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INSIGHTS
THAT ROCK
What Are
The Real Estate Licensing Requirements?
Though licensing varies from state to state, generally, a person
interested in obtaining a real estate salesperson license completes
at least two courses in basic real estate law. Upon successful
completion of these courses, a test is then administered by the
given state. The prospective real estate agent must, obviously,
pass this test. The new agent then must have their name attached
to a real estate agency that has a real estate broker. In many
states, the real estate agent is required to complete a specified
number of hours of continuing professional education over a given
period.
A real estate broker's licensing requirement is a little more
involved. A broker must pass an additional examination, have been
a real estate salesperson for a certain number of years (3 etc.)
and have completed a number of hours of real estate instruction.
An application with letters of recommendation are also part of
the process.
Real Estate
Commissions: How Do They Work?
One
thing that many homesellers do not realize is that real restate
commissions are negotiable. That's right, the average commission
is around 7% of the selling price and it is not uncommon to negotiate
the percentage down.
Once
you list your property with an agency they are considered the
"Listing" agency for your property. If the Listing agency
is also the one who sells your property, they receive the full
7% commission, which is normally split between the selling agent
and the broker. If the agent who listed your property is not the
one who sells it within his/her own agency, then the commission
is normally split into 1/3 (listing agent, selling agent and broker).
Should
your property be placed on the Multi-List, other real estate agencies
have the opportunity to sell your property. If your Listing agency
(Company A) does not make the sale, but another agency does (Company
B), then the commission is normally split into 1/4. One fourth
to the Listing Agent, 1/4 to the Listing Broker (Company A), 1/4
to the Selling agent, 1/4 to the Selling broker (Company B).
As
you can see, it is much more beneficial for the Listing agency
to list and sell your property since they would keep the entire
commission. These commissions also come into play when a property
has a low selling price. A Multi-List sale wouldn't result in
much of a commission for any of the agencies and possibly hurt
the interest to sell it.
How
does a lending institution determine if someone qualifies for
a mortgage?
Generally speaking, the following formulas are used as a basis
for their decisions, but other factors are also incorporated in
the analysis:
General Rule: A buyer cannot afford a piece of property
that has a purchase price that exceeds two and one-half times his/her
gross income.
Detailed Analysis: Mortgage payments, plus taxes and insurance
should not exceed 28% of gross pretax monthly income.
This is calculated as follows:
Mortgage Debt Service Ratio:
Principal + Interest + Taxes + Insurance/Gross Monthly Income
= (Should be 28% or less)
Detailed Analysis: Payments on all recurring debts, including
housing expense, should not exceed 38% of gross monthly income.
This is calculated as follows: Fixed Obligation Ratio:
Principal + Interest + Taxes + Insurance + Fixed Obligations/Gross
Monthly Income= (Should be 38% or less)
In the detailed analysis, both the 28% and 38% tests must be met.
How does a real estate appraiser value your property?
Generally speaking, there are several methods used to make this
determination. One method that an appraiser uses is one that almost
everyone attempts when the time comes to sell their property: A
comparison of sales in the local market.
Incorporated into this method are the location of the property,
the physical condition and features of the property and the dates
of sale of similar properties. The appraiser takes this information
into consideration and then performs an appraisal based upon the
cost of replacing or substituting the property.
This "Cost Approach" takes into consideration such areas as:
1) Current costs of constructing such a house or building.
2) What the value of the land would be if it were vacant.
3) Depreciation considerations.
If the property were income producing, the income potential of the
property would also be factored in.
Generally, a combination of these methods determines the appraised
value of a property though other factors are also involved.
Words That Rock The House!
'The house was covered with more mortgages than paint.'
George Ade, American humorous author and playwright
'If a man owns land, the land owns him.'
Ralph Waldo Emerson, American essayist, poet and philosopher
'Ne'er take a wife till thou hast a house and a fire to
put her in.'
Benjamin Franklin, American statesman, author, scientist, inventor
and philosopher
'Those who live in stone houses should not throw glass.'
Austin O'Malley, American oculist and writer
'Gambling promises the poor what property performs for the
rich - something for nothing.'
George Bernard Shaw, British dramatist, critic, novelist and social
reformer
'All reformers, however strict their conscience, live in
houses just as big as they can pay for.'
Logan Pearsall Smith, English essayist and critic
'My dwelling was small, and I could hardly entertain an
echo in it.'
Henry David Thoreau, American author and naturalist
'It is a mistake that there is no bath that will cure people's
manners, but drowning will help.'
Mark Twain, American humorous writer
'Men like to pursue an elusive woman, like a cake of wet
soap in a bathtub - even men who hate baths.'
Gelett Burgess, American humorous writer and illustrator
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