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What Is An Option Contract?

There are 12 questions on the Florida real estate sales associate exam about contracts. Twelve questions! This is an important section! One of the things we need to know about contracts is what an option contract is. Today, not only do you get to learn what an option contract is, you get to learn a little bit of Orlando history from an Orlando native.

Back in the 1960s, there were three people who owned land in south Orange County. Jack Demetree owned 12,000 acres. Irlo Bronson owned 7,000 acres. And the Goldstein family owned 1,800 acres. A mysterious man came into town using a fake name. He was an attorney who represented a developer called Reedy Creek Ranch. You may have heard of the Reedy Creek Water District or Reedy Creek Fire Department. It’s Disney World.

Is this a map of south Orange County in the 50s and 60s? Or is this Karen’s drawing to teach option contracts?

So this attorney for Reedy Creek meets Demetree and says, “I want to buy your land.”

Demetree says, “Great. I want to sell this land.”

They agree on a price on $125 an acre. But Mr. Reedy Creek says, “Here’s the thing… if these other people won’t sell, I don’t want your property. I have to get all three pieces in order for my project to work. But, I don’t want to buy those two pieces and then have you raise the price on me. So here’s what I’m going to do…I’m going to give you $25,000 for you to take your property off the market for six months. You can’t sell it to anyone else. I want to have the option to buy it.

“In other words, if I come back in the next six months, you have to sell it to me for $125 an acre, and the $25,000 counts toward the purchase price. If I don’t come back in six months, you can keep the $25,000 as payment for your troubles. How does that sound?”

Well, we know how Demetree answered that question. We also know that Disney ultimately exercised their option.

That’s all there is to it. That’s what an option contract is. In my next post, I’ll write a few more details about an option contract that you need to know for the Florida real estate sales associate exam.

Please note that neither I, nor anyone in the Climer family, have any affiliation with Climer School of Real Estate. My father, Ron Climer, sold Climer School of Real Estate in 2014. You can find me at Demetree School of Real Estate. If you are looking for me, want to take a real estate class with me, or want to learn more Orlando history, call me at 407-493-3974.

By Karen Climer|2021-08-25T14:19:36-04:00February 25th, 2019|

A Practice Exam Question About Terminating The Listing Contract

Here’s a practice question that is similar to something you might see on the Florida Real Estate Sales Associate Exam…

Jones lists his property with Broker Bob on July 1. On July 15, Jones filed bankruptcy. On July 25, Broker Bob found a buyer who was ready, willing, and able to purchase the property at full price. Is Broker Bob owed a commission?

a. Yes, if the bankruptcy court requires it.

b. Yes, because the listing was an exclusive agency listing.

c. No, because it was not a single agency relationship.

d. No, because the listing contract has been terminated.

Bankruptcy of either the seller or the broker terminates the listing contract, so the correct answer is D.

If you need any help with the state exam, or are looking for a real estate class (I have one coming up!), give me a call at 407-456-3448. Also, check out my YouTube videos.

Please note that neither I, nor anyone in the Climer family, have any affiliation with Climer School of Real Estate. My father, Ron Climer, sold Climer School of Real Estate in 2014. You can find me at Demetree School of Real Estate.

By Karen Climer|2023-04-07T18:21:32-04:00February 15th, 2019|

What External Obsolescence Is And Isn’t

Recently, a student told me she had a question about external obsolescence on the Florida real estate sales associate exam. The question asked her to identify an example of external obsolescence.

External obsolescence is loss of value due to something that happens off the property or external to the property. For example, if a power plant is built across the street from your home, this is external to your property, but it will probably decrease the value of your home. This is external obsolescence. Construction noise and dust caused by the new school being built around the corner is external obsolescence. If the city decides the new jail should be near your house, that would be external obsolescence.

Don’t confuse something that is external to your property with something that is external to your house. For example, if a sinkhole develops in your backyard, this is NOT external obsolescence. External obsolescence has to be external to your property. The sinkhole in the backyard is external to your house, but it is still part of your property. Peeling paint on the outside of the house is not external obsolescence. The sinkhole or the peeling paint are both examples of physical deterioration. On the street, we call that wear and tear.

Remember, external obsolescence is something that is off the property or external to the property. Don’t confuse external to the building with external to the property.

If you need any help with the state exam, or are looking for a real estate class, check out Demetree School of Real Estate – that’s my school. Also, check out my YouTube videos.

Please note that neither I, nor anyone in the Climer family, have any affiliation with Climer School of Real Estate. My father, Ron Climer, sold Climer School of Real Estate in 2014. You can find me at Demetree School of Real Estate.

By Karen Climer|2021-08-25T14:23:49-04:00February 14th, 2019|

If You Want To Pass The Florida Real Estate Exam, Be Sure You Know The Definition Of Situs, Situs, Situs

The Florida real estate sale associate exam tests your knowledge of the word situs. You probably learned in real estate school that situs is the economic quality of location that creates value. You might not have learned how to remember it and not get it confused with the other hundred new words you learned. I’ve got two short stories that might help you…

Almost fifteen years ago, I sold fixed-week timeshare. Part of the sales pitch was that Orlando had more trading power than other cities because of location, location, location. I tell my students that I never said, “location, location, location.” It is more accurate to say, “situs, situs, situs.” I might not have sold the most timeshare, but I used the appropriate terminology. (It wasn’t long before the timeshare company had me teaching real estate classes instead of selling timeshare.)

Society, however, is not always interested in accuracy. Sometimes we are interested in not offending anyone. I think we’ve gone overboard with some of this politically correct language. We no longer say that people are hungry. Now we say they are “food insecure”. Nobody lies anymore — we have “alternative facts”. It is now inappropriate to say that someone lives in the ghetto, slum, or bad part of town. A neighborhood where you might not want to live is one that has a “situs infection.”

A house that backs up to the train track is a house that has a “situs infection.”

There you have it — two ways to remember the definition of situs.

If this story helped you, check out my review class at Demetree School of Real Estate. I’ve got a lot of stories just like these that will help you pass the Florida real estate sales associate state exam.

Please note that neither I, nor anyone in the Climer family, have any affiliation with Climer School of Real Estate. My father, Ron Climer, sold Climer School of Real Estate in 2014. You can find me at Demetree School of Real Estate.

By Karen Climer|2021-08-25T14:31:58-04:00April 2nd, 2018|

What Influences The Supply Of Real Estate?

Recently, I wrote about the five factors that influence the demand of real estate. If there is a list for demand, you can bet your next commission check that there is a list for supply.

In the perfect real estate market, supply and demand are in equilibrium.

The variables that influences supply are land, labor, lumber, and loans. Let’s go through these one at a time:

Land – it is very difficult to build more house if there isn’t any land. You take a city like Key West. There is very little land left, so there isn’t a lot of building going on. (Well, there wasn’t before Hurricane Irma.)

Labor – this refers to skilled labor: carpenters, roofers, electricians, etc. Speaking of Hurricane Irma… Right after the hurricane, if you needed a roofer, you would get put on a list. The roofer would say, “Can you keep that blue tarp up there for six months because our list is pretty long?” You didn’t have a lot of choices because even the bad roofers were busy.

Lumber – Actually, it’s all material, but I’m saying lumber because it works better with my L list. If builders can’t get material, they can’t build houses. A few years ago, there was a glass houses. If you wanted to construct a building, you have to opt to have zero windows, pay more for the glass (sometimes prohibitively more), or wait until there was more glass. When the supply of buildings materials is low, the supply of new houses is also low.

Loans – This applies to construction loans. If builders can’t get loans (or if they cost too much), they aren’t building as many speculative homes. But as soon as the loans become more available, the builders start building away.

Be sure you know the four factors that influence the supply of real estate. This is something that’s been on the Florida real estate sales associate exam before.

And remember, when you have a list in the book like this, there is a good chance that the question will be phrased like:

Which factor does NOT influence the supply of real estate?

a. availability of land
b. availability of situs
c. availability of construction loans
d. availability of skilled labor

Of course, the answer is B because situs is not on our list of four items.

Be sure to get comfortable with this NOT type of question. It’s pretty common on the Florida state exam.

Please note that neither I, nor anyone in the Climer family, have any affiliation with Climer School of Real Estate. My father, Ron Climer, sold Climer School of Real Estate in 2014. You can find me at Demetree School of Real Estate.

By Karen Climer|2021-08-25T14:40:30-04:00January 8th, 2018|