Modern Real Estate Practice 18th Edition. Chapter 1 Introduction to the Real Estate Business The...
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Transcript of Modern Real Estate Practice 18th Edition. Chapter 1 Introduction to the Real Estate Business The...
Modern Real Estate Practice 18th Edition
Chapter 1Introduction to the Real Estate BusinessThe real estate business is more than just houses. As this chapter says, “Real estate is big business,” and includes commercial properties, condominiums, and open land in addition to single-family homes.
3©2010 Kaplan, Inc.
1 Introduction to the Real Estate Business
• Learning objectives– Identify the various careers available in real
estate, and the professional organizations that support them
– Describe the five categories of real property– Explain the operation of supply and demand in
the real estate market– Distinguish the economic, political, and social
factors that influence supply and demand
4©2010 Kaplan, Inc.
1 Introduction to the Real Estate Business
• A business of many specializations– Brokerage– Appraisal– Property management– Financing– Subdivision and development– Home inspection– Counseling– Education
5©2010 Kaplan, Inc.
1 Introduction to the Real Estate Business
• Types of real property– Residential– Commercial– Mixed-use– Industrial– Agricultural– Special Purpose
6©2010 Kaplan, Inc.
1 Introduction to the Real Estate Business
• The real estate market– Supply and demand– Factors affecting supply– Factors affecting demand
Many types of property define real estate’s “product.” Land is one of the fundamental concepts of real estate, as well as “improvements” in the form of houses and outbuildings. The fence suggests the limits of ownership.
Chapter 2Real Property and the Law
8©2010 Kaplan, Inc.
2 Real Property and the Law
• Learning objectives– Identify the rights that convey with ownership
of real property and the characteristics of real estate
– Describe the difference between real and personal property
– Explain the types of laws that affect real estate– Distinguish between the concepts of land, real
estate, and real property
9©2010 Kaplan, Inc.
2 Real Property and the Law
• Land: the earth’s surface extending downward to the center of the earth and upward to infinity, including permanent natural objects
• Real estate: land at, above, and below the earth’s surface, plus all things permanently attached to it, whether natural or artificial
• Real property: the interests, benefits, and rights that are automatically included in the ownership of land and real estate
10©2010 Kaplan, Inc.
2 Real Property and the Law
Air Rights
Surface Rights
The Bundleof Rights
PhysicalImprovements
Subsurface Rights
Earth’s surfaceto the center ofthe earth and the airspace above theland, including the trees andwater
Land plus permanenthuman-made additions
Real estate plus“bundle of legal rights”
Land Real Estate RealPropertyLand
Earth’s surface to the center of the earth and the airspace above the
land, including the trees and water
Real Estate
Land plus permanent human-made additions
Real Property
Real estate plus “bundle of legal rights”
Air Rights
Surface Rights
Subsurface Rights
Physical Improvements
The Bundle of Rights
11©2010 Kaplan, Inc.
Bundle of Legal Rights
2 Real Property and the Law
Possession
Control
Enjoyment
Exclusion
Disposition
12©2010 Kaplan, Inc.
2 Real Property and the Law
• Real property rights– Surface rights– Subsurface rights– Air rights– Water rights
13©2010 Kaplan, Inc.
2 Real Property and the Law
• Personal property (all property that does not fit the definition of real property)
• Manufactured housing• Plants
– Fixtures– Intent– Method of annexation– Adaptation to real estate– Agreement
• Trade fixtures
14©2010 Kaplan, Inc.
2 Real Property and the Law
• Characteristics of real property– Economic characteristics
• Scarcity• Improvements• Permanence of investment• Area preference or location
– Physical characteristics• Immobility• Indestructibility• Uniqueness
15©2010 Kaplan, Inc.
2 Real Property and the Law
• Laws affecting real estate– Contract law– General property law– Agency law– Real estate license law– Federal regulations– Federal, state, and local tax laws– Zoning and land use laws– Federal, state, and local environmental
regulations
Chapter 3Concepts of Home Ownership
A variety of housing types are available under the general heading of “home ownership,” including single family, small multifamily residences, and high-rise condos.
17©2010 Kaplan, Inc.
3 Concepts of Home Ownership
• Learning objectives– Identify the various types of housing choices
available to homebuyers– Describe the issues involved in making a home
ownership decision– Explain the tax benefits of home ownership– Distinguish the various types of homeowners
insurance policy coverage
18©2010 Kaplan, Inc.
3 Concepts of Home Ownership
• Types of housing– Single-family home– Apartment complex– Condominium– Cooperative– Planned Unit Development (PUD)– Retirement community
19©2010 Kaplan, Inc.
3 Concepts of Home Ownership
• Types of housing– High-rise development– Converted-use property– Manufactured housing– Modular homes– Time-share
20©2010 Kaplan, Inc.
3 Concepts of Home Ownership
• Housing affordability– Mortgage terms– Ownership expenses and ability to pay– Investment considerations– Tax benefits
21©2010 Kaplan, Inc.
3 Concepts of Home Ownership
• Homeowners’ insurance– Coverage and claims– Basic versus broad-form policies– Liability– Coinsurance clause– Comprehensive Loss Underwriting Exchange
(CLUE)– National Flood Insurance Program
Real estate is an industry about property, but it’s also an industry about people. The concept of agency is entirely about people, and relationships between and among them.
Chapter 4Agency
23©2010 Kaplan, Inc.
4 Agency
• Learning objectives– Identify the various types of agency
relationships common in the real estate profession and the characteristics of each
– Describe the fiduciary duties involved in an agency relationship
– Explain the process by which agency is created and terminated and the role of disclosure in agency relationships
– Distinguish the duties owed by an agent to his or her client from those owed to customers
24©2010 Kaplan, Inc.
4 Agency
• Real estate agency– Common-law history– Definitions:
• Agent• Principal• Agency • Fiduciary• Client• Customer• Nonagent
25©2010 Kaplan, Inc.
4 Agency
Agent
SellerBuyer
26©2010 Kaplan, Inc.
4 Agency
• Fiduciary duties of an agent– Care– Obedience– Loyalty– Disclosure– Accounting– Confidentiality
27©2010 Kaplan, Inc.
4 Agency
• Creation and termination of agency– Creation
• Express agency• Implied agency
– Termination• Completion, performance, or fulfillment • Death or incapacity• Destruction or condemnation of the property• Expiration • Mutual agreement• Breach• Operation of law
28©2010 Kaplan, Inc.
4 Agency
• Limitations on authority– Universal agent
• Empowered to do anything the principal could do personally
– General agent• Represents the principal in a broad range of matters
related to a particular business or activity
– Special agent• Authorized to represent the principal in one specific
act or business transaction under detailed instructions
29©2010 Kaplan, Inc.
4 Agency
• Types of agency relationships– Single agency– Seller representation– Buyer representation– Owner as principal– Dual agency
• Disclosed dual agency• Designated agency• Undisclosed dual agency
30©2010 Kaplan, Inc.
4 Agency
Agent
SellerBuyer
31©2010 Kaplan, Inc.
4 Agency
• Types of agency relationships– Disclosure laws– Nonagency– Agency statutes
32©2010 Kaplan, Inc.
4 Agency
• Customer-level services– Reasonable care and skill in performance– Honest and fair dealing– Disclosure of all facts the licensee knows (or
should be expected to know) that materially affect the value or desirability of the property
– State law may require additional services or disclosures
33©2010 Kaplan, Inc.
4 Agency
• Puffing– Exaggeration of a property’s benefits
• Misrepresentation– Fraud: Intentional misrepresentation of a
material fact to harm or take advantage of another
– Negligent Misrepresentation: Broker should have known a statement was false
34©2010 Kaplan, Inc.
4 Agency
• Property conditions– Latent defect
• A hidden structural defect that would not be discovered by ordinary inspection
– Stigmatized property• Properties branded “undesirable” because of actual or
rumored criminal, tragic, or scandalous events that occurred on the property
A real estate brokerage is more than a room full of desks. It’s a hive of activity; dependent on people, information, and technology to keep the business running.
Chapter 5Real Estate Brokerage
36©2010 Kaplan, Inc.
• Learning objectives– Identify the role of technology, personnel, and
license laws in the operation of a real estate business
– Describe the various types of antitrust violations common in the real estate industry, and the penalties involved with each
– Explain how a broker’s compensation is usually determined
– Distinguish employees from independent contractors and explain why the distinction is important
5 Real Estate Brokerage
37©2010 Kaplan, Inc.
5 Real Estate Brokerage
• Brokerage– The business of bringing parties together
• Real estate broker– A person licensed to buy, sell, exchange, or lease
real property for others and to charge a fee for these services
38©2010 Kaplan, Inc.
5 Real Estate Brokerage
• Broker-salesperson relationship– A real estate salesperson is licensed to perform
real estate activities on behalf of a licensed real estate broker
– Employee—broker may require employee to follow rules for hours, attendance, etc.
– Independent contractor—broker cannot require specific office hours, attendance, etc.
39©2010 Kaplan, Inc.
5 Real Estate Brokerage
• Broker’s compensation– Commission is always negotiable– Commission is usually earned when
• A completed sales contract has been executed by a ready, willing, and able buyer
• The contract is accepted and executed by the seller• Copies of the contract are in the possession of all
parties
40©2010 Kaplan, Inc.
5 Real Estate Brokerage
• Broker’s compensation– Procuring cause
• Broker started a chain of events that resulted in a sale
– Ready, willing, and able buyer• One who is prepared to buy on the seller’s terms and
ready to take positive steps toward consummation of the transaction
41©2010 Kaplan, Inc.
5 Real Estate Brokerage
• Salesperson’s compensation– Amount and method of compensation is set by
agreement between the broker and the salesperson
– Fixed salary– Share of commission– 100% commission plan– Graduated commission split
42©2010 Kaplan, Inc.
5 Real Estate Brokerage$189,000 6% (.06 as a decimal) = $11,340
Broker Harry$11,340 50% (.50) = $5,670to be split between Broker Harry
and salesperson Ed
Broker Matt$11,340 50% (.50) = $5,670to be split between Broker Matt
and salespersonTom
$5,670 55% (.55) = $3,118.50(salespersonTom’s share)
$5,670 45% (.45) = $2,551.50(Broker Matt’s share)
43©2010 Kaplan, Inc.
5 Real Estate Brokerage
• Recent issues– Fee-for-services– Minimum level of services
44©2010 Kaplan, Inc.
5 Real Estate Brokerage
• Antitrust laws– Price-fixing– Group boycotting– Allocation of customers or markets– Tie-in (or tying) agreements– Penalties
45©2010 Kaplan, Inc.
5 Real Estate Brokerage
• Legal considerations and technology– Internet, Web Sites, e-mail– Internet advertising– Electronic contracting– Do-not-call registry