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Real Estate Economics
Florida real estate business
Terms in this set (24)
Florida real estate
Residential property in Florida is a family home that is a single family dwelling, a duplex, a triplex (3units) or a quad (4 units) or vacant land that has been zoned for 4 units or less. Farm/Agriculture residential is a family home on less than 10 acres land.
Commercial property is income producing property such as a retail center or an apartment complex of more than four units. The real estate professional must be able to convey to their clients and customers information about how to produce income, and create after-tax cash flow.
Industrial property usually manufactures or distributes products such as a factory or warehouse. This involves sites in industrial parks or subdivisions; redeveloped industrial parcels in central areas and undeveloped industrial acreage.
Agricultural property is farm or ranch land of more than ten acres.
Business Opportunity consists of an investor purchasing an income producing business. The purchase may include real estate along with the business or just the business within a leased space. Knowledge of business practices, specific business loans, and the characteristics of valuation as they apply to the business.
Special Purpose property examples would be schools, churches, nursing homes, post offices and hospitals. Each zoning district will look at the combination of land an improvements with highest and best use in mind.
in Florida is a family home that is a single family dwelling, a duplex, a triplex (3units) or a quad (4 units) or vacant land that has been zoned for 4 units or less. Farm/Agriculture residential is a family home on less than 10 acres land.
is income producing property such as a retail center or an apartment complex of more than four units. The real estate professional must be able to convey to their clients and customers information about how to produce income, and create after-tax cash flow.
usually manufactures or distributes products such as a factory or warehouse. This involves sites in industrial parks or subdivisions; redeveloped industrial parcels in central areas and undeveloped industrial acreage.
is farm or ranch land of more than ten acres.
consists of an investor purchasing an income producing business. The purchase may include real estate along with the business or just the business within a leased space. Knowledge of business practices, specific business loans, and the characteristics of valuation as they apply to the business.
Special Purpose property
examples would be schools, churches, nursing homes, post offices and hospitals. Each zoning district will look at the combination of land an improvements with highest and best use in mind.
In Florida, more than some other states, there is a real need for property managers because so many owners are absentee owners, persons who own real estate but do not reside in that real estate. Property managers are licensed Florida real estate brokers who, under law, perform duties and services on behalf of the owner. Generally, a property manager is defined as one who preserves the value of an investment (by an owner) while generating income as an agent for the owner. The property manager's specific duties will be contained in a Property Management Agreement.
Services a Property Manager May Provide
The Florida Property Manager may provide many different services for the owner. Specific duties should be spelled out in a Property Management Agreement and signed by both parties. A sales associate acting as a Property Manager must be under the direction and guidance of a real estate broker.
Some Specific functions would be to:
Budget expenses for the property
Evaluate the rental market
Advertise and market the property
Rent the property under the guidelines of the owner
Maintain good relationships with the tenants
Handle any environmental concerns
Adjust the rates with the market and the consent of the owner
Maintain the property in good repair
Act as a Fiduciary to the owner
Fiduciary means: a person having a duty to act primarily for another's benefit. It involves duties such as good faith, trust, special confidence and candor. A breach of fiduciary responsibility would make the fiduciary liable for any damage caused by any such action.
Do not confuse the duties of a property manager with those of a Community Association Manager (CAM). CAMs are licensed specialists tasked by the state to manage Community Associations, Homeowner Associations, and Cooperative Associations in their day to day business practices and the maintenance of their common areas.
a person having a duty to act primarily for another's benefit. It involves duties such as good faith, trust, special confidence and candor. A breach of fiduciary responsibility would make the fiduciary liable for any damage caused by any such action.
Community Association Manager (CAM).
CAMs are licensed specialists tasked by the state to manage Community Associations, Homeowner Associations, and Cooperative Associations in their day to day business practices and the maintenance of their common areas.
A property management agreement must contain:
The name and address of the owner
The name and address of the property manager
A address and legal description of the property
The start and end date of the agreement
Specific services to be rendered
Extent of the property managers' authority
Procedures for reporting on the status of the property
Method and schedule of compensation
Signature of owner
Signature of the property manager
Federal Fair Housing laws must be followed at all times. The Equal Opportunity Housing logo should be prominently displayed in the rental office.
four types of maintenance a property manager may be tasked to perform:
he or she must be familiar with the preventative maintenance, routine maintenance, repair maintenance, and construction maintenance.
Preventative maintenance is work done before expensive repair work is needed such as caulking windows and doors, changing furnace filters etc.
Routine maintenance consists of lawn mowing, cleaning carpets and other day to day cleanup other items which keep the property in order for tenancy
Repair Maintenance involves fixing the broken water heater or dishwasher. A property in disrepair is hard to rent.
Construction Maintenance is a total remodel or addition. For example, a club house or pool to help make the property more competitive.
The primary responsibility of any property manager is to protect the owner's investment and maximize the owner's returns.
Property manager's duties
The property manager owes to a tenant the duties of
disclosure of material facts
The property manager does not have a fiduciary relationship with the tenant.
The first measurement of value is called an appraisal. An appraisal is an estimation of value. It is done by appraisers using specific techniques and is done for a variety of reasons including obtaining a loan, obtain insurance value, obtaining a divorce settlement and determining capital gain. The appraiser does what is usually called a fee appraisal. An appraisal is performed in circumstances where a property's value must be determined for the purpose of a loan, an insurance value, or to determine a viable sale price based upon current sales in the area.
There are three levels of appraisers for the state of Florida: Registered Trainee appraiser - must work under guidance of a Certified Residential Appraiser or a Certified General Appraiser; Certified Residential Appraiser - Appraises residential properties; Certified General Appraiser - may perform any type of commercial or residential appraisal.
Any appraisals that involve a federally related real estate transaction must employ a state licensed appraiser.
Important - effective January 2015 the National Appraiser Qualification Board has set out new criteria for Appraisal training for all states. The training criteria for all appraisers must comply with the standards within the board. The AMC was also intended to put distance between the local lender, licensee and the appraiser. Effective October 2012, the Appraisal Management Company must register with the Department.
Most appraisals for purposes of a loan in a federally related transaction are ordered by the mortgage loan originator through an Appraisal Management Company (AMC). These companies were created as a result of the huge demand for appraisal that occurred with foreclosures and short sales in the U.S. Appraisers are regulated by the Florida Real Estate Appraisal Board. The Florida Real Estate Appraisal Board (FREAB) is headquartered in Orlando and consists of nine members. The FREAB administers and enforces the real estate appraiser license law, Chapter 475, Part II, Florida Statutes.
Click here for more information on:
The Florida Real Estate Appraisal Board
(2) 475.612 This section does not preclude a Florida licensed real estate broker, sales associate, or broker associate who is not a Florida certified or licensed real estate appraiser from providing valuation services for compensation. Licensees may perform real property valuation services in Florida as long as they do not represent themselves as a certified appraiser. Such persons may continue to provide valuation services for compensation so long as they do not represent themselves as certified, licensed, or registered under this part.
USPAP Uniform Standards of Professional Appraisal Practice
The preamble of USPAP says:
The purpose of these Standards is to establish requirements for professional appraisal practice, which includes appraisal, appraisal review, and appraisal consulting, as defined. The intent of these standards is to promote and maintain a high level of public trust in professional appraisal practice.
These standards are for appraisers and users of appraisal services. Individuals comply with these standards either by choice or by requirement placed upon them or upon the service they provide by law, regulation, or agreement with intended users.
The Ethics Rules state:
It is unethical for an appraiser to accept compensation for performing an assignment when it is contingent upon:
The reporting of a predetermined result (e.g. opinion of value)
A direction in assignment results favors the cause of the client
The amount of value opinion
The attainment of a stipulated result
The occurrence of a subsequent event directly related to the appraiser's opinions and specific to the assignment's purpose.
Payment for the appraisal is a percentage of the appraised value
In other words, an appraiser must be paid on a fee per-job basis, not a percent of the value of the property.
The Broker Price Opinion
Occasions arise when a Mortgage Loan Office, Bank, or financing entity/representative need a quick opinion of the value of a property based upon properties recently sold in the market. The Broker Price Opinion is requested from a local expert to collect data and provide it in a specific format to the requesting bank. These opinions may be to determine a quick sale price for a short sale property, a foreclosed property which is to be listed, or a deed in lieu of foreclosure property which has been given to the company by a borrower.
Although the USPAP is not required for such a valuation, some of the standards may be useful in assisting the BPO in data collection and additional tools for reporting information.
The Comparative Market Analysis
The final approach to determining value of a property is called the Comparative Market Analysis. Generally, real estate licensees do not do appraising because of its rigorous standards and regulations. Usually what licensees do is called a CMA. It is called either a Comparative Market Analysis or a Competitive Market Analysis, depending on local custom and broker. A CMA does not follow the techniques of appraising; rather it is method of valuing homes that looks at:
recent home sales
homes currently on the market
homes that were listed but did not sell
Real estate brokers use special computer programs, such as the Multiple Listing Service (MLS), usually connected to local taxing and recording offices to obtain this information. The CMA is used by the broker with the seller to set the listing price and to determine what probable price the property will bring. The real estate professional can help sellers determine what they will net from the sale.
A CMA can also be used by a broker representing the buyer to determine the price the buyer wishes to offer for the property, to determine if the property is worth the listed price being asked by the seller, and what other properties in the same neighborhood have sold for recently. The data presented with current properties on the market and average days on the market are also useful in creating an "Absorption Analysis" which is useful in assisting the possible days on the market for a property to sell within the range of current active properties.
In all cases of property valuation, it is imperative that the broker use current information (preferably one year or less) and use the same neighborhood, model and type of home as the property in question. At least three comparables in each category should be used to create a valuable CMA. After looking at all the comparables, the broker determines a price range that a buyer will probably pay for the property, rather than a specific price as an appraisal does. A CMA is exempt from USPAP standards.
Real Estate Professionals do CMAs and may not call a CMA an appraisal.
Appraisal for any federally related transaction is done by licensed appraisers who follow USPAP.
Most buyers will need financing of some type to buy their new home or property. Financing is the business of providing funds for real estate transactions. A knowledgeable real estate professional will know what loan products are available and where to get them. Most real estate transactions require thousands (or millions!) of dollars to complete. It is essential that the real estate professional is current on financing information and trends.
Some of the sources of financing to the buyer are:
savings and loans
mortgage bankers and mortgage brokers
Sellers of the property
The Dodd Frank Act of 2012 changed some specific criteria to establish extensive requirements applicable to mortgage lending industry,
including detailed requirements concerning mortgage originator compensation and underwriting, high-cost mortgages, servicing, appraisals, counseling and other matters which apply to financing real estate. In as such, all mortgage loan originators; those who finance (Lenders) and those who work to bring lenders and consumers together (Mortgage brokerage) must be registered with the newly created Consumer Financial Protection Bureau (CFPB). Coverage of Mortgage Lending Provisions - Includes mortgage originators who take or assist applications and negotiate terms of mortgages. Excludes creditors (except creditor in table funded transaction for anti-steering provisions) servicer employees, agents and contractors, persons or entities performing real estate brokerage activities and certain employees of manufactured home retailers from "originator" definition.
Nonfederal chartered banks and savings associations who broker or lend for mortgages MUST be registered with the Florida Department of Agriculture to provide Mortgage Loan Origination services.
Sellers of a property who provide financing may be required to register with the Florida Department of Agriculture as a Mortgage Loan Originator if they finance more than two properties in a two year timeframe.
Development of Land
When land is prepared to be developed into subdivisions or commercial ventures, there are several steps that a developer must take to prepare and create the end result in land development:
subdividing and development
subdivision plat map and recording
occurs when a developer buys undeveloped or previously developed land to build homes or commercial ventures. In creating a residential development, large tracts of land, usually several acres will be acquired. If the developer is "repurposing" property for its highest and best use, he may assemble several small pieces of land to create a large piece; this is called assemblage. The developer will study the land's current use, and submit for the proper zoning for the property may even task another to sub divide the property. The property may or may not have sewer, water or other utilities at this point.
Subdividing and development
occurs when a residential sub-divider takes over the property and divides it into the size lots he wishes for the price range of properties in this area. Usually the sub-divider hires a subdivision planner who develops the plan with environmental concerns and city (county) restrictions in mind. He draws up a proposed plat map for approval. The subdivision plat map is a visual drawing of where each lot and block will be as well as streets, parks and utilities. This is submitted to the municipality for consideration. When it is approved, the plat map is recorded in the county where the property is located.
Many times as a condition of approval of the plat map, a sub-divider is required to dedicate a certain portion of land for public use for such things as streets, parks, schools, or green areas. A builder buys the property and establishes subdivision covenants and restriction for use in that subdivision alone. The restrictions are private restrictions. Public restrictions come from the city or county where the property is located. Mixed use of land may also come into play for larger developments called PUD's (Planned Unit Developments), where homes may be mixed with condominiums, and commercial properties creating a mini community within a community.
In residential home construction, three types of homes are usually built.
"Spec" homes mean speculation homes, built without having a specific buyer in mind. Sometimes these homes are used as displays; many times they are used for buyers who need a house in a hurry and can't wait to have a new home built. "Spec" homes help keep construction crews busy during off-peak times.
Tract homes are built to a certain set of guidelines used for a particular subdivision. These homes are very similar in design to other homes in the subdivision and usually vary only by color of paint, color of carpet etc. The square footage and layout is the same in each home of the same model.
A custom home is one that is built for a specific buyer, usually using an architect and drawings that the buyer has formulated. Custom homes are built one at a time and are generally much more expensive than other homes.
taxation of real property
business permits for real estate professionals
recording of deed, transfers of property
estate taxes and rules regarding inheritance
Federal agencies such as HUD (Department of Housing and Urban Development), Federal Housing Administration (FHA) and Veterans Administration (VA)
Laws such as Federal Fair Housing, the Real Estate Settlement Procedures Act (RESPA), Truth in Lending Act
Taking of land for National parks, wildlife and wetland areas
Environmental rules and regulations
This set is often in folders with...
Real Estate Exam-Ch. 1-4
FL Real Estate Class Exam
Ch. 1 & 2: The Real Estate Business
Completing the loan disclosure
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