Understanding the Comparable Sales Approach on the Florida Real Estate Exam

A subject property has a pool, but the comparable property does not. If the pool is valued at \$3,000, what adjustments should be made?

a. Add \$3,000 to the subject
b. Subtract \$3,000 from the subject
c. Add \$3,000 to the comparable
d. Subtract \$3,000 from the comparable

With the comparable sales approach, we are basically asking, “What do we need to do to make the comparable exactly like the subject?” If the subject property has a pool and the comparable does not have a pool, how do we adjust the comparable to make it just like the subject?  We add a pool.

It is very easy to get this one mixed up if you try to do it without the formula. If you focus on the formula, you will get it right.  The formula is: CBS-CIA.  If the Comparable is Better, you Subtract. If the Comparable is Inferior, you Add.  Never, never, never, never adjust the subject.

So if you saw the above question on the Florida real estate exam, you would know before you even read the question that A and B are wrong. That narrows it down to C or D.  Since the comparable is inferior, we will add.

Focus on the formula, and you shouldn’t have any problems with this question.

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 |2021-08-25T14:46:32-04:00September 21st, 2017|

Does That Belong To The Buyer Or Seller? It’s Up To IRMA.

If you are anywhere even close to Florida, as in anywhere in the same hemisphere, you are probably sick of hearing about Irma.  Irma is coming.  Now it’s going east.  Nope, it went west.  Irma is gone, but left destruction.  We’ve been hearing about Irma for at least a week.  In all this storm talk, no one has mentioned Irma and the story of Florida’s first home sale.  It’s an old story that not many people know.  Fortunately, as a native Floridian, I know the story.

Back in the good old days, Mr. Seller put his house up for sale.  Mr. Buyer loved the house.  In fact, one of the things Buyer loved most was that the backyard was fenced in, which was rare in those days.  After closing, Buyer returned to the house and the fence was gone.  It wasn’t because Hurricane Irma ripped the fence up.  It was gone because the Seller took the fence with him!  He wanted a fence at his new house, so he took the fence with him!  Can he do that?  Seller said he sold the house, not the fence.

Irma is not just a hurricane. It’s a test to determine whether an item is a fixture.

Buyer was furious.  He wanted that fence.  Buyer and Seller didn’t have the foresight to include the fence in the contract, so they went to court to let the judge decide.  The judge was a very stoic woman with her hair pulled tightly in a bun.  Her name was Irma.  After listening to the facts, Judge Irma said the fence belonged to the Buyer.  The Seller was incredulous.  “How on earth did you decide that?”  Judge Irma explained the four-part test she used (and humbly named after herself).

Intent – What did the buyer or seller say to each other?  If the seller said, “I’m taking the fencing with me?” then his intent is pretty clear.

Relationship Between the Parties – There’s a difference between a buyer/seller relationship and a landlord/tenant relationship.  It’s also different if you are a commercial tenant or a residential tenant.  In a dentist office, for example, the have those special dentist chairs and overhead spotlights.  That stuff is screwed into the floor or the ceiling.  It is a serious installation, but it’s part of the dentist’s office.  When the dentist leaves, he’s going to take his special chairs and lights.  If a residential tenant installed a basketball hoop outside by putting the pole in concrete, they can’t take it with them.  That relationship is different than a commercial relationship.

Method of Attachment or Annexation – How firmly is the item attached?  A trash can that sits on the floor is not very firmly attached, so it is personal property and goes with the seller.  But a door that is hanging on hinges in the doorway is more permanently attached, so it stays with the house.  Or let’s consider our fence… when the fence is installed at a house, it is real property and stays with the property.  Once a hurricane comes and knocks it down, it is no longer attached, so it is personal property.

Adaptation – How well does the item fit in the house?  For example, our fence was cut specifically for the size of this house.  It stays with the house.  Storm shutters are another example of something that was made for that specific house.  Something that does not adapt to the house would be considered personal property, and would go with the seller.

An item, like the fence, that was once personal property but is now real property is called a fixture.  So the test that Judge Irma used to determine whether the item was a fixture is I-R-M-A.

If you found this story and acronym helpful, leave a comment below.  If you would like to hear more stories that will help you remember and understand what you need to know for the Florida real estate sales associate exam, give me a call or sign up for my review class at Demetree School of Real Estate.

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 |2021-08-25T14:48:58-04:00September 12th, 2017|

What Influences The Demand Of Real Estate?

According to the Florida Real Estate Commission, there are five variables that influence the demand of real estate.  I renamed them so they all start with the letter P.  They are:

• Price of real estate – When the price of the house goes up, the demand goes down.
• Population – The bigger the population, the bigger the demand for real estate.
• Percent – I’m referring to the mortgage interest rate.  When mortgage credit is readily available, it is cheaper, which means your monthly payments are cheaper.  That increases the demand for real estate.
• Preferences – This boils down to what people like and don’t like.  When I was kid, you could not give away houses in downtown Orlando.  Everyone wanted to live in the suburbs.  Today, downtown Orlando is the hot place to be.  It’s just what is popular at a given time.

Here’s a study tip about lists like this:  When there is a list of 3-5 related items like this in your real estate textbook, there is a good chance that the question will be, “Which one is NOT ___?”  This is a popular question format on the Florida real estate exam.  For example, a question testing your knowledge to know the variables that influence demand might be something like this:

Which variable does NOT influence the demand of real estate?

a.  Price of real estate
b.  Supply of housing
c.  Availability of mortgage credit
d.  Income of consumers

The best way to handle this question format is to ask yourself about each choice.

• Does the price of real estate influence demand?  Yes.  There is greater demand for a \$200,000 home than a \$2,000,000 home.
• Does the supply of housing influence demand?  I don’t think so, but let’s read the other choices to be sure.
• Does the available of mortgage credit influence demand?  Yes, that is “percent” on our list.  When the interest rate is 3%, the demand for housing is greater than when the interest rate is 10%.
• Does the income of consumers influence demand?  Yes, that is “paycheck” on our list.  Someone who makes \$200,000 a year is more likely to buy a house than someone who makes \$20,000 a year.

So the correct answer is B.  Supply of housing does not influence the demand of real estate.

If you want to learn more memory tools or test-taking tips for the state exam, join me in a class at Demetree School of Real Estate.

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 |2021-08-25T14:52:02-04:00August 27th, 2017|
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