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Pre-License Broker

Pre-License Broker class (Real Estate School)

Key Word/PhraseDescription
Requirements to Become a Broker Florida residence is NOT required SSN, HS grad/GED, 18+
When are you considered a resident in Florida? A what time? 4 months If you reside in Florida with the intention of residing 4 months or longer, you are a resident
Mutual recognition Mutual recognition is only valid for NON-residents and is NOT reciprocity (Florida does not have reciprocity). Must take 40 question FL specific test.
Group License A Group License can be issued to sales and broker associates registered under an owner-developer.
Under 475 F.S., if an individual has sold or leased real estate not titled in his name... ...there is a presumption was acting as a broker or sales or associate.
A spouse of an active-duty member of the armed forces assigned to Florida... ...may be issued a temporary license for 6 months. Does not renew.
A limited partnership is required by FL statutes to file... ...a certificate of limited partnership with FDS, Div. of Corp. Limited partners can make investments of cash and property, but not services.
A cooperative association is permitted to conduct commercial business and to convey, sell, or buy its own property, but it CANNOT... ...be registered as a real estate brokerage entity.
Temporary shelter No transactions! A temporary shelter in a subdivision being sold by a broker is not a branch office if the shelter is intended only for the protection of customers and sales associates.
Requirements on an Entrance Sign for Brokerage. The names of sales associates and broker associates are NOT required on the entrance sign. Brokers full name, trade name, Licensed (Lic) Real Estate Broker
Can a licensee contact a FSBO? Yes, but only if the licensee has an actual buyer interested in the property (for purposes of negotiating a sale).
When is Institutional Advertising most appropriate? In a hot market. Institutional advertising describes the firm, its personnel, and its services. Some brokers believe that this type of advertising is the most effective way to get listings.
The broker also must evaluate the general market conditions in the area. If the market is strong, the broker may consider a more aggressive growth strategy. Sales associates should be trained to price listings competively to avoid advertising listings that have little chance of selling.
Calculation of the number of monthly transactions required. Deduct commissions paid from gross income to get company dollar. Company dollar/number of transactions = average company dollar per transaction Amount needed for expenses+profit/average company dollar= number of transactions needed per month
How many licensed brokers are needed for a real estate brokerage? What about signatories? Only one broker is necessary and must be designated as the signatory on the escrow account. The broker may designate another person, such as a bookkeeper, to sign checks on the account in the ordinary course of business.
Immediately, with respect to escrow deposits means... End of third business day for the broker to deposit into escrow acct. 1 business day for sales associates to give to the broker.
Will a broker be held liable for nonpayment of escrow check? No. A broker will NOT be held responsible for the nonpayment of an escrow check, provided the broker timely deposits the check into the escrow account and the broker’s own culpable negligence did not cause the check not to be honored.
Can a broker deposit escrow $$ into his own interest-bearing account? Yes, if he gets written permission from both buyer and seller and indicates how the interest will be dispersed.
How many days does the broker have to notify FREC of escrow dispute settlement between buyer and seller? 10 days (high five)
Probable Cause After a complete review of the record (complaint is considered legally sufficient) the probable-cause panel makes a determination as to whether probable cause exists. 2 members on the panel.
How many days to respond to a Notice of Noncompliance? 15 days (slaps on the hand). Notice of noncompliance is a warning for a minor violation (an initial offense only) that allows a licensee 15 days to correct the minor infraction without consequence (nonresponse could result in disciplinary action).
For licensees who do not dispute a matter (citation), what happens and when? After 30 days the citation penalty will become effective (a FINAL ORDER) and the case is closed.
What expenses CANNOT be reimbursed from the Recovery Fund? Punitive damages and interest cannot be reimbursed. Court costs, attorney fees, etc can be reimbursed up to $50,000 per judgement ($150,000 max).
What is the penalty for unlicensed activity, including providing real estate services for compensation without a real estate license? Third degree felony
If a broker complies with an escrow disbursement order (EDO) and is later sued... He/she may be reimbursed from the Real Estate Recovery Fund without penalty.
What is the purpose of an appraisal? To determine the problem to be solved and the type of value to be estimated.
What is the Appraisal Standards Board (ASB) responsible for? The Appraisal Standards Board (ASB) sets for the rules for developing an appraisal and reporting its results. It is the enforcement arm of the Appraisal Foundation and enforces the Uniform Standards of Professional Appraisal Practice (USPAP).
What is the definition of PRICE? Price refers to the amount of money actually paid in a transaction. Price and value are not necessarily equal (know the difference).
What is the definition of "going concern" value? Going-concern value is the value of an income-producing property or business enterprise, with a significant OPERATION history. Going-concern value includes intangible assets. Must be operating, not new.
Principle of Increasing and Decreasing returns The principle of increasing and decreasing returns states that when one of more factors of production are increased while others are held constant, output may increase up to a certain point. Over-improvement is an example of decreasing returns.
Example of Decreasing returns Over-improvement is an example of decreasing returns.
Compute the Final Reconciliation given three approaches to value (cost, sales, income CAP). $160,000 at 55%, $155,000 at 35%, $150,000 at 10%. $88,000, $54,000, $15,000 = $157,250
What two underlying assumptions is the Sales Comparison Approach based on? o Market price is valid evidence of market value. o A well-informed buyer will not pay more for a property than the price of equally desirable substitute properties (principle of substitution).
Definition of the Quantity Survey Method The Quantity survey method (most detailed), involves a detailed inventory to reproduce the building (including labor), usually used by developers. An estimate of building/reproduction costs.
Definition of Incurable depreciation If the cost of repairing an item is greater than the value it adds to the improvement, the depreciation is considered incurable.
What is Functional Obsolescence? Anything that is inferior due to operational inadequacies, poor design, or changing tastes and preferences. May be curable or incurable. Examples: o 4 BR house with 1 BA (needs 2 BA) o Windows facing West with no awnings o Green shag carpeting
Formula for Gross Rent Multiplier (GRM) GRM is the ratio between a property’s gross monthly rental income and the sales price of the property. (ex. $224,400 sales price; Monthly rent $1200; 224400/1200 = 187).
How do you calculate "Vacancy and Collection Loss (V/L)"? Potential Gross Income (PGI) x V /L percentage
How do you calculate the "Effective Gross Income (EGI)"? Potential gross income (PGI) – vacancy/collection loss (V/L) = effective gross income (EFI). Given rents, multiple by # of units x 12 for PGI. Then multiply the percent of V/L and subtract from PGI for the EGI.
What expenses are typically included in a reconstructed operating statement? o Vacancy and collection loss o Taxes, insurance, utilities, maintenance, repairs, supplies, management, etc.
For the best results in marketing the property, the seller should price the property... ...just below the competition and just above recent sales.
All value adjustments are made to which property? Subject or comparable? All adjustments are made to the comparable property. Nice/slice Bad/Add
In a CMA, how do you compare a 3 BR and 4 BR house in the same neighborhood? Adjust for differences by finding the value. For example, to compare and 3 BR to 4 BR house, find the value of 1 bedroom and adjust the comparable.
Calculate the gross living area outside area – below grade Garage/porch, etc.
What does a company's Balance Sheet show? The balance sheet shows the company’s financial position at an exact moment in TIME.
What does LIFO mean? LIFO: Last in, first out (most conservative). Generates a lower reported profit for firms in times of rising prices.
What does the "Liquidation value approach" refer to? A business liquidation value is the anticipated proceeds from the sale of all its tangible assets, less the firm’s liability.
How does the F.S. Chapter 475 define a residential sales? The sale of improved residential property of 4 or fewer units, the sale of unimproved residential property intended for use as 4 or fewer units, or the sale of agricultural property of 10 or fewer acres. (Not a coffee shop, 400 unit complex, etc.)
Do Disclosure requirements apply to rentals or leasing properties? No, unless an option to purchase all or a portion of the property improved with 4 or fewer residential units is given.
Under Florida law, it is presumed that licensees are operating as ... ...transaction brokers unless another brokerage relationship is established (written proof not required).
How long must brokers retain relationship disclosures? 5 years for all residential transactions that result in a written contract to purchase and sell and all nonresidential transactions that use designated sales associates (including ones that fail to close).
What is the liability of a customer in a transaction broker relationship? In a transaction broker relationship the buyer or the seller (customer) is not responsible for the acts of a licensee.
Explain when "Designated Sales Associates" are used. In a nonresidential transaction where the buyer and the seller each have assets of $1 million+, the broker may designate two sales associate to act as single agents for the buyer and the seller in the same transaction.
Are oral (parol) agreements enforceable? Yes. Oral (parol) agreements are enforceable in Florida if there is substantial evidence of their existence.
A licensee CANNOT prepare which kind of documents? Deeds, mortgages, promissory notes, etc. This is considered practicing law and is a felony of the third degree.
What are the legal consequences of "Time is of the essence"? Could lead to default by the nonperforming party. Specifically, a buyer could lose their deposit.
Definition of "Owner in severalty" Owner is severalty is a sole owner (divorced, unmarried, single, widowed). At the owner’s death, the property is inheritable by will or descant.
Definition of "Tenancy by the entireties" Ownership by married couple, treated as one owner.
Definition of "Joint tenancy " right of survivorship
Definition "Tenancy in Common" inheritability, can be shared according to will
Must a licensee submit an offer without a deposit? Yes. The buyer is not legally required to give an earnest money deposit on a contract. Licensees must present all offers.
How does an option contract work? It is a unilateral contract between a owner (optionor) and a prospective buyer (optionee) in which the optionee (for $) has the right (not the obligation) to purchase or lease the property at a specified price during a designated period/specific time.
What happens if a person signs a note as a witness? The note should be signed by the borrower only. If another person signs the note, that person becomes a cosigner and is personally liable for repaying the debt.
Characteristic of Lien Theory The borrower owns the property, and the lender has a lien.
In a foreclosure, what is the order of priority for liens? Ad valorem taxes (gov't charges) 1st mortgage, 2nd mortgage, ordered by date of recording
What must a plantiff do to enforce a lost, destroyed, or stolen instrument? An affidavit must detail a chain of all note transfers and show the plaintiff is entitled to enforce the lost instrument if a plantiff seeks to enforce a lost, destroyed, or stolen instrument.
When is a subordination clause used and why? A subordination clause is often used when a builder buys a site from a developer who finances the purchase. The clause allows the builder to get a first mortgage for a construction lean, and the developer’s mortgage will drop to second place.
What effect does a discount point have on the rate (in percent) of a 30-year mortgage? It lowers the rate by 1/8 of 1 percent per point.
A loan is advertised as 5%. A buyer wants the rate to be 4 ½ %. How many points will he have to pay? 4 points (4 x 1/8 = ½)
What kind of problem kind a survey uncover? Encroachments, easements, etc.
Who should conduct a pre-closing inspection and why? The buyer should inspect the property (walk-through/pre-closing) to see that all repairs and maintenance have been completed. The licensee should NOT to avoid liability.
What is the Intangible tax rate and who pays it? Intangible taxes are based on mortgage amounts for new loans ONLY and are 0.002 of the loan amount. The buyer pays (page 2)
What kinds of settlement charges are on Page 2 of the Closing Disclosure? Page 2 of the Closure Disclosure (CD) itemizes the settlement charges or each party (commission, prepaids, title charges, etc.). The totals for each party on page 2 (bottom) are transferred to page 3. All debits belong on Page 2!
What is on page 3 of the Closure Disclosure (CD)? Page 3 shows a summary of loan/sale transactions and additional information about the loan. All prorations go on page 3.
The sales price is shown on the CD as… Debit $ to the buyer, credit $ to seller; page 3. Any debit/credit combo is on page 3!
What is the proration for taxes, and how is it shown on the CD? All prorations go on page 3. Taxes in arrears, seller must be debited and buyer credited. Day of closing charged to buyer.
The binder deposit is shown on the CD as... Credit to buyer; page 3
How much is the buyer’s new mortgage and how is it shown on the CD? Credit to buyer; page 3 Find the mortgage amount by multiplying sales price and loan to value percentage.
What is the proration for association fees and where will it show on the CD? Association fees are typically prepaid by seller at beginning of year. Credit seller $, Debit buyer; page 3
What is the brokerage fee and where does it appear on the CD? All debits belong on page 2 Seller debit Determine fee by multiplying sales price by commission rate.
What are the total government taxes for note, mortgage, and transfer fees, etc. and where is this information found on the CD? All costs/debits go on page 2 Note: intangible (0.002); Doc on loan (0.35) Buyer costs Deed: Doc stamps (0.70) Seller costs Doc stamps are per hundred; round up.
What qualifies someone to exclude tax on the gain of the sale of residence? A taxpayer must use the home as a principal residence for 2 of the 5 years before sale. Married couples filing jointly may exclude up to $500,000 (single up to $250,000).
What is the recovery period, in years, for residential and nonresidential properties when computing depreciation? Depreciation (cost recovery) is calculated for residential properties using a recovery period of 27.5 years and for nonresidential (commercial/office space) using 39 years.
How do you calculate the Depreciable Basis of a property? To find the depreciable basis of a property, add up all of the costs to purchase a property (sales price, appraisal, survey, insurance, etc.) to get the Total Acquisition cost x the building ratio (% of cost that represents the building without land).
What rate is Depreciation subject to when computing taxes on gains? 25%
Gains are taxed in two ways for investment properties. First, capital gains is taxed on individual tax rate, then depreciation is taxed at what rate? When calculating taxes on gains from the sale of an investment property, multiply the Depreciation by .25 to find tax on depreciation. Then add the two taxes together for total tax.
To find net (taxable) income, what must be added back to the Net Operating Income (NOI) before calculating? Reserve for replacements is added. Interest, Depreciation, and loan costs are all subtracted.
In the income property financial stack, what must be subtracted from the NOI to get the Before-tax Cash Flow (BTCF)? Annual debt service (ADS) (loan balance x loan constant)
How do you calculate the NOI from the PGI? • Potential Gross Income (PGI) o – Vacancy and collection loss (V) o = Effective Gross Income (EGI) o – Operating Expenses (OE) o = Net Operating Income (NOI)
What kind of risk can an owner usually buy insurance to mitigate? Static Risk is associated with fire, storm, flood, theft, or liability from accidents. Usually, the investor can buy insurance to cover the risk.
What is the purpose of an "Expense Stop"? An expense stop helps the owner to limit the exposure to rapidly increasing operating costs and help maintain predictability of the operating expenses over the term of the lease.
What purpose does an "Exculpatory clause" serve? An exculpatory clause in a mortgage allows the borrower to surrender the property to a lender without further personal liability.
An example of an operating expense is... Reserve for replacement management fees, salaries, maintenance, insurance, utilities, etc.
How do you determine After-tax Cash Flow (ATCF)? o Net Operating Income (NOI) o – annual debt service (ADS) o – Before-tax cash flow (BTCF) o – federal income tax (taxes) o = After-tax Cash Flow (ATCF)
How do you find the Capitalization (CAP) rate? Rate = NOI x value Income (NOI)/ Rate x value Use IRV
What are Impact Fees? Subdividers frequently pay impact fees to fund major, offsite infrastructure expansion that serves the community at large as well as the subdivision residents.
What constitutes a non-conforming use? A legally nonconforming use is a use established before present zoning classification, and as such is allowed to continue despite its nonconformance with the zoning code (grandfathered in, such as a gas station in a residential area).
What constitutes a variance? A variance is permission obtained to deviate from the designations under the zoning code. The property owner must show that a hardship exists that was created by the property, not financial or personal. (Owner did not cause.)
What is the definition of a Development of Regional Impact (DRIs) ? Florida statute defines Development of Regional Impact (DRIs) as any development that, because of its character, size, or location, will have a substantial effect on the health, safety, or welfare of citizens of more than one county in the state.
CERCLA liability is joint and several, which means... ...that the government need not show a PRPs (Potentially responsible person) fault, only that the person falls within the definition of PRP. Joint and several liability means that any one or more PRP can be sued without including all of them.
What is the requirement of brokers regarding Radon? A mandatory radon disclosure at the time or before a person enters into a contract for sale and purchase or a lease agreement. Must let buyers know what radon is; no testing to disclose radon levels before a sale or lease.
What should a licensee advise a buyer concerning asbestos? Consult an asbestos professional for advice. Although hazardous, it is best not to disturb asbestos material that is in good condition. Encapsulation can prevent asbestos fibers from becoming airborne.
What is the lead-based paint disclosure requirements (1977 and older) Give buyer and lease a pamphlet; give buyer 10 days to test for lead
What is the definition of a community association? Give an example. A community association (condominium) is defined to include greater than 10 units or have an annual budget of $100,000.
According to FL Statutes, Community Association Management (CAM) requires association managers to... ...obtain licenses from the DPBR.
What term is used when the number of available units outnumbers potential tenants? Technical oversupply Economic oversupply occurs when available space is priced beyond the purchasing power of potential tenants.
Name four ways an owner/manager can reduce Risks. o Tenant policies, such as no large dogs on property o Buy insurance o Have tenants sign agreements to be responsible for contents of their space (hold harmless owner) o Hire outside contractors to do hazardous work (they have own insurance)
Created by: Judyhickman