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Florida Real Estate Guide FLORIDA REAL ESTATE GUIDE Sales Associate Pre-License Text Book Approved by the Florida Real Estate Commission ©2008-2017 Copyright by David Collins All rights reserved PREFACE Florida is growing faster than any state in the country, and the real estate industry is a major participant in that growth. A real estate career in Florida can be very rewarding. Whether you are acting as an agent for others or are acting on your own behalf, the more you know about the real estate business, the better your chances are for success. This book is based on the most current FREC Course I syllabus published by the Florida Real Estate Commission for sales associate's pre-licensing education. In addition, the author of this book practices real estate on a full-time basis and therefore brings a unique insight to understanding the practical application of real estate brokerage. The author would like to take this opportunity to thank a number of individuals who were instrumental to the success of this book. Many thanks to the late James Mitchell, Esq., former Assistant State Attorney General assigned to counsel the Florida Real Estate Commission and the Foundation Advisory Commission, for providing invaluable insight and understanding to a complicated business. A Big thanks must also go to Mary Gerlach for her professional review and editing efforts of the text and to Philip Armour for the design of the cover. Additionally, many thanks to the thousands of students who gave their input enabling the author to produce what he believes are an exceptional publication. Finally, the author wishes to express his sincerest hopes for your success in the real estate business. Congratulations for taking the first step towards your new real estate career! David Collins TABLE OF CONTENTS Chapter 1 Introduction to the Real Estate Business Chapter 2 Real Estate License Law and Qualifications Chapter 3 Real Estate License Law and FREC Rules Chapter 4 Agency Relationships, Duties, and Disclosure Chapter 5 Real Estate Brokerage Activities Chapter 6 License Law Violation, Penalties, and Procedures Chapter 7 State and Federal Real Estate Laws Chapter 8 Property Rights Chapter 9 Real Property Ownership Chapter 10 Legal Description Chapter 11 Real Estate Contracts Chapter 12 Residential Mortgages Chapter 13 Types and Sources of Mortgage Money Chapter 14 Real Estate Closings Chapter 15 Real Estate Markets and Analysis Chapter 16 Real Estate Appraisals Chapter 17 Real Estate Investment and Business Brokerage Chapter 18 Real Estate Taxes Chapter 19 Planning, Zoning, and Environmental Hazards Chapter 20 Real Estate Math Review Practice Final Exam Exam Answer Keys Glossary Index CHAPTER ONE: INTRODUCTION TO THE REAL ESTATE BUSINESS 1 CHAPTER ONE: 2 INTRODUCTION TO THE REAL ESTATE BUSINESS 3 4 TALK THE TALK 5 6 Absentee Owner: A property owner who does not reside on the property and who 7 usually relies on a property manager to oversee the investment 8 Appraisal: A supported, defended estimate of the value of property rights as of a 9 given date 10 Appraiser: Any person who is a trainee, licensed, or certified real estate appraiser 11 Business Opportunity Brokerage: The marketing and sale of a going-concern 12 operation. Florida requires that business brokers have a real estate license to 13 market business opportunities 14 Comparative Market Analysis: An informal estimate of market value performed by 15 a real estate licensee for the seller to assist in arriving at an appropriate listing price, 16 or, if working with the buyer, an informal estimate of market value to assist the buyer 17 in arriving at an appropriate offering price 18 Dedication: A deliberate transfer of land by its owner for public use and accepted 19 for such use by the public 20 Farm Area: A selected and limited geographical district to which a sales associate 21 devotes special attention and study 22 Follow-Up: A post-closing communication initiated by a licensee to maintain 23 customer contact and goodwill 24 Property Management: The process of directing, controlling, operating, and 25 maintaining real estate for a third party 26 Real Estate Brokerage: A commercial activity in which the sale, purchase, leasing, 27 rental, exchange or management of real property is conducted by qualified and 28 licensed individuals acting either for themselves or for others for compensation 29 Subdivision Plat Map: The layout of a subdivision showing lots, roads, and other 30 structural aspects of importance 31 USPAP: Rules and guidelines that must be followed by any professional conducting 32 an appraisal 33 34 35 AREAS OF CRITICAL CONCERN 36 • Describe the various activities of real estate brokerage 37 • Distinguish among the five major sales specialties 38 • Identify reasons why property management has grown in importance 39 • Explain the appraisal process and the role of an appraiser 40 • Understand the mortgage process and the role of mortgage loan originators 41 • Explain the three phases of development and construction 42 • Distinguish among the three categories of residential construction 43 44 1-1 CHAPTER ONE: INTRODUCTION TO THE REAL ESTATE BUSINESS 1 I. INTRODUCTION 2 A. Overview: In Florida, the Florida Real Estate Commission (commonly 3 referred to as FREC) oversees and regulates the real estate license law and licensed 4 individuals who participate in the real estate business. FREC defines the term "real 5 estate business" as a vocation in which real property forms the stock in trade that is 6 bought, sold, leased, or rented. 7 8 Real estate represents a very large portion of the overall wealth of our 9 country, particularly in the State of Florida. Property values, mortgage markets, and 10 investment opportunities evidence the role of real estate and its impact in the nation's 11 economy. Other types of businesses and industries are also dependent upon real 12 estate activities, such as property management, appraisers, banking industry, 13 development, and construction businesses. 14 15 B. Real estate is a business of many specializations: A professional real 16 estate licensee should possess specialized knowledge in the following areas: 17 18 1. Property Transfer: A licensee needs to understand the 19 details of transferring legal title from one party to another. An interest in real 20 property can be transferred by deed, will, lease, or other legal methods. 21 Additionally, a licensee needs to understand the entire process from creation 22 of a real estate contract through final closing of title. 23 24 2. Market Conditions: A licensee should understand current 25 interest rates and the availability of financing, the relationship between real 26 estate supply and demand in his or her particular market area, and the history 27 of sold properties. The licensee should also have an understanding of future 28 market trends that will be the driving force of tomorrow's sales. 29 30 3. Sales and Marketing: Being a professional and effective real 31 estate licensee requires understanding the significance of past sales of 32 similar properties. By understanding past sales, licensees can establish a 33 price range that will ideally result in properties being bought and sold in the 34 shortest amount of time and for the best possible price. Once a licensee has 35 established the proper market value of a home (listing price), the next step is 36 to procure a purchaser through the various marketing techniques available. 37 These techniques include drafting effective advertisements, participating in 38 the Multiple Listing Service (MLS), offering open house presentations, and 39 effective showing of real estate to potential purchasers. There is an old 40 saying in the real estate business: "You have to circulate to percolate." 41 42 43 II. BROKERAGES 44 A REAL ESTATE BROKERAGE is a business that performs the actual day- 45 to-day operations of assisting the general public in one or more of the various real 46 estate areas and specialties. They include: 47 48 49 1-2 CHAPTER ONE: INTRODUCTION TO THE REAL ESTATE BUSINESS 1 A. Sales and Leasing: For most Real Estate Brokerages, sales and 2 leasing comprise the bulk of their business activities. All Real Estate Brokerages 3 must have at least one active broker to be responsible for the daily activities of the 4 brokerage. Although many sales associates may work for a brokerage, it is 5 ultimately the broker who actually supervises and is legally responsible for all actions 6 of the sales associates and office employees. 7 8 The licensed associate is an agent of the broker and must not be directly 9 employed by members of the public. It is actually the broker who has the necessary 10 contractual relationship between the brokerage and a buyer or seller. It is important 11 to remember that although a sales associate works directly with the public, he or she 12 does this on behalf of the broker. Individuals working in a real estate brokerage 13 should possess expert information about real estate that is not commonly known by 14 the general public, for instance preparing contracts and understanding other complex 15 documents such as closing statements and mortgages. 16 17 Generally speaking, it is more efficient for a member of the public to employ a 18 real estate professional because the process of finding the right property to buy or 19 the process of selling and finding a qualified buyer is time consuming. A licensee 20 deals with these complex matters on a daily basis and, therefore, is better prepared 21 to make sales and closings a smoother process. 22 23 Many successful real estate licensees have chosen to specialize in a 24 particular area of their community, known as a FARM AREA . By utilizing the 25 process known as farming, licensees become familiar with the properties and the 26 property owners.
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