1. Modern Real Estate Practice 18th Edition

2. 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. 3 ©2010 Kaplan, Inc. 1Introduction 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. 1Introduction 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. 1Introduction to the Real Estate Business Types of real property –Residential –Commercial –Mixed-use –Industrial –Agricultural –Special Purpose

6. 6 ©2010 Kaplan, Inc. 1Introduction 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. Chapter 2 Real Property and the Law

8. 8 ©2010 Kaplan, Inc. 2Real 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. 2Real 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. 2Real Property and the Law Land Earth’s surface to the center of the earth and the airspace above the land, including the trees and water Real Estate Land plus permanent human-made additions Real Property Real estate plus “bundle of legal rights” Air Rights Surface Rights Subsurface Rights Physical Improvements The Bundle of Rights

11. 11 ©2010 Kaplan, Inc. Bundle of Legal Rights 2Real Property and the Law

12. 12 ©2010 Kaplan, Inc. 2Real Property and the Law Real property rights –Surface rights –Subsurface rights –Air rights –Water rights

13. 13 ©2010 Kaplan, Inc. 2Real 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. 2Real 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. 2Real 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. Chapter 3 Concepts of Home Ownership 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. 3Concepts 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. 3Concepts of Home Ownership Types of housing –Single-family home –Apartment complex –Condominium –Cooperative –Planned Unit Development (PUD) –Retirement community

19. 19 ©2010 Kaplan, Inc. 3Concepts of Home Ownership Types of housing –High-rise development –Converted-use property –Manufactured housing –Modular homes –Time-share

20. 20 ©2010 Kaplan, Inc. 3Concepts of Home Ownership Housing affordability –Mortgage terms –Ownership expenses and ability to pay –Investment considerations –Tax benefits

21. 21 ©2010 Kaplan, Inc. 3Concepts 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. Chapter 4 Agency

23. 23 ©2010 Kaplan, Inc. 4Agency 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. 4Agency Real estate agency –Common-law history –Definitions: Agent Principal Agency Fiduciary Client Customer Nonagent

25. 25 ©2010 Kaplan, Inc. 4Agency

26. 26 ©2010 Kaplan, Inc. 4Agency Fiduciary duties of an agent –Care –Obedience –Loyalty –Disclosure –Accounting –Confidentiality

27. 27 ©2010 Kaplan, Inc. 4Agency 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. 4Agency 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. 4Agency 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. 4Agency

31. 31 ©2010 Kaplan, Inc. 4Agency Types of agency relationships –Disclosure laws –Nonagency –Agency statutes

32. 32 ©2010 Kaplan, Inc. 4Agency 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. 4Agency 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. 4Agency 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. Chapter 5 Real Estate Brokerage

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 5Real Estate Brokerage

37. 37 ©2010 Kaplan, Inc. 5Real 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. 5Real 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. 5Real 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. 5Real 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. 5Real 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. 5Real Estate Brokerage

43. 43 ©2010 Kaplan, Inc. 5Real Estate Brokerage Recent issues –Fee-for-services –Minimum level of services

44. 44 ©2010 Kaplan, Inc. 5Real Estate Brokerage Antitrust laws –Price-fixing –Group boycotting –Allocation of customers or markets –Tie-in (or tying) agreements –Penalties

45. 45 ©2010 Kaplan, Inc. 5Real Estate Brokerage Legal considerations and technology –Internet, Web Sites, e-mail –Internet advertising –Electronic contracting –Do-not-call registry