Amk - Florida Real Estate

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Statues and Rules Important to Real Estate
Part III of Chapter 475

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the commercial Real Estate Sale Commission Lien Act, gives a broker lien right for earned commission. This act applies only to commercial property (not residential property). The lien is only against the owner's net proceeds (personal property) from the sale and does not attach to the commercial real property.

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Florida Statue 455

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Licensees who fail to cooly with the provisions of this chapter can be disciplined by the FREC. For example, Section 455.227 FS, authorizes the Commission to discipline a real estate licensee who has failed to notify the DBPR within 30 days of a conviction, finding of guilt, plea, or adjudication of a crime, regardless of whee the even occurred.

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License Application

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A social Security number is required to apply for a real estate license. In the Full Legal Name section of the license application, applicants must enter their name as it appears on the SSC. FL law requires that an applicant's SSN be disclosed on all professional license applications. The SSN is used to determine whether applicants are in compliance with child support obligations.

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Post-licensing education

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Sales associates who do not complete the 45-hour post-licensing requirement and want to continue in the real estate business are required to requalify for licensure by repeating the prelicense course and end-of-course exam and by again passing the state-licensing exam.

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Broker Experience Requirements

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Broker Experience Requirements – To fulfill the experience requirement, a broker applicant must have held an active real estate license for at least 24 months during the five-year period proceeding application to become a Florida real estate broker. A broker applicant can fulfill the experience requirement in one of three ways:
1. The applicant has held and active sale associate license under one ro more real estate brokers for at least 24 months during the five-year period preceding application to become a FL real estate broker. The employment can be under a Fl real estate broker or a broker licensed in another state or in any foreign jurisdiction.
2.The applicant held an active sales associate license while working as a salaried employee of a governmental agency and performing the duties authorize in Chapter 475, for at least 24 months during the five year period preceding application to become a Fl real estate broker.

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Individuals who are exempt from a real estate license

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A person who has been given a power of attorney (called an attorney-in-fact) in order to sign contracts and conveyances on someone’s behalf. A person cannot appoint another individual as an attorney-in-fact for the purpose of conducting real estate services for others (a.k.a. a person appointed by a court of law).

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The Florida Real Estate Commission (FREC) - Composition and Qualifications

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The Florida Real Estate Commission (FREC) consists of seven members. Five of the members are professional (licensed) members of which:
• Four must be Florida real estate brokers who have held active licenses during the five years proceeding appointments
• One must be either a Florida real estate broker or sales associate who has held an active license during the two years preceding appointment.
• Two remaining members are consumer (unlicensed) members who have never been real estate brokers or sales associates.

All FREC members are exempt from civil liability while performing in their official capacity. At least one of the seven members must be 60 years of age or older, but not including at least one member who has held an active sales associate status for at least 3 years.

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Department of Business and Professional Regulation (DBPR)

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The DBPR is the agency charges with licensing and regulating business and professionals in Florida. The DBPR is under the executive branch of the governor, and it is governed by Chapter 120.
The chief administrator of the DBPR is the secretary of the DBPR, who is appointed by the governor, subject by the state Senate.

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Licence Renewal
- Armed Forces Exemption

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The DBPR may issue a temporary real estate license to the spouse of an active duty member of the armed forces who is assigned to duty in Florida. The spouse must hold a valid real estate license in another state or foreign jurisdiction. A temporary license expires six months after the date of issue and is not renewable.

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General Agent

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A sales associate is a general agent of the employing broker.

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Residential Transaction

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A residential sale is defined as the sale of improved residential property of four or fewer units, the sale of unimproved residential property intended for use as four or fewer units, or the sale of agricultural property of 10 or fewer acres. The disclosure requirements do not apply to:
• Non-residential transactions
• The rental or leasing of real property, unless an option to purchase all or a portion of the property improved with four or fewer residential units is given
• Auctions
• Appraisals
• Dispositions of any interest in business enterprises or business opportunities, except for property with four or fewer residential units

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Transaction Broker Relationship
- One of the seven duties of a transaction broker in this limited form of representation is Exercise limited confidentiality:

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Exercise limited confidentiality -- unless waived in writing by a party. This limited confidentiality will prevent disclosure that the seller will accept a price less than the asking or listed price; that the buyer will pay a price greater than the price submitted in a written offer.

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Single Agent Relationship

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Single agent is a broker who represents, as a fiduciary, either the buyer or the seller, but not both, in the same transaction. In a single agent relationship, the seller (or the buyer) is the principal and the real estate broker is the agent. The term principal used to mean the party with whom a real estate licensee has entered into a single agent relationship.

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Advertising Key Concepts
- example

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Advertising: If the phone number of the licensee appears directly below the company name (or directly next to it), it gives the appearance that it is the brokerage phone number. To prevent someone from considering this ad misleading, the licensee, after identifying the brokerage, should make it clear that the phone number is the licensee’s personal number and not the brokerage firm’s main business number.
Ex. of correct ad: “Spacious 4BR, 3BA home in Crystal Pines Subdivision. New roof July 2013. Home is on wooded lot. Excellent Realty. Call Alfonzo “Fonzie” Lombardi, (mobile) 333-222-4444.”

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Escrow and Trust Accounts:
- Immediately Defined --Time line to deposit escrow funds:

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Time line to deposit escrow funds: Must be a timely deposit (immediately). Sales associate must deliver funds to broker by the end of the next business day and the broker must deposit the money no later than the end of the 3rd business day from the date the money was received by the sales associate.
Ex.: If a sales associate receives escrow funds on Tuesday, he has until the end of the next business day (Wednesday) to deliver the check to his broker. The broker has until the end of the 3rd business day to deposit the funds (no later than Friday).

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Escrow and Trust Accounts:
- Title Company and Attorney Escrow Accounts

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No later than 10 business days after each deposit is due under the terms of the sale contract, the licensee’s broker must request written verification of receipt of the deposit.

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Notice and Settlement Procedures
- Conflicting Demands
--- ARBITRATION

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Arbitration is a process whereby, with the prior written consent of all parties to the dispute, the matter is submitted to a disinterested third party. Each side presents its case to a third party, who makes a binding judgment in favor of one side or the other. The parties must agree in advance to abide by the arbitrator’s final decision.

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Notice and Settlement Procedures
- Conflicting Demands
--Escrow disbursement order (EDO)
-----------exceptions to the notice and settlement procedures--------------

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There are three exceptions to the notice and settlement procedures for sales escrow accounts: One is…if the buyer of a residential condominium unit timely delivers to a licensee written notice of the buyer’s intent to cancel the contract as authorized by the Condominium Act, the licensee may return the escrowed property to the purchaser without notifying the Commission (FREC) or initiating any of the settlement procedures.

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Business Entities that nay NOT registered as Brokers

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Business Entities: A corporation sole (church) cannot be registered as a real estate broker.

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Personal Assistent (Real Estate Brokerage Operation)

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Unlicensed personal assistants may not be paid commission or compensated on a transactional basis. Unlicensed personal assistants are considered employees of the sales associate. An hourly salary is ok to be paid by the sales associate. All commission must be paid by the broker to a licensed sales associate. If the personal assistant was licensed, than commission is ok.

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Moral Turpitude

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Moral turpitude is conduct contrary to honesty, good morals, justice, or accepted custom. Embezzlement and crimes of larceny (unlawful taking of another person’s property), including writing bad checks, are generally considered moral turpitude.

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Complain Process
-- Step 7: Judicial Review (Appeal)

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Judicial Review (Appeal): This is the 7th step in the complaint process. The licensee-respondent may challenge the final order within 30 days by filing an appeal. The petition of judicial review (notice of appeal) must be filed with the DBPR and with the appropriate district court. The licensee may request a stay of enforcement. A stay of enforcement, if granted, stops the enforcement of a suspension or revocation in the final order pending the outcome of the appeal process.

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Types of Penalties
- Administrative Penalties

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Types of Penalties: Administrative Penalties (FREC or DBPR) – Possible administrative penalties imposed by the FREC include denial of the application for a license; refusal to recertify a license for renewal; revocation of a license; suspension of a license for not more than 10 years; a fine not to exceed $5,000 for each separate violation of Chapters 455 and 475; and probation, reprimand, or other penalty (for example, publication of the disciplinary action taken against a licensee and the requirement to complete additional education). The FREC may, in addition to other disciplinary penalties, place a licensee on probation. FREC cannot require restitution to an injured party.

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Types of Penalties
- Administrative Penalties -- note on citation

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Licensees receiving a citation have 30 days to accept or reject the alleged violation(s), as specified in the citation. If a licensee doesn’t dispute the matter, the citation penalty will become effective (a final order) and the case will be closed.

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Types of Penalties
- First-Degree Criminal Penalties

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There is one violation of real estate license law that is a first-degree misdemeanor: failing to provide accurate and current rental information or a fee.
The penalty for a first-degree misdemeanor is a fine of not more than $1,000 and/or up to one year in jail.

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Key Concepts of Recovery Fund

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Punitive damages and interest cannot be reimbursed from the fund.
A broker who complies with an escrow disbursement order and is later sued may be reimbursed from the fund without penalty.

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Real Estate Recovery Fund
- Claim resulting from an EDO (Escrow Disbursement Order):

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If a broker who complied with an escrow disbursement order is later required by a court of law to pay damages as a result of legal actions taken by the buyer or seller in the transaction, the FREC (Commission) is authorized to order reimbursement to the broker for the amount of the judgment against the broker up to $50,000.

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Federal Fair Housing Law
- Activities Prohibited

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Use the entry, or rumor of the entry, of a protected class into a neighborhood to persuade owners to sell (commonly known as blockbusting).

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Federal Laws Regarding Land and the Environment
- Interstate Land Sales Full Disclosure Act
---Registration Requirements

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The law requires developers to register their developments with HUD and to disclose to prospective buyers important facts regarding their real estate. The law has two components including…the registration requirement. Land developers must register subdivisions of 100 or more lots by filing a statement of record with HUD.

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Federal Laws Regarding Land and the Environment
- RESPA Disclosures at Time of Loan Application or Within Three Business Days:

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When borrowers apply for a mortgage loan, they must be given certain disclosures including a good-faith estimate (GFE) of closing (settlement) costs, listing the charges the buyer is likely to pay at closing. The standardized GFE facilitates shopping among settlement service providers. If the lender allows the borrower to shop for third-party settlement services, the lender must provide the borrower a list of acceptable service providers.

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Florida Residential Landlord and Tenant Act
- Deposits and Advance Rents (AMK #2)

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When money is given to a landlord as a security deposit or advance rent, the landlord is obligated to account for such deposits in one of three ways including:
1. Hold the money in a spate non-interest-bearing Florida bank account and not commingle, hypothecate (pledge as security for a debt), or use any such funds until due to the tenant.
2. Hold the money in a separate interest-bearing Florida bank account and pay the tenant at least 75% of any annualized average interest rate or 5% per year simple interest, and not commingle, hypothecate, or use any such funds until due to the tenant.
3. Post a security bond with the clerk of circuit court in the county in which the rental property is located in the total amount of the security deposits and advance rents or $50,000, whichever is less, and pay the tenant 5% per year simple interest.

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Florida Residential Landlord and Tenant Act
- Vacating Premises

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When a tenant vacates a rental unit at the end of a lease agreement, the landlord must abide by certain time restrictions as follows:
- The landlord has 15 days to return the security deposit and any accrued interest, if applicable, provided the landlord does not intend to make a claim on the security deposit.
- The landlord has 30 days to notify the tenant if the landlord intends to impose a claim on the deposit.

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Water Rights
- Reliction

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Reliction is gradual receding of water, uncovering additional land (the new land usually belongs to the landowner of the area that was previously covered by water).

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Nature of property
- Test for Fixtures: IRMA

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I – Intent of the parties
R – Relationship between parties
M – Method of annexation
A – Adaptation of the article

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Nonfreehold or Leasehold Estates
- Tenancy At Will:

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Florida statue refers to this as a tenancy without specific term. Tenancies at will may be written in oral agreements. Notice for termination of tenancies at will is set in statute and is based on the time interval between rent payments:
- Week to week – 7 days notice
- Month to month – 15 days notice

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Nonfreehold or Leasehold Estates
- Tenancy in Common

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When two or more persons wish to share the ownership of a single property, they may choose to do so as tenants in common. Tenants in common may acquire title at different times or at the same time. As tenants in common, each owns an “undivided interest” in the property. An undivided interest is interest in the entire property, rather than ownership of a particular part of the property. For example, Sally and Kathy own a house as tenants in common. Sally holds two-thirds interest in the entire property, and Kathy owns one-third interest in the entire property. When Sally and Kathy die, their interest in the property will descend to their heirs. On Sally’s death, her two-thirds interest in the property will descend to her legal heirs (or as instructed by her will).

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Special Ownership Interests
- Homestead

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Homeowners in Florida (including single persons) may homestead their permanent (principal) residence. The FL Constitution grants certain protections and benefits to the homestead:
• Protection of the homestead – Homestead property is protected from forced sale to satisfy judgment liens for debts owning to personal loans, credit card debt, and so forth.
• Size of the homestead – The size of the homestead property is restricted to 160 acres of contiguous land and improvements outside a municipality (city) or up to ½ acre of contiguous land and improvements if the property is located within the city.

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Cooperatives, Condominiums, and Time-Sharing
-Condominium
-- Disclosure and Cancellation Period

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Developers of 20 or more new residential units must also prepare a prosecutes and file it. A copy of the prosecutes must be given to prospective purchasers.

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Deeds
- Elements of a Deed (AKA is I )

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The deed must be dined by a competent (of sound mind and legal age) grantor and witness by two people to be valid. The grantee need not be competent nor sign the deed.
CEDDING
C – Consideration (valuable or good)
E – Execution (signed by a competent grantor and two witnesses)
D – Description of property
D – Delivery and acceptance (voluntary)
I – Interest or estate being conveyed (habendum clause)
N – Names of a grantee and grantor
G – Granting and other appropriate clauses

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Condition of Title
- types of title insurance

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There are two types of title insurance: Owner’s policy and Lender’s Policy
Lender’s policy - Unlike the owner’s title insurance, the lender’s title insurance is transferable. If the mortgage lender sells the mortgage to another investor, the title insurance is assignable to the new mortgagee.

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DEEDS
- Clauses in a Deed
-- Habendum clause

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One is the habendum clause, so named because in medieval times it began with the Latin phrase habendum et tenendum (“to have and to hold”), limited the estate or tenancy being conveyed. Today, the habendum clause starts with the words “to have and to hold.” Then, usually the word “forever” follows if the estate is fee simple or the words “for the life of the grantee” if it is a life estate. Any other restrictions or limitations on the property’s use, such as reservation by the seller to retain mineral rights to the land, are usually entered before or after the habendum clause.

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Statutory Deeds
- General Warranty Deed

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(Full Covenant and Warranty Deed): Contains three unique covenants in addition to the covenant of seisin (the promise that the grantor owns the property and has the right to convey title/is not in a quick claim deed) and the covenant against encumbrances including:
1. Quiet enjoyment – guarantees peaceful possession undisturbed by claims of title. Further assurance guarantees the grantor will sign and deliver any legal instrument that might be required to make the title good in the future.
2. Warranty forever – guarantees the grantor will forever warrant and defend the grantee’s title against all lawful claims

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Ownership Limitations and Restrictions
- Types of Lease Agreements

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Types of Lease Agreements:
Net lease – the tenant (lessee) pays fixed rent plus property costs such as maintenance and operating expenses (taxes, insurance, and utilities). Net leases are typically used on commercial property. The terms net, net-net, and triple-net are often used in commercial real estate. The number of “nets” indicates that the tenant is assuming more and more of the expenses. In a triple-net lease, the tenant pays all operating and other expenses in addition to the fixed rent. These expenses include taxes, insurance, assessments, maintenance, utilities, and other charges associated with the property.

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Lien Priority
- Junior Lien

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The priority of junior liens is based on the date of recording in the public records. The priority of most liens is the date and time the lien was recorded in the public records. Four important junior liens are:
1. Mortgage liens
2. Judgment liens
3. Vendor’s liens
4. Income tax (IRS) liens

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Range and Township

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Range – up and down (vertical – runs north/south) range lines parallel to the principal meridian (PM) every 6 miles
Township – right to left (horizontal – runs east/west) township lines run parallel to the base line (BL) every 6 miles

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Description by Lot and Block Numbers

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Probably the most common type of legal description used for single-family dwellings located in developed subdivisions is the lot-and-block method of land description. The lot-and-block method can be used only where plat maps have ben recorded in the public records (also called plat method, description by recorded plat, or description by recorded map).

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Tax Maps

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1 acre = 43, 560 sq. feet
For example, a property costs $21, 780 per acre. What is the cost per square foot of the property?
21,780 ÷ 43,560 = $0.50 per sq. ft.

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Essentials of a Contract

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A valid contract is one that complies with the provisions of contract law and contains four essential elements:
• Competent parties
• Offer and acceptance (mutual assent)
• Legal purpose
• Consideration (good or valuable)

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Essentials of a Contract
- Legal purpose

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The provisions spelled out in a contract must not be prohibited by law. For example, a sale and purchase contract (or sale contract) that provides for payment of commission to an unlicensed person is a contract with an illegal purpose. The contract would be enforceable in a court of law.

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Statute of Frauds

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Requires that contracts conveying an interest in real property and contracts that are not to be performed within one year of the date created must be in writing and signed to be enforceable. An enforceable contract is a legally binding contract that the courts will recognize. Contract covered by FS of frauds include the following:
- Purchase and sale contracts
- Option contracts
- Deeds and mortgage instruments
- Lease agreements for a term longer than one year
- Listing agreements for a term longer than one year

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Statue of Limitations
(Amount of TIME the contract is inforced)

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designates the period of time during which the terms of a contract may be enforced. It protects people from being compelled to perform or otherwise be sued after a period of time has expired. The times vary, depending on whether it is an oral contract or a written contract:
• Written contracts – five years
• Oral contracts – four years
• Partly written and partly oral – five years for the written portion and for years for the oral portion

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Remedies for Breach of Contract
- Special performance

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Court orders the other party to perform according to the terms of the contract.
If awards of money damages do not afford sufficient relief, the wronged party may sue for specific performance to have the courts force the other party to perform as the contract specifically states. The action is termed a relief in equity because such judgments are awarded in a court of equity.

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Type of Listing
- Exclusive-Agency Listing

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A seller gives an exclusive-agency listing to one broker who handles the transaction. The seller reserves the right to sell the property without paying a commission, unless the buyer was introduced to the property by the broker or others acting under the broker. If the broker or another person acting under the broker’s authority sells the property before the seller is able to do so, the broker is entitled to commission.

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Lead-Based Paint

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When purchasing or renting pre-1978 housing, the Residential Lead-based Paint Hazard Reduction Act requires that sellers must allow homebuyers a 10-day period during which to conduct an inspection for the presence of lead-based paint (sellers are not required to pay the cost of the inspection).

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Homeowners Assoc. Disclosure Summary

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In addition to providing the Homeowners Assoc. Disclosure Summary, the contract for sale and purchase must state that the right to void the contract cannot be waived by the buyer. (The right terminates at closing.)

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Assignment of Mortgage

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When ownership of a mortgage is transferred from one company or individual to another, it is called an assignment. This process is accomplished by executing an assignment of mortgage. The assignment of mortgage is a legal instrument stating that the mortgage assigns (transfers) the mortgage and promissory note to the purchaser.

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Mortgage Clauses
- Subordination

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Subordination – lender agrees to step down in priority of the lien (allows another mortgage priority)

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Types of Mortgage Loans

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A conventional loan is one that is not insured or guaranteed by a government agency. The lender assumes the full risk of default in a conventional loan. Nonconventional loans include FHA-insured and VA-guaranteed loans. Nonconventional loans typically require a smaller down payment compared with conventional loans because with nonconventional loans, the government provides some risk protection to the lender.

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Types of Mortgage Loans
- FHA
-- Section 203(b) Loan Program
--- Mortgage Insurance Premium

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The FHA insures mortgage loans to protect lenders in the event that borrowers default. The FHA is the largest government insurer of mortgages in the world. The cost of the mortgage insurance is passed on to the borrower.

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Types of Mortgage Loans
- FHA
-- Section 203(b) Loan Program
--- FHA 203 (b) Loan Limit

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To make sure that FHA loan programs serve low and moderate income households, FHA sets limits on the amount that can be borrowed based on area home values. For example, for the year 2012, the maximum FHA loan for a single-family residence in Gainesville and Tallahassee was $271,050. However, in Orlando the maximum FHA loan was $353,750 and $423,750 for an FHA loan to purchase a single-family residence in Fort Lauderdale and Miami. Lenders make FHA-insured loans in even $50 increments. FHA sets maximum mortgage amounts.

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Types of Mortgage Loans
-Veterans Affairs Mortgage
---VA Loan Guarantee

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The VA establishes loan guarantee limits referred to as the VA loan guarantee or the maximum entitlement. The 2011 maximum entitlement (guarantee) is $104,250. A veteran’s entitlement is the maximum amount the government guarantees the lender will be paid in the event the borrower defaults.

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Types of Mortgage Loans
-Veterans Affairs Mortgage
--Assumability of VA Loans
----Other Loan Features

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Down payment are not required on VA Loans (except as noted above and for the purchase of manufactured homes).

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Subcategories of Mortgages
- Amortized Mortgage

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Although the borrower pays the same amount each month, on a fixed-rate mortgage, the portion used to pay interest decreases each month, while the portion used to repay principal increases each month. On a 30-year fixed-rate mortgage, the payments during the first few years are used almost entirely to pay interest; payment during the last few years are almost entirely principal repayment.

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Other Types of Financing
- Adjustable-Rate Mortgage
--- Margin

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Margin (or spread) is the percentage added to the index. It’s the lender’s estimated overhead costs (cost of doing business) and profit. The margin percentage remains constant over the life of the loan.

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Mortgage Loan Underwriting
-Lean to Value Ratio

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The loan-to-value (LTV) is the relationship between the amount borrowed and the appraised value (or purchase price) of a property.

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Loan-to-Value Ratio Formula

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• Loan amount ÷ price (value) = loan-to-value (LTV) ratio
• Example: A home was purchased with a down payment of $36,000 and a loan of $200,000 at 6.5% for 30 years. Monthly payments are $1,264.14. What is the LTV ratio?
• $200,000 loan ÷ $236,000 purchase price = .84745 or 85% LTV ratio

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Federal Regulatory Bodies
--Federal Reserve System

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Federal Regulatory Bodies: Federal Reserve System
The Fed uses three economic tools (or methods) of monetary policy. The Fed’s principal and most effective tool for implementing monetary policy is open-market operations. Open-market operations involve the purchase and sale of U.S. Treasury and federal agency securities. The purchase or sale of these securities results in an increase or decrease of money in circulation.

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Primary Mortgage Market
- Commercial Banks

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CB's are chartered by either a state or the federal government (called national banks). National banks are supervised by the Office of the Comptroller of the Currency and are members of the FRS.

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Secondary Mortgage Market
- Ginnie May

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Mortgage-backed securities are the only MBSs to carry the full faith and credit guarantee of the U.S. government.

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Lenders Charges
- Mortgage Discounting

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: Lenders use computers or prepared tables to determine the number of discount points that must be paid. However, as a general rule of thumb, each discount point paid to the lender will increase the lender’s yield (return) by approximately ⅛ of 1% (0.00125). When using the rule of thumb, for each discount point charged by a lender, add ⅛% to the stated (contract) mortgage interest rate to estimate the lender’s yield (add cost to the borrower) from the loan.
Ex. 2 points is figured by ⅛ x 2 = 2/8 which reduces to ¼