Definitions

Question 1

Broker Associate

Answer 1

A person who is qualified to be issued a license as a broker but who operates as a sales associate in the employ of another.

Question 2

Commission

Answer 2

The Florida Real Estate commission

Question 3

Customer

Answer 3

A member of public who is or may be a buyer or seller of real property and may or may not be represented by a real estate licensee in an authorized brokerage relationship

Question 4

Department

Answer 4

Department of Business
And
Professional Regulation

Question 5

Fiduciary

Answer 5

A broker in a relationship of trust and confidence between that broker as agent and the seller or buyer as principal. The duties of the broker as a fiduciary are loyalty, confidentiality, obedience, full disclosure, and accounting and the duty to use skill care and diligence.

Question 6

Involuntarily Inactive Status

Answer 6

The licensure status that results when a license is not renewed at the end of the license period prescribed by the Department

Question 7

Principal

Answer 7

The part with whom a real estate licensee has entered into a single agent relationship

Question 8

Real Property or Real Estate

Answer 8

means any interest or estate in land and any interest in business enterprises or business opportunities, including any assignment, leasehold, subleasehold, or mineral right; however, the term does not include any cemetery lot or right of burial in any cemetery; nor does the term include the renting of a mobile home lot or recreational vehicle lot in a mobile home park or travel park.

Question 9

Sales associate

Answer 9

means a person who performs any act specified in the definition of “broker,” but who performs such act under the direction, control, or management of another person. A sales asso- ciate renders a professional service and is a professional within the meaning of s. 95.11(4)(a).

Question 10

Single Agent

Answer 10

means a broker who represents, as a fiduciary, either the buyer or seller but not both in the same transaction.

Question 11

“Transaction broker”

Answer 11

means a broker who provides limited representation to a buyer, a seller, or
both, in a real estate transaction, but does not represent either in a fiduciary capacity or as a single
agent. In a transaction broker relationship, a buyer or seller is not responsible for the acts of a licensee. Additionally, the parties to a real estate transaction are giving up their rights to the undivided
loyalty of a licensee. This aspect of limited representation allows a licensee to facilitate a real estate
transaction by assisting both the buyer and the seller, but a licensee will not work to represent one
party to the detriment of the other party when acting as a transaction broker to both parties.

Question 12

“Voluntarily inactive status”

Answer 12

means the licensure status that results when a licensee has applied
to the department to be placed on inactive status and has paid the fee prescribed by rule.

Question 13

Creation and improvement.

Answer 13

Creating real properties from raw land involves
capital formation, financing, construction contracting, and regulatory approvals.
The key parties involved in this aspect of the business are generally the
developer, the landowner, and the mortgage lender. Also involved are market
analysts, architects, engineers, space planners, interior designers, and
construction subcontractors.Experts who manage the legal aspects of the development project include real
estate attorneys, title companies, surveyors, property insurance companies, and
government regulatory officials. The brokerage community, with the assistance
of professional appraisers, usually handles the ownership and leasing
transactions that occur over the many phases of development.

Question 14

Management and maintenance.

Answer 14

All real estate, whether raw land or improved
property, must be managed and maintained. The two principal types of
managers are property managers and asset managers. Property managers and
their staff oversee specific properties on behalf of the owners, making sure the
condition of the property and its financial performance meet specific standards.
Asset managers oversee groups of properties, or portfolios. Their role is to

achieve the investment objectives of the owners as opposed to managing day-
to-day operations.

Maintenance personnel include engineers, systems technicians, janitorial staff,
and other employees needed to maintain the property’s condition.

Question 15

Demolition.

Answer 15

_______experts in conjunction with excavation and debris
removal experts serve to remove properties that are no longer economically
viable from the market.

Question 16

Investment ownership.

Answer 16

A specialized niche in the real estate business is the
real estate investor who risks capital in order to buy, hold, and sell real
properties. In contrast to property owners whose primary interest is in some
other business, the real estate investor focuses on identifying and exploiting real
estate investment opportunities for profit. The real estate investor provides
capital and liquidity to the real estate market.

Question 17

Regulation.

Answer 17

All real estate is to some degree regulated by government. The
principal areas of regulation are usage, taxation, and housing administration.
Professional regulatory functions include public planners, zoning
administrators, building inspectors, assessors, and administrators of specific
federal statutes such as Federal Fair Housing Laws.

Question 18

Transfer.

Answer 18

Rights and interests in real estate can be bought, sold, assigned,
leased, exchanged, inherited, or otherwise transferred from one owner to
another. Real estate brokers and the brokers’ salespeople are generally centrally
involved in such transfers. Other professional participants are mortgage brokers,
mortgage bankers, appraisers, insurers, and title companies.

Question 19

Residential property

Answer 19

refers to property that is owned and used for habitation.
Such properties may be further classified in terms of how many families they are
designed to house, whether they are attached to other units or detached, and so
forth.

Question 20

Commercial property

Answer 20

generally refers to retail and office properties, but may
also include industrial real estate. The term “commercial” relates to the fact that
the property can potentially generate income from a business’s usage.

Question 21

Investment property

Answer 21

refers to any property that is held by its owners for
investment purposes. All classifications of property may be investment
properties. Generally, however, the term does not refer to owner-occupied
residences, even though such properties constitute an investment. Apartments,
condominiums, cooperatives, and single-family homes may be considered as
investment property if non-occupants own the property for investment purposes.
These properties are also referred to as residential income properties.

Question 22

Classifications of Real Estate by Use

Answer 22

residential industrial
residential income farm and ranch
office special purpose
retail land

Question 23

Primary real estate brokerage activities involve performance of one or more of
the following tasks:

Answer 23

 locating a buyer for a seller
 locating a seller for a buyer
 locating a tenant for a landlord
 locating a landlord for a tenant

Question 24

Property type;(brokers and agents: Forms of specialization (1 of 5)); Since different properties have different features and potential
buyers, brokers commonly choose to specialize in a property type. Thus there
are:

Answer 24

 residential agents
 commercial agents (office, retail)
 industrial agents
 land agents

Question 25

Geographical area; (brokers and agents: Forms of specialization (2 of 5))

Answer 25

Brokers and agents must maintain current, accurate data
on properties. It is not possible to keep track of every property in larger
markets. Therefore, one must create an area of geographical specialization.
One’s area may be defined by natural barriers; by streets and highways; or by a
certain set of subdivisions.

Question 26

Type of transaction;(brokers and agents: Forms of specialization (3 of 5));

Answer 26

The principal types of transaction are sales, leases
and subleases, exchanges, and options.Each form of transaction involves particular legal documents and considerations.
As a result, many agents, particularly commercial agents, specialize in a type of
transaction. For example, in an urban commercial property market, agents
generally specialize in either leases or sales.

Question 27

Type of client.;(brokers and agents: Forms of specialization (4 of 5));

Answer 27

Brokers increasingly represent buyers and tenants as well as
sellers and landlords. Since conflicts of interest may be involved, many brokers
restrict their business to representing either buyers and tenants or sellers and
landlords exclusively.
Some brokers and agents also specialize according to the type of business
their clients are in or their motivations for the transaction. Thus one finds
brokers who focus exclusively on hospitals, or fast food chains, or executive
relocations.

Question 28

Type of relationship.;(brokers and agents: Forms of specialization (5 of 5));

Answer 28

In recent years, many brokers have specialized in
providing advisory services to clients instead of the traditional transaction-based,
commission-compensated services. In the advisory relationship, the broker works
on identified real estate tasks or projects in exchange for a fee, salary, or retainer.
The fee advisor may or may not focus on completing a transaction.

Question 29

Forms of
specialization:
In the modern brokerage environment, brokers and agents specialize along the
following lines:

Answer 29

 property type
 geographical area
 type of transaction
 type of client
 type of relationship

One’s choice of specialization is influenced by competitive factors in the market
and by perceived opportunities.

Question 30

Skills and Knowledge in Real Estate Brokerage

Answer 30

Professionals in the brokerage business must have a broad range of real estate
knowledge and skills. Agents must develop a thorough awareness of their local
market and the properties within it. In addition, agents must develop a
proficiency with the economics of real estate: prices, financing, closing costs, and
so forth. Equally important are “people” skills: communicating with clients and
responding to their needs.

Question 31

Knowledge in Real Estate Brokerage:

Answer 31

local market conditions
local properties
real estate principles
real estate law
value estimation
real estate financing
investment principles
license laws
related math calculations
closing procedures

Question 32

Skills in Real Estate Brokerage

Answer 32

financial qualification
market analysis
marketing practices
ethical practices
liability management
data management
selling
time management
communication
writing
basic computer operation

Question 33

2 types of REGULATION AND LICENSING

Answer 33

Regulation of
business practices
and
Real estate
license laws

Question 34

Regulation of

business practices

Answer 34

The real estate industry is regulated by every level of government. Federal and
state statutes, as well as a large body of court decisions, generally referred to as
common law, circumscribe how real estate can be developed, managed, and
transferred.
Among the laws most relevant to agents and brokers are those relating to:

 agency
 contracts
 disclosure
 environmental impact
 fair housing

In addition to federal, state, and local laws and regulations, the real estate
industry is, to a degree, self-regulated by the codes of ethical conduct
propounded by the industry’s many trade organizations. For example, the
National Association of Realtors® Code of Ethics not only reflects the law but
sets an even higher standard of performance for member brokers and agents.
It is imperative for new practitioners to understand and abide by the many laws
which regulate the industry.

Question 35

Real estate

license laws

Answer 35

State Real Estate ______ ___ comprise the primary body of laws and regulations
governing real estate brokerage practice. License laws in each state specify who
must obtain a license to practice real estate and set the requirements for
obtaining and maintaining the license. License laws also define critical aspects
of real estate brokerage, including
 procedures for handling escrow deposits and fees
 procedures for advertising
 guidelines for dealing with clients and customers
State license laws are administered in each state by a real estate commission.
The commission is charged with administering and enforcing license laws. In
addition, the commission may pass regulations that further refine or clarify state
statutes.

Question 36

The general thrust of state real estate legislation/ State License Law is to:

Answer 36

 establish personal, educational, and professional requirements for
obtaining a license
 establish statutory guidelines of professional conduct and
continuing education to maintain a license
 establish a regulatory entity to administer and enforce licensing
 authorize the regulatory body to create regulations and procedures
that will enable it to discharge its legal responsibilities

Question 37

Services requiring

licensure

Answer 37

Generally, any person who performs a real estate service on behalf of another
party for consideration must be duly licensed under state law. For example, a
person who receives payment for helping a buyer locate a house must be
licensed. However, an investor searching for a property to buy does not need to
be licensed because the investor is not acting on behalf of another party.
Consideration includes money compensation, exchange of free services, or any
other valuable good or service that a person expects to be paid.

Question 38

The following services generally fall into the license-required category:

Answer 38

 brokering of sale, lease and exchange transactions
 managing property, including rental activities
 appraising
 counseling
 syndicating
 auctioning

Question 39

"Exemptions". Real estate license laws commonly exempt the following from
licensing requirements (do not need license):

Answer 39

 employees of a property owner who are not paid on a per-
transaction basis, such as an onsite rental agent in an apartment

complex
 employees of transient lodging facilities such as motels and
hotels
 managers of residential condominiums or cooperatives
 dealers in cemetery lots
 attorneys performing regular legal duties for a principal
 persons acting in a court-appointed capacity

Question 40

Types of license

Answer 40

State licensing agencies issue two principal types of license: a broker’s license
and a salesperson’s license. Within these types are variations based on the active
or inactive status of the license and on the business identity and professional
capacity of the licensee.

Question 41

Broker’s license

Answer 41

individual: active or inactive
corporation
limited liability company
partnership
non-resident

Question 42

Salesperson’s license

Answer 42

individual: active or inactive

broker-salesperson: active or inactive

Question 43

Broker’s License Defined:

Answer 43

An active broker’s license authorizes a licensee to represent
clients by performing real estate services. A broker whose license has expired or
is inactive may not perform brokerage services. Broker’s licenses are typically
valid for a one- or two-year period, after which they must be renewed. Inactive
status typically occurs at the option of a licensee who wants to leave the real
estate business temporarily. A broker who is acting under another name must
register the name as a fictitious business identity.
The most common brokerage identity is the sole proprietorship. Other business
entities, however, may broker real estate. These include corporations, general
partnerships, and limited partnerships. In order for these entities to perform real
estate services, certain individuals within the organization generally must
maintain an active broker’s license.
A broker who does business at locations other than the principal office requires a
branch office license. While the branch office must be licensed, state laws vary as
to whether the branch manager requires a broker’s license.
A broker’s license authorizes a broker to perform services anywhere within the
state’s borders. This allows a broker to arrange the sale of an out-of-state property
as long as the services are conducted within the state. It also allows a broker from
one state to co-broker a transaction with a broker in another state, provided
neither broker performs services in the other’s state. A non-resident license
empowers a broker to practice in another state. This type of license is commonly
issued in areas near state lines where residents of the two states are frequently
principals in transactions.
In the absence of a non-resident license, a broker’s license from one state usually
does not confer the authority to operate in another state since there is no
reciprocity in licensing between states. A broker who holds a Virginia real estate
license has no authority to operate in Wyoming. However, a licensed broker
desiring a license in another state may be excused from some of the licensing
requirements that an unlicensed applicant has to meet.

Question 44

Salesperson’s license defined

Answer 44

A salesperson may hold an active or inactive license,
depending on whether the agent is currently employed and performing services.
As in the case of a broker’s license, a salesperson who wishes to leave the
business temporarily can voluntarily de-activate the license.

350 Principles of Real Estate Practice

A broker-salesperson’s license is a salesperson’s license held by a duly licensed
broker who prefers to act as a salesperson on behalf of an employing broker
instead of performing services as a broker. Since a salesperson can only act in
one capacity – as agent of an employing broker – an individual may not be an
active broker while holding an active broker-salesperson license.

Question 45

Voided license.

Answer 45

Licensees may not practice real estate with a voided license. The
three causes for voiding of a license are:
 expiration
 suspension
 revocation
In addition, it is important to note that if an employing broker’s license expires, is
suspended, or is revoked, then the licenses of all of the broker’s salespeople are
likewise voided.

Question 46

Licensing
requirements
and procedures (8 of them)

Answer 46

To obtain a real estate license, an applicant must fulfill certain requirements.
While license requirements vary from state to state, they commonly focus on
personal background, education, real estate experience, and a licensing
examination.

Question 47

Licensing
requirements
and procedures (1 of 8):Personal requirements.

Answer 47

To qualify for a broker’s or salesperson’s license, an
applicant must be of legal age and mentally competent. In addition, an applicant
may be required to have a high school diploma or its equivalent.

Question 48

Licensing
requirements
and procedures (2 of 8):Moral character.

Answer 48

The application process in most states also evaluates an
applicant’s character and reputation in terms of honesty, trustworthiness, and
possible criminal record. Direct questioning, reference checking, and
fingerprinting are part of the process.

Question 49

Licensing
requirements
and procedures (3 of 8):Educational prerequisites.

Answer 49

Most states now require successful completion of a
certain number of hours of classroom or self-study instruction for licensing.
Other states may allow for testing or conditional licensure provided that the
licensee or licensee-candidate has completed portions of the requirement, or
commits to completion within a certain time-frame following issuance of the
license.
For salespeople, the pre-license education requirement may range from 24-180
contact hours of instruction. In most cases, an applicant must first enroll in a
number of required courses and then a number of elective courses to complete the
hour requirement. In certain states, prior college courses may be counted toward
the education requirement.
Educational prerequisites for a broker’s license usually consist of additional
required real estate courses and other advanced courses, including college
business courses. Whenever a real estate course is required, a student must
demonstrate successful completion by passing a course examination.

Question 50

Licensing
requirements
and procedures (4 of 8):Required brokerage experience.

Answer 50

Most states require an applicant for a broker’s
license to have experience as an actively licensed salesperson within a certain
period preceding the date of the application. For example, an applicant may need

Chapter 22: Real Estate Licensing and Regulation 351
to have completed one year of service for a broker within the previous four years
prior to the application.

Question 51

Licensing
requirements
and procedures (5 of 8):Agency affiliation.

Answer 51

Generally, an applicant for a salesperson’s license does not
need to have a commitment from an employing broker to obtain a license. In the
absence of an employer, the state will issue an inactive license which can be
activated when the licensee is hired. Similarly, a broker may obtain an inactive
license without any pre-existing commitment to begin practice immediately.

Question 52

Licensing
requirements
and procedures (6 of 8):Application.

Answer 52

All aspects of the license application, including background data,
references, prior experience in real estate, fingerprinting, and required fees must
be complete for an application to be processed. An application is usually
completed and processed before an applicant takes the state license examination.

Question 53

Licensing
requirements
and procedures (7 of 8):The state license examination.

Answer 53

All states require license applicants to pass a
comprehensive license examination. Generally, the examination consists of
multiple-choice questions. If an applicant passes the exam, the state issues a
broker’s or salesperson’s license, provided all other licensing requirements are met.

Question 54

Licensing
requirements
and procedures (8 of 8):Continuing education.

Answer 54

Most states now require licensees to complete continuing
education courses in order to renew a license. Failure to complete continuing
education requirements can cause a licensee to lose the license to practice real
estate.

Question 55

The Real Estate

Commission

Answer 55

In addition to establishing real estate license requirements, state license laws
provide for the establishment of a real estate regulatory entity to administer and
enforce licensing legislation. This entity is most often known as the state’s real

estate commission. In some states, it is a real estate department or similarly-
named entity within the state’s department of license regulation.

Question 56

A state real estate commission has the authority to:

Answer 56

 oversee the licensing process
 administer all aspects of the license laws
 receive and deliberate on consumer complaints
 handle problems between licensees
To enable it to discharge its responsibilities, a state empowers its real estate
commission to institute binding regulations for licensees.

Question 57

The Real Estate

Commission: Structure.

Answer 57

Most real estate commissions are comprised of a group of commissioners appointed by the executive branch of state government, commonly
the governor. Commissioners serve a term of office which may be renewable, depending on state law. A real estate commission usually employs a support staff
to manage the day-to-day affairs of the agency. It is common for the support staff
to be headed by a salaried executive director.

Question 58

The Real Estate

Commission:Authority.

Answer 58

A real estate commission’s authority is generally

 regulatory
 judicial
 administrative

Regulatory powers enable the agency to pass specific regulations and rules to support the administration of the license law. Judicial powers enable it to conduct
hearings and investigations into the activities of licensees and to rule on license suspensions or revocations. Administrative powers enable it to establish the staff organization, records, and facilities to manage the licensing process and the
licensees themselves.

Question 59

The Real Estate

Commission: Education and research foundation.

Answer 59

In addition to administering the licensing
process and the conduct of licensees, most real estate commissions establish and maintain an education and research foundation. The foundation serves the real
estate industry and the public by carrying out various real estate research projects.

Question 60

Regulation focus:License status.

Answer 60

As primary tasks, a real estate commission manages the initial licensing and then the maintenance of license status of practitioners. Managing the status of licenses entails establishing rules and procedures for changes of
status: activation, deactivation, renewal, re-issue, suspension, revocation. Among other things, the commission validates education certificates, sets rules forchanging employers, and keeps track of licensee’s address changes.