Chapter 1
Introduction to the Real Estate
Business
The real estate business is more than just houses. As this
chapter says, “Real estate is big business,” and includes
commercial properties, condominiums, and open land in
addition to single-family homes.
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Introduction to the Real Estate Business
Learning Objectives
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Identify the various careers available in real estate,
and the professional organizations that support them
Describe the five categories of real property
Explain the operation of supply and demand in the
real estate market
Distinguish the economic, political and social factors
that influence supply and demand
Modern Real Estate Practice
17th Edition
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Introduction to the Real Estate Business
A Business of Many Specializations
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Brokerage
Appraisal
Property management
Financing
Subdivision and development
Home inspection
Counseling
Education
Modern Real Estate Practice
17th Edition
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Introduction to the Real Estate Business
Types of Real Property
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Residential
Commercial
Industrial
Agricultural
Special Purpose
Modern Real Estate Practice
17th Edition
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Introduction to the Real Estate Business
The Real Estate Market
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Supply and Demand
Factors Affecting Supply
Factors Affecting Demand
Modern Real Estate Practice
17th Edition
Chapter 2
Real Property and the Law
Many types of property define real estate’s “product.”
Land is one of the fundamental concepts of real estate, as
well as “improvements” in the form of houses and
outbuildings. The fence suggests the limits of ownership.
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Real Property and the Law
Learning Objectives
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Identify the rights that convey with ownership of real
property and the characteristics of real estate
Describe the difference between real and personal
property, and the various types of personalty
Explain the types of laws that affect real estate
Distinguish among the concepts of land, real estate
and real property
Modern Real Estate Practice
17th Edition
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Real Property and the Law
Land - The earth’s surface extending downward to
the center of the earth and upward to infinity,
including permanent natural objects
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Real Estate - Land at, above and below the
earth’s surface, plus all things permanently attached
to it, whether natural or artificial
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Real Property - The interests, benefits and rights
that are automatically included in the ownership of
land and real estate
Modern Real Estate Practice
17th Edition
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Real Property and the Law
Modern Real Estate Practice
17th Edition
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Real Property and the Law
Bundle of Legal Rights
Modern Real Estate Practice
17th Edition
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Real Property and the Law
Real Property Rights
Surface Rights
 Subsurface Rights
 Air Rights
 Water Rights
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Modern Real Estate Practice
17th Edition
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Real Property and the Law
Personal Property
All property that does not fit the definition of real property
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Manufactured Housing
Plants
Fixtures
Intent
Method of annexation
Adaptation to real estate
Agreement
Trade Fixtures
Modern Real Estate Practice
17th Edition
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Real Property and the Law
Characteristics of Real Property
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Economic Characteristics
Scarcity
Improvements
Permanence of investment
Location
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Physical Characteristics
Immobility
Indestructibility
Uniqueness
Modern Real Estate Practice
17th Edition
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Real Property and the Law
Laws Affecting Real Estate
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Contract law
General property law
Agency law
Real estate license law
Federal regulations
Federal, state and local tax laws
Zoning and land use laws
Federal, state and local environmental regulations
Modern Real Estate Practice
17th Edition
Chapter 3
Concepts of Home Ownership
A variety of housing types are available under the general
heading of “home ownership”: single family, small
multifamily residences, and high-rise condos.
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Concepts of Home Ownership
Learning Objectives
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Identify the various types of housing choices
available to home buyers
Describe the issues involved in making a home
ownership decision
Explain the tax benefits of home ownership and the
provisions of recent changes to the Tax Code
Distinguish the various types of homeowner’s
insurance policy coverage
Modern Real Estate Practice
17th Edition
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Concepts of Home Ownership
Types of Housing
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Apartment Complex
Condominium
Cooperative
Planned Unit Development (PUD)
Retirement Community
Modern Real Estate Practice
17th Edition
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Concepts of Home Ownership
Types of Housing
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Highrise Development
Converted-use Property
Manufactured Housing
Modular Homes
Time-share
Modern Real Estate Practice
17th Edition
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Concepts of Home Ownership
Housing Affordability
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Mortgage Terms
Ownership Expenses and Ability to Pay
Investment Considerations
Tax Benefits
Modern Real Estate Practice
17th Edition
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Concepts of Home Ownership
Homeowner’s Insurance
Coverage and Claims
Basic vs. Broad-form Policies
Liability
Coinsurance Clause
National Flood Insurance Program
Modern Real Estate Practice
17th Edition
Chapter 4
Agency
Real estate is an industry about property, but it’s also an
industry about people. The concept of agency is entirely
about people, and relationships between and among them.
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Agency
Learning Objectives
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Identify the various types of agency relationships
common in the real estate profession and the
characteristics of each
Describe the fiduciary duties involved in an agency
relationship
Explain the process by which agency is created and
terminated and the role of disclosure in agency
relationships
Distinguish the duties owed by an agent to his or
her client from those owed to customers
Modern Real Estate Practice
17th Edition
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Agency
Modern Real Estate Practice
17th Edition
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Agency
Modern Real Estate Practice
17th Edition
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Agency
Real Estate Agency
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Common-law history
Definitions:
 Agent
 Subagent
 Principal
 Agency
 Fiduciary
 Client
 Customer
 Nonagent
Modern Real Estate Practice
17th Edition
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Agency
Fiduciary Duties of an Agent
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Care
Obedience
Loyalty
Disclosure
Accounting
Confidentiality
Modern Real Estate Practice
17th Edition
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Agency
Creation and Termination of Agency
Creation
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Express Agency
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Implied Agency
Termination
 Completion, performance
or fulfillment
 Death or incapacity
 Destruction or
condemnation of the
property
 Expiration
 Mutual agreement
 Breach
 Operation of law
Modern Real Estate Practice
17th Edition
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Agency
Limitations on Authority
Universal Agent
General Agent
Special Agent
Empowered to do
anything the
principal could
do personally
Represents the
principal in a
broad range of
matters related
to a particular
business or
activity
Authorized to
represent the
principal in one
specific act or
business transaction under
detailed
instructions
Modern Real Estate Practice
17th Edition
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Agency
Types of Agency Relationships
Single Agency
 Subagency
 Seller Representation
 Buyer Representation
 Owner as Principal
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Modern Real Estate Practice
17th Edition
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Agency
Types of Agency Relationships
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Dual Agency
Disclosed Dual Agency
Designated Agency
Undisclosed Dual Agency
Disclosure Laws
 Nonagency
 Agency Statutes
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Modern Real Estate Practice
17th Edition
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Agency
Customer-Level Services
Reasonable care and skill in performance
 Honest and fair dealing
 Disclosure of all facts the licensee knows (or
should be expected to know) that materially
affect the value or desirability of the property
 State law may require additional services or
disclosures
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Modern Real Estate Practice
17th Edition
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Agency
Puffing
Misrepresentation
Exaggeration of a
property's benefits
Fraud: Intentional
misrepresentation of a
material fact to harm or
take advantage of another
Negligent Misrepresentation:
Broker should have known a
statement was false
Modern Real Estate Practice
17th Edition
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Agency
Property Conditions
Latent Defect
A hidden structural defect that would not be
discovered by ordinary inspection
 Stigmatized Property
Properties branded “undesirable” because
of actual or rumored criminal, tragic or
scandalous events that occurred on the
property
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Modern Real Estate Practice
17th Edition
Chapter 5
Real Estate Brokerage
A real estate brokerage is more than a room full of desks.
It’s a hive of activity, dependent on people, information,
and technology to keep the business running.
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Real Estate Brokerage
Learning Objectives
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Identify the role of technologies, personnel and
license laws in the operation of a real estate business
Describe the various types of antitrust violations
common in the real estate industry, and the penalties
involved with each
Explain how a broker’s compensation is usually
determined
Distinguish employees from independent
contractors and explain why the distinction is
important
Modern Real Estate Practice
17th Edition
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Real Estate Brokerage
Brokerage
The business of bringing parties together.
Real Estate Broker
A person licensed to buy, sell, exchange or
lease real property for others and to charge a
fee for these services.
Modern Real Estate Practice
17th Edition
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Real Estate Brokerage
Broker-Salesperson Relationship
A real estate salesperson is licensed to
perform real estate activities on behalf of a
licensed real estate broker
 Employee – broker may require employee to
follow rules for hours, attendance, etc.
 Independent Contractor – broker cannot
require specific office hours, attendance, etc.
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Modern Real Estate Practice
17th Edition
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Real Estate Brokerage
Technology
Computers and Laptops
 Internet, Web Sites, E-mail
 Cell Phones, Digital Cameras, PDAs
 Internet Advertising
 Security
 Electronic Contracting
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Modern Real Estate Practice
17th Edition
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Real Estate Brokerage
Broker’s Compensation
Commission is always negotiable
 Commission is usually earned when
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a completed sales contract has been executed by
a ready, willing and able buyer
the contract is accepted and executed by the
seller
copies of the contract are in the possession of all
parties
Modern Real Estate Practice
17th Edition
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Real Estate Brokerage
Broker’s Compensation
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Procuring cause
broker started a chain of events that resulted in a
sale
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Ready, willing and able buyer
one who is prepared to buy on the seller’s terms
and ready to take positive steps toward
consummation of the transaction
Modern Real Estate Practice
17th Edition
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Real Estate Brokerage
Salesperson’s Compensation
Amount and method of compensation is set by
agreement between the broker and the salesperson
Fixed salary
 Share of commission
 100% Commission Plan
 Graduated Commission Split
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Modern Real Estate Practice
17th Edition
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Real Estate Brokerage
Modern Real Estate Practice
17th Edition
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Real Estate Brokerage
Antitrust Laws
Price-fixing
 Group boycotting
 Allocation of customers or markets
 Tie-in agreements
 Penalties
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Modern Real Estate Practice
17th Edition
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Real Estate Brokerage
Recent Issues
Fee-for-Services
 Minimum Level of Service
 Do-Not-Call Registry
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Modern Real Estate Practice
17th Edition