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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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