Chapter 2 - Real Estate Business

Question 1

Real Estate Broker

Answer 1

person or organization acting as the agent for others negotiating the purchase and sale of real property for a fee (i.e., commission)

Question 2

Real Estate Salesperson

Answer 2

individual, working under the supervision of a sponsoring broker, who is licensed to negotiate and arrange real estate sales

Question 3

Appraiser

Answer 3

assess and report their opinion on the value of a property using experience judgment, facts and the use of formal appraisal processes.

Question 4

Real Estate Attorney

Answer 4

attorney who reviews contracts on behalf of their client, verifies that clear title is being delivered, assists in the closing process, and even negotiates on behalf of their client.

Question 5

Property Manager

Answer 5

manages properties for an owner acting as the owner’s agent (takes care of property for owner, screens prospective renters, coordinates repairs, handles maintenance and tenant concerns, and even evicts when necessary)

Question 6

Home Inspector

Answer 6

Qualified professional trained and experienced in evaluating buildings and their components (Come into play when a property has been sold and before the transaction is completed to examine it (up to 1,600 items) for the buyer. When presented the final report, buyers can negotiate repairs or adjustments, depending on the terms of the contract. If the parties can’t agree, the contract may be cancelled.)

Question 7

Mortgage Brokers & Bankers

Answer 7

Provide financing for real estate transactions in non-cash deals–arranges loan between lender and borrower for a fee. A mortgage banker is a direct lender, working for 1 institution, whereas a mortgage broker can work with several different lending companies.

Question 8

Architect

Answer 8

Designs and plans buildings with construction documents and specifications and works with contractors to construct them.

Question 9

General Contractor

Answer 9

Contractor whose principal business is in connection with any structure being built, requiring in its construction the use of at least 2 unrelated building trades or crafts–coordinates all aspects of the construction, using their industry knowledge to bring together the many different aspects so the process goes well. They hire and schedule subcontractors, such as plumbers, electricians, roofers, framers, and other. The contractor oversees the job and is a constant single presence with whom the property owner works.

Question 10

Residential Properties

Answer 10

includes single family and multi-family buildings, examples includes private single family home, duplex, fourplex, condo, or townhome

Question 11

Commercial Properties

Answer 11

property used for profit-driven business purposes, such as retail stores, restaurants, 5+ unit multi-family residential building (apartment), offices, shopping centers, hotels, nursing homes, and mobile home parks.

Question 12

Mixed Use Properties

Answer 12

Combination of commercial and residential real estate, for example: storefronts on the ground floor and residential spaces above.

Question 13

Industrial Properties

Answer 13

Cover a wide variety of applications including factories or warehouses for distribution, fabrication, or research and development.

Question 14

Agricultural Properties

Answer 14

farms or ranches, generally intended to be income-producing but can be for personal use as well

Question 15

Special Purpose Properties

Answer 15

special use properties including schools, churches, & government buildings. Property is characterized by the specific reason it was constructed and is not easily converted to another application. Challenging to determine value

Question 16

Vacant Land

Answer 16

land that has no improvements added to it. Sometimes called raw land, this property is usually purchased with future use in mind. Therefore, zoning is an important consideration.

Question 17

Demand

Answer 17

supply of willing and able buyers in the marketplace or lack thereof

Question 18

Supply

Answer 18

The amount of certain goods or services that is available in the market

Question 19

Scarcity

Answer 19

lack of supply

Question 20

When supply is plentiful, demand is low, so pricing ___, _______ demand

Answer 20

When supply is plentiful, demand is low, so pricing drops, increasing demand

Question 21

When supply is limited and demand is high, prices ____, _____ some potential buyers and ____ demand

Answer 21

When supply is limited and demand is high, prices increases, eliminating some potential buyers and reducing demand

Question 22

What are some factors that affect supply?

Answer 22

• -Supply shortages (FOMO)
• -Construction costs
• -Local and State Governments (zoning restrictions)

Question 23

What are some factors that affect demand?

Answer 23

• -Population
• -Demographics
• -Economy of an area (i.e., employment & wage levels)
• -Interest Rates

Question 24

Recovery Phase of the Economy

Answer 24

phase when there is low demand, which is indicated by declining vacancies in properties, and no new construction is happening. It’s a lull where the demand is balanced with the available supply.

Question 25

Expansion Phase of the Economy

Answer 25

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

Question 26

Hyper Supply Phase of the Economy

Answer 26

Phase where there is new construction but vacancies are increasing, indicating there might be an oversupply developing.

Question 27

Recession Phase of the Economy

Answer 27

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

Question 28

Main Market Indicators

Answer 28

• -Vacancy Rate - rate that homes are for sale or sit empty
• -Combination of price and sales info - knowing how much homes are selling for and how many homes are being sold and rented
• -Building Permits - people build more when the market is strong

Question 29

National Association of Realtors (NAR)

Answer 29

It’s the largest real estate trade organization in the U.S., and it’s represented at national, state, and local levels. There’s an internal enforcement process and code of ethics for members, but joining isn’t mandatory.

Question 30

Chapter 452

Answer 30

“Real Estate Practice” - contains all state licensing laws governing the real estate business. Laws are enacted and can be modified by state legislature.

Question 31

The administrative code

Answer 31

series of chapters with rules further detailing the application of the laws

Question 32

Real Estate Examining Board (REEB)

Answer 32

“The Board”, operating under the Department of Safety and Professional Service, oversees professional conduct in the industry, updates the rules governing the real estate profession, and advises the legislature on proposed statute changes. - “the intent of the board in adopting the rules in [this] chapter [24] is to establish minimum standards of conduct for real estate licensees and to define that conduct which may result in board discipline.” Administrative, not legislative in nature–serves in an advisory capacity to lawmakers who create legislation such as Chapter 452; does not write and enact these regulations.

• -Grants licenses to firms and individuals to work as both brokers & sales professionals
• -Oversees renewals
• -Approves the standard forms used for real estate transactions
• -Determines educational requirements of real estate courses

Question 33

Supervising Broker

Answer 33

Licensed broker(s) at a firm that oversees day-to-day transaction management and ensure matters are done in accordance with Chapter 452 and other pertinent regulations. Broker is ultimately responsible for your actions.

• -provides each license holder with a written documents that details their responsibilities
• -alerts a license holder where to find published rules of ethical conduct and responsibilities
• -check in on each license holder’s status associated with the firm at renewal time, which falls on 12/14 on even-numbered years
• -responsible for transaction record keeping
• -review all trust account records relating to a transaction
• -ensure a written disclosure statement to a customer or client has been provided by a licensed associate
• -confirm that licensed real estate professional uses the standard forms that have been approved by the board and that forms are filled out correctly, with no critical omissions
• -provides oversight and mentorship by pointing out errors to licensed salespeople and educating them how to fill out forms correctly in future

Question 34

Licensed Professional must have fair knowledge of the following: (4)

Answer 34

1. English language
2. Real estate essentials, such as deeds, mortgages, land contracts of sale, leases, bills of sale, etc.
3. Obligations btwn principal and agent, as well as working knowledge of Chapter 452 of WI statutes
4. Passing grade on real estate licensing test after completing 72 hours of coursework or 10 academic credits

Question 35

What does a broker’s license require?

Answer 35

1. Salesperson’s license, practicing under a licensed broker for a minimum of 2 years
2. 72 hours on topic of business management, knowledge, and experience with real estate rules, regulations, and law OR 20 academic credits
3. 40 points of experience (i.e., 5 points for every residential transaction closed, 10 points for every commercial transaction closed, 1/2 point earned for each month of a property management contract, & 1 point for every timeshare transaction closed)

Question 36

What is the license renewal process?

Answer 36

license is valid for 2 years–must be renewed 12/15 of each even-numbered year after paying a fee and completing 18-hours of continuing education (+ a passing grade) - keep 5 years of records on your CE

Question 37

What are the application requirements for your real estate license?

Answer 37

1. Must take coursework within 5 years of applying for license
2. Passing exam grade cannot be more than a year old
3. Must provide transparent details about your criminal history

Question 38

In which states does WI engage in reciprocity with licensed professionals?

Answer 38

Indiana and Illinois - non-residents may apply for WI licenses if they meet minimum educational and experience requirements

Question 39

Before you can perform any real estate services, you must notify the Board that your license will be associated with a specific firm by:

Answer 39

1. Providing notice when you apply for your license that it will be associated with a specific firm
2. File a standard form that states your license will be transferred to a firm (usually requires a fee)
   * *Can only take on work for 1 firm at a time**

Question 40

How do you transfer your license to a different firm?

Answer 40

You must file a notice with the board within a MAXIMUM of 10 days. In the event that a firm decides to terminate its relationship with you, the company also has up to 10 days to file notice using a standard form. Must be filed in writing.

Question 41

Can a licensed broker work independently?

Answer 41

Yes, so long as the Board is notified in writing that you plan to engage in this practice. If you plan to work independently and also under a brokerage firm, you also must get written approval from your firm with which your license is associated. Independent brokers cannot engage in conflicts of interest and are responsible for supervising their own licenses, other licensed parties they hire, and any unlicensed personal assistants.

Question 42

What should you do if your personal information (i.e., name or address) changes?

Answer 42

You have up to 30 days to make name and address changes on your real estate license

Question 43

What should you do if you decide to operate under a trade name?

Answer 43

required to give written notice–it’s not uncommon for real estate professionals to form a company and brand the business name

Question 44

What if your business type changes?

Answer 44

You will need to file a new license application that indicates the new business type and other details. You cannot operate until the new license has been issued.

Question 45

What happens when you work with an out-of-state broker?

Answer 45

• -Out-of-state broker must enter into a cooperative agreement with an in-state firm
• -Out-of-state salesperson must also be a party to a cooperative agreement and work w/ a WI supervising broker
• -Both out-of-state brokers and salespeople must provide proof that they are licensed in their home state and are in good standing
• -Cooperative agreement must outline the details and limitations of out-of-state parties
• -Board-approved standard form must be filed for each property or transaction
• -Failure to follow the WI regulations can result in up to a $5,000 fine or 1% of the transaction’s value.

Question 46

What penalties can be imposed through investigations?

Answer 46

reprimands, placing limits on real estate license, or revocation (lasting at least 5 years)

Question 47

If your license is revoked, how do you reapply for it?

Answer 47

after the revocation period, reapplying for a license after that period usually requires additional education and training

Question 48

If found guilty of discrimination, an automatic __ day suspension comes with a 1st offense. A 2nd incident triggers a license revocation.

Answer 48

If found guilty of discrimination, an automatic 90 day suspension comes with a 1st offense. A 2nd incident triggers a license revocation.

Question 49

Unlicensed Assistant

Answer 49

• -Must sign an agreement with the real estate firm that outlines their duties, responsibilities, supervision, and compensation they will receive before starting a position
• -Can answer phones, take messages, run errands, file paperwork, run virus scans on computers, create flyers, set up & pick up signage, and help with an open house only if they are directly supervised by a licensed real estate professional
• -Cannot perform any duties that requires a license (i.e., fielding offers, negotiating on behalf of clients, signing legal documents, distribute funds, or answering specific questions about listings)
• -The REEB could review violations by firms that allow unlicensed assistants to overstep.