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GETTING STARTED INREAL ESTATECHAPTER 1

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THE REAL ESTATE BUSINESS

Run your real estate business like a business.

Set specific hours for work and work those hours.

Be self motivated.

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1. Be self–motivated (Master Marketing).

2. Master the telephone.

3. Master listings.

4. Master selling.

5. Learn your business.

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THE REAL ESTATE MARKETPLACE

The real estate marketplace, where you will be an agent, will help buyers or sellers to buy or sell property.

It is the price a buyer will pay and not the price a seller desires that ultimately determines value. Prices are set by demand, this is when the buyer wants property. Thus, buyers set the market prices.

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Example:

In 1989 California lost the aerospace industry and the real estate economy went down in the cellar. Buyers and home owners lost their jobs and home owners wanted to sell but nobody wanted to buy.

At the present time house prices are inflating. But we will have another decline in value. We don’t know when, but it will happen and a few years later the appreciation cycle will begin again. This cycle keeps repeating.

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Selling a home is a people business, NOT a property business.

Who buys a HOME, the husband or the wife?

Usually the wife.

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Selling investment property is still a people business, but you are more involved with the benefits that the property can provide.

Who buys the investment property, the husband or the wife?

This could be either the husband or the wife.

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Needs verses Wants.

When you are working with prospective clients you need to determine if they have to buy, want to buy or if they are just looking.

Try to work with the clients that need to buy.

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Emotion plays a significant part in a purchase decision.

will–sell vs. must–sell

will–buy vs. must–buy

Must sellers and buyers are the best motivated.

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COMFORT ZONE

A task that a client would do that would not cause excess anxiety.

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How do you feel if he is driving on the freeway at 25 MPH?

Example:

Your friend is driving you home at 3:00 in the morning.

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How do you feel if he is driving on the freeway at 55 MPH at 3:00 AM?

How do you feel if he is driving on the freeway at 175 MPH at 3:00 AM?

Which one of the speeds would fit your comfort zone, and which one would be scary?

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When a client is in a real estate transaction he or she will face certain comfort zones.

Cost of the home. The cost of the home will determine the monthly payments and down payment.

Here are some comfort zones you should watch for:

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Financing. This is more important than cost. Can the buyer afford the monthly payments?

Example:

If the home cost $1,000,000, most people think that they could not afford the home. But if the interest rate is 3% amortized over 100 years, then the monthly payment would be $2,632 for principal and interest. Many buyers could make these payments, also no money down.

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Down payment. The buyer will usually put 20% down.

The are many programs today with less than 20%, but when using these programs the buyer will have to pay mortgage insurance. There are some assisted loan programs with 3% down or no down, and some will have the closing costs included in the down payment.

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BODY LANGUAGE

Historically the authorities claim that we have been speaking fluently for about 10,000 years. They also say that body language has been around for about 10,000,000 years.

Body language is really quite simple. Basically when we feel we are right, we are more aggressive and we move forward. When we feel something is wrong we move away from it.

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There are two people in every conversation or sales, and each one will show their body language.

The presenter (the real estate agent)

The listener (the buyer or seller).

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While you may be inclined to believe the verbal text; you choose to convey to your client the most important aspect of your presentation message through body language. It's important to realize that you need to use a second, more subtle, and arguably more influential language known as body language.

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Knowing how your posture and gestures support or contradict your words is surprisingly vital, and the same holds true for the client. Put to proper use, nonverbal communication greatly enhances the effectiveness of your presentation. Watch your client’s nonverbal communication and it will talk to you.

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People communicate non–verbally by using postures, gestures, facial expressions, mannerisms, and physical appearance (body language).

In studies of non–verbal communication, many experts agree that the impact of your communication can be broken down as follows:

Our body language: 55 percent.

How we say the words: 38 percent

What we say (actual words used): 7 percent

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As you can see, the words we use to deliver our presentation aren't nearly as important as we'd like to believe, since 93 percent of our message is delivered non–verbally.

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Common Gestures And Their Meanings In Western Society

POSITIVE BODY LANGUAGEBody Movement

GestureMeaning

Leaning closer Openness, interest, sincerity

Head nodding Agreement

Smiling Approval, happiness, agreement, satisfaction

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Body MovementGesture

Meaning

Standing straight Confident, relaxed

Relaxing of arms, relaxed posture

Openness

Maintaining good eye contact

Interest

Talking with hands Involvement, openness, excitement

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NEGATIVE BODY LANGUAGE

Body MovementGesture

Meaning

Running fingers through or twisting hair

Frustration, nervousness

Obscuring your hands (by placing them in their pockets or gripping them behind their body)

Uneasy (trying to gain control and comfort)

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REAL ESTATE LICENSES

Salesperson

4 year license

18 month license

You must take a three-unit course in real estate principles to take the real estate sales test: this will give you an 18 month license.

Complete Real Estate Practice (three units) and one other qualifying three unit course to extend your license to four years.

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Be at least 18 years of age and a U.S. citizen.

Pay necessary fees.

Pass the qualifying three hour 15 minute exam, with 70% or better (150 questions).

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BROKER

Be at least 18 years of age and a U.S. citizen.

Complete eight broker courses.

Previous real estate experience. Two years out of the last five years, or have a four-year college degree.

Pay necessary fees.

Pass the qualifying two (2) - 2½ hour exams, with a score of 75% or better (200 questions).

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BROKER COURSESMUST HAVE:

Real Estate Practice

Legal Aspects of Real Estate

Real Estate Finance

Real Estate Appraisal

Real Estate Economics or Accounting.

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OTHER BROKER COURSES

Any three of the following:

Advance Real Estate Appraisal

Advance Real Estate Finance

Business Law

Real Estate Economics.

Real Estate Office administration.

Real Estate Property Management.

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CONTINUING EDUCATION

FIRST RENEWAL

Usually applies to first-time sales people renewing their license.

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You must have 12 hours:

Fair Housing

Agency

Trust Funds

Ethics

F A T E

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CONTINUING EDUCATION –AFTER THE FIRST RENEWAL

You must take the FATE ‡ courses and others to complete 45 hours.

‡ An Agent renewing his or her license for the second or more times may take a six–hour “Survey Course” of agency, ethics, fair housing and trust funds. The total must equal 45 hours of CE.

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According to IRS (Internal Revenue Service) or FTB (Franchise Tax Board), an agent is an independent contractor.

EMPLOYEE orINDEPENDENT ONTRACTOR

According to California Real Estate law, an agent is an employee of the broker.

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EMPLOYEES

According to the Business and Professional Code (Section 10177(h)) a real estate agent is an employee of the broker.

The broker is responsible for the actions of the agent.

It is highly suggested that the broker carry worker’s compensation on each employee. Today many brokers will carry worker’s compensation insurance for their independent contractors.

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INDEPENDENT CONTRACTOR

IRS and FTB will treat a salesperson as an independent contractor, if three criteria are met:1. The salesperson is a real estate agent.

2. Reimbursement to the salesperson is based solely on sales, not on hours worked.

3. There is a written contract that states the salesperson shall be treated as an independent contractor for tax purposes.

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Designated broker must supervise sales person activities as per the law.

There is only one employing broker or agent in any one real estate establishment.

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Broker Anderson owns a real estate office. Broker Rooks and Broker Ford work in the office with 5 salespersons. Broker Anderson sells 2 homes per month. Broker Rooks reviews all the paper work and signs the paper work. Broker Ford is the top producer with the sale of 5 homes per month.

Who is the broker in the office?

Broker Rooks

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Broker Jones owns Sunshine Realty and has 5 offices. There are offices in city 1, city 2, city 3, city 4, and city 5 of the state of California and all are under the same corporate structure called “Sunshine Realty.”

How many brokers will Jones need to run all five offices?

ONE

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Broker Jones owns Sunshine Realty and has 5 offices. There is an office in city 1, city 2, city 3, city 4, and city 5 of the state of California. Each of office is called Sunshine Office 1, Sunshine Office 2, etc. Each office is under its own corporation or name.

How many brokers will Jones need to run all five offices?

FIVE

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Agent – One who represents another, called the principal, in dealing with a third person for a commission.

A Real Estate broker acts as an agent for the principal who wishes to sell, buy or exchange real property, or a business opportunity.

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AGENCY DISCLOSURE

Any licensee must disclose his or her agency.

An agent is one who represents the principal, and is called an agent.

The word, agent, is synonymous with the employing broker

There is only one employing broker or agent in a real estate company.

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PROBLEMMr. Montegudo is a new real estate agent and earns $20,000 in commissions his first year in the real estate business. He has $8,000 in real estate expenses. He also owns a home and pays $12,000 in interest on his home. How much does he have to pay in taxes?

TAXES

The agent has to pay his/her own taxes owed.

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Schedule C

Income $20,000Expenses $8,000Profit $12,000

1040

Income (Sch. C) $12,000Itemized deductions* $12,000Taxable Income $0

Taxes Owed $0

* Property taxes, home interest, and contributions.

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Social Security Tax

Profit $12,000SS Tax Rate 15%SS Tax $ 1,800

On federal and state tax returns there are different tax brackets.

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CHOOSING A BROKER

The new agent should remember that the interviewing broker wants good agents. A new agent should interview him or her to make sure they are giving the new agent education and help that will make him or her successful.

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Choose an office . . .

…that offers a good training program.

…that offers assistance when you need it. An office that has a designated person in charge of your training is a definite plus. One good example is a mentor program.

…that has a good library of books, audiotapes, CDs and videos available for your use.

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…that is primarily devoted to the area or real estate that you want to practice in, for example, sale of homes and/or lease in the real estate specialty area you desire to work in.

…that will help you in promoting your business, such as through advertising and a Web Site.

…that is comfortable for you. You must feel comfortable with the broker, your co–workers and the operation of the office. If you are uncomfortable, your chances of success are going to be materially diminished.

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MULTIPLE LISTING SERVICE MLS

The MLS is part of the board of realtors.

Most brokers today belong to one or more MLS services.

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Real estate salespersons should continue seeking training in their profession.

Real estate is a changing profession.

The deposit receipt has minor changes every six months and major changes about every 3 years.

At one time, the deposit receipt was one page on legal size paper. Over the years it grew to six pages, and now it has eight or ten pages (letter size), plus disclosure statements (another one to 20 pages).