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Chapter 1 Introduction to the Real Estate Business. The 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.. 1Introduction to t
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1. Modern Real Estate Practice 18th Edition
3. 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. 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. 5 �2010 Kaplan, Inc. 1 Introduction to the Real Estate Business Types of real property
Residential
Commercial
Mixed-use
Industrial
Agricultural
Special Purpose
6. 6 �2010 Kaplan, Inc. 1 Introduction to the Real Estate Business The real estate market
Supply and demand
Factors affecting supply
Factors affecting demand
7. 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.
8. 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. 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. 10 �2010 Kaplan, Inc. 2 Real Property and the Law
11. 11 �2010 Kaplan, Inc. 2 Real Property and the Law
12. 12 �2010 Kaplan, Inc. 2 Real Property and the Law Real property rights
Surface rights
Subsurface rights
Air rights
Water rights
13. 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. 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. 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
16. 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. 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. 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. 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. 20 �2010 Kaplan, Inc. 3 Concepts of Home Ownership Housing affordability
Mortgage terms
Ownership expenses and ability to pay
Investment considerations
Tax benefits
21. 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
22. 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.
23. 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. 24 �2010 Kaplan, Inc. 4 Agency Real estate agency
Common-law history
Definitions:
Agent
Principal
Agency
Fiduciary
Client
Customer
Nonagent
25. 25 �2010 Kaplan, Inc. 4 Agency
26. 26 �2010 Kaplan, Inc. 4 Agency Fiduciary duties of an agent
Care
Obedience
Loyalty
Disclosure
Accounting
Confidentiality
27. 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. 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. 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. 30 �2010 Kaplan, Inc. 4 Agency
31. 31 �2010 Kaplan, Inc. 4 Agency Types of agency relationships
Disclosure laws
Nonagency
Agency statutes
32. 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. 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. 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
35. 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.
36. 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. 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. 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. 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. 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. 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. 42 �2010 Kaplan, Inc. 5 Real Estate Brokerage
43. 43 �2010 Kaplan, Inc. 5 Real Estate Brokerage Recent issues
Fee-for-services
Minimum level of services
44. 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. 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