B428 Real Estate Day 3 Brokerage, Appraisal and Prelim Agreements.

B428 Real EstateB428 Real Estate

Day 3Day 3

Brokerage, Appraisal and PrelimBrokerage, Appraisal and Prelim

AgreementsAgreements

Power of AttorneyPower of Attorney

Authorizing another to act on your behalf.Authorizing another to act on your behalf.

Person is called “attorney in fact.”Person is called “attorney in fact.”

Must be in writing, signed and notarized.Must be in writing, signed and notarized.

Jed Clampett by Jethro Bodine, his attorney in factJed Clampett by Jethro Bodine, his attorney in fact

The durable power…The durable power…

TerminationTermination

Two Programs of OwnershipTwo Programs of Ownership

CondominiumsCondominiums

CooperativesCooperatives

Public RecordingPublic Recording

Interests in land are recorded on the Interests in land are recorded on the local level…local level…

County Recorder, County Clerk, County Recorder, County Clerk, County Registrar, Clerk of the Court County Registrar, Clerk of the Court or Bureau of Conveyances.or Bureau of Conveyances.

What is recorded?What is recorded?

DeedsDeeds MortgagesMortgages EasementsEasements Land ContractsLand Contracts OptionsOptions Mechanics LiensMechanics Liens Long-term LeasesLong-term Leases

Listing ArrangementsListing Arrangements

1.1. Open ListingOpen Listing

2.2. Exclusive AgencyExclusive Agency

3.3. Exclusive Right to SellExclusive Right to Sell

CommissionsCommissions

Remember: Remember: Commissions are Commissions are negotiable.negotiable.

Full CommissionFull Commission

Discount CommissionDiscount Commission

Flat FeeFlat Fee

The Net ListingThe Net Listing

Why would the book say that “ Net Why would the book say that “ Net listings are illegal in some states and listings are illegal in some states and frowned on by other real estate frowned on by other real estate regulatory agencies?”regulatory agencies?”

When Commissions/Fees are PaidWhen Commissions/Fees are Paid

1.1. Ready, willing and able buyer.Ready, willing and able buyer.

2.2. Compliance with signed listing Compliance with signed listing agreement.agreement.

3.3. Sale must be consummated.Sale must be consummated.

4.4. If sale is terminated by seller’s If sale is terminated by seller’s refusal to close, fee must still be refusal to close, fee must still be paid.paid.

Real Estate AssociationsReal Estate Associations

Local AssociationsLocal Associations National AssociationsNational Associations

• National Association of RealtorsNational Association of Realtors®®• National Association of Real Estate National Association of Real Estate

BrokersBrokers Multiple Listing ServicesMultiple Listing Services

Agency RelationshipsAgency Relationships

Seller AgencySeller Agency Buyer AgencyBuyer Agency SubagencySubagency Dual AgencyDual Agency

Duties of the Agent Duties of the Agent

To the Principal (the client)To the Principal (the client)

loyalty and honestyloyalty and honesty confidentialityconfidentiality

obedienceobedience accountingaccounting

full disclosurefull disclosure skillskill

To the Customer (third party, i.e. the buyer)To the Customer (third party, i.e. the buyer)

disclose agencydisclose agency provide good serviceprovide good service

avoid misrepresentationavoid misrepresentation provide provide informationinformation

present offers in timely waypresent offers in timely way

ValuationValuation

The most The most probableprobable price a property price a property shouldshould bring in a bring in a competitivecompetitive and and openopen market under all conditions market under all conditions requisite to a requisite to a fair salefair sale, the buyer and , the buyer and seller seller eacheach acting acting prudentlyprudently and and knowledgeablyknowledgeably, and assuming the , and assuming the price is not affected by price is not affected by undue undue stimulusstimulus..

Purposes for Setting ValuePurposes for Setting Value

Market ValueMarket Value Loan ValueLoan Value Insurance ValueInsurance Value Estate Tax ValueEstate Tax Value Tax AssessmentTax Assessment Eminent DomainEminent Domain Personal or Business Financial StatementsPersonal or Business Financial Statements Liquidation’Liquidation’ Property SettlementsProperty Settlements

Sales Comparison ApproachSales Comparison Approach

Sales Comparison Approach = Sales Comparison Approach =

Market ApproachMarket Approach

The assumption is that the informed The assumption is that the informed investor will not pay more than what investor will not pay more than what other investors have recently paid for other investors have recently paid for comparable properties.comparable properties.

Choosing Comparable PropertiesChoosing Comparable Properties

QualityQuality ConstructionConstruction SizeSize AgeAge LocationLocation Lease maturitiesLease maturities Lease termsLease terms

Income Capitalization Approaches*Income Capitalization Approaches*

Gross Income MultiplierGross Income Multiplier

Direct CapitalizationDirect Capitalization

Discounted Present ValueDiscounted Present Value

*The value has something to do with the property’s *The value has something to do with the property’s ability to produce incomeability to produce income

OptionOption

Irrevocable OfferIrrevocable Offer Seller bound to sell if option Seller bound to sell if option

exercisedexercised Supported by “separate Supported by “separate

consideration”consideration” When might an option be useful?When might an option be useful?

Options continued…Options continued…

Key terms:Key terms:

Option priceOption priceExercise priceExercise priceExpiration dateExpiration dateManner of ExerciseManner of Exercise

Contrast: Right of first refusalContrast: Right of first refusal

Things to Watch For in anThings to Watch For in an Earnest Money Agreement Earnest Money Agreement

PartiesParties Purchase PricePurchase Price

• Earnest MoneyEarnest Money• Existing LoansExisting Loans• Seller FinancingSeller Financing

3. Items included in the sale3. Items included in the sale 4. Title conveyed4. Title conveyed 5. Costs of Closing5. Costs of Closing 6. Inspection6. Inspection 7. Title Insurance7. Title Insurance 8. Time of the essence8. Time of the essence 9. Possession9. Possession 10. Default10. Default 11. Signatures11. Signatures

Purchase and Sale AgreementPurchase and Sale Agreement

Agreement to purchase and sell land Agreement to purchase and sell land to close on a future date.to close on a future date.

At the closing title is transferred in At the closing title is transferred in return for payment of the purchase return for payment of the purchase price.price.

AssignmentAssignment

Read Chapter 8Read Chapter 8

Do Review Questions 1-16, pages 114-116.Do Review Questions 1-16, pages 114-116.

Read Chapter 10, beginning on page 150 Read Chapter 10, beginning on page 150 thru 159.thru 159.

Do Review Questions 3,7,8,14 on pages Do Review Questions 3,7,8,14 on pages 169 and 170. 169 and 170.