Posted by admin on May 18, 2010 under Real Estate License Basics | 
In this installment of the Real Estate Basics series we will review buyer qualification. How to properly qualify a buyer will be covered in a real estate course and is important information to have when making a living with a real estate license. In order to qualify for a mortgage, buyers must prove to be creditworthy and meet the lender qualifications for a loan. Lender qualifications for the borrower will include a thorough review of their income, debt, cash on hand, and net worth. This information is gathered to come up with the debt and income ratios. These ratios are crucial to a borrower’s ability to qualify for a mortgage loan.
The income ratio is important to understand as it determines the amount of money the borrower qualifies to borrow. A borrower’s proposed housing expenses, including principal, interest, taxes and insurance, is divided by the borrower’s gross monthly income in order to calculate the income ratio. Most lenders require that a borrower’s income ratio be at no more than 25 to 28 percent. In order to pre-qualify a buyer for the appropriately priced properties, their monthly gross income should be multiplied by 25 to 28 percent. The monthly payment for the properties you should show them should remain within that range to help ensure loan qualification.
The debt ratio includes all other monthly debt along with the proposed housing payment. The total of all debt divided by the borrower gross income should not exceed 36% for a conventional mortgage, however some types of FHA backed or VA loans will allow the debt ratio to be as high as 41% of the borrower’s gross monthly income and still qualify for the mortgage.
Beyond the debt and income ratios, lenders are looking for stability in a borrower’s income. Specifics that they will be looking for are the length of time the borrower has been employed in their current field and the level of education and training they have completed relevant to their field. If the applicant has had numerous jobs in a short period of time, the lender will require an explanation of the instability. It is helpful if the jobs are in the same field. Any bonus income or overtime that is included in the application will need to be reviewed for its likelihood of continuing on a regular basis before it is considered to be regular income.
Borrowers seeking mortgage approval must have sufficient cash on hand to cover the required down payment according to the loan to value ratio, as well as costs associated with the loan closing. If any of the money to be used for the down payment was a gift to the borrower, a gift letter explaining that the funds were a gift and will not require repayment may be required by a potential lender. The borrower’s net worth must also be established in order for the lender to determine the applicant’s ability to repay the loan in the event that they become unemployed. The borrower must have cash reserves and assets with enough liquid value to exceed the value of their combined liabilities.
Credit worthiness is determined by a review of a borrower’s credit report and FICO credit score. The report is a complete financial history of an applicant including the amount of debt carried and the consistency of payments made on time. Negative payment history may be grounds for a mortgage denial unless the circumstances can be adequately explained to the lender in writing.
Posted by admin on May 19, 2010 under Real Estate License Basics |
This time, our Real Estate Basics series will look at the many different ways that there are to transfer property from one individual or entity to another. Real estate courses will take you in detail through each of the ways to transfer property as this is essential knowledge you will need to earn a real estate license in any state. When it comes to transferring property, there are many different ways for this to take place. Voluntary alienation is the transfer or conveyance of ownership of property by deed. A deed is a document transferring ownership of the property and considered evidence of title.
There are also a number of ways to transfer property through involuntary alienation or without the consent of the grantor. With Eminent Domain, the government has the right to take possession of a person’s property when it is deemed for necessary public use and/or for public good. Adverse Possession is a transfer that has many similarities to an easement by prescription.
Escheat is the transfer of property to the government because the owner has died without a will, or intestate, and has no heirs. If the decedent has heirs then the property is transferred upon the death of the grantor to the heirs as per the Statute of Descent and Distribution. Should the owner die with a will, or testate, the estate will be probated prior to the heirs taking possession.
In order for a will to be deemed valid, it must be made by a person who is of sound mind, legal age, and not under undue influence. It must contain proper wording. Giving real estate in a will is to devise while transferring property in a will is to bequest property. A handwritten will is known as a holographic will and is not legal in every state. When a will is given orally upon ones imminent death, written down by a nurse and witness by a doctor it is a nuncupative will.
In order to transfer the title of a property, that property must have marketable title. This means that the property in question is free of any problems that would hinder the sale. A marketable title requires a clear chain of title, or record of property ownership from the property origin to the current owner. If there are any gaps in the chain of title, a Suit to Quiet the title must be filed by the owner or title company involved with the sale in order to have marketable title. A Certificate of Title is necessary to prove that the ownership of the property is valid and that is has no significant liens or encumbrances.
Title Insurance is protection against the unknown when transferring title. A standard title insurance policy will protect you in the event that something is uncovered on the public record. An extended coverage policy covers encroachments and other things that you would not find as a matter of public record.
All of this and much more will be a part of the real estate training you need to earn your real estate license.
Posted by admin on May 7, 2010 under Real Estate License |
People looking for a new career in tough economic times have many choices of degree and certification programs that can train you in a brand new field or offer you an undergraduate degree in 18 to 24 months. The trouble with many of these programs is there is no guarantee how many people will find employment that will pay you enough to repay the debt heir education put them in, let alone employment in the field they chose. To spend all that money and more than a year of study to not be guaranteed a career is not practical for most people who have a family to support. An option for those could be a career in real estate. A real estate license can be earned at a fraction of the cost and in much less time than it takes to earn a traditional degree.
How long it takes to get a real estate license depends upon many factors. Educational requirements can vary greatly from one state to the next. In some states the required coursework to qualify to sit for the real estate examination is extensive, even requiring a college degree; however, this is not the norm. Most states have a prerequisite number of hours of specified coursework that must be completed at an approved, accredited real estate school. In many states the coursework can be completed in weeks. To sit for the Florida real estate exam requires 63 hours of approved classes and a New York State real estate license requires just 75 hours. Other states have more lengthy requirements. California, for example, requires completion of three 45 hour long courses to sit for the California real estate exam; less than 300 class hours are needed to sit for the Colorado real estate broker exam.
Where you get your real estate education will also contribute to how long it takes to get your real estate license. One option is a traditional real estate school. Depending upon the state that you are in and the number of hours the school chosen offers per week, in most cases the educational requirements can be completed in only 4-6 months. An online real estate school can decrease the educational period from a few months to mere weeks. An accredited online real estate school will allow people to study at their own pace whenever and wherever they chose. Coursework can be completed in significantly less time for motivated individuals.
The application and exam process can also vary, adding anywhere from days to several weeks onto the time it takes to get a real estate license. Many states have automated the process of submitting your license application and taking your real estate exam. Some states will provide you test results and a temporary license at the test site. States that have not yet upgraded to an automated licensing system will still require mailing of applications and waiting for exam results to be released and the license to be sent to the broker of record.
Posted by admin on May 26, 2010 under Real Estate License Basics |
An agency is a fiduciary agreement between two individuals in which the party known as the agent is in control of the other party, the principle. An agency relationship in real estate is defined as one between a broker (agent), the client (principle) and the customer (a third party). Each state has its own laws that apply to this relationship known as the laws of agency. In a real estate transaction the agent is hired by, and therefore works for, the client. The customer in this relationship is the third party that is not represented by the agent.
An agency relationship is created most often by way of a written or an oral agreement. A listing agreement establishes an agency relationship for a specific transaction. A listing agreement should contain the details of the transaction, including the compensation required and the contract expiration date. An agency relationship can also be implied. Implied agency can be intentional or unintentional when the parties involved behave as though an agreement is in place.
There are three types of agency agreement between an agent and a client, each representing different levels of authority given the agent. Universal agency is given through a Power of Attorney. This gives the agent the authority to perform all of the actions that an agent can perform within the scope of the law. General agency provides the agent the authority to complete specific tasks and duties to be carried out on an on-going basis, such as entering into contracts. The largest percentage of real estate business is conducted under a special or limited agency. Special agency authorizes the agent to perform a specific transaction and the relationship is terminated upon completion of that transaction.
There are three main forms of agency relationship. Single agency is an agent representing a single client. This form of agency relationship can be either a buyer’s agency or a seller’s agency. A sub agency relationship is formed when there is a licensed agent or broker employed by the broker that is the client’s agent. In a dual agency relationship, the agent represents both the buyer and the seller. Where this form of agency relationship is allowed, it must be voluntary and disclosed to all parties.
Once an agency relationship has been created, there are a limited number of ways in which to terminate it. Completing the contract and closing the sale can terminate an agency relationship. Expiration of the contract without renewal also terminates the relationship. The parties involved in the agreement can mutually decide to terminate a contract as well. Agency relationships can be terminated involuntarily as well under specific circumstances; however this could create legal and/or financial ramifications for whoever initiates the termination of the contract.
The agent has responsibilities to both the client and the customer. The agent’s duties to the client include skill, due diligence, obedience, loyalty, confidentiality, financial accountability, and full disclosure. In return, the customer duties to the agent are availability, information and compensation. The agent’s duties to the customer are honesty and fair dealings, reasonable care and proper disclosure. The customer has no duties to the agent in a contract.
Real estate courses will cover these relationships in depth in order to prepare individuals for the real estate license examination. No matter what state in the nation you attend real estate school, you can be certain that agency and customer relationships are a critical part of real estate training.
