Real Estate Exam Review

Commission Calculations

• Sales Price: 100% of the money transferred in a property sale.

• Broker's Commission:

  • If a broker receives 5% commission, the seller retains 95% of the money.

Calculating Commission

• To calculate the commission, multiply the sales price by the commission rate:

  • \text{Sales Price} \times \text{Commission Rate} = \text{Commission}

Calculating Sales Price

• If you know the commission and the commission rate but not the sales price, divide the total commission by the commission rate:

  • \frac{\text{Total Commission}}{\text{Commission Rate}} = \text{Sales Price}

Calculating Commission Rate

• If you know the commission and the sales price but not the commission rate, divide the commission by the sales price:

  • \frac{\text{Commission}}{\text{Sales Price}} = \text{Commission Rate}

Example 1

• A broker sells a residence for $485,000 and receives $26,675 as commission. What was the commission rate?

• Calculation:

  • \frac{$26,675}{$485,000} = 0.055 or 5.5%

Example 2

• Real estate transaction with two brokers sharing commissions equally.

• One broker receives $4,000, and the commission rate is 7%. What was the sales price?

• Since commissions are split equally, the total commission is 4,000 \times 2 = $8,000.

• Calculation:

  • \frac{$8,000}{0.07} = $114,285.71

Determining Sales Price to Achieve a Specific Seller Net

• A seller wants to net $50,000 from the sale, and closing expenses are $1,200, so the seller needs $51,200.

• The commission rate is 7%. What does the sales price have to be to achieve this net?

Steps:

• Calculate the percentage of money remaining after commission:

  • 100\% - 7\% = 93\%

• Divide the required net by the remaining percentage:

  • \frac{$51,200}{0.93} = $55,053.76, rounded up to $55,054.

Verification:

• Calculate the commission:

  • $55,054 \times 0.07 = $3,853.78, rounded up to $3,854

• Subtract the commission from the sales price:

  • $55,054 - $3,854 = $51,200

Another Calculation

• The list price on the property is $495,000.

• The seller received $420,000 after a 5% commission rate.

• What was the sales price?

Steps:

• Calculate the percentage of money remaining after commission:

  • 100\% - 5\% = 95\%

• Divide the seller's received amount by the remaining percentage:

  • \frac{$420,000}{0.95} = $442,105.26

Verification:

• Calculate the commission:
  * \$442,105.26 \times 0.05 = $22,105.26

• Subtract the commission from the sales price:

  • $442,105.26 - $22,105.26 = $420,000

Irrelevant Information

• Be aware of irrelevant information in the problem statements; not all provided details are necessary to solve the problem.

  • In the previous Example, the list price of $495,000 was irrelevant.

Commission Splits

• If commissions are split equally between two brokers, and you are given the amount one broker received, multiply that amount by two to find the total commission.

Homework

• Page 471 in the big book: Questions 8, 11, 20, 32 and 41.

• Answers are available on page 477 to check your work.

Closing Cost Example

• Page 274 shows closing costs totaling $9,712.10 and cash to close totaling $14.

• Page 275 itemizes these closing costs with columns for buyer and seller expenses.

Determining Commission Rate from Closing Disclosure

• If both brokers received $5,700 commission, how will we find the commission rate paid by the seller if the sales price is $180,000?

Solution

• Add the two commissions to find total commission paid
  * $5,700 \times 2 = $11,400

• Total Rate

  • \frac{$11,400}{$180,000} = 0.0633

  • About 6.3%

Unequal Commissions

• Broker Alpha receives $7,200, while Broker Omega (you) receive $5,700. Sales price $180,000.

• What was the commission rate charged to the seller?
  and what percentage was your commission rate?

Solution

• Add the two commissions to find total commission paid
  * \$7,200 + $5,700 = $12,900

• Total Rate

  • \frac{$12,900}{$180,000} = 0.0716

  • About 7.2%

• Find your commission rate percentage:

  • \frac{$5,700}{$180,000} = 0.0316

  • About 3.2%

Contract Law

Valid Contract (L.O.C.L.)

• To create a valid contract you must have "Luck"

• Legal: Legal purpose and legally competent parties.

• Offer & Acceptance: Offer needs to be set out and accepted.

• Consideration: How much money is the buyer offering?

• Consent: Consents between both parties must be given voluntarily without any influence.

Types of Contracts

• Valid: An agreement with all essential elements present.

• Void: Lacking one or more essential elements (never legal).

• Voidable: Appears valid but can be canceled by one party (statute of limitations to overturn is three years). Ex. Signing a contract under the influence.

• Executed: Fully completed.

• Executory: Still in progress.

Offer and Acceptance

• An offer is a promise made by one party requesting something in exchange.

• Acceptance is the seller promising to be bound by the exact terms proposed by that offer.

• Once an offer is changed, the offer is a counteroffer. The new counteroffer also needs to be accepted to create a contract.

• An offer may be revoked any time before it's accepted.

Time is of the essence

• Each element of the contract must be performed in the specified time.

Owner Financing

• Seller provides credit for all or part of funds.

• Also called land contract or installment contract.

• The Seller is the Vendor and The Buyer is the Vendee; Vendor needs to receive a down payment.

• Buyer takes possession & get an equitable title.

Termination of Seller Representation

• Purpose Fulfilled: Property is sold.
  * All confidential information must be maintained.

• Terms Expired: The Listing agreement has fully expired (90 day listing).

• Property Destroyed: House is no longer habitable.

• Operation by Law: The Bank comes (foreclosure) and takes it, Eminent Domains.

• Mutual Agreement: The owner and the seller mutually decide to cancel.

• Death or Incapacitation: Death of seller may or may not terminate, death of sales associates does not terminate the listing

Types of Listing Agreements

• Exclusive Right to Sell: The broker is guaranteed payment regardless of who finds the buyer.

• Exclusive Agency Listing: he seller hires a broker, but only to show that I'm serious about selling the house but i am competing with the owner.
  * If seller, brings the buyer, seller is not obligated to pay the broker commission.

• Open Listing: Several brokers, who ever brings the buyer first, gets paid.
  * This listing has the least amount of protected for getting paid.

• Net Listing: Illegal, taking advantage of the seller (all i need is $100,000 anything above that you can keep)

Novation

• Replacing a contract.

Fair Housing

• Civil Rights Act of 1866: Prohibits discrimination in housing based on race.

• HUD's Protected Classes: Race, Color, National Origin, Religion, Sex, Familial Status, and Disability.

State and Local Fair Housing Enforcement

• HUD refers Maryland fair housing cases to the Maryland Commission on Civil Rights, because Maryland law and enforcement have been judged to be substantially equivalent to federal law.

• Maryland Commission on Civil Rights handles all residential discrimination complaints

Property Characteristics & Market

Supply and Demand

• If supply of houses = demand of people, prices stay the same

• If have 10 houses and 20 people, the demand is greater than the supply = prices go up.
  * Buyers bid against each other.

• If supply is greater than the demand, the price comes down.

Characteristics of Land

• Immobile: It can't physically be moved.

• Indestructible: It's physically indestructible.

• Unique (Nonhomogeneity): They're not alike.

Real Estate vs Personal Property

• Real estate is land plus the house, land is immobile; Cannot move real property.

• Personal properties, can be moved around, but not real property.

Title

• Ownership.

Appurtenant

• Runs with the land, transfers to the new owner.

Changing Property Types

• An item of real property can become personal property through severance.

• Personal property can become real property through annexation.

Fixtures

• Anything attached to the house (radiators, kitchen cabinets etc.) are fixtures.

Trade Fixtures

• Personal property used in conducting a business in a rented space. e.g. personal property barber chair etc.

Trade Fixtures

• NOT removed is a session = acquiring new property.

Maria

• A court case is called in because you don't know if your fixture is personal or real (or not).

• Maria (Does this go with the house)
  * Method of attachment: Is it gonna cause major damage?
  * Adaptability of the Item:
  * Relationship between parties.
  * Intention: Did they agree?
  * Agreement of parties

• Did we have an agreement that the chandelier with the house.

Factors Affecting Supply

• Labor force & its availability.

• Material Costs.
  *(Govt Control) Monetary policy i.e Interest policy.

Brokerage

• Broker's compensation is specified in the contract.

Real Estate

• License laws and statutes of fraud, says that you gotta have written agreement to receive compensation.

Ownership

Title: A way of referring to ownership not a physical document.
*Alienation: You can do whatever you want as long as it' *s legal
*You can gift a property while living if you die.
Tenancy in Common: Divided share of estate in which each owner has an inheritable interest but can be divided.
Joint Tenancy:
*comes with the right of survivorship,
*if you do not want the person's heir.

• p-possessions

• i - interest - hold in an equal stake
  Time - same

• Title

*PIT (possession, interest, time and title), there’s two different types of Tennessee, Tennessee in commen, and Joint. So say I made that i want my person’s heirs Joint = non inheritable, while tennessee is inhertibile= to add that, you can change the deeds in the joint will be the tenants and commen.

Tenancy by Entirety(Married): The law sees them as on divided person.
*community property: 50/50 share equal partner

• If it was Separate property (inheritance), not shared you get to keep.
  *Trust
  A trustor is a person who created the trust (you want to do whatever with the trust. Trustee is a person that you hire to carry everything out. (Attorney)
  Living and testamente trust or what
  trust=will
  partners
  Rships of partnership .
  if they bring the money and decision it they have limited, you put 100 dollar business, the only benefits that have of what everyone else has of business business or decisions that limited has is
  a dividend when money corporation is also artificial .

condos
copretive 120 stock and you live whatever, town house , apartment.
township. you want own a property a state you can go there and forever use it or use it never.
3 types
state can hold one week every year
*A state/ State to hold that hold of 1/3 of the building
life state hold up to own a lot on that, the owner don't want to take back. The owner that want that comes with his son is cal remainder and it
an encubance an essment . some people dont like that.
a lane is to you get into you lane that is going
alice is not becaus can can take that back if dont no, you can take my permission when you. go to pick apple any. anytime, from my neighbor
encoumants is to find list pentent to tell if house is going take take. ⅕s to the to court. that is wat the titles that the tile companies gonna pull up
or government you will that is going

Types Of Deed

General Warrenty Good: (The buyer get the grace protection)
bargain to sell the deed or only is that no one and and Im taking it, because sale or because i
oo sale or because sale or tax is not
clain deed use something that does and what did is and a for you for me. this is the dats for the. ⅕s.

a d is always gonna be.
transfer is done will for what kind a the proccess is

if not proccess the.

Title search

Report is where all the documents and is going.
title good to transfer.
title Insurance biggest blessing if so happen you get in it you good.
if not you gotta pay
.
accsion
lane you again what is it.
l ane you again is w