Chapter 1 –INTRODUCTION TO THE REAL ESTATE BUSINESS Learning Goals: • Name and describe the 3 Nevada real estate licenses. • Name and describe the activities involved in at least two areas of real estate specialization. • Name at least one real estate specialty that requires a holder to receive both a real estate license and an additional permit or certificate. • Name at least 1 trade organizations. • Define a Realtor. What type of license should I pursue? What credentials do I need? Nevada offers 3 different real estate licenses. A salesperson, broker-salesperson and broker is called a licensee. ABC Real Estate School 3st ed National Workbook August 2010 Page 8 Salesperson’s License Course Certificate Get Fingerprints Contract with taken at vendor a broker. The to start a broker signs background your investigation. Real application. Estate License Pass the Fill out the Nevada application Salesperson’s and submit Exam. it to the Real Estate Division. Broker-Salesperson’s License Course Certificates Contract with Copy a broker. college The broker transcripts signs your for 64- application. college Real credits Estate License Get Fingerprints Fill out the taken at vendor application to start a and submit background to the Real investigation. Pass the Estate Nevada Division Broker’s Exam. ABC Real Estate School 3st ed National Workbook August 2010 Page 9 Brokers License Course Copy Certificates college transcripts Contract with for 64- a broker. The college broker signs your credits application. Get 2-years Fingerprints Real taken at vendor verified to start a Estate licensed background experience. investigation. License Pass the Commercial Nevada Broker’s Location for Exam. Fill out the an Office and application Financials and submit it to the Real Estate Division ABC Real Estate School 3st ed National Workbook August 2010 Page 10 Should I Choose a Specialty Area? When I become a licensee, what will I do? Real estate is a diverse field, with millions of participants and a lot of opportunity. For a licensee just starting out, choosing the right broker and office is important. For a seasoned licensee; making good advertising choices, finding the right contacts, and choosing profitable agents may be the most important choices. How do I choose a broker and an office? What type of real estate is selling? Are foreclosures the hot item, are buyers snatching up new homes, or are there more buyers than sellers so you need to list property? Will you be marketing residential property, or is commercial property more interesting to you? Maybe property management or leasing is more your style. Besides interest, will your specialty be profitable for you? How long will it take you to earn your first check? How much of your savings do you want to spend, before you see any income? Brokers can help you answer those questions. The broker is responsible for training new licensees. Do you feel comfortable asking the broker questions? Will you be contacting the broker, or is the office manager going to be your contact? How accessible is your contact? Will someone be accompanying you to your first couple of listings and sales? Will the broker offer training? Will you be working full-time or part-time. Does the office encourage both? What will the broker require? Is there specific advertising you must purchase? Do you need to attend office meetings? Will you be required to answer the office phones on occasion? How will you find your clients? Does the broker advertise for the office or just for himself? Does the office have a Web presence? What does a Web search uncover? Will you be meeting clients at your office? If so, is the office convenient to your home, and is it also convenient for the clients that you will be pursuing? And lastly, how must does it all cost? Will you be paying a percentage of your commissions earned to the office, or will the office be collecting a flat fee? How much income does the broker anticipate that you will earn your first month. How about earning potential for your first year? You will property be signing an ‘independent contractor’s1’ agreement. Inquire about fees associated with early termination of your agreement. Can you take clients with you if you decide to change offices? Can you take ‘earned’ commissions? 1 The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result. http://www.irs.gov/businesses/small/article/0,,id=179115,00.htm 1/27/10.l ABC Real Estate School 3st ed National Workbook August 2010 Page 11 What type of license do I need? Do I need an additional permit or certificate? Is there enough business in one real estate specialty area to justify complete focus? What are my choices? Real Estate Specialties A. Brokerage Owner: Owner of a real estate business. The owner may or may not be the broker or office manager. B. Broker: Responsible for training and monitoring real estate licensees. The broker must open an office that at a minimum holds a secure file cabinet and advertises the business name on the outside of the building or the building directory. C. Broker Price Opinion (BPO) Specialist: A professional who estimates the value of real property in anticipation of listing or selling property controlled by the paying client. D. Foreclosure/Real Estate Owned (REO) Specialization: Working with lenders (maybe listing property) who own repossessed property, or working for a broker who contracts with lenders who own repossessed property. E. Short Sale Specialist: A sale of a property where the secured mortgage exceeds the property value may require the lender to release rights to the property and accept less than the mortgage amount in the sale. Paperwork is required, persistence is crucial, and stellar negotiation skills are vital. Some licensees prefer to employ legal help and professional negotiators. F. Office Manager: A broker-salesperson that is in charge of a branch office for a broker, or a sales office for an new home owner-developer. He/she must be qualified to become a broker, He must have at least 2 years of experience within the preceding 4 years as a salesperson or broker- salesperson, and notify the Division on a certain form. ABC Real Estate School 3st ed National Workbook August 2010 Page 12 G. Property management: Managing real estate to protect the owner's investment and maximize the owner's return. In Nevada, an on-going property manager must have a real estate license and a property management permit. This does not include leasing activity...only on-going property management. H. Financing: The business of arranging for, or providing funds for real estate transactions. The Mortgage Lending Department is the state department that licensing finance bankers and brokers in Nevada. I. Business broker: Per statute, a business broker is a person who, while acting as a real estate licensee for another and for compensation sells, exchanges, options, purchases, negotiates, or lists or solicits prospective purchasers of a business. He/she needs to hold a real estate license and attach a business broker permit to the license. J. Leasing: Negotiating contracts between an owner and a renter. K. Community Manager: A person who provides for or engages in the management of a common-interest community. In Nevada, a community manager needs to hold a community manager certificate. L. Subdivision and development: Activities of splitting a large parcel of real estate into smaller ones and constructing improvements (such as streets, utilities, structures, vegetation) to the land. In Nevada, a developer registers as an ‘owner developer’ and may act as a broker by hanging real estate licenses of licensees who will sell the properties in the development. M. Counseling/Facilitator: The activity of providing clients with competent and independent information and advice to assist in their real estate investment decisions without actually representing them as an “agent”. This is not a legal classification in Nevada. N. Education: Offering real estate education opportunities to both practitioners and consumers. O. Time Share Sales Agent: A licensee in Nevada is licensed to sell time shares. The special permit called a Time Share Sales Agent may specifically sell new time-shares. ABC Real Estate School 3st ed National Workbook August 2010 Page 13 Trade Organizations Based on a licensee’s specialty area, he/she may find it advantageous to join a trade organization geared towards that specialty area. The licensee may choose based on the services, such as databases owned, offered. A licensee has a variety of options. Some of the possible choices are: • National Association of Real Estate Brokers (NAREB) • Members subscribe to a Code of Ethics • Members are known as Realtists • Real Estate Educators Association (REEA) • Real Estate Buyer’s Agent Council (REBAC) • Currently associated with NAR • Building owners and Managers Association (BOMA) • Institute of Real Estate Management (IREM) • Commercial Investment Real Estate Institute (CIREI) • American Society of Real Estate Counselors (ASREC) • Association of Real Estate License Law Officials (ARELLO) • Founded in 1929 • ARELLO is an accreditation body for courses. • Web site offers consumers the ability to search a licensee’s name to find out if the licensee has a real estate license. • The first proponent of creating real estate licensing laws in all states. • National Association of Realtors (NAR) Multiple Listing Service * Maintained by the Association of Realtors®. * A computer database containing detailed information about available properties. * Original listing usually states the total commission to be paid to the co-operating brokerage (buyer’s agent).