REE 3043
Chapter 1
Welcome & Introduction
2. Syllabus Review
3. Class Overview (what we will cover)
4. Chapter 1 Why Study Real Estate?
- Definition of Real Estate & Special Characteristics
- The Market for Real Estate Knowledge
- Industry Trends and Statistics
5. Chapter 2: Legal Descriptions
- Metes and Bounds Method
- Rectangular Survey System
- References to Recorded Plats
1. Welcome
Fill out SEETING CHART
Introduce myself, from Berlin, (work in real estate)
Commercial (Taurus) & Residential license since 1994, broker since 2006
(Arvida, Michael Saunders, Coldwell Banker) in Sarasota
Ask students their background, when graduating, where do they live?
Has anybody worked in real estate?
Foreigners?
2. Syllabus
- discuss calculator, attendance, (team) projects, Sep 26, topic due!!!
guest speaker (Sep 12, property financing)
exciting times to study RE, look at CNN, Real Estate site.
Or zillow.com
Local info
Tampa
On left: home values
3. Class Overview
(we are not staying with the same order as the text)
4. Chapter 1 (The Market for Real Estate Knowledge) & Legal Descriptions
Definition of Real estate is: “Land and things attached to it”
not just surface of land but also area above and below, & water
(“Real” comes from the Spanish word for “royal”)
attached: you would need tools to remove.
things are tangible physical things as a house (not mobile)
or intangible: rights to security, right to use, right to air,
exception: mobile homes are often categorized as real estate for mortgage
purposes
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Special Characteristics:
- fixed location (different from all other types of economic resources, if
demand is high for apples in once country, more apples would be shipped
there and the price would stabilize), not so in RE, local demand and supply
forces will determine price.
- uniqueness
Most RE is unique or heterogeneous. Even 2 properties right next to each
other may be very different. That makes it hard to appraise sometimes.
-interdependence of land use
The use and therefore the value of a property depends greatly on the use of
nearby property, provisions of public service, and general economic
conditions of community. A beautiful lot on beach in Brazil may not have
much value because the neighboring area has not been developed yet. Or a lot
on the Bay in Bradenton has low value because a trailer park is adjacent. That
is why market analysis is important for anyone interested in a RE transaction.
- long life
RE has very long lives, lots exist for ever, unless a catastrophe occurs like a
hurricane, in Europe some houses last for centuries.
- long-term commitments
RE has long live and people who buy RE are committed for a long time.
Mortgages mature in for 30-40 years.
-large transactions
Average house $180,000, not a decision you enter into lightly. You have to
understand the rules and regulations so that you don’t get hurt financially. RE
business is generally highly regulated (except for mortgage industry – that is
why we had the sub-prime mortgage crisis).
- long gestation period
Long time to build, time between conception and completion
Economic conditions can change, RE development is risky, long-term
economic evaluation/market analysis is very important (look into the future).
Market for real estate
market: brings buyers and sellers of goods and services together
here it is the knowledge of real estate
or: a mechanism , circumstance or arrangement through with goods &
services are traded)
Where do supply and demand come from?
Demand: amount of goods and services desired at different prices
Demand for knowledge:
from individuals and businesses (=consumers) who buy and sell real estate
Need help from brokers, appraisers, title companies, mortgage brokers,
lawyers
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Supply: amount of goods and services available at different prices
Supply of Real Estate Knowledge:
From Universities (such as this class)
Private real estate schools (train brokers, agents) physical location or by mail.
Private companies to help individual investors: No Money Down
Trade groups and organizations: National Association of Realtors
Appraisal Institute
On-job training
How do they interact?
Draw chart:
P
Supply
Demand
Q
Higher demand, demand curve shifts to right, higher equilibrium price
Higher supply, supply curve shifts to rights, lower equilibrium price
-Trends and Statistics
Our purpose to study real estate: to make informed decisions regarding RE
Real Estate is very important
RE is single largest component of wealth in our society
Market value of non-government owned real estate $22 trillion (2002)
US publicly traded corporate equities: $13.3 trillion
RE generates 1/3 of US GDP, creates jobs for 9 million Americans
RE is source of 70% of local government revenues
-> Influences individuals & families, companies, governments & overall
economy
Case/Shiller Index the most widely used index for home values.
Height of the market was early 2006,
Now values back to 2002 levels (35% under the peak)
With the drop in values, many people could not afford to pay mortgages and
got forced into foreclosures. Sub prime ARMS were the riskiest and went into
default the most. More on the types of mortgages in a later chapter (in FL 8%
of all mortgages were in foreclosure in 2008)
Homeownership rate has dropped from 69% in 2006 to 66% in 2012 (Germany
only 42%).
New housing starts have decreases significantly since 2006, the development
industry was a hard hit (more on that in a later chapter on Real estate
development).
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Another important statistic: interest rates, that are at an all time low at below
5% for 30 year fixed rate loan. But people still cannot borrow as standards
have gotten tougher, people don’t have the down payment, or the necessary
credit score, and or are scared as they think values might drop even lower.
Chart: Statistics show the supply has increased! Now: over 2 mil employees
If equilibrium price has increased, the demand must have increased by more
than supply! Find out if equilibrium price has increased in HW!
Go over Excel Chart Income Statistics, how to make a chart!
Homework: Read Ch. 13 & 14
Visit the website for the US Bureau of Labor Statistics (www.bls.gov) and find the national
mean annual wages and employment for all occupations (00-000), real estate brokers (419021), salespersons (41-9022), property, real estate & community association managers (119141), and appraisers (13-2021) in the US for 2011. Display the wage statistics for all years in
the attached Excel table and calculate the % changes from 2010-2011 and 1998-2011. Then
create a bar chart displaying the wage (not the % change) data for all years. Make sure the
years are in the legend, i.e. are the series. Bring a printed copy of the table & chart to class.
NOTE: Search under “subject areas”, “employment”, “employment by occupation”, “OES
Tables”, then under “current tables: May 2011 estimates”, “National Cross-Industry”.
CH 2: Legal Descriptions p. 32-45.
Whenever a legal transaction involving RE occurs, legal description is
important. For example: sale of house: legal document used to convey
ownership from one party to another: deed is created. In mortgage also very
important
Existing legal descriptions: tax records: Sarasota county tax collector, real
estate
New descriptions: lawyer or certified land surveyor
1. Metes & Bounds
Original method: refers to corners and boundaries
Metes = are distances
bounds = are the directions of the boundaries of land.
Starting point, go at a certain direction for a certain distance to define the
boundaries of a piece of land. Reference point: a surveyor puts metal pin in
ground to define a point, or natural objects, monuments: Indian mount or rock
or tree could be used (particularly in the old days)
Good for irregular parcels
POB = point of beginning = ending point
Metes = Distance: measure in feet
Bounds = Direction of boundary: angles (degree, minutes, and seconds)
360 degrees to a circle
4 quadrants: NE, SE, SW, NW
1 quadrant = 90 degrees
1 degree = 60 minutes
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1 minute = 60 seconds
Example:
Beginning at an iron pin on the northern side of Cambero Street 20 feet due
East of the northeastern corner of the intersection of Travieso and Cambero
Street, as measured along the northern side of Cambero Street , running
thence N. 30° 15’ 10” E. 300 feet to an iron pin, running thence due East 150
feet to an iron pin, running thence S. 30° 15’ 10” W. 300 feet to an iron pin,
running thence due West 150 feet to the point of beginning.
2. Rectangular Survey System
Started after the Revolutionary War, during the westward movement and was
needed to describe vast lands. Good to describe large areas of land & parcels
that are very regular/square/rectangular.
In land west of Mississippi, excluding Texas, including FL use this method.
Principal meridians (N-S), strips 6 miles wide, west and east are “range lines”
Base lines (E-W), strips 6 miles wide north and south are ‘township lines”
range and township lines form a township = basic unit in the rectangular
survey system, 6 x 6 miles, 36 square miles (Note: 1 mile = 5,280 feet)
each township is divided into 36 sections, 1 square mile = 640 acres
each section is divided into quarters, each quarter into quarter
Areal photographs show which method of land survey was used
metes-and bounds: random pattern
Rectangular survey system: even patchwork patters
Example: The parcel is in the southwest quarter of the southeast quarter of
Section 14 in Township 43 South, Range 34 East of the Tallahassee Principal
Meridian.
A combination of metes and bounds and rectangular system is often used.
Rectangular system describes accurately large areas of land, for example farm
land. But in communities with subdivisions metes and bounds is more
accurate. In new developments out West a combination is appropriate.
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3. Reference to Recorded Plats
alternative and supplement: engineers drawing of parcels of real estate called
plats, recorded as part of public record
plats show streets, blocks (or tracks), lots
shows distance and direction of boundaries (integrates metes and bounds
method)
parcels are referred to a lot within a block (or track) of a subdivision.
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