Part one covered the basics of real estate and the five types of real estate brokers. This article will touch on the three additional elements of doing real estate business – the government, the construction industry and development activities.
Local and State Governments
Each level of government impacts real estate business. First, local government may require building permits, occupational licenses and property taxes paid to city, county or school board. The local government will establish the zoning code and may issue building moratoriums. Most State governments own and manage large amounts of property. They will identify environmentally fragile and other important areas that are protected from development. There may be state taxes on deeds, intangible taxes on mortgages and taxes for property financing and title transfers. The Florida Real Estate Commission (FREC) enforces and administers state-level real estate laws.
The Federal Government
The federal government’s fiscal, economic and monetary policies directly affect real estate markets. The Federal Reserve System (the Fed) controls inflation and stimulates the economy, which both impact the Florida real estate market. Real estate professionals should be familiar with the Internal Revenue Service (IRS), Department of Veterans Affairs (VA), Environmental Protection Agency (EPA), Federal Housing Administration (FHA) and Department of Housing and Urban Development (HUD). For example, the VA and FHA may insure or guarantee loans through conventional lenders. The IRS establishes the tax codes for residential and investment properties. Florida’s Department of Revenue offers information for industry professionals here.
Real Estate Land Acquisition
The three phases of real estate development include land acquisition, subdivision and construction. First, land acquisition may occur through a purchase, sales, option and deed contract. Real estate professionals must compare the zoning laws against the land-use plans to determine if the desired project can be constructed or improved. Real estate improvement is the generic term for anything that is commercially constructed, such as a mall, house or tool shed. Real estate subdividing refers to dividing land into smaller parts and real estate development refers to activities that improve raw property.
Real Estate Development
Real estate development may include clearing trees, excavating roads, paving streets, building storm drains and installing water systems. This may involve a subdivision plat map that shows sizes and locations of individual lots, streets and utilities. The “plat” must be approved by the government and recorded as a public record. A dedication refers to a gift of land from an owner, such as a real estate developer, to the government for public use, such as a park or street. Infrastructure concurrency means that the local government will require that infrastructure be in place during the improvement activities, such as adding water lines while building a house.
Real Estate Construction
Real estate deeds are recorded in public records to maintain values and conformity, such as the minimum square footage of houses that may be constructed or rule that all property owners cannot block the view of a lake. These are referred to as deed restrictions, which affects one property and a subdivision’s members. There are three categories of residential construction. First, speculation homes, or spec homes, which are built before there are buyers. These are typically built on a small scale, such as buying two lots and building two homes. Tract home projects are built on spec, but on a much larger scale. This usually includes model homes, sales teams and licensee cooperation. Custom homes are for existing owners.
Finally, there are professional organizations and educational institutions that every real estate professional should either know or join. First, the National Association of Realtors (NAR) is the largest trade organization in the country. Most real estate professionals join the local real estate board and the Florida Association of Realtors (FAR). Part three will cover Florida’s real estate license laws and qualifications.