- Person or company licensed to sell, buy, exchange or lease real property for others and to charge a fee for these services
- NOT a salesperson-employs salespeople
Salesperson, broker of record or associate broker
Real Estate Licensing and Registration Act and the State Real Estate Commission's Rules and Regulations
- Laws that govern how licensees provide real estate laws in PA
- 10 categories under the commission
Specializations Not Under Comission
- Property Management
- Subdivision and Development
- Home Inspection
- Counseling-Real Estate Brokers Only
National Association of Realtors (NAR)
- All realtors must be associated with NAR
- Realtors or Realtor Associates
National Association of Real Estate Brokers (NAREB)
- Members are known as realists
- Focus on Fair Housing Laws
Types of Real Property
- Residential-up to 4 units
- Commercial-business property including office space, shopping centers, etc
- Mixed Use-allows for two uses, commercial and residential in the same building
- Industrial-warehouses, factories, land in industrial districts and power plants
- Agricultural-farms, timberland, ranches and orchards
- Special Purpose-churches, schools, cemeteries, museums, gov't held lands
Supply and Demand
- When supply increases and demand remains stable, prices go down.
- When demand increases and supply remains stable.
- Supply is up, prices are lower
- Demand is up, prices increase
Supply and Demand in the Real Estate Market
- Uniqueness-no two parcels are identical
- Immobility-property can not be relocated to satisfy demand where supply is low. Buyers can not always relocated to areas with greater supply
Factors Affecting Supply
- Labor Force-a shortage of skiiled labor or building materials or an increase cost.
- High transfer costs, such as taxes and permit fees
- Construction mate-rials (costs)-Increased construction costs may be passed along to the buyer or tenants in the form of higher prices and increased rents that can further slow the market.
- Gov't Controls
- Gov't Fiscal polices
Factors Affecting Demand
- Employment Demands
- Wage Levels
Types of Housing
- Apartment Complexes
- Cooperative Lease-property lease through a corporation including shares of stock
- Planned Unit Developments (PUDS)
- Master planned communities-merge land uses as housing, recreation and commercial in one self contained development
- Converted use factories-factories, office buildings, hotels, schools and churches
- Retired Communities
- High Rise Developments--mixed use developments MUDs
- Manufactured Housing (Mobile Homes)
- How long a person wants to live in a particular area
- A person's financial situation
- Housing affordability
- Current interest rates
- Tax consequences of buying versus renting
- What might happen to home prices and tax laws in the future
- Two of the biggest factors when deciding to own or rent-mortgage terms and payment plans
- Federal Housing Administration(FHA) and the US Department of Veterans Affairs(VA) offer programs with low down payments and lower credit score requirements.
Ownership and Ability to Pay
- PITI-principal, interest, taxes and Insurance. Lenders base their decisions on this.
- Buyers must provide at least 10% of the purchase price as a down payment
- Mortgage payments, both principle and interest, plus taxes and insurance impounds could not exceed 28% of the gross income.
- Payments of all debts, including long term debt such as car payments, student loans or other mortgages could not exceed 36% of monthly income.
- Insurance premiums, utilities and routine are not included in the in the 36%, but are covered by the buyers 64% of the gross income.
- Properties value increases
- the total mortgage debt is reduced through monthly payments, the owner's actual financial ownership in the property, EQUITY
- Income tax deductions available to the home owners
Homeowners may deduct from their income some or all of the mortgage interest and certain other expenses.
Capital Gains Tax
- $500,000 is excluded from capital gains tax for profits on the sale of a principal residence by married taxpayers who file jointly
- $250,000 for single filers
- CAPITAL GAINS TAX-the difference between the original cost of the property and what it sells for today, minus certain expenses. Homeowners must have occupied the home for at least two of the last 5 years.
- Homeowners may deduct the following from their gross income:
- Mortgage Interest Payments on first and second homes
- Real estate taxes
- Certain loan origination fees
- Discount points
- Loan prepayment penalties
- Coverage and Claims-basic form and includes coverage against
- Fire or lightning
- Glass Breakage
- Windstorm or hail
- Riot or civil commotion
- damage from aircraft, vehicles and smoke
- Vandalism and criminal mischief
- loss of property removed from the premises when endangered by fire and other perils
- Broad Form covers
- Falling objects
- Damage due to the weight of ice, snow or sleet
- Collapsing of all or part of the building
- Bursting, cracking, burning, or building of a steam or hot-water system, etc
Coinsurance clause-Must cover 80% of the new replacement costs
Comprehensive Loss Underwriting Exchange (CLUE Report)
Database of claims history that enables insurance companies to access prior claims information in the underwriting and claims process
Federal Flood Insurance Program
- National Flood Insurance Act of 1968-enacted by Congress to help homeowners of property in flood prone areas by subsidizing flood insurance.
- Flood insurance is a separate policy and only covers damage due to flooding
- FEMA administers the NATIONAL FLOOD INSURANCE PROGRAM (NFIP)
- Not available through brokers.
Special Flood Hazard Areas(SFHA)
- Flood prone regions
- Federally funded loans require flood insurance
- MAY BE PURCHASED BY QUALIFIED BROKERS
- Cost of flood insurance affects the buyers financial rations, which in turn affect the price that the buyer can pay for the property.
- Eligibility is based on the community participation in the Community Rating System (CRS)-a voluntary incentive to encourage local gov't to take steps to to reduce flood losses, facilitate accurate insurance ratings and to promote the awareness of flood insurance issues.
What is Covered by Flood Insurance
- Defined by FEMA as as "general amd temporary condition of partial or complete inundation of tow or more acres of normally dry land or two or more properties from:
- An overflow on inland of tidal waves
- An unusual and rapid accumulation of run-off or surface water
- Mudflows or mudslides on the surface of normally dry land
- The collapse of land along the shore of a body of water (under certain conditions)
Advanced Purchased Required
Coverage is not effective until 30 days after the purchase of the policy
Information about Mind Subsidence Insurance
- Purchased through the DEP
- Limits damage to the to the structure
- Damage to the surrounding site is not covered, nor is personal property
- Bureau of Mines can provide information about the location of mines an help property owners evaluate the likelihood of mine subsidence.