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Real Estate Sales Person > Chapter One-The Real Estate Business > Flashcards

Chapter One-The Real Estate Business Flashcards

1
Q

What is the difference between a property manager and a rental agent?

A

A property manager handles, leasing, advertising, collecting rent, maintenance.
A rental agent finds tenants and collects a fee.

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2
Q

What is a BPO and how can a sales associate be compensated for preparing one?

A

A broker price opinion is a written opinion of the value of real property. It does not have to follow the guidelines set by USPAP.
A Sales associate is compensated by his broker. As the compensation for all transactions is paid to the broker.

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3
Q

Understand the notification requirements for a licensee who is found guilty of a crime

A

Must notify the FREC within 30 days of the act, regardless of the outcome of the situation, or where is took place.

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4
Q

Know the criminal convictions disclosure requirements for a license who is found guilty of a crime

A

Must disclose felonies, traffic violations, conviction of a crime, plea a guilty, adjudication, or lack thereof, and nolo contendere

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5
Q

Name the sales associates qualifications for licensure

A

18 years and older, social security number, high school diploma or GED

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6
Q

Understand how a licensee may earn continuing education for attendance at a FREC meeting

A

May attend a FREC meeting and count this for 3 hours of classroom time for continuing education

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7
Q

Be prepared to identify individuals who are exempt from licensure

A

Property owners/developers, salaried employees of corporations, trust, partnerships, rental leaser not paid commission, property managers.

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8
Q

Understand the FREC’s three general areas of responsibility.

A

Executive-regulate and enforce law given by legislature.
Quasi-legislative-enact and revise administrative rules
Quasi-judidical-deny, grant, revoke, suspend, applications, and penalties.

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9
Q

What is the benefit given to a spouse of an active duty member of the military assigned to Florida?

A

As long as the spouse holds a valid real estate license in another state, they may be granted a temporary license. It will expire in 6 months and cannot be renewed.

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10
Q

Know what is required to reactivate and involuntary inactive license.

A

12 months or less of being in/in you must take a 14hr FREC course.
More than 12 months you must take a 28hr FREC education course.

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11
Q

Know the meaning of voluntary relinquishment.

A

Voluntarily canceling the license, provided there is no current investigation.

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12
Q

When does a broker need to hold multiple licenses?

A

When the broker works for different/multiple different companies or brokerages.

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13
Q

Understand the characteristics of the transaction broker relationship.

A

Limited representation for both parties, the buyer and seller, but doesn’t represent either in a fiduciary capacity. Has limited confidentiality to motivation, pricing, and terms.

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14
Q

Know what must be disclosed as material fact.

A

Must disclose all know facts that affect the value of the residential real property and are not readily observable to the buyer. Such as cracks in the tile under the carpet caused by the foundation settling. May not disclose information about the last occupants health or if there was a death in the house.

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15
Q

What types of offers and counteroffers must be presented in a timely manner?

A

All! All offers and counteroffers must be presented in a timely manner.

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16
Q

Understand the authorized relationships in one brokerage firm in a single transaction.

A

Transaction broker-represents both buyer and seller. no fiduciary relationship. works with customers.
No brokerage relationship-does not represent the buyer or seller. Simply a facilitator in the transaction. No fiduciary. Customer.
Single Agent- represents only one person in the transaction either the buyer or seller. Cannot represent another party in the same transaction as a single agent or a transaction agent. Only a no brokerage relationship.

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17
Q

Understand how a broker would reopen a branch office during the same license period.

A

Registrations of office locations may not be transferable. You must reregister the new office and pay the fee.

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18
Q

What must a sales associate include in advertising and on promotional materials?

A

Name of brokerage, licensee status, and if they include personal name but be at least the last name registered with the DBPR. Phone number too?

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19
Q

Know the telemarketing rules regarding the National Do Not Call Registry

A

May call to solicit in response to a “For Sale” Sign. May not solicit to a FSBO sign. May only call a FSBO if they have an actual buyer interested in the property. May contact individuals that have had an established business relationship with them in the last 18 months after the transaction concluded. Sales associates may contact a person for up to three months after a business inquiry or application (open house or FSBO seller who requested info)

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20
Q

Recognize the procedure that must be followed when placing earnest money with a title company or attorney.

A

The name of the title company or attorney must be indicated in the sale contract.

No later than 10 business days later, the broker must send a written request of verification of the receipt of the deposit. If the deposit is held by a title company or attorney nominated by the seller or sellers agent the verification is waived.

No alter than 10 business days later than the day the broker made the request, the broker must provide the seller with a copy of the written verification. If the title company or attorney has not provided it, this information must be provided to the seller within ten days.

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21
Q

Know how a tenant may be compensated for a referring another tenant to his apartment complex

A

A tenant may be paid a referral fee of no larger than 50 dollars by a property management company or the owner of an apartment complex.

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22
Q

Understand real estate brokerage limited partnerships.

A

Limited partnerships is a written instrument filed with the Florida Dept. of State. Must be one or more general partners to qualify. Must make an investment of cash or property. Not liable to creditors of the partnership unless the limited partners names appear in the partnership name.

Must register with the DBPR under limited partnership name. If dealing with public on real estate services, must have license as an active broker. Register with all other general partners for identification. Sales assoc, and brokers assoc, may not be general partners but may be limited partners with an active broker guiding them.

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23
Q

Which business entities may NOT register as a real estate brokerages?

A

Joint Ventures, Sole corporations, Business Trusts, Cooperatives Associations, Unincorporated associations

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24
Q

Define Legally Sufficient

A

A complaint is legally sufficient if it contains facts indicating the violation of

  1. florida statute
  2. any existing legally enacted DBPR rule
  3. any existing legally enacted FREC rule
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25
Q

Following a formal hearing, who prepares and submits a recommended order to the DBPR?

A

An administrative law judge.

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26
Q

Understand the procedure for a stay of enforcement.

A

Licensee has 30 days to file an appeal with both DBPR and the appropriate district court. Then may request a stay of enforcement. The district court with then issue a writ of supersedeas to allow the licensee to continue practice until the case of the appeal can be heard.

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27
Q

How does a licensee object or appeal a citation issued in error?

A

Licensee has 30 days to object to a citation in a written manner. If they do not pay the fine in a timely manner, the FREC will file an administrative complaint.

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28
Q

What is the penalty for falsifying a DBPR license application.

A

Falsifying an application is a third degree felony.

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29
Q

What may be awarded from the Real Estate Recover Fund to a broker who has complied with an Escrow Disbursement Order.

A

The Real Estate Recovery Fund may award up to 50,000 to a broker to pay damages as a result of legal actions taken by the buyer or seller in the transaction. He must notify the FREC of the court case and diligently defend his actions. No punitive damages may be recovered.

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30
Q

Which federal law prohibits discrimination based on race in all real property transactions.

A

Civil Rights Act of 1866

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31
Q

Understand the requirement to display the Fair Housing poster.

A

The poster must be displayed at real estate offices and other business involved in the housing industry. Failure to prominently display the poster could be considered evidence of discrimination.

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32
Q

Name and define the activities prohibited under the Fair Housing Act.

A

Steering, redlining, and blockbusting

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33
Q

How are security deposits and advance rents handled by a real estate broker?

A

Has 3 days after the receipt of the money to deposit it into the escrow account. May have a separate account if they would like. May have up to 5000 in the account for maintaining the escrow account.

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34
Q

Know the notification requirements for a landlord regarding security deposits at the end of the lease.

A

Has 15 days to return the security deposit and any accrued interest, provided the landlord does not intend to make a claim on the security deposit.

Has 30 days to notify the tenant if the landlord intends to impose a claim on the deposit.

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35
Q

Define the terms associated with water rights.

A

Accretion - land build up from water-borne rock sand and soil

Alluvion - Deposits of new land as a result of accretion settling. Landowner entitled to new soil.

Erosion - Gradual loss of land due to natural forces.

Reliction - Gradual receding of water, revealing additional land.

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36
Q

Know the four legal tests to determine a fixture.

A

Intent of the Parties- do they intend to make it a fixture and become part of the real property.

Relationship of the Parties - The relationship between the parties such as buyer and seller or landlord and tenant. tenant required to leave all real property. Commercial counters and racks are trade fixtures.

Method or Degree of Attachment - The manner that it is attached. If removing the fixture would cause damage or not.

Adaption of the Item - If the item was custom made specifically for the property,

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37
Q

Understand life estates

A

Freehold estate ( indefinite time period ) Owns the property for the duration of their lifetime. After that the property reverts back to the grantor or the remainder men in a fee simple or concurrent ownership.

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38
Q

What type of debt may not force the sale of a homestead property

A

Homestead property is protected from forced sale for personal loans, credit card debt, and judgement liens. May be forced sale from property tax, special assessments, mortgages, vendors lien, construction lien

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39
Q

Understand the characteristics of Tenancy in Common

A

Tenancy in Common is the most frequent form of co-ownership. Tenancy in common means each person owns undivided interest in the property and may choose to do with it as they please. Upon death the interest/ownership is based to their heirs.

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40
Q

Identify estates that have the right of survivorship.

A

Joint Tenancy (specifically stated and written). Must have PITT at the same time of conveying title. Possession, Interest, Time of signing, and Title. Tenancy by the Entireties.(auto in marriage)

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41
Q

Name the documents required to be delivered to a prospective purchaser of a resale condominium.

A 
Most recent year end financial report. 
Rules of the Association 
Covernance form
Declaration
Articles of incorporation
Bylaws
FAQ
42
Q

Indefity the types of voluntary alienation.

A

Deed- real estate transaction. Sale of a contract and consummated by the delivery and acceptance of a deed.

Will- person dies in testate (with will) convey title in the will the to devisee. (receiver of real property as a gift)

43
Q

Understand the types of notice.

A

Actual notice- when direct knowledge is acquired in a transaction. (just doing it)

Constructive notice- making it public records. (telling the world)

44
Q

Know the purpose of the owners title insurance policy.

A

To protect the owner from unexpected risks such as forged deed signatures, and damages or defects in the title.

45
Q

Define the covenant of seisin.

A

A promise that the grantor owns the property and has the right to convey title. (it has been seized!)

46
Q

Differentiate the types of lease agreements.

A

Gross lease- tenant pays fixed rent
Net Lease- pays rent plus building expenses
Percentage Lease- Rent based on gross sales
Variable Lease- Rent changes, graduated at set times, tied to index
Ground Lease-long term lease on land. Tenant may erect building.

47
Q

MATH! Calculate the rent owed for a percentage lease.
A lease calls for a minimum rent of 2800 per month plus 4% of annual gross sales in excess of 500,000. What is the annual rent if the annual gross sales were at 725,500.

A

725,500-500,00=225,500
225,500x.04=9020
2800(12)+9020=42,620

48
Q

Be able to identify Superior and Junior Liens.

A

Superior- Real estate tax, which become a lien on January 1 each year. Special assessment liens. Federal estate tax lien (at time of death)

Junior- Mortgage Liens, Judgement liens, vendors liens, income tax(IRS) liens.

49
Q

Understand the directions in a metes-and-bounds description.

A

metes-distance
bounds-direction
Direction,Degrees,Second Direction, Minutes, Seconds.
In between each degree is 60 minutes.

50
Q

Be able to locate a range using the government survey system.

A

Range are vertical lines.

51
Q

Locate the sections within a township.

A

Correction and Guide Lines form check. Each Check has 24 square miles. Every six miles is another range or township lines to form townships. each township has 36 sections.

52
Q

Know the charactersistics of the lot and block method

A

used for plat mats. Each plat mat is divided into Blocks and each block is divided into smaller sections called lots.

53
Q

Understand the statue of frauds pertaining to real estate contracts.

A

Requires that contracts conveying interest in real property or contracts that are not to be performed within on year of the date created must be signed and in writing to create an enforceable contract. Contracts covered are. purchase and sale contracts, option contracts, deeds and mortgage instruments, lease agreements for more than one year. listing agreements for a term longer than one year.

54
Q

What is the effect of a counter on the original offer.

A

It kills it. The original offer is no longer valid.

55
Q

Define the remedies for a breach of contract.

A

Specific performance. If money does not cover the damages, the courts force the other party to do the specified performance.

Liquidated damages-stipulated amount of money incase a breach is made.

Rescission-cancel the contract and court orders they parties back to origin as the the contract never happened.

Compensatory damages- suing for the amount of money lose

56
Q

Understand the authority of a power of attorney

A

Written legal document allowing a person Legally able to make all decisions as though for another.

57
Q

Know the characteristics of net listing agreements.

A

When the seller agrees to sell a property for a stated acceptable minimum amount, called the seller’s net. The brokers commission is paid from the excess of the sellers net

58
Q

What are the disclosure requirements for the pre 1978 housing.

A

Lead based paint, usually on window sills on wood.

59
Q

Know the disclosure requirements for property with a mandatory homeowners associations.

A

If HOA exists that are mandatory you must disclose that, any assessments they require, and the existence of any restrictive covenants.

It also stats that the buys should not sign the contract without ready the HOA disclosure summary first
If the summary is not provided the contract becomes voidable. The buyer has three days to cancel in writing after receipt of the summary, or prior to the closing, whichever comes first. Closing voids the right to cancel.

60
Q

What si the difference between lien theory and title theory.

A

Title theory is when the mortgagee holds title to the property or a deed trustee until the debt is paid off.

Lien theory, the borrower retains title to property while the lender has a lien on the property to foreclose and recover the debt if necessary

61
Q

Know the provisions of promissory note

A

Must accompany all mortgages. Represents evidence of a legal debt. Make the borrower personally liable for the obligation. Lists the penalties. Not usually recorded.

62
Q

Name and understand the mortgage clauses

A

Prepayment Clause, Acceleration Clause, Right to Reistate, Due on Sale, Defeasance

63
Q

When would an assignment of mortgage be used.

A

When conveying title while still holding a mortgage on the property.

64
Q

Know how to amortize a loan.

A

MultiplyDivideSubtractSubtract.

Principal Balance x annual interest / 12 = first months interest

month mortgage payment-first months interest = payment on principal

Beg principal balance-payment on principal = new balance

65
Q

Define the components of ARM

A

Index-index moves up and down and this is linked with the interest. Not controlled by lender and verifiable by borrower

Margin- percentage added to the index. the margin is the lenders cost of doing business and profit. remains constant.

Calculated interest rates = index+margin

66
Q

Be able to calculate qualifing ratios for FHA loans

A

total obligations ratio (TOR; cannot exceed 43% for FHA. 41% for VA. 36% for conventional) = total monthly obligations / monthly gross income

housing expense ratio (HER; 31% for FHA) = monthly housing expenses / monthly gross income

total obligations include PITI and MIP and recurring expenses (things found on credit report, cc payments, auto payments, student loan payments, and child support payments)

housing expenses include Principal, Interest, Property Taxes and Hazard Insurance (PITI) and monthly mortgage insurance premium (MIP)

67
Q

Know the difference between FHA and VA loans

A

FHA - insures mortagaes, non conventional, do not make loans, discount points, loan limits minimum of 3.5%down to secure loan.

VA - guarantees loans(maximum), can sometimes make loans, no loan limits, funding fee(down) is 2.5. If veteran is service related disabled fee is waived, discount points,

68
Q

What are the maximum qualifying rations for conventional and non conventional loans.

A

FHA- HER=31% TOR =43%
VA TOR =41%
Conventional TOR = 36%

69
Q

Understand triggering terms under the TILA

A

bait and switch. if you said something in the advertisement, you keep it that way. % of down, number of payments, period of repayment, amount of repayment and finance charges.

70
Q

Know the disclosure requirements under RESPA

A

Disclosures at the time of loan application or within three business days.

  • HUD settlement cost booklet. (info on closing)
  • Good Faith Estimate. (estimate of closing cost)
  • Servicing disclosure statment (lenders intend to transfer loan)
71
Q

The FED uses three “tools” to carry out the monetary policy. Understand the effect of each.

A

Open market operations- when they sell, less money in circulation, inflation, higher interest rates.

Discount rate - raising interest rates to member banks. they raise interest for customers, customers stop loaning.

Reserve requirements- the funds must hold by institutions (banks) against deposit liability. (vault cash) 5:1 = 20% required to be reserved.

72
Q

Calculate the shared commissions from a sale.

A

total price x commission rate = commission total x commission % for brokerage= total commission for that brokerage x agents commission split % = total commission for that agent

73
Q

Be able to compute a developers percentage of profit.

A

MADE over PAID. find how much the person lost or gained from a sale. and divide by the amount they spent on purchasing it in the beginning

74
Q

How are the property taxes entered on the HUD 1 closing statement.

A

paid in arrears. take year property taxes and divide by 365 to get daily tax rate. x by number of days owning the property.

75
Q

Be able to calculate state doc taxes and intangibles

A 
doc stamps (deeds)
total purchase price / 100 x .7

Mortgage int. tax
Mortgage total x .002

Doc stamp (note)
mortgage value / 100 x .35

must always round up after dividing.

76
Q

Understand how to charge the intangible tax

A

charged on all new mortgages at two mills (.002) per dollar of debt

77
Q

How does the good faith deposit appear on the HUD 1 statement

A

Under credit to the buyer. because the statement is showing is due, the good faith deposit has already been made, so it is credited to the total cost.

78
Q

Understand over improvement.

A

When you have spent too much money and will not get that money back. (spent 60k on something that will only increase the value of the home by 30k)

79
Q

Define the characteristics of value

A

to have value goods must have demand, utility, scarcity, and transferability.

I gotta want it,
can use it,
hard to get it,
can sell it.

80
Q

Understand the concept of highest and best use

A

the most profitable use to which a property may be put. The use must be legally permissible (zoning). Physically possible (soil, shape, size) and Financially feasible. (income generated considering cost of improvements)

81
Q

Calculate the reproduction cost of a property.

A

all the square footing x price per square foot and add them together.

82
Q

Know the three major cases of depreciation and give examples of each.

A

Physical deterioration, Functional Obsolescence, External Obsolescence

wear and tear
don’t like how it works
don’t like whats around it

83
Q

Understand effective age and economic life.

A

Effective age is what the appraiser determined the age of the building. (condition of building or how well maintained) The economic life is the total estimated number of years that the property will contribute value.

84
Q

Be able to calculate the depreciated the value of a building.

A

Depreciated value = effective age /eco life x reproduction cost

85
Q

Understand the classifications of operating expenses and give examples of each.

A

fixed expenses = taxes, hazard insurance,
variable expenses=utilities, payroll, supplies, ect)
reserve for replacements= allowance saved to replace things you know you will have to. (roof, AC. things that wear fast)

86
Q

Know the formula to calculate the GIM

A

sale price/annual gross income = # of years to get your money back (GIM)

87
Q

Understand the risks associated with general business conditions

A

financial- ability to pay property expenses, business- degree of variance of budgeted income and actual income and expenses, purchasing power- can you buy and produce your good
interest rate-intrest can increase while your income does not

88
Q

Know the concept of positive and negative leverage.

A

Positive leverage, when you borrow funds and its benefits exceed the cost of borrowing.

Negative Leverage, when the cost of borrowing exceeds the benefits

89
Q

Name the similarities and differences in business brokerage and real estate brokerage.

A

Business brokerage usually involves assets other than real estate such as good will and personal property. (name and value, licenses, patents, copyrights)

Going on value-includes the name and reputation

Large market!
Shares of Stock
Short term liabilities.

90
Q

Know the difference between property that is IMMUNE from property taxes and property which is EXEMPT from property taxes. Provide examples

A

immune from property taxes are - government (city, state, and federal) i.e. courthouses, military facilities, municipal airports

exempt- churches and non profit organizations. subject to taxation but the owner is released from the obligation

91
Q

Know the total exemptions available on homestead property.

A

0-50k-25k
50k-75k - 25k plus amount over 50k
75k- 50k

disabled veteran 10%-99% = 5000
widow
legally blind
disabled non service - 500

92
Q

How does a homeowner benefit from the Save Our Home amendment?

A

The assessed value of a home caps and increasing value at
3%
or the percentage of change of the Consumer Price Index
whichever is less.

You can move up to 500000 in exemptions to a new home.

93
Q

Convert mills to decimals

A

.02 = 20 mills move the decimal three places to the right to convert decimal to mills

15 mills = .015 move the decimal three places to the left to convert mills to decimals.

94
Q

Be able to calculate one owners special assessment for street paving.

A

front footage x dollar per footage = total cost

total cost x percentage paid by owner = total owners special assessment / 2 = one owners special assessment tax

95
Q

Know the current useful asset life as established by the IRS.

A

27.5 years for residential property

39 years for non residential income producing property.

96
Q

Know how the IRS annual depreciation deduction is computed.

A

depreciable value (purchase price-land value) / useful asset life = annual depreciation

97
Q

Know the characteristics of the real estate market.

A

> Immobility of real estate - houses don’t move.
market is slow to respond to change in supply and demand- its time consuming, and when the balance of S and D are upset it may take years to correct
land is indestructible- land is permanent and durable. not going anywhere.
real estate is unique- no standard product, they are all different.
government controls influence the market through zoning building codes, head ordinances as well as indirect influence such as monetary policies.

98
Q

Be able to define a base of industry and a service industry.

A

base-attracts outside money tot he area, such as film making, citrus industry.

service industry-service business that serve and keep money in an area. (grocery store, barbar shop, clothing store)

99
Q

Describe the use of a buffer zone.

A

strip of land separating one zone from another. such as apartment complex, residential neighborhood, and business zone

100
Q

Understand legally nonconforming use

A

properties use was lawfully established but no longer conforms with regulations of a zone.

Real Estate Sales Person (1 decks)

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