Chapter 1

Georgia Real Estate An Introduction to the Profession Eighth Edition Chapter 1 Introduction to Real Estate

Key Terms broker independent contractor license reciprocity license revocation license suspension licensee principal broker real estate commission real estate salesperson realtist REALTOR® sales associate © 2015 OnCourse Learning

Overview Real estate is a unique subject. No two situations are ever exactly alike.

Overview Experience has a high correlation with success in this business. This course combines explanations of the basic principles of real estate along with why things are done and how these principles apply to everyday activities.

How to Use The Textbook Key terms are listed at the beginning of each chapter Additional terms are set in italics throughout the text Review questions at the end of each chapter test you on your comprehension Answers are given in Appendix D in the back of the book © 2015 OnCourse Learning

Career Opportunities Residential Brokerage requires a broad knowledge of the community and its neighborhoods; an understanding of real estate principles, law and practice; and an ability to work will with people © 2015 OnCourse Learning

Career Opportunities Commercial Brokers specialize in income-producing properties such as apartment and office buildings, retail stores and warehouses. Industrial Brokers specialize in finding suitable land and buildings for industrial concerns. © 2015 OnCourse Learning

Career Opportunities Farm Brokers handle small farms along with large tracts of land owned by agribusiness corporations. College training in agriculture is an advantage and on-the-job training is a must. © 2015 OnCourse Learning

Career Opportunities Property Managers supervise every aspect of a property’s operations to produce the highest possible financial return over the longest period of time. A property manager’s tasks include renting, tenant relations, repairs and maintenance, accounting and advertising. © 2015 OnCourse Learning

Career Opportunities A Real Estate Appraiser gathers and evaluates all available facts affecting a property’s value. Appraisers in Georgia must be licensed. © 2015 OnCourse Learning

Career Opportunities Developers buy land, build homes and sell them to homeowners and investors. This can be done on a small scale or on a large scale. Urban Planners work with local governments and civic groups to anticipate future growth and land-use changes. © 2015 OnCourse Learning

Career Opportunities Mortgage Financing specialists can work independently or as an employee: Mortgage Brokers work independently. They receive a fee from the borrower for locating a lender. Loan Officers work as an employee of a lending institution. © 2015 OnCourse Learning

Career Opportunities Consulting involves giving others advice about real estate for a fee. A consultant must have a broad knowledge about real estate. © 2015 OnCourse Learning

Career Opportunities Investment Opportunities in real estate include: Apartment buildings Rental homes Underpriced properties Small-scale developer © 2015 OnCourse Learning

License Laws & Professional Affiliation License Requirements Property owners who deal only with their own property are not required to hold a real estate license. © 2015 OnCourse Learning

License Laws & Professional Affiliation A Real Estate License is required for any person who, for compensation or the promise of compensation, lists or offers to lists, sells or offers to sell, buys or offers to buy, negotiates or offers to negotiate, either directly or indirectly for the purpose of bringing about a sale, purchase or option to purchase, exchange, auction, lease or rental of real estate. © 2015 OnCourse Learning

License Laws & Professional Affiliation Rationale for Licensing The public has a vested interest in seeing that real estate salespersons and brokers have the qualifications of honesty, truthfulness, a good reputation and real estate knowledge before they are allowed to negotiate real estate transactions on behalf of others. © 2015 OnCourse Learning

License Laws & Professional Affiliation Rationale for Licensing All 50 states and the District of Columbia require that people who offer their services as real estate agents be licensed. © 2015 OnCourse Learning

License Laws & Professional Affiliation Loyalty, Honesty and Truthfulness The Georgia Real Estate Commission (GREC) has the power to refuse to issue a license to someone with a past history of dishonesty and untruthfulness. GREC can also suspend or revoke a license once it has been issued. © 2015 OnCourse Learning

License Laws & Professional Affiliation Loyalty, Honesty and Truthfulness As part of the application process, potential licensees must provide a criminal background check that is no more than 60 days old. © 2015 OnCourse Learning

License Laws & Professional Affiliation People Required to Be Licensed: Brokers Salespeople Appraisers Property Managers Community Association Managers © 2015 OnCourse Learning

License Laws & Professional Affiliation People Exempt from Being Licensed Property Owners Attorneys acting for a client Trustees, Receivers, Administrators and Executors acting under a will or trust Government employees dealing in real estate © 2015 OnCourse Learning

Real Estate Broker A real estate broker is licensed to act independently in conducting a real estate brokerage business. A broker can be an actual person or a business firm. If the broker is a firm, the person in charge must be a broker. © 2015 OnCourse Learning

Real Estate Broker A broker receives a fee, usually a commission, based on the selling price or lease rent. The broker may represent the buyer or the seller, or both at the same time with full disclosure. © 2015 OnCourse Learning

Real Estate Broker A broker may hire other brokers or salespersons for the purpose of bringing about real estate transactions. © 2015 OnCourse Learning

Salesperson A real estate salesperson works for a real estate broker to list and negotiate the sale, lease or rental of real property for others in exchange for compensation, under the direct supervision of an employing broker. A salesperson cannot operate independently. They must be employed by a broker. © 2015 OnCourse Learning

Salesperson When a salesperson takes a listing, they do so in the name of the broker. The salesperson is empowered to act on behalf of their broker through an independent agreement with the broker to sign on behalf of the firm. © 2015 OnCourse Learning

Sales Associate A sales associate refers to anyone with a real estate license who is employed by a broker. Someone who holds a broker’s license can work for another broker. They are licensed as an associate broker. © 2015 OnCourse Learning

Qualifications for Licensing Salesperson Examination Minimum age is 18 years old Must complete a 75-hour course The Georgia Salesperson exam consists of 152 multiple-choice questions A passing grade of 75% or higher is required © 2015 OnCourse Learning

Qualifications for Licensing Broker Examination Minimum age is 21 years old Must be actively licensed for 3 of the last 5 years Must complete a 60-hour course 10 graded computer simulation exercises © 2015 OnCourse Learning

Qualifications for Licensing Continuing Education Beginning in July 2015, the continuing education requirement will be 36 hours to renew a license. Georgia has a four-year license period. © 2015 OnCourse Learning

Licensing Procedure Applied Measurement Professionals (AMP) is the testing provider for GREC: www.goamp.com Exam cost is $115 Exam locations: Lilburn, Marietta, Savannah and Macon © 2015 OnCourse Learning

Licensing Procedure To become licensed, you will need: $170 certified check or credit card GCIC Background Report Notarized Lawful Presence Verification Document Sponsoring Broker Form © 2015 OnCourse Learning

Licensing Procedure Licenses must be renewed every 4 years to remain active. The license will lapse if it is not renewed before it expires. Licenses can be put on inactive status. The license must still be renewed every 4 years, but continuing education is not required until the license is reactivated. © 2015 OnCourse Learning

Licensing Procedure Many states will issue a nonresident license to out-of-state brokers. This is especially helpful when a broker is located near a state border. Some states will give credit for the national portion of the license exam already taken, requiring only the state portion of the exam. © 2015 OnCourse Learning

Licensing Procedure License Reciprocity is when one state honor’s another state’s license. Georgia has differing agreements of reciprocity with other states. Contact the real estate department of the state you are interested in for specific information. © 2015 OnCourse Learning

Licensing Procedure When brokers operate outside of their home state, they may be required to file a notice of consent with the secretary of state. This enables the secretary of state to receive legal summonses on behalf of the nonresident broker. © 2015 OnCourse Learning

Licensing the Business Firm A real estate broker can operate as a sole proprietorship under either the broker’s own name or a fictitious name. A broker can also operate in partnership with other brokers or as a corporation. © 2015 OnCourse Learning

Licensing the Business Firm Because a corporation is an artificial being, there must be a qualifying broker who accepts responsibility for the management of the firm. © 2015 OnCourse Learning

Licensing the Business Firm If the broker has multiple offices, it is not required that those offices have their own qualifying broker. It is required that the company provide adequate supervision. Each office will typically have a managing broker. © 2015 OnCourse Learning

Real Estate Regulation © 2015 OnCourse Learning

Real Estate Regulation The state legislature enacts laws addressing the licensing and regulation of real estate brokers and salespersons. The legislature also establishes the real estate commission. © 2015 OnCourse Learning

Real Estate Regulation The real estate commission deals primarily with adopting rules and regulations to implement the license law established by the legislature. In Georgia, the real estate commission has six members. © 2015 OnCourse Learning

Real Estate Regulation Five of the commission members are licensees, the sixth member is a non-licensed member of the general public. Members are appointed by the Governor and confirmed by the Senate. The commission meets monthly. © 2015 OnCourse Learning

Real Estate Regulation The commission hires a commissioner to oversee real estate regulation. The commissioner hires and supervises staff. Neither the commission nor any commission employee hold an active real estate license. © 2015 OnCourse Learning

Real Estate Regulation Real estate commission staff collect fees, issue licenses, investigate alleged malpractices and audit broker trust fund accounts. © 2015 OnCourse Learning

License Suspension and Revocation Without a real estate license, it is unlawful for a person to engage in real estate activities for the purpose of earning a commission or fee. Unless an agent has a valid license, a court will not uphold an agent’s claim for a commission from a client. © 2015 OnCourse Learning

License Suspension and Revocation Reasons for license suspension and revocation include: violation of the state’s real estate act misrepresentation undisclosed dual agency commingling acting as an undisclosed principal © 2015 OnCourse Learning

License Suspension and Revocation Licenses can also be revoked or suspended for: false advertising obtaining a license by fraud failure to account for a client’s funds practicing law without a license paying commission to unlicensed persons conviction of a felony or certain misdemeanors © 2015 OnCourse Learning

License Suspension and Revocation When the commission receives a complaint from someone regarding a licensee, the staff will conduct an investigation. If the commission decides to suspend or revoke the respondent’s license, the respondent has the right of appeal to the courts. © 2015 OnCourse Learning

Affiliating with a Broker A salesperson must have a broker to work for before the actual license will be issued. If you are new to the industry, training and education will be at the top of your list when looking for a broker. © 2015 OnCourse Learning

Affiliating with a Broker Compensation for salespeople is usually a percentage of the commission they earn for the broker. How much each receives is open to negotiation between the broker and each salesperson. © 2015 OnCourse Learning

Affiliating with a Broker Hold interviews with several brokers. You are interviewing them as much as they are interviewing you. © 2015 OnCourse Learning

Affiliating with a Broker An Employment Contract must be in writing and must stipulate how the agent will be compensated while they are with the broker and how they will be compensated when they leave the broker on transactions that have been started but not yet completed. A written agreement is required by Georgia law. © 2015 OnCourse Learning

Independent Contractor Status Sales associates act like an independent contractor because the associate it typically paid only if the associate brings about a sale that produces a commission. © 2015 OnCourse Learning

Professional Real Estate Associations REALTOR® is a registered trade name that belongs to the National Association of REALTORS® (NAR). It is reserved for the exclusive use of members of the National Association of REALTORS® © 2015 OnCourse Learning

Professional Real Estate Associations One of the most important features of the National Association of REALTORS® is its Code of Ethics. To be recognized as a REALTOR®, one must observe the ethical standards by which the industry operates. © 2015 OnCourse Learning

Professional Real Estate Associations The National Association of Real Estate Brokers is a national trade association representing minority real estate professionals. Members use the trade name Realtist. © 2015 OnCourse Learning

Review State Laws required to obtain a real estate license. © 2015 OnCourse Learning