Florida Real Estate Practice Exam

The advantages of real estate as an investment are the rate of return, tax advantages, hedge against inflation, leverage and equity buildup. Real Estate is not considered a liquid investment in the short term.

An overimprovement occurs when an owner invests more money than what is reasonably expected to recapture. External obsolescence is any loss in value due to changes in the neighborhood or area where the house is located, for example, an active Railtrack, a new speedway and anything that can make the location less desirable by prospective buyers. External obsolescence is incurable because it is out of the control of the property owner. Physical obsolescence is directly related to the condition of the property such as wear and tear, structural issues, defective air conditioning, old roof.

Florida allows property owners to homestead their principal residence. The benefits of the homestead are the protection of the family in case the owner on the title dies and the allowance of up to $50,000 in property tax exemption. The Homestead also protects the size of the property (160 acres of contiguous land and improvements outside the city and ½ acre within the city) as well as the protection of personal property (up to $1,000) in case of bankruptcy and to protect from the forced sale to pay for personal debts. Nevertheless, the homestead does not protect from foreclosure if the homestead property is the collateral to a defaulted mortgage loan, neither from unpaid property taxes, special assessments, foreclosure for unpaid condo association fees or homeowners association fees, or vendor and construction liens secured by the property.

For a real estate contract to be legally sufficient in Florida, the parties must be of contractual legal capacity, meaning that they are not mentally disabled and are of legal age to contract. Also, there must be consideration, which means the benefits each party bargains for. There should also be offer and acceptance; both parties need to agree on the terms of the contract voluntarily. The contract also should have a legal purpose, avoiding any illegal provision on it like establishing payments of commissions to parties who are not licensed. There is no legal need to acknowledge or notarize a real estate contract, nor to have earnest money or acknowledgment.

In a gross lease in Florida, the tenant (lessee) pays a fixed amount that can include the payment for utilities and other related services while the landlord (lessor) pays for insurance, taxes, maintenance, and utilities. The net lease also is known as "triple net," on the contrary, makes the tenant responsible for expenses of maintenance, utilities, taxes, and insurance. The percentage lease stipulates that the tenant will pay rent based on the gross sales received from his business in the leased property. There is no all-inclusive lease.

The priority of a mortgage lien is determined by the date in which the document is registered with Clerk of the Courts in the county in which the property is located. This is also known as the recording date of the document. The date of the application, loan commitment or closing is not relevant.

The Right to Reinstate clause provides for the mortgagor's right to reinstate the original repayment terms in the note after the mortgagee initiated the acceleration clause and provided all sums that are due are paid, including the expenses incurred by the mortgagee to enforce the mortgage. If the mortgagor attempts to sell or transfer the property without the lender's prior consent, the lender can advance the due date of the debt through the Acceleration Clause. The Prepayment Penalty clause provides for the mortgagor's ability to pay off the debt before the due date. There is no covenant in the mortgage that allows for deferments of payments on the mortgage.

This scenario is a violation of the Florida real estate law because only a real estate licensee can provide real estate services and receive compensation for it. It is a violation of Chapter 475 to provide real estate services to others for compensation of any type if the person providing such services does not hold a current and active real estate license at the time, unless specifically exempted by the law. It is a third-degree felony with a penalty of not more than $5,000 and/or up to five years in jail per offense. There is no exception for relatives or compensation under $1,000. Even though no commission was paid, both father and son violated the statute with their agreement.

Joan needs to secure the signature of Richard, her seller, and the signature of William's buyer in a Consent to Transition to Transaction Broker before showing the property. Florida law prohibits a dual agency. Therefore, in order for a brokerage that has a Single Agent Relationship with a buyer or a seller to assist both parties on a real estate transaction, the licensee must change to a Transaction Brokerage Relationship with the prior written consent of the parties.

The Florida Fair Housing Act prohibits discriminatory acts based on race, sex, disability, nationality, religion, color, or familial status. Real Estate licensees must ensure there is equal access to housing. Any charge of discrimination is considered valid by HUD unless there is evidence that can refute such charge. In a case of discrimination in which a licensee is involved, the burden of proof is placed on the broker to prove his/her innocence to HUD. Also, the Florida Real Estate Commission might initiate disciplinary proceedings against the licensee.

To calculate the property taxes, you take the following steps:

1. You should remember that the school board only recognizes the base exemption of $25,000.00. City and County, on the contrary, recognize the entitlement of the owner to an additional $25,000 exemption when the property's assessed value is greater than $75,000.00. 

2. Figure out Taxable Value for School Taxes 

 $190,000 assessed value - $25,000 base homestead exemption - $5,000 additional exemption for service disability - $500 widower exemption = $ 159,500.00 taxable value for school taxes.
 
3. Figure out Taxable Value for County Taxes 

$190,000 assessed value - $50,000 homestead exemption - $5,000 additional exemption for service disability - $5,000 widower exemption = $130,000 taxable value for county taxes.
 
4.  Figure out Tax Due 

$ 159, 500.00 x .0057 = $ 909.15 school taxes
$ 130,000.00 x .0098 = $ 1,274.00 county taxes
 
City taxes do not apply because the property is out of city limits.
 
$909.15 + $1,274.00 = $2,183.15

Calculate the answer as follows:

$400,000 x 4% = $16,000
$100,000 x 5.5% = $5,500.00
$75,000 x 7% = $5,250.00
$16,000 + $5,500 + $5,250.00 = $26,750.00

A competent real estate licensee must know the legal steps and requirements to transfer property and of the conditions that can invalidate a real estate contract. They also need to know the changes in market conditions for sales and leases, the changes in the zoning laws and the building moratoriums. Finally, they need to know the most effective ways to market each of the listings they procure. To be an expert, a licensee does not need to know maintenance or insurance companies, nor be knowledgable on schools and populations of the area; this information would be helpful to the clients but is not determinant to the experience of the agent. An agent should never provide information about mold or termites other than recommending the buyers to seek an inspection to avoid conflicts of interest or misrepresentations.

The social security number is required by Florida Law in all professional license applications to determine if the applicant is in compliance with child support obligations. Florida Real Estate law does not require an applicant to be a US citizen or a legal resident of the country nor does it require a credit verification of the applicants.

The broker has 15 business days to notify FREC in writing of the conflicting demands. From the time she received the conflicting demands, she has 30 business days to implement one of the four settlement procedures.

FREC, under its quasi-judicial responsibility, makes determinations of violations, imposes administrative penalties such as fines, carries out suspension and revocation of licenses and also grants or denies applications. But in the cases of criminal violations of the law, its responsibility is only to report such violations to the state's attorney.