is subject to an additional 3.8% Medicare tax for single filers making more than $200,000 or married couples filing jointly who make more than $250,000. -When investment property is sold, the investor must pay 25% (recapture rate) of the amount that the taxpayer used for depreciation deductions.

It is hard work to learn the inventory of houses for sale. To become proficient, sales associates should:

-Spend the first few weeks in real estate looking at property. -See at least 30 new properties each week. -Keep a record of listings they have viewed by using a contact program like Top Producer, Salesforce or Act! or even by using index cards grouped by price range and outstanding features. Evernote is an excellent (free) software program for keeping track of favorite homes. Sales associates may use the cards like flash cards to remember five good listings in each price range or five with pools or five fixer-uppers. With practice, sales associates can remember more than five listings. -Constantly practice matching neighborhoods with price ranges or house sizes. -Prepare a five-star home list showing a best-buys-on-the-market sheet for each price range (for instance, $175,000 to $200,000). See a sample list in Five-Star Homes List.

Many economic principles influence the value of real property. The following principles are important to licensees attempting to estimate market value:

-Substitution -Highest and best use -Law of supply and demand -Conformity -Contribution -Law of increasing and diminishing returns -Competition -Change -Anticipation

seven important points to remember when you are prospecting:

-Success is in the numbers. Be confident that this process will result in much higher income levels. You will discover a strong correlation between your prospecting and the number of transactions you make. When you discover what your personal ratios are, you will find it easy to better control your income levels by your daily prospecting. If you get $3,000 extra income, on average, from every 100 contacts you make, you should assume that by making 1,000 additional contacts (20 per week) you can increase your income by $30,000. -Be consistent. Make your contacts at the same time every day. Stick to the schedule, but if a closing or an appointment is unavoidably scheduled, make sure the prospecting time is rescheduled for later in the day. It's like a diet; you might get off track, but success will come only if you get back to the plan. -Call at your best time of day. Some of us are great in the morning. Others are a little grumpy and should set a later prospecting time. Just be sure you have a high energy level. Because showing and listing appointments are usually set for afternoons or evenings, morning may be the best time for a prospecting routine. -Make the first call! The calls that follow will be easier. Think of the athletic slogan "Just do it!" The hardest call is the first call. Just think one call at a time. -Don't leave a message. They likely will not call back and may recognize your phone number and will probably avoid future calls when you call back. -You'll get better. As you make your daily calls, your contact skills will get better and your enthusiasm levels will increase. -Remember the goal. Before you make your calls, visualize what you want to happen as a result of the call. Put a sign above the phone that says "Get an appointment!" Another sign might read "Get a referral!"

Sales associates need three types of knowledge:

-Technical knowledge -Marketing knowledge -Product knowledge

CAN-SPAM Act

-The Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM Act) of 2003 establishes requirements for commercial email, spells out penalties for spammers, and gives consumers the right to ask emailers to stop spamming them. -The act covers only commercial electronic mail messages and regulates emailers whose primary purpose is to advertise a commercial product or service.

Gathering Contract Data The information gathered must be verified for accuracy and currency. The licensee should pay particular attention to and be sure to verify the following two categories of data:

-The owner/seller's name and address and the property's legal description. MLS data, property appraiser information, and even listing agreements have been in error on occasion. The sales associate should get the information from a title insurance policy, a deed, or a survey. -Financing information. Financing data tend to change frequently and require last-minute updating. Check with local lenders to make certain that times allowed for obtaining financial commitments are realistic and that the rates and terms contemplated actually are available.

The amounts shown won't magically work for every sales associate, but they do depend on the following two assumptions:

-The sales associate likes people and is articulate and organized. -The sales associate has finished training and knows how to: prepare a CMA, make an effective listing presentation, show properties, ask closing questions, and ask for the order.

To be more effective with your customers:(communication)

-Your handshake should be firm, but not too hard. -Usually, direct eye contact when you are talking or listening is good. Staring without blinking or looking away occasionally may be disconcerting to the listener. -Persons from certain cultures may perceive constant direct eye contact as disrespectful. -Don't cross anything. Arms and legs should be open and relaxed. -Lean forward into the conversation to display your interest. If you lean backward, especially if hands are joined behind the head, it may be perceived as a sign of superiority or aloofness.

To win a fraudulent misrepresentation case against a broker, the plaintiff must prove that the:

-broker made an error in giving information, oral or written, to the buyer or failed to disclose a material fact to the buyer; -broker knew the statement was not accurate or the information should have been disclosed; -plaintiff reasonably relied on such statement; and -plaintiff was damaged as a result.

Some good sources of buyers include:

-calls resulting from advertising (both print and online), -calls resulting from signs, -past customers and clients, -friends and family, -open house visitors, -canvassing prospects, -buyer seminar attendees, and -a buyer farm.

Discount Points Decrease Interest Rate

-can be considered prepaid interest -lenders will reduce the interest rate on a loan if the borrower pays discount points -the borrower calculates how many points to pay if any

unforeseen circumstances

-divorce, legal separation, or death of a spouse; -becoming eligible for unemployment compensation; -a change in employment that makes it impossible to pay the mortgage or basic living expenses; -multiple births resulting from the same pregnancy; -damage to the home from a natural disaster, act of war, or terrorism; and condemnation, seizure, or involuntary conversion of the property, such as foreclosure.

The broker has been hired to get the best price in the shortest time and with the least inconvenience to the seller. This requires the licensee to market the property in ways other than just showing it herself. Some of these activities include:

-educating the sellers on what to do when the house is going to be shown, such as turning on the lights, removing clutter, removing or locking up the pets, and leaving the property, if possible; -disseminating the property information to all agents in the company; -putting the sign on the property; -putting an MLS lockbox on the property (if approved by the seller and available in the market area); -arranging for all company sales associates to inspect the listing on caravan day; -getting the information into the MLS as soon as possible; -announcing the listing at company sales meetings and at the board of Realtors® marketing meetings; -preparing a brochure to place in the home for prospective buyers and cooperating licensees; scheduling an open house, if appropriate, for the listing; -writing at least three good ads to generate potential buyers; -putting the listing on websites (personal page, company page, and other advertiser's pages); using email autoresponders to get immediate feedback for customers who ask for information from a website; -preparing web advertising and virtual tour; -preparing mail-outs to send to potential buyers; telling 20 neighbors about the listing by mail; calling the neighbors to ask for help in finding buyers; -holding Realtors® luncheon at the property to increase activity; and -reviewing sales and listing activity in the neighborhood. Update the CMA at least once a month.

A professional sales associate can ensure that the buyer will have this information before showing properties. The steps are to:

-get the buyer preapproved by a lender, and get a Loan Estimate, -show the buyer the important financial aspects of the purchase, and -describe the sales process to the buyer.

The person who sends a fax must:

-have an established business relationship (EBR) with the recipient or written consent from the recipient, -have voluntarily received the recipient's fax number, -provide the recipient the right to opt out of getting more faxes, and -remove the numbers of persons who opt out within 30 days.

New regulations require:

-lenders to retain at least 5% of the loans that are securitized, except for those fully documented fixed-rate loans that are considered "safe"; -stricter limits on prepayment penalties or fees that lenders charge when a loan is paid off early; -borrowers to show they can pay the loan, and lenders will have to require much more documentation—self-employed borrowers may have more problems getting a loan; and -creation of management companies to facilitate the ordering of appraisals by lenders and act as insulators from lender pressure in arriving at market value.

The three types of required residential brokerage notices include the following:

-no brokerage relationship notice -single agent notice -consent to transition to transaction broker notice

Parking areas should have

-one accessible space for every 25 total spaces. -8ft wide for car, with a 5 foot access aisle At least one space must be van accessible (8 feet wide with an 8-foot access aisle, and at least 98 inches of vertical clearance). The accessible spaces should be the closest available to the accessible entrance.

Regulation Z of TILA was amended by the Federal Reserve Board because of the losses sustained during the recent housing bubble. The amendment:

-requires that fee appraisers be paid reasonable and customary compensation, -prohibits coercion of appraisers for both permanent mortgages and home equity loans, -prohibits appraisers and appraisal management companies from having financial or other interests in the properties being appraised, and -requires creditors and closing agents that have information about appraiser misconduct to file reports to the appropriate state licensing authorities.

Don't spend time working to get a listing if the:

-seller is not motivated; -seller suggests you break the law by ------------nondisclosure or discriminatory practices; -listing is outside your target market, such as in an adjoining community or is a warehouse opportunity if you're a residential sales associate; -listing is outside your preferred price ranges; -property condition is so bad you would be embarrassed to show it; or -owners are so rude or demanding you don't want to work with them. prioritize your efforts and focus only on those listings that will sell within a reasonable time with reasonable effort on your part Send referral for those you don't want

In the investigation of complaints, HUD will consider, as evidence of compliance, among other things:

-the use of the equal housing opportunity logo, statement, or slogan stating that the property is available to all persons regardless of race, color, religion, sex, handicap, familial status, or national origin; and -that when photographic ads are used, human models should be representative of the majority and minority populations in the area, including both sexes and children, where appropriate.

Three types of caps (ceilings) limit increases in the calculated interest rates of ARM loans:

1. Amount of the increase that can be applied at the time of the first adjustment (for example, cap of 1% or 2% per adjustment period) 2. Amount of increase that can be applied during any one adjustment interval (for example, no more than 2% during any one-year period) 3. Total amount the interest rate may be increased over the life of the loan (for example, no more than 6%)

Explaining the Pricing Process Here's an 11-step sequence that works for many sales associates:

1. Before talking about pricing the house, begin by helping the seller understand current market conditions. You can get this information from MLS statistics, your broker, and local news outlets. Use statistics for the overall market, such as the number of homes for sale, number of homes sold last month, and the number of month's supply of homes on the market. Talk about the differences between buyers' markets and sellers' markets and how they affect the time of sale and pricing. 2. Once you've explained general market conditions, tell the sellers the:number of houses currently listed in the neighborhood,number of homes sold last month, andmonth's supply of homes on the market (divide listed homes by sales). 3. Give the sellers your analysis of the market:Is it a buyers' or a sellers' market?Are prices rising or falling?What is likely to happen if interest rates rise (or fall)? 4. Explain the importance of pricing the property within the selling range. Use the pricing pyramid in The Pricing Pyramid to show the sellers how overpricing the property reduces the pool of likely buyers. 5. Inform the sellers that the purpose of the CMA is to determine the best list price for the property. 6. Explain the report and how you researched the properties. If your conclusions of market value are less than the sellers' desired price, you may have a problem. Hold off on stating your conclusions. Wait to see what the sellers conclude from the comparable sales. (Usually, sellers will quickly realize that their price is too high and, if motivated to sell, will agree to reduce the price.) 7. Explain how each section of the CMA is important in the decision-making process by giving the sellers an overview of the following: Sold listings prove what selling prices have been and what bank appraisals might show. Homes now for sale illustrate the importance of competitive pricing. Expired listings demonstrate the futility of pricing property at an unrealistically high price. 8. Review individual properties on the report while referring to visual aids such as a subdivision map and photos. 9. Ask the sellers for questions or comments. 10. Give the sellers time to arrive at a range of values independently. 11. If the sellers want to price the property too high, discuss the reasons why that approach is unproductive. 12. When a realistic listing price has been agreed upon, complete the seller's net proceeds form.

Sales associates can avoid closing problems by following each of these 10 steps:

1. Disclose everything to all parties that will affect their decisions before the buyer and the seller sign the contract. Surprises after a contract is signed almost certainly will result in one party wanting to get out of the contract. 2. Write the contract carefully and properly explain it to the parties. 3. Recommend that buyers and sellers select lenders and title-closing agents who are organized professionals able to meet deadlines. 4. Tell the loan officer and closing agent what the licensee expects in the way of communication and performance. 5. Prepare a Property Sale Information Sheet (click here). 6. Give the closing agent a copy of the prior title insurance policy, if possible. 7. Provide a complete legal description of the property to the closing agent. 8. Ask a lender and a title agent to communicate by email, speeding the process while also giving written documentation of the transaction. 9. Use a checklist of duties such as the Closing Progress Chart (click here). 10. Ask the closing agent to close the buyer's and the seller's sides separately to reduce confusion during the closing.

Two common exceptions to the statute of frauds are recognized:

1. Executed contracts. Performance of the promise made proves the contract existed; therefore, the function of the statute of frauds has been accomplished, and a written form is not required. 2. Partial performance. Usually, the statute of frauds does not apply to partially performed contracts as long as two conditions have been met: (1) partial or full payment has been made, and (2) the buyer has either taken physical possession of or made improvements to the subject property. For example, if a buyer has evidence of a $500 payment toward the purchase of a parcel of land, then moves onto the property and plants a crop of tomatoes, the statute's function has been accomplished. The payment and possession are regarded as evidence that a valid contract exists.

There are three exceptions for which the PMI may continue:

1. If the loan is "high risk" 2. If the borrower has not been current on the payments within the year before the time for termination or cancellation 3. If the borrower has other liens on the property

Exception to the Withholding Requirement

1. Make an election to treat the rental income as not passive because it is effectively connected with a U.S. business by attaching a declaration to a timely filed tax return. Once made, the election may not be revoked without permission from the IRS. 2. Notify the property manager by submitting Form W-8ECI with a valid U.S. tax identification number. Generally, a Form W-8ECI will remain in effect for a period starting on the date the form is signed and ending on the last day of the third succeeding calendar year.

Deposit Received

2(a) With the amount of the deposit, the date, and the escrow agent. The deposit is subject to collection, which means the funds have been fully deposited into the account of the escrow agent. 2(b) This line is used when the payment of the deposit is split between the initial deposit and an additional deposit. Typically, the second deposit is much larger than the initial deposit. The amount of the additional deposit and the date or the number of days within which it must be made should be inserted. The contract allows the seller to recover not only the initial deposit but also any unpaid deposit. If the buyer defaults by failing to make the additional deposit, the seller is faced with having to initiate litigation to recover the balance. While the seller has an alternate remedy of specific performance, the seller's best remedy in the event of buyer default is a forfeiture of the deposit. 2(c) Enter the amount of total financing in this line. It can be shown as a dollar amount or as a percentage, but a dollar amount is usually better for determining whether the balance to close is correctly added. 2(d) This line can be used for items that are not cash or financing. For example, it might be a boat taken as part of the purchase price. 2(e) State the balance of the cash to be paid after deducting from the purchase price the cash deposit, financing, and other payments. Note that this figure does not include closing costs, prepaid items, or prorations. The contract requires that the funds be by wire or by other collected funds. "Collected" means any checks, including deposits, must have become actually and finally collected and deposited in the account of escrow agent or closing agent.

blogging

A blog is a contraction of two words—web log. It's an article written by an individual or a group of individuals (like a company) that is posted on a website. The blogger must set aside a specific time for writing content that is relevant to real estate, the local scene, events in the area, schools, entertainment, et cetera. It's hard to think of fresh content, so the blogger should make notes as new ideas come to mind. Looking at feeds from other good real estate bloggers may generate ideas (but you can't plagiarize). You have to be authentic and write engaging articles, not tired boilerplate information. In order to drive traffic to your site, there must be lots of content.

Professional Ethics

A body of accepted codes of behavior for a specific industry. National Association of REALTORS® (NAR) has standardized a code

Statute of Frauds

A body of law that requires certain contracts, such as those for the sale of real property, to be written. NO TIME COMMITMENT. In Florida, an agreement or a promise that cannot be performed by both parties within one year after the contract date must be evidenced by a written document. Also, an agreement to sell or the actual sale of any interest in real property is subject to the statute of frauds and must be in writing and signed by all parties bound by the contract to be enforceable. Witnesses are not required.

BPO

A broker price opinion is a more formal CMA. BPOs are typically requested by a lender for an estimate of the value of property that may be in default or already owned by the lender. Use adjustments.

Single Agent

A broker who represents either the seller or the buyer in a real estate transaction, but not both.

accommodation

A change to a dwelling that the housing provider must provide. An example would be a tenant's request for a handicap-accessible parking space near the tenant's apartment.

Radon

A colorless, odorless gas occurring from the natural breakdown of uranium in the soil. Many experts believe radon gas to be the second-leading cause of lung cancer.

Voidable Contract

A contract that allows the buyer, the seller, or both to void a contract based on some predetermined action or event.

to-do list

A daily list, usually designed in priority order, of tasks to be completed that day.

Closing Disclosure

A detailed accounting of charges and credits for the buyer and the seller in a real estate transaction.

Single Agent Notice

A disclosure form informing the principal of the duties of his single agent.

Consent To Transition To Transaction Broker Notice

A disclosure form that allows a single agent to become a transaction broker. The notice must be signed by the principal before the broker can make the change.

No brokerage relationship notice

A disclosure that must be given by a licensee who does not represent a buyer or a seller before entering into an agreement or showing a property. Need not be signed.

Misrepresentation

A false or misleading statement made intentionally or unintentionally, or the failure to disclose a material fact.

Americans With Disabilities Act (ADA)

A federal law that guarantees equal opportunity for individuals with disabilities in public accommodations, employment, transportation, state and local government services, and telecommunications.

Civil Rights Act Of 1866

A federal law that prohibits discrimination based on race. -For many years, the law was not widely enforced, but in 1968 the U.S. Supreme Court upheld the law in the case of Jones v. Mayer. -The Act applies to all real estate transactions; there are no exceptions or exemptions.

farm

A geographic area selected for special prospecting attention by a real estate licensee. farming should produce 20% of the listings in the farm area in the second year, 50% in the third year, and up to 75% of the listings after that. no more than 200 homes but should select an area that allows for expansion of the farm. Many successful sales associates ultimately develop farms with 800 to 1,000 homes located in several neighborhoods.

Finding expired listings

A good way to obtain a listing is to get a recommendation from a sales associate who has a listing that is about to expire when the owner won't relist. You can either agree to have your broker pay a referral fee or have a cooperative arrangement to send your sellers to them at the end of a listing period. Licensees can prospect for expired listings by: -direct mail, -telephone, or -visit.

Title Insurance

A guarantee to reimburse a loss arising from defects in title or liens against real property.

Supply and demand.

A high occupancy rate indicates a shortage of space and the possibility of rental increases. A low rate, as evidenced by many For Rent signs posted in the area, results in tenant demands for lower rents and other owner concessions.

Quality Income

A lender's analysis of factors that reveal the likelihood of the borrower's income continuing over a long period.

Redlining

A lender's refusal to loan money in an area based on illegal discrimination.

Selecting Comparable Properties

A licensee preparing a CMA has two choices when selecting properties to include in the report. -The first choice is to report every sale and every listing in the neighborhood, together with features and prices. -The other choice is to analyze only the properties that are comparable. Listing only three or four comparable properties makes a clearer presentation for a seller and reduces the chance for confusion about values. Appraisers use this approach. Perhaps the best approach for the licensee is to prepare a comprehensive list of all properties that have sold, are listed currently, or have expired and then select the most comparable properties from that list for analysis. This method satisfies the needs of completeness and clarity.

Transaction Broker

A licensee who has limited representation to the buyer, the seller, or both in a transaction. Instead of being an advocate for the buyer or the seller, the licensee is working for the contract.

Product Knowledge

A licensee's familiarity with the real estate market and specific properties available for sale.

Marketing Knowledge

A licensee's knowledge of the sales process, including the psychology of selling, advertising, personal marketing, and prospecting.

Fallback List

A list of properties similar to the property being advertised that can be used by the licensee if the advertised property does not appeal to the person responding to the ad.

Exclusive Agency Listing

A listing that requires the owner to pay the listing broker if the property is sold by any broker but allows the owner to personally sell the property without being liable for a commission. Exclusive agency residential listings are less common than exclusive right-of-sale listings. A common problem with exclusive agency and open listings is the exposure to lawsuits for procuring cause between the broker and the seller.

Exclusive Right-of-sale Listing

A listing that requires the owner to pay the listing broker no matter who sells the property. The broker is automatically the procuring cause of the sale. To be enforceable it must be in writing and include valuable consideration (promise for promise). most advantageous listing from the broker's viewpoint and the most common type of listing.

fixed-rate mortgage

A loan secured by real estate that has the same rate of interest for the life of the loan. The use of a due-on-sale clause in a fixed-rate mortgage reserves the lender's right to make an interest-rate change if a transfer of ownership takes place. Practically all conventional mortgages issued since the early 1980s contain a due-on-sale clause.

Adjustable-rate Mortgage (ARM)

A loan that allows the borrower's interest rate to fluctuate based on some external index beyond the control of the lender. The popularity of ARMs increases when interest rates rise, and they lose favor when interest rates are low.

credit scoring

A method of credit reporting using a numeric score. A higher score reflects a person with better credit history.

Passive Prospecting

A method of prospecting that does not include direct face-to-face or telephone conversations. Advertising and direct mail are examples of passive prospecting.

Codes

A method used by persons to discriminate in employment and housing. An employer may pencil in a series of numbers on an application form (for example, the number 11 may mean "Asian" and the number 15 may mean "African American"). These tactics are illegal.

Type of mortgage:

A mortgage loan can be obtained based on either a fixed rate or an adjustable rate, and the appropriate box should be checked. If the buyer has not decided, the third block should be checked, indicating that the buyer will seek a commitment for either a fixed-rate or an adjustable-rate loan. If the buyer seeks a different type of mortgage, address this in an addendum.

Biweekly Mortgage

A mortgage that requires the borrower to make payments every two weeks (26 payments per year). The payment is calculated by dividing the monthly mortgage payment by two. The effective result is that the borrower makes 13 monthly payments per year.

biweekly mortgage

A mortgage that requires the borrower to make payments every two weeks (26 payments per year). The payment is calculated by dividing the monthly mortgage payment by two. The effective result is that the borrower makes 13 monthly payments per year.

Open Listing

A nonexclusive agreement in which a seller agrees to pay a broker if the broker sells the property. The broker is not paid if the seller or another broker sells the property. CANT BE ENTERED INTO THE MLS Brokers may work simultaneously, but the first broker who produces a ready, willing, and able buyer at the terms accepted by the seller is the only one who earns a commission. If the owner himself sells the property without the aid of any of the brokers, he is not obligated to pay any commission; but if a broker can prove she was the procuring cause of the transaction, she may be entitled to a commission. Either or all parties may terminate an open listing at will, and in the absence of formal notification, an open listing may terminate after a reasonable time. The owner is not obligated to notify any of the brokers that the property has been sold.

Customer

A person who works with a sales associate or a broker. While the person could be a principal, the usual definition is that the broker is either a transaction broker or has no brokerage relationship with the person.

handicap

A physical or mental impairment that substantially limits one or more major life activities. -such as walking, seeing, hearing, learning, breathing, caring for oneself, or working; a record of having such an impairment; or being regarded as having such an impairment. -Not only can housing providers not discriminate against a person with a disability, but they must make reasonable accommodations to rules, policies, and practices to provide that person with the same enjoyment of a dwelling; to allow the person to make reasonable physical modifications of premises; and to require multifamily housing built since March 1991 to have basic wheelchair accessibility.

Reserves For Replacement

A portion of an investment property's income that is set aside to pay the cost of replacing major building components when necessary.

Certified Property Manager (CPM)

A professional designation awarded by the Institute of Real Estate Management (IREM) to a property manager who has successfully completed required education and experience.

Contract Service

A property maintenance service that is done by an individual or company not in the employ of the property manager. Before entering into any service contract, managers should solicit competitive bids on the job from several local contractors.

Highest and best use

A property's highest and best use is its most profitable legally and physically permitted use—that is, the use that provides the highest present value. For example, the highest and best use of a house on the main street of a downtown area is unlikely to be residential. It is likely to be used as an office property, a restaurant, or for retail. It may also need to be demolished so a more appropriate improvement may be built. Law of supply and demand As it does with any marketable commodity, the law of supply and demand affects real estate. Property values rise as demand increases or supply decreases. For example, when demand began to increase recently, the result was an increase in property value throughout many areas of Florida. MOST important influence to market value

Federally Related Transaction

A real estate-related financial transaction that falls under a federal financial institutions regulatory agency and that requires the services of an appraiser.

Fiduciary Relationship

A relationship of trust and confidence between an agent and a principal.

Loan Estimate

A required disclosure that shows the amount of cash needed at closing, as well as the annual percentage rate of interest charged on the loan. Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) The GFE was combined with the TIL

Community Association

A residential homeowners association in which membership is a condition of ownership of a unit in a part of a residential development that is authorized to impose a fee that may become a lien on the parcel.

Resident Manager

A salaried individual employed for specific management functions for a single investment property.

If a sales associate gets a good-faith deposit on Wednesday, the broker must deposit the funds no later than Monday.

A sales associate must give the earnest-money deposit to the broker no later than the end of the next business day. FREC rules require that the buyer's good-faith deposit be placed in a bank no later than three business days after receipt of the funds. The broker should deposit the funds immediately.

Designated Sales Associate

A sales associate who is appointed by a broker as a single agent for a buyer or a seller in a nonresidential transaction when another sales associate in the firm has been appointed as the single agent for the other party in the transaction. Both buyer and seller must have assets of at least $1 million and agree to the arrangement.

Lockbox

A secure box holding the key to the home, usually attached to a door handle, allowing licensees who are members of the MLS easy access to the property by using a special access key to the box.

Show List

A selected inventory of apartments that are available for inspection by prospective tenants.

Service Triangle

A service triangle measures the distance from the range to the refrigerator to the sink and back to the range. Smaller than 12 feet would be a cramped kitchen (like a boat galley). Larger than 22 feet would require a great deal of walking to get needed items. 12-22

Comparable properties

A similar property in the same market area that may be used to help estimate the value of the property being appraised.

comparable property

A similar property in the same market area that may be used to help estimate the value of the property being appraised.

Negative Amortization

A situation occurring, usually under a graduated payment mortgage, where the payment on the loan is less than the amount required to pay the accrued interest. The unpaid interest is added to the principal balance of the loan, and the loan balance gradually increases.

Florida Fair Housing Act

A state law, modeled after the federal Fair Housing Act, that prohibits discrimination based on race, color, religion, sex, national origin, familial status, or handicap.

Counteroffer

A substitution for the original offer made by the offeree who changes the price or terms offered, sending it back to the offeror. The original offer is terminated. The original offeree becomes the offeror.

Intangible Tax

A tax of 2 mills (.002) levied on the amount of new mortgage indebtedness. The buyer normally pays this charge multiplying the mortgage amount by .002 For example, the intangible taxes on a new mortgage of $112,500 would be calculated as follows: $112,500 × .002 = $225. There is no rounding.

Documentary Stamp Tax

A tax on a real estate transaction that may be levied on the sales price of a property or on the amount of a mortgage note. The seller normally pays for stamps on the deed, and the buyer pays for note stamps. The deed stamps are based on the sales price and are $.70 per $100 or fraction thereof. For example, if a property sells for $140,000, the documentary stamp taxes would be calculated as follows: $140,000 ÷ $100 = 1,400 increments 1,400 × $0.70 = $980 Documentary stamp taxes on the new note are based on the amount of the new or the assumed mortgage and are $.35 per $100 or fraction thereof. No stamps are charged on notes taken subject to the mortgage because the buyer has not assumed any of the debt obligations. For example, if the note amount on a new mortgage were $112,500, the documentary stamp tax would be calculated on the note amount as follows: $112,500 ÷ $100 = 1,125 increments 1,125 × $.35 = $393.75

Exclusion of Gain From the Sale of a Personal Residence

A taxpayer may exclude up to $250,000 ($500,000 for a married couple filing jointly) of gain on the sale of a personal residence if the taxpayer owned and occupied the residence for at least two of the previous five years. If the taxpayer held the home less than two years, a prorated portion of the exclusion may apply. -The exclusion is available only once every two years, but there are several exceptions.

Prorations and Prepayments

Property income and expenses should be prorated between the buyer and the seller. Usually, the 365-day method is used for prorations of annual expenses. The annual cost is divided by 365 days to get a daily rate. That rate is then multiplied by the number of days involved to get the amount due. Proration calculations should be based on the last day of seller ownership. The day of closing is charged to the buyer, although it is possible that, by negotiation or custom in an area, the day of closing would be charged to the seller. Prorating property taxes Property tax is the most common proration on a closing statement. The buyer normally pays property taxes in arrears, so they would be a debit to the seller and credit to the buyer. If the closing occurs in November or December, it is possible that the seller has paid the tax bill already, resulting in a credit to the seller and a debit to the buyer. Closing date—April 15 Property taxes—$2,275 Number of days from January 1 through April 15: January31February28March31April14Total104 Daily rate—$2,275 ÷ 365 days = $6.23288 per day Proration—$6.23288 × 104 days = $648.22 Debit the seller; credit the buyer. Property Tax Proration Exercise 13.1 Do the following property tax prorations: Closing DateTaxesDebitCreditAmount ($)September 12$2,567.00$November 18$4,260.00 (Paid 11/3)$April 24$1,892.56$ Prepayments for new loan When an institutional lender makes a new loan, and if the loan-to-value ratio is greater than 80%, the lender likely will require that the borrower pay into an escrow fund for taxes, hazard insurance, and mortgage insurance. This ensures that adequate funds will be available to make the payments when required. The amount of the specific charges varies with the time of the year the loan is closed. Once the escrow account is established, a monthly amount for taxes, insurance, and any required mortgage insurance is added to the monthly principal and interest payment. These funds, placed in a trust account, become the responsibility of the financial institution, which must pay such items when they are due. Some of those prepaid items are discussed here. Prepaid taxes -Divide taxes by 12 to get mnthly -add 3 months to the number of months of the closing date -multiply (months +3) times monthly rate The lender normally collects taxes by adding the months of the year through closing, then adding two or three more months. For instance, if the closing is in April, the lender takes four months plus another three. In effect, the proration credit for three-plus months that the buyer receives from the seller offsets the effect of the lender's charge. Closing date—April 15 Taxes—estimated at $2,275 for the year Monthly taxes—$2,275 ÷ 12 = $189.58 The first payment will be on June 1. The lender will escrow seven months so that when November comes, the lender will have sufficient funds to pay the property tax bill. monthly taxes $189.58 × 7 months = $1,327.06 Debit the buyer for the amount of prepaid taxes. The buyer has received a proration credit of $648.22 from the seller, so the net from the buyer to set up the account is $678.84. Prepaid Tax Calculation Exercise 13.2 Assuming the lender wants three extra months, calculate the amount of taxes to be escrowed. Closing DateTaxes for the YearPrepaid Amount ($)January 18$2,400.00$July 3$4,842.30$September 30$1,453.89$ Prepaid insurance The buyer must pay the first year's policy in advance, plus two months. For example, if the insurance policy is $1,160, the monthly payment is $96.67 ($1,160 ÷ 12). Often the statement shows 14 months prepayment. In other cases, if the buyer has paid the premium outside closing (POC), the statement shows only two months. Debit the buyer for one year plus two months' prepaid insurance. Prepaid Insurance Calculation Exercise 13.3 Calculate the amount of insurance to be escrowed in the following example. The lender wants it paid in advance plus two extra months. ClosingInsurance for the YearPrepaid AmountJanuary 18$2,400$July 3$900$September 30$2,200 (POC)$ Prepaid interest Because the first payment covers the interest for the previous month, interest is collected at closing for the days remaining in the closing month. Closing date—April 15 First payment on the mortgage—June 1 The first payment covers May interest. Interest must be collected on the day of closing for April 15 through April 30 (16 days). $112,500 × .09 = $10,125 per year $10,125 per year ÷ 365 days per year = $27.73973 per day $27.73973 per day × 16 days = $443.84 Debit the buyer $443.84 for prepaid interest. Prepaid Interest Calculation Exercise 13.4 Calculate the interest prepayment for the new loans as follows: Closing DateMortgage Loan AmountInterest RatePrepaid Amount ($)September 12$245,0008.875%$January 17$92,5008.75%$December 29$127,0009.0%$ Prepaid mortgage insurance If mortgage insurance is required as part of an FHA or conventional mortgage loan, the borrower must pay for the coverage. The FHA requires homebuyers to pay two types of mortgage insurance premiums (MIPs): Up-front MIP (UFMIP), which is a percentage of the mortgage amount Annual premium, which is calculated on the unpaid principal balance The VA does not charge for guaranteeing a loan; however, it imposes a funding fee based on the mortgage amount. This funding fee may be included as part of the amount borrowed or paid in one lump sum at closing. A lender also may require an amount in cash adequate to open an escrow account, plus 1% of the loan amount as a maximum placement fee. Under VA loan rules, the closing costs and placement fees cannot be included in the loan amount. Conventional lenders require private mortgage insurance (PMI) when a loan-to-value (LTV) ratio is more than 80%. Premiums fall into two general categories. In the first case, a single premium covers a lender's risk for a 10-year period. In the second case, a lender imposes a lower initial fee on the borrower and charges an insurance premium each year after that until the unpaid principal is reduced to a designated amount, normally 80% of appraised value. The first plan's one-time, single-premium charge or the second plan's lower initial cost is payable by the borrower at the time the loan closes. It should be noted that a PMI rate card must be used because of the different types of loans available and the different coverages required. It is probably best not to make a large up-front payment but instead to make a higher monthly payment. In case of an early loan payoff, the premium is not refunded.

A broker entered into an agreement with a prospective buyer, using the Florida Realtors® Exclusive Buyer Brokerage Agreement. The broker showed the buyer a property, but the buyer said he really didn't care for it. After their agreement expired, the buyer signed a similar agreement with a second broker. About one month later, the second broker showed the buyer the same property and the buyer bought it. Which is TRUE?

According to the terms of the contract, the second broker is entitled to the commission as the procuring cause of the sale. The "Protection Period" section (paragraph 8) of the FAR Exclusive Buyer Brokerage Agreement states that the buyer's obligation to pay the broker's fee ceases when the buyer enters into a good-faith exclusive buyer brokerage agreement with another broker after the termination date of the original contract.

Advantages and Disadvantage of a 30-year mortgage

Advantages of a 30-year mortgage Monthly payments on the loan are spread over 30 years, offering the borrower protection against future increases in interest rates and inflation rates while providing for the orderly repayment of the amount borrowed. Household budgets are easier to manage when the borrower does not have to plan for changing payment amounts or interest rates. Disadvantages of a 30-year mortgage If overall interest rates drop, the rate on a fixed-rate mortgage will not go down with them. To take advantage of lower interest rates, the original loan must be refinanced, requiring the borrower to pay substantial closing costs on the new loan.

pro and con of biweekly mortgage

Advantages of a biweekly mortgage A biweekly mortgage combines the benefits of the 30-year loan and the 15-year loan without the increased payments of the 15-year loan. It offers borrowers the affordability of the 30-year loan because the two biweekly payments come within a few pennies of the one monthly payment on a 30-year loan. Also, Fannie Mae requires that payments be deducted automatically from a borrower's checking or savings account every two weeks. Because more than half of the nation's workforce is paid on a biweekly basis, it is compatible with a large number of paychecks. Some lenders include a conversion clause that permits a borrower to change a biweekly mortgage to a traditional 30-year, fixed-rate amortized mortgage at little or no cost with only 30 days' advance notice. Disadvantages of a biweekly mortgage The biweekly mortgage has the same disadvantages as other fixed-rate mortgages. In addition, the biweekly loan threatens those borrowers who do not maintain stable checking or savings account balances. The biweekly mortgage also locks borrowers into payment plans that they could set up themselves, at their own discretion, with a traditional 30-year loan. Some lenders also charge a setup fee.

ARM Pro and Cons

Advantages of the ARM loan The ARM's low initial interest rate and the borrower's ability to qualify for a larger mortgage top the list of advantages of adjustable-rate mortgages. ARMs are most appropriate for those who plan to hold the mortgage loans for no more than four years. Also, anytime the interest rate gap between a fixed-rate loan and an adjustable-rate loan reaches 3% in favor of the ARM, an ARM loan with interest-rate caps and a one-year Treasury bill constant maturity index should make sense to homebuyers. Many ARMs are now written with conversion privileges, allowing the mortgagors to convert to fixed-rate loans for a modest fee during a specified period. This enables borrowers to take advantage of falling interest rates if they desire to do so. One of the standard features of ARMs is no prepayment penalty. Longer adjustment periods are available Many borrowers prefer an ARM loan that won't adjust for several years. For example, the low initial rate may last for three, five, or seven years, then adjust once each year. Such loans would be called 3/1, 5/1, or 7/1 ARMs. Other options would be for loans that had an initial rate that lasted five years, and then went to a fixed-rate loan at the prevailing rates available for the fifth year. This would be called a 5/25. There are 3/27s, 5/25s, 7/23s, or 10/30s. No one program is better for everyone, so each borrower must evaluate the possibilities based on his personal situation. Disadvantages of the ARM loan ARM borrowers bet against the lenders that interest rates will not rise to the extent that the maximum interest-rate caps will be needed. The main disadvantages of the ARM loan are the uncertain amounts of future mortgage payments and the difficulty in calculating adjustments in interest rates as they occur. Lenders, of course, do the actual calculation of adjustments, but they have been known to make mistakes, and such mistakes can be expensive to the borrowers. Calculation details are spelled out in each loan document, but they are somewhat complicated and require the use of either a financial calculator or a handbook of ARM payment tables. For a borrower who wants to audit a lender's ARM adjustments without going to the trouble of research and math calculations, Loantech LLC (800-888-6781), a mortgage consulting firm, will perform a complete individual ARM adjustment review for a fee based on the terms of the loan document submitted.

Advantages of the FHA ARM

An FHA ARM has several advantages over a conventional ARM. Often, an FHA ARM bears a slightly lower interest rate because of the government insurance provided the lender. In addition, the FHA commonly uses more lenient qualification formulas. The down payment (required investment) also is lower in many cases, and the interest rate increase each year is limited to 1%, with a lifetime cap of 5% (conventional caps usually are 2% per year, with a 6% lifetime cap). FHA loans continue to be easier to assume than conventional loans, although the FHA has increased the requirements for assumption of FHA loans. The FHA now requires a review of the creditworthiness of each person seeking to assume an FHA-insured loan.

Housing For Older Persons Act

An act that describes housing intended for and operated for occupancy by older persons where at least 80% of the occupied units are occupied by at least one person who is 55 years of age or older. Properties that fall within these guidelines are exempted from the familial status requirements of the Fair Housing Act.

Innocent Purchaser Status

An amendment to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) that exempts from liability those landowners who made reasonable inquiries about hazardous substances before purchasing the property.

Material Fact

An important fact that may affect a buyer's decision to buy or a seller's decision to sell. Licensees must disclose facts that materially affect the value of residential property.

index

An indicator beyond the control of a lender to which the interest rate on an adjustable-rate mortgage is tied.

Community Association Manager

An individual licensed by the Department of Business and Professional Regulation who is paid to perform certain functions for a residential homeowners association. The term community association under this law includes any association that has 10 or more units or an annual budget greater than $100,000. A community association manager must be licensed to perform the following functions for compensation: control or disburse funds, prepare budgets or other financial documents, send notices of meetings or conduct meetings, and coordinate maintenance and other services for the association.

Disability

An individual with a disability is a person who (1) has a physical or mental impairment that substantially limits one or more major life activities, (2) has a record of such an impairment, or (3) is regarded as having such an impairment.

Death in a Property (689.25(1)(b), F.S.)

An owner of real property, or a real estate broker or sales associate, is immune from a lawsuit for failing to disclose to a buyer that the property was the site of a homicide, suicide, or death, or that an occupant of that property was infected with human immunodeficiency virus (HIV) or diagnosed with acquired immune deficiency syndrome (AIDS).

For Rent By Owner (FRBO)

An owner who attempts to rent his own property without using a broker.

For Sale By Owner

An owner who attempts to sell her own property without using a broker.

Property Management

Any person who rents or leases real property for another party for compensation must have a current, active real estate license. The following two exemptions exist: Salaried employees of an owner, or of a registered broker working for an owner or for the properly licensed property manager of an apartment complex, who work in an onsite rental office of the apartment community in a leasing capacity Salaried persons employed as managers of condominiums or cooperative apartment complexes who rent individual units, if the rentals arranged by the employees are for periods not exceeding one year These exemptions are granted under the law to unlicensed, salaried employees. They may not be paid a commission or any form of compensation on a transactional basis. These exemptions are granted under the law to unlicensed, salaried employees. They may not be paid a commission or any form of compensation on a transactional basis. Residential real estate is the largest source of demand for the services of professional property managers.

The Appraisal

Appraisals are used by buyers, sellers, and lenders who want a supported, defended estimate of the value of property. The most common purpose of an appraisal is to assure a lender that the value of the collateral is sufficient to support the loan amount. Only certified or licensed appraisers can make appraisals used in a federally related transaction. A real estate licensee is permitted to appraise a property for compensation in a nonfederally related transaction. The appraisal must be professionally and competently completed, and it must comply with the Uniform Standards of Professional Appraisal Practice (USPAP). Failure to do so leaves the licensee open to civil liability and disciplinary action. A licensee involved in the listing or sale of a property should not prepare an appraisal for that property.

Investigation

As part of the investigation, HUD will interview the complainant, the respondent, and pertinent witnesses. HUD has the authority to take depositions, issue subpoenas and interrogatories, and compel testimony or documents.

An appraisal of real property is

Because it is an estimate, it is not a precise or accurate "determination" of value.

Age

Because most subdivisions are built within a relatively short time, age differences are usually not significant among comparables. A new home is likely valued by the builder according to actual costs, overhead, and profit. While overall upkeep is important, the home's age may alert the licensee to outmoded design and fixtures or to needed repairs. It is better to use homes of similar age as comparable sales.

Practical Steps for Sales Associates

Brokers and sales associates should follow these practical steps to decrease the risk of misrepresentation claims: -Have the seller complete a property condition disclosure form and discuss any potential problem areas. Inform the seller of the legal duty to disclose material facts that affect the value of residential property and are not readily observable. -Disclose pertinent information in writing, such as in a property condition disclosure form from the sellers. The buyers should sign the disclosure indicating that they have received it. A confirmation letter would confirm earlier discussions in which you pointed out a leaky roof or the need to consult with a soil engineer, and it would affirm that neither you nor the seller makes any warranty as to the condition of the roof or the foundation. Keep copies of these documents in the transaction file. If the seller refuses to disclose material defects, decline the listing. Taking a listing of this nature is not worth damage claims, loss of reputation, and the potential loss of your license. -Ask about factors outside the property boundaries that might influence its value and affect a person's decision to buy, such as these:Abutting and nearby uses (present and propose, such as a rock band venue next door)Highway expansion or rerouting of a bus line -Do not make statements when you don't have firsthand knowledge or that are not based on expert opinion or advice. Have a list of government agencies from which you can get information. Suggest that the buyer check things out, too, by providing the telephone numbers and website addresses of the appropriate government agencies. It is best that important technical information come directly to the buyer from the government agency. -Avoid exaggeration. If you wish to venture a quick opinion about things you are not certain about, make sure the buyer understands that it is only a guess, and be certain the buyer does not rely on it in making a decision. -When using email for discussing important items, request that the customer reply to the email. Keep the email and reply for documentation. -Get information about condominiums, including:House rules regarding children, pets, and waterbedsLocation of lockers and parking stallsExistence of special assessments (for what and how much)Maintenance fee(s) (what is included, proposed increases)Planned future capital improvementsExisting reserves and purpose of reservesHistorical information as to when capital improvements were completed

Taxation of independent contractors

Brokers must meet three major requirements in order for their sales associates to qualify for independent contractor status: The sales associate must hold a real estate license. The sales associate's gross income must be based on production rather than on the number of hours worked. The sales associate's work must be done based on a written contract that states, among other things, that the sales associate will not be considered an employee for federal tax purposes.

Additional terms: This is the area for special clauses specific to the needs of this particular transaction.

Brokers: Parties agree in this paragraph that the listing and cooperating brokers are the only brokers entitled to compensation. The seller and the buyer direct the closing agent to disburse brokerage fees according to the brokerage agreements and the cooperating broker arrangements for commission splits.

The capitalization rate

Capitalizing net operating income is a basic approach to estimating value. While an appraiser uses a rate determined by verified sales in the marketplace, an investor sets the rate that provides an acceptable return using subjective criteria the investor establishes. The capitalization rate is the one-year before-tax operating return on a real property investment without considering debt service on the property. If an investor pays all cash for a $300,000 investment and the net operating income is $30,000, the rate of return is 10%. This is calculated by dividing the net operating income by the value ($30,000 ÷ $300,000). Assume, however, that the investor would not purchase the property unless it yielded 12%. By dividing the net operating income by the rate desired ($30,000 ÷ 12%), the investor would agree to pay only $250,000.

Community shopping centers

Community shopping centers may include a Home Depot, Kmart, or Stein Mart as the anchor, along with a supermarket and other retailers, restaurants, and service companies. Management should try to arrange the mix of tenants so that each complements the others in the center and the overall effect is to generate additional traffic. Lease terms in these centers run longer than in strip centers. Professional property managers usually manage centers of this kind.

Operating Expenses (OE)

Costs of operating an income property. Includes property taxes, maintenance, insurance, payrolls, and reserves for replacements. Operating expenses are divided into three categories: fixed expenses, variable expenses, and reserves for replacement.

Design

Design must be viewed from both functional and aesthetic standpoints. Functional aspects include the existing traffic patterns in a house, placement of doors and windows, room-to-room relationships, and the usefulness of rooms. Aesthetic aspects focus on how pleasant and attractive an interior appears to an observer.

Disadvantages of Investing in Real Estate

Disadvantages of investing in real estate include: management time, high capital requirements, poor liquidity, personal stress, and high risk. Management time Related to the advantage of personal control comes the disadvantage of the time required to manage the property. The owner must review and manage of an income property's operations. A prudent investor takes an active role in overseeing management. The investor must seek a higher return on the investment to compensate for the time requirements. High capital requirements Real estate requires a substantial capital investment. Not only do the investors need funds to buy the property, they also must have reserve funds available to make needed renovations or to cover unexpected shortfalls. If vacancy rates are high, the investors will find it difficult to sell the property and may need to inject more money into the real estate to pay its operating costs and debt service to carry them through the hard times. Poor liquidity Investment real estate is a complicated asset, even in the best markets. Land-use requirements, environmental audits, maintenance inspections, lease reviews, and new financing all take a substantial amount of time. It could take a year or more to close a sale. In bad markets, however, it can be close to impossible to sell property at a fair price because so many other properties are available. This is a significant disadvantage of investment real estate. Personal stress Many first-time real estate investors suffer rude awakenings when they discover that property management isn't just about cash flow projections and planning, but it is also about personal interaction with tenants. Because an owner's first few properties usually are not large or profitable enough to justify hiring a manager, an owner must do it. When the mortgage payment is due, slow-paying tenants can become an irritation. Tenant complaints take time and skill to resolve. Tenants sometimes leave a property in poor condition when they move, requiring a large contribution of time and money to restore the premises for the next tenant. Eviction is sometimes necessary and is usually distressing to both landlord and tenant. High risk It is said that the longer an asset is held, the greater the chance of catastrophe. Many examples exist of seemingly good real estate investments gone bad. Problems could result from overbuilding in the market, causing high competition and lower rents. Environmental laws may require expensive retrofitting. Or a major employer may relocate to another area, causing local unemployment. Insurance does not cover this dynamic risk. To overcome dynamic risk, the investor must analyze a property carefully before purchasing and then manage it effectively.

Disbursements at Closing

Everyone expects to be paid at closing. This is not always possible, and licensees should be prepared to explain the problem to the sellers. Perhaps an example using a broker's trust account is easier to understand. Many real estate brokers have hundreds of thousands of dollars in their escrow accounts. A broker who disburses from the escrow account before making a deposit into the account, even if the future deposit would be in certified funds, is guilty of a serious violation because the broker would be using funds that belong to others. The Florida Realtors®/Florida Bar Residential Contract for Sale and Purchase requires that the buyer pay the amount due at closing by wire transfer or other collected funds. Collected funds means any checks received by the closing agent have been collected and are in the account of the closing agent. If this is not done, disbursements at closing will be delayed.

Complete agreement:

Except for brokerage agreements, this is the only agreement between the parties. Handwritten portions of the agreement supersede preprinted portions if the two conflict. This sentence protects the contract if a licensee fails to delete an inconsistent provision covered in handwritten clauses or to protect any riders or addenda that are designed to show the parties' true intent. To know whether it is necessary to revoke, amend, or replace a printed provision, a licensee must know the content of the printed provisions.

Expenses section

Expenses that the seller might be required to pay should be listed. It is better to overestimate than to underestimate the expenses. -The documentary stamps tax on the deed is $.70 per $100 or fraction thereof of the sales price. The seller normally pays the tax. -Wood-destroying organism (WDO) inspection (treatment and repairs) could be a substantial expense to the seller, but the cost is not known at the time of listing or contract. A conservative approach would be to show the cost of both in this section. A licensee should stay current on the costs of inspection and treatment in the property's market area. In many areas, the inspection is paid by the buyers. -Title insurance and related costs are based on local practice. -Homeowners warranty costs help the sellers to assure the buyer that the home is in good condition. The home will be warranted against many defects by an independent home warranty company. Depending on the company, these costs may range from $300 to $500. -Buyer's closing costs, the origination fee, and discount points can be very substantial expenses to the seller if the seller agrees to pay them. When taking a listing, a sales associate should include these items if sellers in the market customarily pay them. When preparing this estimate at the time of contract, the sales associate should take extra care if the seller will pay the buyer's costs. The licensee should use the lender's Loan Estimate, with a maximum amount agreed to in the contract. Leaving this open-ended in a contract can be problem if the discount points or other costs increase between the time of acceptance and the time of closing. -Lenders sometimes require repairs and replacements before making a loan. The repairs also could be the result of wood-destroying organisms or nonfunctioning appliances. The licensee should overestimate somewhat as a cushion for such contingencies. -The seller's attorney fee is an optional expense. The licensee should list the normal closing review fee for the market area of the seller. -The brokerage fee is the commission the brokerage firm charges. -Other miscellaneous costs include items such as express mail fees for mortgage payoffs and recording mortgage satisfactions. The licensee should overestimate somewhat as a cushion here to allow for contingencies. This line also could be used to round uneven expense amounts into even amounts. For example, if the expenses were $8,945.60, the miscellaneous costs could be estimated at $54.40, resulting in total estimated expenses of $9,000.

Expired Listings

Expired listings can be a profitable source of business for licensees who know why listings expire, how to locate them, and how to approach the owners of expired listings.

Showing

Explain to the seller the broker's value in showing the property to buyers. -If the sellers have jobs, or are away from the home, the house is not available for showing. -The FSBO sign invites lookers to request access to the house. In the interests of personal safety, many sellers are not comfortable letting strangers in. -If the house has poor curb appeal (but is nice inside), buyers will likely ride by. Remind the owners that you will bring qualified buyers inside, the only place they can truly evaluate this home. -You can remind the sellers that if they are not home all day and on the evenings and weekends to show the home, the buyer may not call back. -Every time they go shopping or to work, their property is "off the market." Explain that when they list with you, the property will be on the market 24 hours a day because they can reach a licensee who will have the information the buyer wants.

A buyer will take out a conventional loan and pay 18% down. The buyer makes a higher down payment to save on property insurance.

FALSE The buyer should make a 20% down payment so he won't have to buy mortgage insurance.

Team Advertising

FREC rule 61J2-10.026, effective July 1, 2019, regulates advertising by teams or groups as follows: (1) "Team or group advertising" shall mean a name or logo used by one or more real estate licensees who represent themselves to the public as a team or group. The team or group must perform licensed activities under the supervision of the same broker or brokerage. (2) Each team or group shall file with the broker a designated licensee to be responsible for ensuring that the advertising is in compliance with Chapter 475, Florida Statutes, and division 61J2, Florida Administrative Code. (3) At least once monthly, the registered broker must maintain a current written record of each team's or group's members. (4) Team or group names. Real estate team or group names may include the word "team" or "group" as part of the name. Real estate team or group names shall not include the following words: (a) Agency(f) Corporation(k) Properties(b) Associates(g) Corp.(l) Property(c) Brokerage(h) Inc.(m) Real Estate(d) Brokers(i) LLC(n) Realty(e) Company(j) LP, LLP or Partnership(o) or similar words suggesting the team or group is a separate real estate brokerage or company (5) This rule applies to all advertising. (6) In advertisements containing the team or group name, the team or group name shall not be in larger print than the name of the registered brokerage. All advertising must be in a manner in which reasonable persons would know they are dealing with a team or group. (7) Nothing in this rule shall relieve the broker of the legal obligations under Chapter 475, Florida Statutes, and division 61J2, Florida Administrative Code.

When highlighting a property's features, the sales associate must remember the most important words in any sales presentation:

Fact Bridge Benefit Picture The fact is that the property is on the cul-de-sac. The bridge might be "What that means to you, Mr. and Mrs. Jones, . . ." The benefit is the rest of the sentence: "is that because there is no through-traffic, automobiles travel very slowly, resulting in greater safety to your children." The picture is a word picture: "Imagine being out here on the street while your children roller-skate safely."

Licensees may fill in the blanks on only the lease forms specifically approved by the Florida Supreme Court.

False Currently, there are two leases approved by the Florida Supreme Court: the Residential Lease for Single-Family Home and Duplex, and a form developed by The Florida Bar.

Fax broadcasters

Fax advertisements are often sent in bulk on behalf of a business or entity by separate companies called fax broadcasters. Generally, the person or business on whose behalf a fax is sent or whose property, goods, or services are advertised is liable for a violation of the junk fax rules, even if the person or business did not physically send the fax.

Junk Fax Protection Act

Federal law prohibits most unsolicited fax advertisements to any machine, either business or personal. An unsolicited advertisement is defined under the act as "any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person's prior express invitation or permission, in writing or otherwise."

Online Contracts for Realtors®

Florida Realtors® members have access to the Form Simplicity website, which allows users to: -fill in forms such as listing and sales contracts; -save forms as internal data or flat PDF files; -print forms; -email forms to customers; -link common information between forms, providing the quick processing of contract-related forms; create a Form Transaction, managing forms as a group and for the auto-filling in of information common to the deal such as names and addresses; -save their own special clauses to insert into contracts; -use their contact list information on customers, cooperating licensees, title companies, and loan institutions to automatically populate their contracts; and -set up a brokerage office database account so the broker can review all contracts.

Florida Laws Regarding Listing Agreements

Florida law recognizes written, oral, or implied listings, assuming evidence is available to support a claim for compensation. If a listing is written, it must include a definite expiration date, a description of the property, the price and terms acceptable to the sellers, the amount of commission due upon the broker's performance, and the signature of the parties. A written listing agreement may not have wording that makes it self-renewing, or the listing will be void. The broker, or the broker's authorized representative, must deliver to the sellers a copy of the listing agreement within 24 hours of signature.

Number of baths

Full baths (lavatory, toilet, and tub, with or without shower), three-quarter baths (lavatory, toilet, and shower), and half baths (lavatory and toilet) comprise this category. Modern plumbing is assumed, so an adjustment must be made for out-of-date fixtures, if different from the subject property.

ADA New Contruction

Full compliance with ADA is required

Style

Generally, the style of a house follows the rule of conformity (a house should not be the only one of its type in the neighborhood). An important aspect of style is the number of floors of the residence. A one-story ranch house probably could be compared to a split-level, with some adjustment made. A three-story house is not comparable to a one-story ranch house, however.

Post-closing Duties

Give commission check to broker Upon returning to the office, the sales associate should give the closing file, as well as the commission check, to the broker. Pick up sign and lockbox from property The listing sales associate should ensure that the sign and lockbox are removed from the property and returned to the office. Often the sales associate does this just before closing. Many sales associates remove the lockbox for security reasons immediately after the contract has been signed. Send letter of thanks to buyer or seller The letter, which should include both the sales associate's and the broker's signatures, will be appreciated by the customer, will foster goodwill, and will likely result in future business. Many companies request that the buyer or the seller complete a questionnaire about the level of service provided in the transaction. Visit buyer or seller to follow up The sales associate who calls on the customer after the closing demonstrates the careful attention needed to ensure that all details of the transaction have been completed satisfactorily. Provide notice of closed sale to the MLS Most MLS systems require that listing status changes be submitted as soon as possible. This provides brokers and sales associates in the area with the most current information about listing availability and comparable sales information.

Filing

If HUD accepts the complaint for investigation, the investigator will draft a formal complaint on HUD's standard form and mail it to the complainant. The complainant must sign the form and return it to HUD. Within 10 days after receiving the signed complaint, HUD will send the respondent notice that a fair housing complaint has been filed against him along with a copy of the complaint. Within 10 days of receiving the notice, the respondent must submit to HUD an answer to the complaint.

Defects

If a defect is found, sometimes called a cloud on the title, the loan process stops until the issue is cleared to the lender's satisfaction. The issue might be an unsatisfied construction lien, an income tax lien, a property tax lien, an easement infraction, an encroachment, or a zoning violation. Sometimes a borrower's name is not correct on the deed, an error exists in the legal description, the deed has a faulty acknowledgment, or it lacks the appropriate signatures. Because of the many complexities in a real estate transaction, it is not uncommon to find problems in a title search or a property survey. In certain instances where clouds are difficult to remove by ordinary means, they must be cleared by filing suits to quiet title. After appropriate evidence is submitted, a judge removes or modifies an otherwise damaging defect in a title. The loan process can continue when a clear chain of title is shown on the public records.

Financing contingency:

If the buyer cannot qualify for the loan in time after making all necessary good-faith efforts, if the buyer is turned down, or if the appraisal is too low to get the financing, the buyer may elect not to proceed, return all the seller's documents, and after all interested parties agree, get the deposit back.

Financial qualification is the key to a successful sale

If the buyer contracts for a home and applies for a loan that is later denied, the seller, the buyer, and the sales associate have wasted time and effort. In addition, loan application fees ranging from $250 to $500, depending on the lender, could be lost. Having a lender preapprove the buyer is the best approach and should be used whenever possible, but certainly before the buyer actually contracts for property. Preapproval means the buyer has been interviewed and the buyer's credit report has been reviewed and the income verified.

Hearing in a U.S. District Court

If the court finds that a discriminatory housing practice has occurred or is about to occur, it can award actual and punitive damages as well as attorney's fees.

Homeowners Association Disclosure

If the disclosure summary required by section 689.26, Florida Statutes, has not been provided to the prospective purchaser before executing this contract for sale, this contract is voidable by buyer by delivering to seller or seller's agent written notice of the buyer's intention to cancel within 3 days after receipt of the disclosure summary or prior to closing, whichever occurs first. Any purported waiver of this voidability right has no effect. Buyer's right to void this contract shall terminate at closing.

Variable price:

If the full purchase price cannot be expressed in monetary terms, the manner in which it might be determined accurately should be stated in the contract in an addendum. For example, if acreage is involved and the parties agree on a price per acre, that price per acre should be set forth in an addendum (under "Special Clauses," check "Addendum is attached"), together with a provision for an accurate survey determination. Whenever an addendum is used, it should have the date of the original contract, the complete names of the parties, and a complete legal description. It also must be dated and signed by the parties.

Cause determination and charge

If the investigation produces reasonable cause to believe that discrimination has occurred or is about to occur, HUD will issue a determination of reasonable cause and charge the respondent with violating the law. After HUD issues a charge, a HUD administrative law judge (ALJ) will hear the case unless either party elects to have the case heard in federal civil court. Parties must elect within 20 days of receipt of the charge.

Warranties by the Owner

If the listing broker is a single agent for the seller, both the broker and the seller have obligations under the listing agreement. The principal has legal obligations to the broker, including performance of all promises made in the contract, as well as the obligation to engage in honest, straightforward dealing. The actions and misrepresentations of a seller can become a liability to the agent. For example, if a seller tells a sales associate that the plumbing pipes are copper and the sales associate passes along that information to a buyer without qualification, both the seller and the brokerage firm may be liable for damages if the buyer later discovers the plumbing pipes are polybutylene. Litigation may result in damages assessed against both the seller and the broker.

Rejection

If the price offered is very low and is obviously a "fishing expedition," the seller may be advised to reject the offer outright. A better approach might be to reject the offer with an invitation to come back with a more serious offer. Many Florida markets are sellers' markets; however the local market could be a buyers' market. Sellers should be cautious in rejecting offers, and also when making counteroffers. Many sellers have refused to accept low offers and later regretted missing the opportunity to sell. As their counselor, be certain that the sellers are aware of market conditions.

Withholding tax rates:

If the property will be used as a personal residence and amount realized is as follows: $300,000 or less0%$300,001 to $999,99910%$1 million or more15%

Conditional termination

If the seller decides not to sell the property, the broker may agree to terminate the contract. The seller must sign a withdrawal agreement and then pay the broker's direct expenses and a specified cancellation fee. If the seller contracts to transfer the property during the protection period, the broker may cancel the termination and collect the balance of the commission due.

Garage

If the subject does not have one, any garage on a comparable property requires an adjustment. Compare garages on the subject and comparable properties for type of construction and size.

parroting

If you repeat the words exactly

No-cause determination

If, after a thorough investigation, HUD finds no reasonable cause to believe that housing discrimination has occurred or is about to occur, HUD will issue a determination of "no reasonable cause" and close the case. A complainant who disagrees can request reconsideration of the case.

Law of increasing and diminishing returns

Improvements to land and structures can reach a point at which they have no positive effect on property values. As long as money spent on such improvements produces a proportionate increase in income or value, the law of increasing returns is in effect. When additional improvements bring no corresponding increase in income or value, one can observe the law of diminishing returns. Smaller homes in a neighborhood of larger homes may experience increasing returns when improved. Homes that are the same size or larger than surrounding homes should not be improved significantly until the owners have considered the economics of their decisions.

Saving the commission

In almost every case, the principal reason sellers avoid hiring a broker is to save the commission. The sales associate should point out that buyers like to buy directly from sellers in order to save the commission (by negotiating a lower price), so the seller is less likely to save very much.

Conformity

In neighborhoods of single-family houses, buildings normally should follow the principle of conformity; that is, they should be similar in design, construction, and age to other buildings in the neighborhood to realize their maximum value. An elaborate mansion on a large lot with a spacious lawn is worth more in a neighborhood of similar homes than it would be in a neighborhood of more modest homes on smaller lots. Subdivision restrictive covenants are designed to promote the principle of conformity to maintain and enhance values.

modification

In the case of a person with disabilities, a modification is a change that the housing provider must allow the tenant to provide at the tenant's expense.

Entrances

Inaccessible entrances should have signs showing the closest accessible entrance. A service entrance should not be used as the accessible entrance unless there are no other options. * Entrance doors should have atleast 32 inches of clear opening with at least 18 inches of clear wall space on the pul side. Door in public areas should have at least a 32 inch opening. **Door handles should be no higher than 48 inchees and operable with a closed fist. Lever or pull NOT A DOORKNOB

Closing Disclosure

It must be received by the borrower at least three business days before the closing. The Closing Disclosure will be discussed in Unit 13. The HUD-1 Settlement Statement was combined with the TIL

Property Sale Information Sheet

It provides necessary data about the sale, the cooperating agent, the lender, the title company, and more. This form should be clipped inside the closing file and referred to as necessary when servicing the sale.

Prorations section

Prorations are usually debits (charges) to the seller. Because the closing date is not certain, the sales associate need not do exact prorations; approximations are satisfactory if amounts are rounded higher. The statement offers no provision for insurance prorations. The buyers should purchase a policy, and the seller should get a cancellation refund. Because the insurance refund and escrow refund from loans paid off are not received at closing, the net proceeds statement does not include these items (if the mortgage is to be assumed, the prorations could be offset by the amounts held in escrow because the buyer will be expected to reimburse the seller for those amounts). -Property taxes should be estimated for the year if tax information is not available. An assumed closing date is used to estimate prorations. If the closing were anticipated for June 28, for example, the licensee would show a charge to the seller for half the year's taxes. -Interest prorations can be difficult to calculate because the amount depends on the time of month for the closing. The safest policy, if the loan is current, is to show a charge for a full month's interest. -Rents and deposits can be major charges to the seller of an income property. If the seller has collected rent in advance, the buyer is entitled to the rent for the part of the month after the closing. The buyer also should be paid the security deposits.

Canvassing

Prospecting for buyers or sellers by telephoning or walking door to door.

Income Tax Regulations Affecting Residential Real Property

Real estate licensees are not income tax experts, but should be knowledgeable about federal taxes related to real estate transactions. Licensees always should advise consumers to seek professional tax advice.

Creating rapport

Reflecting what a person says can create a bond of agreement. You can reflect their words by echoing what they say. You can reflect their style by using their modes of speech. However, poor use of this technique can have the opposite effect.

Regional shopping centers

Regional shopping centers usually have three or more major department stores as anchors. They generally are located near expressways to draw more distant shoppers to the sites. The centers often have large numbers of general merchandise retailers. A professional manager is essential to enhance the value of this very large investment.

Restrooms

Restrooms should be accessible to people with disabilities. If a restroom is inaccessible, there should be a sign giving directions to an accessible restroom. A wheelchair-accessible stall that is at least 5 feet square is necessary to make turns. Grab bars should be behind and on the side wall nearest the toilet. At least one lavatory should have a 30-inch-wide-by-48-inch-deep clear space in front. The bottom of the lavatory should be no lower than 29 inches; the rim should be no higher than 34 inches. ***The faucets should be operable with one closed fist.

Properties that have sold

Reviewing actual sales prices of comparable properties helps buyers and sellers see what buyers actually pay in the marketplace. Comparable sales data are important when new financing is necessary because an appraiser relies on the data to estimate market value. Many sales are contingent on financing the purchase price, so it is of no value to overprice a property only to lose the sale when the lender and the buyer receive the appraisal report.

Properties that are now on the market

Reviewing the prices of comparable properties now on the market shows the seller what owners of properties with similar characteristics are asking. These properties will compete with the seller's. The principle of substitution means that a buyer will select the property with the best price, all other things being equal. A seller who wishes to position the property in the most effective price window values it just above recent sales and just below competing properties. A properly priced listing should result in a reasonably quick sale at the optimum price.

Static Risk

Risk that is quantifiable and insurable. For example, the risk of fire is a static risk. Fire insurance will transfer the risk from the owner to the insurance company. Buying hazard insurance protects against static risk. Static risk is risk that can be insured. Examples include fire, windstorm, accident liability, floods, appliance contracts, and worker's compensation.

Selective use of human models when conducting an advertising campaign.

Selective advertising may involve an advertising campaign using human models primarily in media that cater to one racial or national origin segment of the population without a similar advertising campaign directed at other groups.

Residential Contract for Sale and Purchase 1. Parties

Seller: The seller's name(s) should be the same as that shown in the property's title, showing the marital status of the seller. You can get this information from the seller's title insurance policy or a copy of the recorded deed. Residential property: If a married person owns the residential property individually, you should also obtain the signature of the nonowning spouse. Joint ownership: If the property is jointly owned, obtain the signatures of all joint owners. If a residence is located on the property, obtain the signatures of joint owners and their spouses. Corporations, partnerships, estates, trusts, and use of powers of attorney: Each requires special attention and instructions. Seek broker or legal counsel, as appropriate. Buyer: Buyer's name(s) should be shown in the same manner as the buyer wishes title to be taken at closing. Other points to consider include the following: -Each buyer shown on the contract must sign the contract. -If the buyer later desires to take title in some other manner and this is permitted by the contract, an appropriate assignment or amendment to the contract should be obtained at closing. -Buyers often seek advice as to the manner in which they should take title to property—for example, tenancy by the entireties, tenants in common, and so on. If the buyer asks how title should be taken, advise the buyer to see an attorney. -Non-U.S. corporations, U.S. corporations, partnerships, et cetera: Seek broker or legal counsel, as appropriate. -Address: Insert the street address, city, and ZIP code, which may render an otherwise insufficient legal description legally sufficient.

Financing

Sellers don't normally help buyers find new financing on the property, and buyers may want assistance in deciding where to go for a home mortgage and may not understand the process. Because of that reason, many buyers ask for the help of a real estate professional.

Fax opt-out notice requirements

Senders of fax advertisements must provide specified notice and contact information on the fax that allows recipients to opt out of any future faxes from the sender and specify the circumstances under which a request to opt out complies with the act.

CMA

Similar to the comparable sales approach used by appraisers but usually less detailed. Used by brokers and sales associates to estimate the most likely selling price of properties they are listing or selling.

Single-family homes

Single-family homes are the most popular form of housing in the United States for owners, but not for renters. According to the National Multifamily Housing Council, in July 2015, more than 110 million people, 35% of the population, were renters. Although homes that are rented to other parties often are managed directly by the owners, there is a growing trend toward professional management of such properties, particularly condominiums and vacation homes. Many large corporations and their relocation companies hire property managers for homes vacated by employees who have been transferred. Rising construction costs and a decrease in the availability of usable land have resulted in the growing popularity of town houses, condominiums, and cooperatives. Although each unit is a single-family residence, the individual owners of the units share certain responsibilities—such as maintenance of the roof, common walls, grounds, and common facilities—for the development as a whole. They usually employ professional managers to handle these jobs and maintain accounting records.

Strip shopping centers

Small strip shopping centers, because of their rectangular shape, lend themselves well to a variety of uses. They can be converted from storefronts to offices to restaurants with relatively little expense. A typical strip center consists of a 100-by-60-foot building with four 25-foot- or five 20-foot-wide bays. The market in many areas became very soft during the last economic downturn, making new construction loans difficult to obtain for some years. The market has improved in recent years, becoming attractive again to small investors.

What Are the Buyers' Housing Objectives?

Some of the information the sales associate should get from the buyers includes the following: -What features do they want in the home? -How quickly do they need to move? -Must the buyers sell their current home? -If they're leasing now, when does the lease expire? -Have the buyers already spoken to a lender and been preapproved? -Is there a specific area they want?

Standards:

Some of the more important standards are shown here.

Other Documents

Some of the other documents the buyer may sign include an anticoercion statement that says the lender did not require the buyer to choose a certain insurance company. The lender and the title insurance company will want a compliance agreement that the parties will do anything necessary to give the lender an acceptable loan package, such as signing new documents, if required. If the loan is more than 80% of a home's value, the lender will want an affidavit that the buyer will occupy the property. The seller will be required to sign an affidavit that (1) she owns the property, (2) she has the right to convey it, and (3) it is not encumbered by any lien or right to a lien, such as a construction lien.

The PITI payment includes the principal, interest, and escrow expenses in the monthly mortgage payment.

TRUE

a standard feature of ARMs is no prepayment penalty.

TRUE

The definition of market value now includes foreclosed properties as comparable sales.

TRUE In order to find market value in many areas, the high numbers of foreclosed properties really establish market value.

At closing, the seller will have to sign an affidavit that there are no liens on the property.

TRUE The seller will be required to sign an affidavit that she owns the property, she has the right to convey it, and it is not encumbered by any lien or right to a lien, such as a construction lien.

Closing Progress Chart

The Closing Progress Chart will help the licensee organize the details of the closing. If there is a cooperating licensee, the chart should be a joint effort so that licensees agree about which licensee will handle certain duties and when the tasks should be completed. Once the associates agree, each sales associate should place a copy of the chart in the closing file. Additionally, each date scheduled should be transferred to the sales associate's appointment book. As each task is completed, the sales associate should place a check mark in the appropriate row. An "X" in the chart indicates that comments have been made on the back of the form. A discussion of each item follows.

Conciliation

The Fair Housing Act requires HUD to bring the parties together to attempt to resolve every fair housing complaint. If the parties sign a conciliation agreement, HUD will end its investigation and close the case.

Written communication

The ability to communicate effectively in letters, emails, and other documents.

Oral communication

The ability to speak effectively one on one or in a group presentation.

Servicing The Listing

The actions of a licensee who stays in touch with a seller regularly, getting feedback from licensees who have shown the property, sending the seller copies of advertisements, and generally keeping the seller informed of the marketing efforts. A seller who does not hear from the listing sales associate perceives that the agent is not doing her job. --Select one evening each week, such as Thursday night, to service your listings.

margin

The additional percentage added to the index on an adjustable-rate mortgage, resulting in the calculated interest rate.

Advantages of Investing in Real Estate

The advantages of investing in real estate include high leverage, good return, shelter from federal income taxes, and personal control of the asset. Leverage Leverage is the use of other people's money to increase the investor's return. Few other investments offer the high leverage that real estate does. Stocks and bonds typically require at least a 50% down payment; mutual funds want 100% invested. Yet real estate investments can be made with 25% down payments, and less in many cases. Good returns Many careful and astute investors achieve excellent returns, often exceeding 20%. Income tax shelter Most investment opportunities such as savings accounts, bonds, stocks, and mutual funds require that investors pay taxes on all current income (dividends). Real estate investments often provide tax-deferred cash flows, primarily because of cost recovery deductions (depreciation). This allows investors to avoid paying taxes on the cash flows until they sell the property. Exchanging and installment basis reporting are other ways to defer paying taxes. These methods will be discussed later in this section. More personal control Many investors are uncomfortable with the notion of entrusting their assets to other persons or companies with little or no control over the use of those assets. The purchase of real estate gives an investor much more control over the investment's operation and management. This is true even if the investor employs a property manager because the manager is under the investor's control.

Before-tax Cash Flow (BTCF)

The amount of spendable income from an income property after paying operating expenses and debt service, but before the effect of income taxes. Sometimes called cash throw-off.

Equity

The amount of the owner's portion of the property value after deducting mortgages and other liens. Special assessment liens and construction liens would be shown in the space provided for other encumbrances. All items should be rounded because this is an estimate. An exact mortgage balance is unnecessary because of the closing date's uncertainty. Uneven dollars and cents amounts should not be included. Exact amounts imply an accuracy that does not exist in the estimate.

Employment

The applicant must sign an employment verification form authorizing the employer to reveal confidential information concerning the applicant's job status. Not only will the applicant's wages or salary and length of employment be verified, but the employer also will be requested to offer an opinion of the applicant's job attitude and give a prognosis for continued employment and prospects for advancement. Employment may be checked again before closing.

Testing understanding

The best way to use reflection is to test your understanding of what the customer has said. This could also help to build rapport. If you repeat the words exactly, it's called parroting. Rephrasing in your own words is called paraphrasing.

Deposits

The borrower must sign a separate deposit verification form for each bank account, authorizing the bank to reveal to the lender the current balance in the borrower's account. Under the Federal Right to Privacy Act of 1974 (FERPA), the bank cannot release such confidential information without a verification form. The knowledge that the loan processor can verify account amounts usually is enough incentive for the borrower to be truthful in reporting financial information. When the deposit balances are verified, the appropriate entries are made in the applicant's file.

Multiple listing service.

The broker (unless otherwise directed by the seller) will timely deliver the listing to the MLS. Some brokers hold a listing out for an extended period, during which time the broker attempts to sell the property himself. If the licensee is a single agent, this could be considered as subordinating the principal's interests to the broker's personal interests, a clear violation of fiduciary duties. The seller authorizes the broker to report listing information, price and terms, and financing information for any resulting sale to MLS participants.

Broker obligations

The broker makes promises to work diligently to sell the property.

A seller refuses to allow the listing broker to split commissions with buyers' brokers, transaction brokers, or nonrepresentation brokers. Based on this information, which statement is TRUE?

The broker may take the listing but may not enter it in the MLS. The reason is that a licensee who enters a listing into the MLS is offering compensation to the brokerage firm that sells the listing. Because no compensation is offered, it may not be entered into the MLS.

A sales associate is preparing a CMA. If he wants to find comparable sales of properties sold directly by owners, he should look in

The clerk's office will show all deed transfers. The tax appraiser's office will also show the information, but may be easier to locate, because the information is easily accessed by legal description or address.

Note

The closer presents the note for the buyer's signature. The note shows the principal balance, number of payments, and the dates and the amount of the payments. The amount will be for principal and interest only. The first payment date will normally be the first day of the second month after closing. The note is not witnessed or notarized. If a signature appears on the face of the note along with the borrower's signature, that person becomes a cosigner on the note.

Closing date:

The closing date should be set for a reasonable period after any conditions have been satisfied and the title evidence delivered.

Assignability:

The contract allows three options for assignability: -Buyer may assign the contract and be released from liability. -Buyer may assign the contract but will not be released from liability. -Buyer may not assign the contract. It's a bad idea to let the buyer assign the contract and be released from liability, in effect walking away from the contract.

Improvements and attachments:

The contract includes all improvements and attached items, and further describes fixtures, built-in furnishings, built-in appliances, ceiling fans, light fixtures, attached wall-to-wall carpeting, rods, draperies, and other window coverings, refrigerators, ranges and ovens, storm shutters, and smoke detectors (unless any of these items are specifically excluded).

Numbers

The difference between making a living and becoming a real estate sales superstar is numbers. Following these tips will help you become a successful prospector: -Follow all laws when prospecting, paying particular attention to the National Do Not Call Registry. -A cross-reference directory can give you information on area residents and businesses. Cross-reference directories are arranged by street addresses and numerically by phone number. Listings arranged by street addresses allow you to find all the residents and businesses on a particular street in sequence. Listings arranged by phone number allow you to find all the numbers and names for a particular area code and exchange. The product is available in print, online, or on CD. An annual subscription (costing from $150 to $400, depending on the location) will give current information, and can filter out phone numbers that appear on the National Do Not Call Registry

The Range

The estimates for each section should be rounded. The range would then be calculated from the reconciled value of sold properties and the reconciled value of properties listed currently. Another method for setting a range of values is to reconcile the sold properties to a value estimate, then check to see what properties sell for as a percentage of list price, then divide the value estimate by that amount. The two values comprise the range high and low.

Loan underwriting

The evaluation of risk when a lender makes a mortgage loan to reduce the lender's exposure to loss.

Transactional Characteristic

The factors related to a real estate transaction itself, such as time of sale and financing terms.

Property Characteristic

The features of a property that are used as a basis of comparison in an appraisal or comparative market analysis.

Reconciliation

The final step in the appraisal process before the report is prepared. The correlation of property values derived from each of the three appraisal approaches into a single estimate of value.

Fixed purchase price:

The format of the preprinted contract calls for a fixed purchase price to be expressed in monetary terms using U.S. dollars.

Blockbusting

The illegal act of a licensee who frightens homeowners into selling by raising fears that minority homeowners are moving into a neighborhood.

Steering

The illegal, discriminatory act of a sales associate who brings buyers into an area based on the racial or ethnic makeup of the neighborhood.

Curb Appeal

The impression, good or bad, that is made when a person first looks at a house from the street.

Net Operating Income (NOI)

The income from an investment property remaining after operating expenses have been paid from the effective gross income. deducting operating expenses (fixed, variable, and reserves) from effective gross income.

Calculated Interest Rate

The interest rate in an adjustable-rate mortgage that is calculated by adding the margin to the index.

Economy.

The investor also should review the neighborhood's economic health. Rental rates in the neighborhood are a sound indicator of the real estate market's economic strength. The investor can obtain the most reliable current rental rate information by shopping the competition.

Fair Housing Act

The law applies to persons who own four or more homes, multifamily properties (except properties with fewer than four units, one of which is occupied by the owner), brokers and sales associates who sell two or more homes in a year, and transactions in which a broker is involved. It does not apply to religious organizations or private clubs.

Persons covered by the Fair Housing Act

The law applies to persons who own four or more homes, multifamily properties (except properties with four or fewer units, one of which is occupied by the owner), brokers and sales associates who sell two or more homes in a year, and transactions in which a broker is involved. While it appears that a private owner may be able to discriminate under the 1968 act, the 1866 act clearly prohibits discrimination based on race.

A lender has a maximum of three business days after a loan application to give a Loan Estimate to a prospective buyer.

The lender must give the disclosure to the borrower at the time of loan application or within three business days after the receipt of the loan application.

Addenda:

The licensee should check the appropriate boxes for addenda that apply to this agreement. The Comprehensive Addendum to the Residential Sale and Purchase Contract has many of the most common clauses. Various laws and regulations require that some riders be attached to the contract and that other riders expand and clarify contract terms. All the riders listed are available as preprinted forms.

Property listings that have expired

The listing prices of properties that do not sell demonstrate the resistance level of buyers to overpriced listings. In almost every case, the expired listing has been priced too high for the amenities offered.

Credit report

The loan processor requests the borrower's credit report. The credit report is an important part of the loan approval process. Of the two types of credit reports, consumer credit and mortgage credit, this discussion centers on the latter. A credit report is the product of information accumulated from a thorough check of the creditors indicated on the loan application, as well as a review of the public records to discover whether any lawsuits are pending against the applicant. When completed, the credit search company sends the loan processor a report of its findings.

Data verification

The loan processor will verify the information included in the application by checking with the various references given, the banks where deposits are held, and the applicant's employer.

caps

The maximum amount that an interest rate can increase per year, or during the life of a loan.

Adjustments

The method used by brokers and appraisers to account for differences in comparable properties. If a subject property is superior, the appraiser makes a dollar adjustment increasing the sale price of the comparable. If the subject property is inferior to the comparable property, a negative adjustment is made.

Mortgage

The mortgage is the security for the note. It is the document that may require the borrower to pay ¹⁄12 of the ad valorem taxes and the hazard insurance and mortgage insurance premiums, along with the principal and interest. It requires that payments be made on time, that taxes be paid, and that the property be covered by insurance. It also describes prepayment options and probably states that a transfer of the property will make the loan due immediately.

Routine Maintenance

The most common maintenance performed on an investment property, such as grounds care and housekeeping.

Neighborhood amenities and facilities.

The neighborhood's social, recreational, and cultural amenities can be important. Parks, theaters, restaurants, schools, and shopping centers attract potential tenants.

Net proceeds to seller

The net proceeds equal the seller's equity less expenses and prorations. The amount of the seller's proceeds should be rounded to the next lowest $100. Using precise figures imply an accuracy that does not exist.

Time to get commitment:

The number of days the buyer has to obtain a loan commitment is sometimes based on how much time the seller will give the buyer to find financing. In any event, the broker or sales associate should know approximately how long local institutions take to process loan applications. Then a reasonable period should be inserted.

Prompt application:

The number of days the buyer will have to make an application is inserted. Except under unusual circumstances, it should be possible for the buyer to make an application for the mortgage almost immediately. The broker or sales associate should ensure that the buyer proceeds diligently to make a loan application. Keep in mind that paragraph 11 of the contract makes time of the essence, and failure to make a timely application may be a default.

Time Management

The organization of a person's day to maximize efficiency. It includes planning, scheduling, and prioritizing.

Attorney fees; costs:

The parties will split the mediator's fee and pay their own costs, expenses, and attorney fees. In any litigation, the winning party is entitled to collect all costs and fees from the other party.

PITI Payment

The payment required of a borrower that includes principal, interest, taxes, and insurance. Most lenders require an amount each month that includes principal and interest plus escrow items—property taxes, homeowners insurance, and possibly mortgage insurance or homeowners/condominium association dues.

EXPANSION

The phase of a business cycle that begins after a recovery when economic conditions improve. High employment levels, wages, and consumer purchasing power increase demand for goods and services. Prices rise because of greater demand, and credit is easy, making more money available for purchasing.

Principal amount:

The principal amount of the third-party mortgage that the buyer seeks is inserted. Licensees should have a working knowledge of what is available in the local financial market.

Qualifying

The process used by a licensee to determine whether to spend time working with a buyer or a seller. For example, a buyer would first be qualified financially, and then based on motivation to buy.

Subject Property

The property being appraised.

Corrective Maintenance

The repairs to a building's structure and equipment following breakdown.

Ethical

The right thing to do. Usually a higher standard than legality.

Landscaping

The sales associate should evaluate the size, quantity, and quality of trees, plantings, and other types of landscaping.

Construction quality

The sales associate will make a major adjustment if construction quality of a comparable is not equivalent to that of the subject property and may disqualify the property as a comparable if the difference is too pronounced.

Number of bedrooms

The sales associate would make a major adjustment if the subject property has two bedrooms and the comparables have at least three, or vice versa. Don't double count when adjusting for square feet.

Seller obligations

The seller agrees to: -cooperate with the broker to obtain a sale and refer all inquiries to the broker; -give keys to the broker and make property available for showing during reasonable times; -inform the broker before leasing or mortgaging the property; -hold the broker harmless because of (1) the seller's negligence or misrepresentations, (2) losses from the use of a lockbox, (3) the existence of undisclosed facts about the property, or (4) arbitration or lawsuits against the broker by another broker (this serves as a warranty that the seller's statements to the broker are true and indemnifies the broker against representations made by the seller that the broker passes on to a buyer; the warranty against seller misrepresentations is commonly called the warranty of owner clause); -comply with the Foreign Investment in Real Property Tax Act (FIRPT) requirements in case the seller is a foreign national (This could require that the buyer withhold up to 15% of the sales proceeds and forward the funds to the IRS.); Withholding tax rates: If the property will be used as a personal residence and amount realized is as follows: $300,000 or less0%$300,001 to $999,99910%$1 million or more15% If the property is more than $1 million, it doesn't matter whether or not it's a personal residence. -make legally required disclosures affecting the property's value. Seller also warrants that seller knows of no facts materially affecting the property's value. This part is a latent defects clause. This usually involves the seller completing the Seller's Property Disclosure—Residential (click here). The sales associate should not complete this form for the seller; and -consult with qualified professionals for legal, tax, and other matters, the intent of which is to reduce the licensee's liability.

Broker authority

The seller authorizes the broker to do the following: -Advertise the property as the broker deems advisable, place an appropriate sign on the property, and use the seller's name in marketing the property. This section also allows the seller to opt out of displaying the property on the internet. The property address will not be included in internet advertising. -Place appropriate signs on the property, including For Sale and Sold signs. -Obtain information about the mortgage (usually a signed request from the seller for a status letter). -Provide a CMA to potential buyers. -Place a lockbox on the property, if the seller specifically authorizes it. The seller is asked to relieve the broker, staff, and board of Realtors® from liability due to loss. The seller may request that the broker withhold oral offers and all offers once the seller accepts a contract. -Act as a transaction broker. Florida Realtors® has a different form for each of the available brokerage relationships. -Virtual office websites that allow automated estimates of value or comments or reviews about the property. This section allows the seller to opt out of the value estimates or comments.

If a lender offers a first mortgage for 4.5% and charges four points, the effective interest rate if the loan is held for at least 12 years is 5%.

The statement is true. The formula to calculate the effective interest rate is note rate + (points ÷ 8) = effective interest rate. 4.5% + (.04 ÷ 8) = 4.5% + .5% = 5%.

Method of payment:

The subparagraphs set forth the manner in which the purchase price is to be paid. The sum total of the monetary amounts set forth in these subparagraphs should equal the purchase price.

Gross Domestic Product (GDP)

The sum total of goods and services produced by the United States. The four major components of GDP are consumption, investment, government purchases, and net exports.

Quantity of income

The total amount of a borrower's income from all sources.

Potential Gross Income (PGI)

The total annual income a property would produce if it were 100% occupied, with no vacancy or collection loss.

A home has dimensions of 35 feet by 57 feet that include an attached 24-by-22-foot garage and a 200-square-foot screen porch. How many square feet of gross living area does the home have?

The total area of the improvements is 1,995 square feet (35 × 57). The garage has 528 feet (24 × 22). So the living area of the house is 1,267 square feet (1,995 - 528 - 200).

Number of rooms

The total number of rooms in a house does not include the foyer or bathrooms and generally does not include basement rooms. Don't double count when adjusting for square feet and number of bedrooms.

dynamic risk

The uninsurable risk in owning real property. For example, changes in environmental or tax laws, of loss of a major employer in the area. This risk can sometimes be avoided by careful analysis before the property is acquired.

The Warranty Deed

The warranty deed is the most common deed, with the seller guaranteeing to the buyer that he has good title, without material defects or encumbrances, and will stand by the guarantee forever. Special attention should be given to the names and legal description and to any items in the "subject to" section, such as restrictive covenants and mortgages.

Home inspectors must be licensed by the DBPR

They must have a high school diploma, be of good character, complete a minimum of 120 hours of prescribed education, and pass a state examination. Home inspectors must also take 14 hours of board-approved continuing education at each renewal cycle before renewing the second time

Fair Housing Amendments Act Of 1988

This federal law expanded the Fair Housing Act to include protections for families with children and persons with disabilities.

Brokerage relationship

This form is an agreement that the broker will act as a transaction broker. Other forms are available for nonrepresentatives and single agents. The listing contract includes the disclosure forms for single agent or transaction broker. The seller should sign the forms, or, if the seller declines to do so, the licensee should so indicate on the listing contract form. If the broker is starting as a single agent and may become a transaction broker, the transition notice must be signed.

Compensation.

This is an agreement to find a purchaser who is ready, willing, and able to buy, either at the list price or at any other price agreeable to the seller. It is not dependent on a closing (as in a listing "to effect a sale"). -This paragraph sets the commission as a percentage of the price or as a dollar amount. The commission is due no later than closing but may be due whether or not a closing occurs. -In case the seller and a buyer agree to an option contract, this paragraph sets the commission as a percentage of the option amount or as a dollar amount. The commission is due at the time the option is created. The total commission, less the commission received from the option, is due when the option is exercised. -In case a lease agreement is created, this paragraph sets the commission as a percentage of the price or as a dollar amount. The commission is due when the seller enters into an agreement to lease. An exception occurs if the seller employs another broker under an exclusive right-to-lease agreement. -Broker's fee. This paragraph describes when the broker's fee is due: if any interest in the property is transferred, whether by sale, lease, exchange, government action (e.g., eminent domain), or bankruptcy, no matter who finds the buyer, if the seller refuses to sign an offer at full price and terms, defaults on a contract, or agrees with a buyer to cancel an executed sales contract, or if, after the listing's expiration, a prospect who learned about the property through a broker buys the property within the protection period. An exception occurs if another broker has subsequently listed the property. -Retained deposits. This paragraph entitles the broker to a specified percentage of all deposits that the seller retains as liquidated damages for a buyer's default. The amount cannot exceed the total commission as shown in paragraph 6(.

Square feet of gross living area

This is one of the most common areas for making adjustments because size differences among homes can be calculated easily. If licensees make adjustments for square footage, they also must be careful when adjusting for number of rooms or bedrooms because this could lead to double counting. Adjustments for gross living area can be misleading if all properties are not comparable. For instance, a small house normally sells for more per square foot than a large house in the same area. A one-story house has a higher cost per square foot than a two-story house. Be sure that all properties used are comparable to the subject property. Appraisers normally do not count any floor area that is below grade as gross living area, so do not use such properties unless the subject also has below-grade area.

Substitution

This is probably the most important factor in pricing residential property in a neighborhood with an active market. The value of a given parcel of real property is determined by using the principle of substitution. The maximum worth of the real estate is influenced by the cost of acquiring a substitute or comparable property.

Escrow agent:

This paragraph authorizes the escrow agent to accept and disburse funds and releases the escrow agent from liability unless there has been willful breach of the contract or gross negligence. If the escrow agent has to interplead the subject matter with a court, the court costs and attorney's fees may be paid from the deposit.

Authority to sell property

This paragraph gives the broker an exclusive right to sell the property. The listing term also is shown here. Many brokerage firms have policies for the listing term, depending on the type of property. A typical residential period is six months. The licensee should examine that policy carefully, however, in light of the best marketing period. For instance, in many areas of Florida, the best sales period is May through August. If that is the case, a six-month listing taken on January 2 expires July 2, with two months remaining in the best selling period. A far better approach is a minimum of six months, provided all listings remain active at least through August 31. A contract written during the listing period extends the listing until the closing. The seller agrees to offer the property without unlawful discrimination. The seller warrants that he can convey the property legally.

Effective Date; Time:

This paragraph makes the effective date the date that the last of the parties initialed or signed the latest offer. Calendar days will be used in computing time periods. It also has the wording that "time is of the essence." Time periods other than time for acceptance and effective date that end on Saturdays, Sundays, or holidays will extend to 5:00 pm of the next business day.

Dispute resolution

This paragraph requires that conflicts be submitted to a mediator agreed to by the parties. If the mediation is not successful, and unless the parties agree in advance to arbitration, either party may sue. The prevailing party is entitled to recover attorney's fees and costs. This section allows the parties (seller, listing associate, and listing broker) to agree to settle disputes by binding arbitration in the county where the property is located. The parties agree to split the costs equally. The inclusion of the listing associate in the contract is curious because the listing agreement is between the seller and the broker, and only the broker is authorized to take action for a commission. If the intent was to protect the broker from the sales associate's later claims for a commission if arbitration was unsuccessful, that might be better handled in the employment agreement. The agreement suggests that the costs will be split among the three parties.

Professional advice; Broker liability:

This section advises the buyer to get legal and other professional advice. The buyer agrees to look solely to the seller for property condition, square footage, and other facts that affect property value. If the buyer or the seller makes misstatements, the broker is entitled to collect court costs and attorney's fees to defend against damage claims.

Disclosures:

This section covers disclosures such as radon gas, permits, mold, flood zones, energy disclosure, lead-based paint, homeowner's association, ad valorem taxes, and FIRPTA withholding. The sellers must also disclose all known defects that materially affect the value of the property, other than those that are readily observable.

Information and signature section

This section provides space for additional terms and personal information, including tax ID numbers, as well as signature lines. Note that the listing sales associate may be authorized to sign the listing for the broker. This facilitates giving the seller a copy of the agreement immediately, satisfying the 24-hour requirement. The box at the bottom of the contract indicates when the seller's copy was legally delivered.

Cooperation and compensation with other brokers

This section states that the broker's policy is to cooperate with all other brokers except when it would not be in the seller's best interests. It authorizes the listing broker to offer commission splits with other brokers. The seller checks her approval for splits with (1) buyers' agents, (2) nonrepresentatives, (3) transaction brokers, or (4) none of the above. If the seller checks "none of the above," the listing broker may not put the listing into the MLS, because the MLS requires an offer of compensation to a cooperating broker.

Fair Housing Act

Title VIII of the Civil Rights Act of 1968 is commonly called the Fair Housing Act. This federal law, as amended, provides for equal housing opportunities regardless of race, creed, or national origin, sex, persons with disabilities, and families with children.

Title Insurance

Title insurance companies combine the abstracting process with insurance that guarantees the validity and accuracy of the title search. A purchaser of title insurance can rely on the insurance company's assets to back up its guarantee of a property's marketable title. This guarantee is evidenced by a policy of title insurance. Most financial institutions now require that a title policy be issued to them for the face amount of a loan. When a title insurance policy is issued to a lender, it is usually on the American Land Title Association (ALTA) form. While a standard title policy insures against losses overlooked in the search of the recorded chain of title, an ALTA policy expands this standard coverage to include many unusual risks, such as forgeries, incompetency of parties involved in issuing documents pertaining to the transfer of ownership, legal status of parties involved in the specific loan negotiations, surveying errors, and other possible off-record defects. Some additional risks can be and usually are covered by special endorsements to an insurance policy. These could include protection against any unrecorded easements or liens, rights of parties in possession of the subject property, mining claims, water rights, and additional negotiated special items pertinent to the property involved. Participants in the secondary mortgage market (Fannie Mae, Freddie Mac, and Ginnie Mae) generally require the expanded ALTA policy for the added protection it provides. Many lenders use the phrase "an ALTA policy" when describing an extended-coverage policy.

Mortgage Factor Chart

To use this chart, start by finding the appropriate interest rate. Then follow that row over to the column for the appropriate loan term. This number is the interest rate factor required each month to amortize a $1,000 loan. To calculate the principal and interest (PI) payment, multiply the interest-rate factor by the number of 1,000s in the total loan. For example, if the interest rate is 4% for a term of 30 years, the interest-rate factor is 4.78. If the total loan is $100,000, the loan contains 100 1,000s. Therefore, 100 × 4.78 = $478 PI only. To estimate a mortgage loan amount using the amortization chart, divide the PI payment by the appropriate interest rate factor. Using the same facts as in the first example: $478 ÷ 4.78 = $100 1,000s or $100,000

Other space

Unfinished attic, porch, utility room, Florida room, or any other room not part of the primary house area is included in this category.

One-year Treasury security index

Unlike the conventional ARM choice of index, all FHA ARMs must use the published one-year constant maturity Treasury security index, using the most recently available figure that applied exactly 30 calendar days before the designated change date. The new current index plus the constant margin rounded to the nearest one-eighth of one percentage point is the new calculated interest rate. It is then compared with the existing interest rate. If it is the same as the existing interest rate, no change is made to the existing rate. If it is up to 1% higher or lower than the existing interest rate, the new calculated interest rate becomes the new adjusted interest rate. If it is more than 1% higher or lower than the existing interest rate, the new adjusted interest rate is limited to a 1% increase or decrease of the existing interest rate. The new adjusted interest rate becomes effective on the designated change date and is regarded as the existing interest rate until the next allowable change date. In no event may any future combination of interest-rate adjustments exceed five percentage points higher or lower than the initial interest rate. The FHA considers interest payable on the first day of the month following the month in which the interest accrued. Therefore, adjusted monthly mortgage payments resulting from the adjusted interest rate are not due until 30 days after the designated change date. No negative amortization is allowed with FHA ARMs. The FHA requires that payments be recalculated each year to provide for complete amortization of the outstanding principal balance over the remaining term of the loan at the new adjusted interest rate. Lenders must give borrowers at least 30 days' notice of any increase or decrease in the monthly mortgage payment amount. The adjustment notice must contain the date the adjustment notice is given, the ARM change date, the new existing interest rate, the amount of the new monthly mortgage payment, the current index used, the method of calculating the adjustment, and any other information that may be required to clarify the adjustment.

nonverbal communication

Unspoken communication expressed by the position of the body, hands, arms, legs, or facial expressions, commonly called body language. OFTEN CALLED BODY LANGUAGE

Selective use of equal opportunity slogan or logo.

When placing advertisements, such selective use may involve placing the equal housing opportunity slogan or logo in advertising reaching some geographic areas but not others.

A married couple lives in a 2,100-square-foot home. House sizes in the area range from 1,200 square feet to 2,100 square feet. A sales associate found seven comparable sales from different sized homes. He calculated the sales price per square foot for each home, averaged all the prices, and applied it to the square feet in the subject home. In preparing the CMA, the sales associate

When preparing a CMA, licensees should use only comparable homes. Only the larger home sales should have been considered in this analysis.

Reflecting

When reflecting what the other person has said, you show not only that you have understood but also that you indicate interest in the other person and help establish rapport.

Hearing before a HUD ALJ

When the ALJ decides the case, the ALJ will issue an initial decision. If the ALJ finds that housing discrimination has occurred or is about to occur, the ALJ can award a maximum civil penalty of $19,787 per violation for a first offense, in addition to actual damages for the complainant, injunctive or other equitable relief, and attorneys' fees.

Saturate and Remind

When you meet a new qualified prospect by phone or in person, that person is now put in the saturate mode, with at least a weekly contact for six weeks. Now they know who you are and what you do. If your contacts have been skillful, they also like you, will do business with you, and will send you referrals. After the saturation period, you can reduce the number of contacts to twice monthly, and you'll have a steady source of business.

Surveys

Whether the abstract and opinion of title method or the title insurance policy method is used, a property's title is searched by an experienced abstractor who prepares a report of those recorded documents that clearly affect the quality of ownership. In addition, lenders usually require a survey of the collateral property as a condition for a new loan. Although many properties are part of subdivisions that have been engineered and described by licensed and registered surveyors and engineers, some owners might have enlarged their homes or made additions to the improvements since the original survey. These might not meet the various setback restrictions set forth in the local zoning laws. Some properties might have been resubdivided, while others now might have encroachment problems. An ALTA survey is a boundary survey prepared in a way that meets minimum standards adopted by the American Land Title Association/American Congress on Surveying and Mapping (ALTA/ACSM). It's much more than just a boundary survey of the land with flags at the corners. An ALTA survey shows improvements, easements, rights-of-way, and other encumbrances that affect land ownership. The surveyor must have a current title commitment. The title commitment includes the legal description of the property and legal descriptions of any easements and encumbrances. The surveyor works closely with the title insurance company because each depends on the other's work. The surveyor must show any encroachments, including pertinent information. The certification language of the ALTA survey includes the names of the parties, including buyer, seller, title company, and lender.

Under the "time is of the essence" provision

failure of any party to perform the duties or promises made within the exact time limits established in the contract constitutes an automatic default and, in turn, grants the performing (other) party the right of cancellation.

Sphere of Influence

family, friends, past customers, and former co-workers.

cloud

judgement that removes an otherwise damaging defect in title

The most important determinant of value for a vacant site is

location

A sales associate's primary objective when answering a sign call or an ad call is to

make an appointment Only by getting together with the buyer can the most effective service be made available.

An unlicensed individual may not

negotiate or agree to any commission split or referral fee on behalf of a licensee.

Three basic relationships can exist between the individual or corporate owner of a building and the property manager:

owner-broker, employer-employee, and trustor-trustee. Property managers in all categories are considered professionals, and their responsibilities are very similar.

Acquaintances

people we've met or spoken to by phone but don't know well. We will develop this group into a powerhouse of direct and referral business. One of the major objectives of our prospecting efforts is to move as many targeted strangers to this category as possible. combination of contacts with this group using mail and telephone at least twice monthly.

Civil Rights Act of 1968, commonly known as the Fair Housing Act

prohibits discrimination in the sale, rental, and financing of dwellings based on race, color, religion, sex, and national origin

The ADA and Substance abuse...

protects people recovering fro substance abuse BUT DOES NOT protect persons that are currently engaging in current illegal use of controlled substances Juvenile offenders and sex offenders, by virtue of that status, are not protected under ADA.

Matching

reflects nonverbal signals, but it is less obvious and not copying. Better way to relate. Less obvious.

Federal Residential Lead-Based Paint Hazard Reduction Act

requires that disclosure be made to purchasers of residential buildings that were built before 1978. The seller, landlord, or licensee must provide the following before the contract is signed: A lead hazard information pamphlet Information about the presence of any known lead-based paint or lead-based paint hazard A 10-day period to conduct an inspection (does not apply to rentals) Must be attached to the contract.

The Florida Realtors® listing agreement has a dispute resolution clause that

requires the parties to seek mediation first.

Real estate property managers manage four major classifications of real property:

residential, commercial, industrial, and special purpose

A regional market

should include demographic and economic information, such as population statistics and trends, a list of major employers in the area, and income and employment data. It should explore the economic base of the city and prospects for the future in that locale.

Why FSBOs Might do better with a broker

showing negotiating financing contracting saving the commission

The two principal categories of residential real estate are

single-family homes and multifamily residences.

The property manager has the duties of

skill, care and diligence, obedience, loyalty, accounting, disclosure, and confidentiality.

sphere of influence, expired listings, farm, for sale by owners (FSBOs) and for rent by owners (FRBOs), and canvass. Previous NextGo to Summary

sphere of influence, expired listings, farm, for sale by owners (FSBOs) and for rent by owners (FRBOs), and canvass.

Components of full title report

survey Search of title physical inspection

Existing structures must be made accessible when that goal is readily achievable

the goal can be carried out without much difficulty or expense.

Few other investments offer the high leverage that real estate does. Stocks and bonds typically require at least a 50% down payment; mutual funds want 100% invested. Yet real estate investments can be made with 25% down payments, and less in many cases.

true

Goals should be

written, measurable, and attainable, and should contain deadlines.

How to approach owners of expired listings

you must have empathy. The seller whose home was on the market for six months and didn't sell might: wonder why he bought a home that no one else likes, feel the broker did little or nothing to market the property, or believe the home was overpriced during the listing period.