RealEstateU Study Guide

Rule 520-1-.04

-(Fees) Covers the fees involved in obtaining a license issued by the Georgia Real Estate Commission -(Brokers License Requirement) Summarizes the required experience for a brokers license -(Exam) If you want to get your license in GA, you must first pass the state exam -(Licensure Applications) Applications for a license, renewal, change or transfer of license must be submitted on approved forms -(Application Deadlines) Once you pass the community association manager's or salesperson exam, you must apply for an active or an inactive license with in 3 months or there will be fees

Mobile Homes

-Account for roughly 8% of all housing units in the United States. -A structure transportable in one or more sections, designed and equipped to contain not more than two dwelling units to be used with or without a foundation system. -only about half of mobile home owners actually own the land where their house is parked.

4 phases in the Real Estate cycle

-Recovery -Expansion -Hyper Supply -Recession

Time-Share Homes

A form of subdivision of real property into rights to the recurrent, exclusive use or occupancy or a lot, parcel unit, or segment of real property, on annual or some other periodic basis, for a specified period of time. -Fee Simple -Right-to-Use -Leasehold

Mineral Rights

A landowner's right to receive a portion of the profits of any minerals that are extracted from the land.

Straight Line Depreciation

A method of depreciation under which improvements are depreciated at a constant rate throughout the estimated useful life of the improvement.

Appraisers

Access and report their opinion on the value of a property.

Home Inspectors

Come in when a property has been sold and before the transaction is completed to examine it for the buyer. There are 1600 items their members are trained to check.

"Buydown"

Commonly used when buyers are looking to get discounted rates at least for the first years of their mortgage.

Fixtures

Fixtures are items attached to the land or improvements, which usually cannot be removed without an agreement between the parties. (Fixtures are considered real property) -Custom Shelving -Built-in Stereo System -Shower/Bathtub -Toilet -Sink

Chattel

Goods or every species of property moveable or immoveable which are not real property. Personal property.

Attorney General

Has the right to assist in any manner in the enforcement of any portion of the Georgia real estate code.

International Building Code (IBC)

IBC sets guidelines which base classifications on the heights of occupied space. The IBC that any structure of occupied living space higher than 75 feet above "the lowest level of fire department vehicle access" is considered a high-rise.

Residential Properties

Include single family homes and multi-family buildings. Single family homes are private freestanding residential houses, while a multi-family building has more than one housing unit. (apartment building, condo or townhome)

Trade Fixtures

Items that are installed by a business or commercial tenant and are removeable upon termination of the tenancy. (Trade fixtures are considered personal property of the tenant) -Business Signage -Display Counters -Custom Equipment -Store Shelves

Customer

Means a person who has not entered into a brokerage engagement with a broker but whom a broker may perform ministerial acts in a real estate transaction.

Appreciation

Monetary gain resulting from the increase in the market value of an investment, excluding applications of capital. Foe example, a house which is sold five years after it was purchased for 50% more than the purchase price.

Homeowner's Insurance

Plans may cover the buildings, the contents, and/or liability in case someone is killed or injured on your property. -Smoke Infiltration -Fire damages -civil disobedience such as riots -severe weather events -Explosions -Aircraft -Volcanoes

Private Mortgage Insurance (PMI)

Protects a lender against losses due to default on the loan.

Real Property

Real property includes real estate and the rights that go with it. (land, things affixed to land, appurtenances, and the bundle of rights)

Sellers Agent

Seller's agents work with sellers to list and market their property, negotiate prices and terms, and guide sellers through the selling process.

Special Purpose

Special purpose real estate includes schools or churches. Special purpose means the property is characterized by the specific reason it was constructed. These are properties that are not easily converted to another application. For example, a school building could not be turned into an apartment building, or a church could not become a grocery store without difficulty.

Property Manager

Takes care of rental property for the owner, screens perspective renters, coordinates repairs, handles maintenance and tenant concerns, and even evicts when necessary. Most states require a property manager to have a brokers license or work as a licensed agent under a broker.

Real Estate Recovery Fund

The Commission has the authority, and obligation to maintain a real estate recovery fund. This fund should have a balance of at least one million dollars and is a research, education, and recovery fund. The purpose of the fund is to provide funds for any person harmed in a real estate transaction who is not a licensee. Any party harmed shall be entitled to collect a maximum of $25,000 from the fund.

Expansion

The Expansion phase is when the activity resumes. While the vacancies are still down, implying a market for property, new construction is going on to meet the anticipated need.

Emblements

The crops and other annual plantings grown on a property (farm) are considered to be personal property of the cultivator. -corn -apples -potatoes -strawberries

Air rights

The rights in real property to the reasonable use of air space above the surface of land.

Advertising

This rules defines any "advertising" or "advertisement" as any method, manner or activity conducted to inform the general public for real estate rent, lease, sale or exchange.

Joint Tenancy

When more than one person owns the real property and you share the right to possession.

Rule 520-1-.04 (Part 2)

-(Firm name on application) A broker operating as a sole proprietor must use the same name on the license as a sole proprietor and on the broker's certificate of licensure. -Covers criminal history reports -Address applicants with convictions -Addresses applicants with disciplinary actions -Addresses incomplete applications -

Acting without a license (Fee)

-Any person who has intention to close a transaction without a license shall be deemed to be in violation of the rules of the Real Estate Commission. If such action is determined to be in violation of Georgia Code, the commission has the right to issue a cease and desist order to the involved parties. -If after a cease and desist order is issued for acting without a license, the commission shall have the right to impose a fine of up to $1,000 per transaction. Each day such a violation occurs shall be treated as a separate violation and will be subject to judicial review by the superior court.

Power of the Commission

-Can regulate all licensing matters including the issuing, suspension, revocation, and censure of any licenses. Each applicant agrees that the Commission has this power as part as their initial application. -Power to investigate or examine a broker's trust account. -Establish what behavior is acceptable for those that are license holders.

Cooperative

-Cooperatives are apartment buildings owned by a corporation that sells shares which entitle shareholders to exclusive, private use of a residential dwelling, or housing unit.

Condominium

-Each unit is owned individually. The units may be owner occupied, or used primarily for rentals, or vacation homes. In a condo building all common areas, such as walkways, meeting rooms, swimming pools, and other shared spaces in a condo arrangement are all jointly owned by the condo owners. -An estate in real property wherein there is an undivided interest in common in a portion in real property coupled with a separate interest in space called a unit, the boundaries of which are described on a recorded final map, parcel map, or condo plan.

Education Requirements post license

-Every salesperson has to provide that they have completed a 25 hour post-license course within 1 year after obtaining their license -To renew an active license a salesperson must complete 36 hours of continuing education during the renewal period -Licensees have to complete 3 hours of continuing education covering license law during each renewal period

Mortgage Loan Type Examples

-Federal Housing Administration (FHA) -Veteran Affairs -Fannie Mae "Home Ready" -"HUD Good Neighbor Next Door"

Capital Gains

-Is the effective profit or loss realized based on the difference between sale price of a piece of real estate and the cost of acquiring the asset. -There are short term and long term capital gains. Real estate investments purchased and sold within a one-year period have a higher tax rate than assets held longer than 12 months. The current tax rate is based on marital status, tax brackets, and how the property was acquired.

Advertising Rules (Law)

-Misleading advertising that misrepresents real estate property is strictly prohibited. Licensees who witness false or misleading advertising should take steps to prevent it. -Written permission to advertise is required prior to advertising property for rent, sale, lease or exchange. A licensee cant advertise any real estate unless they have written permission from the owner or owner's agent. -Discriminatory advertising is prohibited. A licensee can not advertise a property using references to a certain color, race, familial status, sex, handicap, religion, or national origin. -All advertising by licensees under a broker including salespersons associate brokers and community association manager must be directly supervised by the broker and include the name of the firm. This means that licensees cannot advertise the services of real estate under their own name.

Violations

-Misrepresentation of property values -Failure to disclose dual broker relationships -Conflicts of interest Penalties for violations, or fraudulent representation include suspension of licenses, refusal to issues new or renew a license, sanctions, fines, and potential imposition of new education requirements.

Modular Homes

-Modular homes are built in movable sections called modules in a factory according to a buyer's specifications on a particular floor plan designed by the company offering the home for sale. -Assembled on a permanent foundation, so moving is not usually an option. -A system for the construction of dwellings and other improvements to real property through the on-site assembly of component parts (modules) that have been mass produced away from the building site.

Required Fees/Georgia Commission

-Real Estate professionals in Georgia are required to pay specific fees for their licensing. These fees are paid to the Georgia Real Estate Commission which is the authority responsible with setting the fees. -The purpose of the fees (which you are assessed) is to pay the expenses associated with operating the Commission's office as well as those fees incurred during enforcement of the Georgia Statues. Under the guidelines set by the Commission, no fees collected shall be refunded for any reason.

Georgia Real Estate Commission

-The Commission is appointed by the governor and is comprised of six people. Five of them must be real estate professionals that are actively participating in the industry for no less than five years. The last person must have no connection to the real estate industry and instead must be an active consumer advocate. -The Commission's role is to create regulations which apply to those who have real estate licenses in the state of Georgia. The commission is further tasked with providing an annual report for the Governor. This report must cover what rules or regulations were implemented, provide hard numbers for the amount of real estate agents in the area, as well as a detailed analysis of the income and expenses of the Commission.

1031 Exchange

-The IRS Code allows two property owners to literally trade like-kind property without paying capital gain taxes. -These exchanges only apply to business and investment properties. You cant trade a private residence for another private residence. -You could trade a four unit apartment home for a single-family rental, as long as the exchange results in the net market value and the property equity purchased is the same of greater than the property you're selling.

Presenting Offers

-When preparing or signing an offer or brokerage engagement, the licensee has to include the license numbers of each firm and license. This must be the six-digit assigned by the Commission. -A licensee has the responsibility to distribute all documents used in a real estate transaction to anyone who signs the document. -A broker should keep track of documents and records for three years. This includes brokerage engagements, sales contracts, leases, closing statements, and any document for a real estate contract. -The falsification of transaction documents is prohibited, as is misleading representatives. A licensee cannot falsify a record or knowingly.

Broker/Associates Broker license

-You must be at least 21 years old -have an active license -an active license a minimum of three of the past five years

Community Association Manager (CAM) License

-at least 18 years of age -resident of Georgia -High School diploma of GED -passing a criminal background check -25 hours in an approved managers study course -passing an approved real estate exam

Homeowner's Insurance Types

0-Dwellings/Fire 1-Basic 2-Broad Form 3-Special Form 4-Tenant Coverage 5-Comprehensive 6-Condominium Insurance 7-Mobile Home Insurance 8-Older Homes Coverage

Broker Trust Funds

A broker can fulfill their duty to account by using the trust or escrow account in different circumstances like: -rejection of an offer -Withdrawal of an offer -Distribution of funds at the closing -filing of an interpleader action -Distribution of funds based on court order -to fulfillment of a contract requiring the deposit of funds

Real Estate Broker

A person or an organization acting as the agent for others in negotiating the purchase and sale of real property for a fee. A real estate broker can do everything a real estate agent does, but they can also establish their own business and manage their own team of real estate agents. However, they can also work independently, for franchises or for other agents as associate brokers.

Bundle of Rights

All of the legal rights incident to ownership of property including rights of use, possession, encumbering, disposition, and the right to quiet enjoyment (All rights can be shared or sold)

Georgia Administrative Procedure Act

Allows licensees, schools, or instructors to follow due process when accused of acting inappropriately. Once the hearing process is complete, the Georgia Commission has the discretion to deal with adverse findings.

Real Estate Salesperson

An individual who is licensed to negotiate and arrange real estate sales; works for a real estate broker. A real estate salesperson is a licensed agent that negotiates and arranges real estate sales. Agents must work under a real estate broker and the commission earned from sales is split between the broker and the agent.

Internet Advertising

Any internet advertising must contain the name and the telephone number of the licensees brokerage on each webpage with limited exceptions. If the brokerage has a trade name or franchise name it has to be included prominently in the advertising.

Hearing

Applicants for a real estate license may have the opportunity to rebut a denial, suspension, or revocation of their license through a hearing.

Ministerial Acts

Are tasks that don't require a broker's discretion or individual judgement.

Brokerage Management

Brokers are responsible for overseeing the activities of licensees in their offices. In addition, they are required to follow all local rules for operating a business. The general rules which apply to operations include putting policies in place to protect the public and provide for the oversight of those licensees who are working in the office.

Trust/Escrow Account

Brokers can have more than one trust or escrow account as long as they inform the Commission of the account information within one month of its creation. Licensees have to give any cash, checks, or other consideration to their designated broker as soon as possible. Brokers must keep any received consideration in a trust or escrow account registered with the Commission.

Contractors

Build the buildings. Usually, a general contractor coordinates all aspects of construction, using their industry knowledge to bring together the many different aspects so the process goes well. They hire and schedule sub-contractors such as plumbers, electricians, roofers, farmers, and others.

Buyers Agent

Buyer's agents find properties, show them, negotiate prices and terms, and guide buyers through the purchasing process.

Agricultural Properties

Can be farms or ranches. These properties are generally intended to be income producing properties but can be for personal use as well. They can vary greatly in size from family farms and ranches to large commercial projects. Agricultural property is usually used to grow and harvest crops, or raise, breed, and care for livestock such as cows, horses, pigs, sheep, or goats.

Industrial Properties

Can include factories or warehouses and can range from small to enormous. They can cover a wide variety of applications. In addition to assembly and production, there can be distribution, warehousing, and research and development.

Inactive license

Cant practice as a real estate broker, associate broker, salesperson, or community association manager. An inactive license can perform real estate activities for an unlicensed person who owns the property

Top Earners

Classified as a single taxpayer that earns more than $200,000 per year, or a married couple filing jointly, who earns more than $250,000 per year. (Current tax rate for them is 23.8% which is also the highest tax rate)

Property Insurance

Covers loss associated with a variety of damage and typically protects the homeowner against natural events, like forest fires, hailstorms, and hurricanes, as well as man-made causes, such as vandalism.

Real Estate Brokerage Engagements

Each brokerage engagement has to include the terms of the agreement and an expiration date. When the engagement is entered into, the licensee is obligated to provide original copies of the agreement to all parties involved.

Personal Property

Everything that is not real estate is considered personal property. (Also known as chattel) As a general rule of thumb, that which is moveable is considered personal property. -Furniture -Appliances -Moveable shelf -Television -Dresser

Multi-family Buildings

Have two or more individual connected by at least one adjoining wall, floor, or ceiling. There are many variations that include: quads, duplex's, and Victorian homes. (most multi-family home units are investment rental properties)

Demand Vs Supply

Imagine a seesaw but the weight is determined by the supply and demand. When the supply is plentiful and the demand is low, the pricing drops, increasing demand. When the supply is limited and demand is high, the price escalates, eliminating some possible buyers and reducing demand.

Physical Characteristics of Real Estate

Immobile- You can't move it. Once the boundaries are established in the deed, that is the real estate until the boundaries are changed by adding or subtracting land. This distinguishes land from personal property. You cannot bring it anywhere, or change its location to change your rights or obligations. Indestructible- The structures on the real estate can be destroyed. Fixtures, moveable property, buildings, and other improvements can all be damaged or destroyed. But the land itself, even if you dig a giant hole in it, is still the same land. Unique- Real estate is unique. Each parcel of land is unlike any other on Earth. There, can of course, be similar tracts of land. But the land within the defined boundaries of the deed is unlike any other.

Coercion

Includes over stating property value, making promises based on future potential property value, or convincing a seller to change property brokers when a contarct already exists.

Media

Includes photos, print, broadcast, and internet outlets. Examples of this are magazines, newspapers, posters, flyers, billboards, business cards, video, radio, signs and television.

Management Agreements

Involve licensees with property management relationships with their clients. Any written property management agreement must identify the property being managed and list the terms and conditions of the managers responsibilities. The management agreement specifies how income is transmitted to the owner and what kind of reporting will be provided on an annual basis. Any expenses managed by the broker must be included in the agreement, including how payments are funded.

Mixed-Use Properties

Is a combination of commercial and residential real estate. An example of mixed-use would be an apartment with storefronts on the ground floor and residential spaces above. Another possibility would be an apartment building with retail or business space included.

Tax Depreciation

Is a gradual reduction in the value of your property that allows you to recover part of your cost or other basis in the form of a tax adjustment. You cant depreciate land, however you can depreciate structures and improvements, including rental property. The most common depreciation method is called the "Straight Line Method" where you divide the value of your house by "27.5" to get the allowable annual depreciation deduction. So, assuming you have a rental home valued at $150,000, your annual deduction for residential property would $5,454.54 which is the result of dividing $150,000 by 27.5.

Brokerage Relationship

Is an agency (or non-agency) relationship between the broker and their client (or customer) under a brokerage engagement.

Commercial Properties

Is property used for profit-driven purposes, such as retail stores, restaurants, or offices. Shopping centers, hotels, nursing homes, and mobile home parks are also a part of commercial properties. Commercial property, since its used for business, could involve leases, rentals, tenants, maintenance, expenses, parking lots, and other elements not present in residential property.

Firm

Is the partnership, corporation, sole proprietorship, or limited liability company licensed as a broker.

Loan Organization Fees

Lenders charge administrative fees for reviewing applications, verifying credit worthiness and processing paperwork prior to issuing a loan. (The fee is based on the price of the real estate and typically equals 1% of the loan value.)

Community Association Managers (CAM)

May need to obtain a fidelity bond or the appropriate insurance if they meet certain thresholds. A CAM license manages a community and maintains, collect, controls, or disburses funds belonging to the community association. If the amount of these transactions exceeds $60,000 at any time, a fidelity bond or insurance is required.

Real Estate

Means land, plus man-made improvements. In modern times, improvements generally include a house, building, or fence. If you're working in rural areas, this can include a separate garage, barn, out-house, smoke house, silo, chicken coup, or anything else a person permanently installs on their land. These are called fixtures of appurtenances.

Life estate

Means that the property is owned by a person until the die, when it reverts to the original owner

Encumber

Means to have a lien placed against the property for a payment of a debt.

M.A.R.I.A (to determine if an item is a fixture)

Method of Attachment (If an item is attached using bolts, screws, nails, glue, cement, or another permanent method, it is considered a fixture, and therefore real property.) Adaptability (Items that were custom built to fit in a particular room will most likely be considered a fixture) Relationship of the Parties (If the parties went to court to determine if an item is a fixture or not, the courts typically favor the buyer over the seller, and the tenant over the landlord) Intention of the Parties (What was the intention of the seller when the installed the item? If the seller installed the item with the intention pf making the item permanent then the item is a fixture.) Agreement Between the Parties (Most purchase contracts will expressively define which items are in the sale, and which items are not included. To avoid any misunderstandings, fixtures that will be personal property should be stated in writing.)

Mortgage Brokers and Bankers

Provide financing for real estate transactions. While all-cash deals happen, most of the time some type of loan is involved. The difference between a mortgage broker and banker is that the mortgage banker is a direct lender, working for one institution, where a mortgage broker can work with several different lending companies.

Agency

Refers to a real estate brokers relationship with a client via the client's express written agreement.

Brokerage Engagement

Refers to a written contract between buyer, seller, tenant, or landlord, and the broker. The engagement includes consideration for duties that the broker performs, such as producing a buyer for a listed property or a property for a buyer willing and able to purchase real estate. The same holds true for a broker either listing an available renter or producing a renter for an available rental property.

Client

Refers to someone who is in a brokerage engagement with a broker.

Dual Agents

Represent both the buyer and seller or the tenant and landlord in the same transaction.

Economic Characteristics of Real Estate

Scarcity- There is only so much land in the world. Of that land, there is only so much that is habitable. One has to pay for real-estate, and as with the general definition of scarcity, the price one will pay depends on how scarce similar real estate is on the market. Location- Most of the value of real estate is tied to where it is located. This works hand and hand with scarcity. Sought after places have less available real estate. This will increase the price. Geography/Topography- Costal land, near beaches, tends to be more expensive then land further from the shore. The reason being that people want a view of the ocean or lake. And that land is far scarcer than locations more inland. There's only so much sea shore. Improvements- Raw land has a certain value. But once a house is built on it, the value goes up considerably. Other structures like a pool, fence, drive way, and high quality gardening also impact the value of real estate. Improvements also include pipes, connection to a sewer line, electrical wiring, and in modern times, phone and internet connection. Permanent Investment- Because real estate is not liquid it is seen as good. Gold can physically be stolen, as can cash or other valuables. But because the land is not moveable, it cannot be simply taken away. Once you buy land, you can own it forever. The value may go up or down, but it is land and it is yours as long as you dont sell it/ foreclosure.

Hyper Supply

The Hyper Supply phase is when there is new construction but the vacancies are increasing, indicating there might be an oversupply developing.

Recession

The Recession phase is when supply has reached a point where it tips the seesaw, with an excess units available, more than the demand requires. This results in increasing inventory.

Recovery

The Recovery phase is when there is low demand, which is indicated by declining vacancies in properties, and no new construction is happening. Its where the demand is balanced with the available supply.

Supply

The amount of a certain good or service that is available in the market. Factors that affect supply: -Location -Construction Costs -Local and State Governments

Mortgage Interest

The fee lenders charge to offer loans secured by ether a primary or secondary home, used primarily for personal use. (Interest is calculated every month, or after every scheduled payment, on the remaining principle over the term of the mortgage.

Demand

The supply of willing and able buyers in the marketplace or lack thereof. Factors that affect Demand: -Demographics -The Economy -Interest Rates

Tax-Deferred Exchange

The trade or exchange of one real property for another without the need to pay income taxes on the gain at the time of trade.

Acting without a license

There are exception on when a license is required which may include the spouse of a licensee, an attorney acting in an incidental manner or under power of attorney, property or community association managers, or others who may not be collecting a fee for their services such as a referral fee. (None of these exceptions shall apply to any person who is attempting to offer their services without obtaining a license when one would normally be required.