Chapter 1: The Real Estate Business Flashcards
The real estate market is
Local in nature
Farming
Licensees will concentrate on one type of property or on one particular neighborhood.
Farming area or target market
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.
real estate brokerage
is a business in which real estate-related activities are performed under the authority of a licensed real estate broker
Broker
acts as an agent of intermediary between two or more people in the negotiation of the sale, purchase, or rental of real estate.
Sales Associate
works for the broker, providing services to prospective buyers and sellers on behalf of the broker.
Licensee
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.
Property Transfer
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.
Valuation and Comparative Market Analysis (CMA)
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.
Valuation and Broker Price Opinion (BPO)
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.
Marketing and the MLS
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.
Customer Follow-up
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.
Residential Transaction
- 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
Agricultural Sales
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.
Commercial Sales or Leasing
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.
Industrial Sales or Leasing
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.
Business Brokerage
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.
Going Concern Value
the value of a business, includes its income, tangible and intangible assets, and goodwill, in addition to the value of the real property.
Absentee Owners
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.
Property Management
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.
Community Association Management (CAM)
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.
Appraising
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.
Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA)
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.
Uniform Standards of Professional Appraisal Practice (USPAP)
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.
