Chapter 1: The Real Estate Business

Question 1

The real estate market is

Answer 1

Local in nature

Question 2

Farming

Answer 2

Licensees will concentrate on one type of property or on one particular neighborhood.

Question 3

Farming area or target market

Answer 3

Finding and specializing in a particular neighborhood or type of property, this is considered to be one of the best ways to succeed in residential sales.

Question 4

real estate brokerage

Answer 4

is a business in which real estate-related activities are performed under the authority of a licensed real estate broker

Question 5

Broker

Answer 5

acts as an agent of intermediary between two or more people in the negotiation of the sale, purchase, or rental of real estate.

Question 6

Sales Associate

Answer 6

works for the broker, providing services to prospective buyers and sellers on behalf of the broker.

Question 7

Licensee

Answer 7

whether a sales associate or broker, is a person who has met the requirements of law and is licensed and permitted to perform specified services to members of the public in connection with real property transactions.

Question 8

Property Transfer

Answer 8

There are laws, documents, disclosures, and technicalities that can be bewildering. Deeds, mortgages, surveys, appraisals, contracts, title insurance, flood plains, zoning and building codes, and finance.

Question 9

Valuation and Comparative Market Analysis (CMA)

Answer 9

Real estate licensees prepare a cma, which is a value estimate based on recent sales of similar properties in the same neighborhood. It uses many concepts that an appraisal does but may not be referred to as an appraisal.

Question 10

Valuation and Broker Price Opinion (BPO)

Answer 10

a lender may hire a real estate professional to preform a BPO in a short sale transaction to help determine the selling price of the property since the licensee typically has knowledge of the local market. The licensee will be asked to take photos of the property and complete a BPO report form provided by the lender. The report includes a neighborhood analysis of comparable properties along with local and regional market information. BPOs are less thorough than an appraisal but require more analysis than a basic CMA.

Question 11

Marketing and the MLS

Answer 11

The multiple listing service (MLS) system provides an extensive marketing tool for real estate licensees. It provides the opportunity to market listings to thousands of other local and statewide licensees in addition to potential buyers around the world.

Question 12

Customer Follow-up

Answer 12

Consistent and repeated follow-up with customers is key in maintaining good relationships and obtaining new prospects. Twice a year, with such things as a note or postcard on the anniversary of their purchase.

Question 13

Residential Transaction

Answer 13

• The sale of any improved residential property of four units or fewer
• Unimproved property intended for four units or fewer,
• Agricultural properties of ten acres or less,
• Leases with options to purchase all or a portion of improved property of four or fewer residential units, and
• Dispositions of business interests involving property of four or fewer residential units

Question 14

Agricultural Sales

Answer 14

Large tracts of land and significant sums of money. Brokers involved in these sales must be able to analyze the profitability of current agricultural uses and estimate the potential of properties under consideration.

Question 15

Commercial Sales or Leasing

Answer 15

Licensees must be capable of analyzing the past and future potential income derived from investment property. Potential commercial properties that an investor might consider include apartment buildings, office buildings, and shopping centers. Commercial real estate brokers must also have a basic knowledge of tax laws that affect income earned from commercial property as well as the tax consequences of buying and selling investment property.

Question 16

Industrial Sales or Leasing

Answer 16

industrial properties include warehouses and manufacturing facilities. Industrial sales involve users/owners, rather than investors. Industrial real estate brokers seek to locate properties that meet the future owner’s requirements. Knowledge concerning government regulations of land use, environmental considerations, transportation, labor costs, and utility charges are all important.

Question 17

Business Brokerage

Answer 17

A broker who specializes in the listing and sale of businesses, referred to as business opportunities, must be able to estimate the value of a business being offered for sale or purchase.

Question 18

Going Concern Value

Answer 18

the value of a business, includes its income, tangible and intangible assets, and goodwill, in addition to the value of the real property.

Question 19

Absentee Owners

Answer 19

Owners who buy income property as investments and depend on professionals to manage them. This has grown over the years and has become a major service offered by real estate professionals.

Question 20

Property Management

Answer 20

differs from simply being a rental agent. A rental agent finds tenants for properties and collects a fee for the service but does not manage the property once the tenant has been located. Property managers locate tenants, collect rents, handle payments of taxes, insurance, and other operation expenses. Property managers do not write or prepare leases, but they may assist prospective tenants in completing attorney-prepared leases.

Question 21

Community Association Management (CAM)

Answer 21

a CAM license is required when the community association employs a property manager who receives compensation for certain management services, and the community association served contains more than 10 units or has an annual budget in excess of $100,000.

Question 22

Appraising

Answer 22

is the process of developing an opinion of value of real property. An appraiser conducts an independent, impartial, and objective analysis based on research and data pertaining to the value of the specified real property. Appraisal fees are based on the time, effort, and expense involved for completion of the assignment, not on the value of the property.

Question 23

Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA)

Answer 23

legislation passed by congress designed to correct many of the problems discovered during the hearings into the collapse of lending institutions in the United States.

Question 24

Uniform Standards of Professional Appraisal Practice (USPAP)

Answer 24

was developed by the Appraisal Foundation, made up primarily of national appraisal organizations and educators as a standardized method by which appraisals should be prepared and reported.

Question 25

Financing

Answer 25

Borrowed money is the lifeblood of the real estate business. Understand the various sources of financial assistance available to borrowers. Knowledge of the practices of various lending institutions, the availability and cost of credit, and the requirements borrowers must meet to qualify for various financing plans is necessary. Mortgage loans can be obtained through mortgage companies, commercial banks, savings and loans, credit unions, life insurance companies, trusts, and even individuals.

Question 26

Mortgage Loan Originators (MLOs)

Answer 26

are individuals or businesses that arrange loans between lenders and borrowers; although they do not make loans, mortgage loan originators are an important source of funds as well. They must have a separate license issued by the Florida Department of Financial Services (FDFS).

Question 27

Property Insurance

Answer 27

desirable and mandatory in many instances. Many real estate offices offer home warranty programs. Lenders usually require homeowner’s insurance as a condition of a loan.

Question 28

Construction- 3 general phases of development and construction

Answer 28

• Land acquisition
• Subdividing and development and,
• Recording of the subdivision plat map

Question 29

Types of residential construction

Answer 29

Custom building
Speculative building
Tract building

Question 30

Custom Building

Answer 30

is when a contractor is employed to build a structure according to the customer’s specifications

Question 31

Speculative building

Answer 31

is when a contractor builds a structure before securing a buyer with the hope of selling the finished structure. This is also referred to as building on spec.

Question 32

Tract building

Answer 32

is when a developer acquires a large tract of land, records a subdivision plat map, and uses a model center from which sales may be made.

Question 33

National Association of REALTORS (NAR)

Answer 33

the nation’s largest trade and professional association, with a goal of preserving the right of individuals to own real property through an exchange of information.
Members must agree to abide by a strict Code of Ethics and provide optimum service to the public. The term REALTOR is a registered trademark of the NAR and may be used only by those who are members of the organization

Question 34

Florida Association of REALTORS (FAR)

Answer 34

The largest trade association in the state. FAR does all its business as Florida REALTORS. Members can take advantage of benefits such as business contacts, networking opportunities, educational offerings, research and legislation representation, discount programs, online forms, and technology services.

Question 35

Local Association of REALTORS

Answer 35

many licensees join local boards or associations of REALTORS. Joining a local association also gives the licensee membership in FAR, as well as NAR. If a broker is a member, all sales associates must also join.

Question 36

Local Government

Answer 36

• planning and zoning, property taxation, building and health code regulations are controlled by local governments. Local government bodies can also impose a moratorium or temporary delay for a building project.

Question 37

State Government

Answer 37

at the state level, real estate development is impacted by the following:
• Developments of Regional Impact (DRI)
• Department of Environmental Protection (DEP)
• Department of Economic Opportunity (DEO)
Roads, waterways, and other factors that affect multiple political jurisdictions are impacted at the state level.

Question 38

Federal Government

Answer 38

legislation that affects the operation of lending institutions has had an enormous effect on the real estate profession. Monetary policy adopted by the Federal Reserve System has a daily influence on the construction and real estate industries.