GREC REnews, Vol. 12, Issue 1 (Jan. 2016)

January 2016 Volume 12 Issue 1

Monthly Newsletter of the Georgia Real Estate Commission

GREC RENews

Happy New Year from the Georgia
Real Estate Commission!
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A

This Issue: Results of Job Analysis Focus on Terminology Stats of Interest The Appraisers Page

P. 1 P. 2 P. 3 P. 4-5

Recent National Job Analysis Essential to Developing Licensing Examination Provides Insight into Current Real Estate Practices

2016 Calendar
UGREC Brokerage Course & Trust Accounts Class DatesUH:
January 27-28, 2016 Camden County BOR www.cccbor.com
March 30-31, 2016 Bartow Area BOR www.bartowrealtors.com
Georgia Instructor Training GIT March 17-118 www.grec.git.com
Link to the Georgia Real Estate License
Law, Rules, and Regulations
Link to GREC Disciplinary Sanctions
View Current Suspensions and
Revocations
Click Here

Anyone who has taken a Georgia real estate licensing exam is no doubt

familiar with the exam provider Applied Measurement Professionals (AMP). AMP

periodically conducts a National Job Analysis as the initial step in reviewing Georgia's

licensing exams. Last fall they completed their fifth analysis of job tasks completed by

real estate licensees, essentially "activities related to listing, selling, transferring, and

managing property". Licensees were surveyed and asked to rate the significance of

certain tasks to their current real estate practice as well as how often each task was

performed.

The results of the survey were analyzed by AMP staff and the AMP Advisory

Board composed of state regulators who contract to have their exams administered by

AMP. Next using the survey results the content outline of the licensing exams was

reviewed and revised. Finally exam questions were reviewed and the final content of

the exams established.

AMP provides exam applicants a detailed outline of the subject matter of the

exams. Individuals studying for the salesperson or broker exams can review the list of

topics and their relative weight in the exam by national and state sections. In addition,

broker applicants can complete practice tests or simulations of the broker exam at

www.goAMP.com. These simulations are an excellent tool for discussion at sales

meetings or training sessions provided by the broker because they present relevant

examples of situations that require decision-making by the licensee in the field. GREC

provides examples in a guide to Broker simulations at GREC Guide for Broker

Simulations.

For an overview of current real estate practice, The 2015 Summary Report of

the AMP National Job Analysis of Real estate Licensees can be viewed in

detail at www.goAMP.com. The following describes the demographic makeup

of the respondents to the National survey, which includes both brokers and

salespersons:

Total of 3,619 total respondents

Almost 20% are from Georgia

Changes to the exam are aimed at

51% from southern states

keeping the AMP Real Estate

47% Male 53% Female

Program examinations reflective of

About 16% of respondents licensed 1 year current real estate practice.

About 30% licensed from 0-5 years.

60% of the respondents were salespersons

Additional information obtained from the survey, such as the use of social media,

education level, and age of licensees is graphically displayed on Page 3 of this

newsletter. Go to page 3

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GREC RENews January 2016, Volume 12 Issue 1
Focus on Terminology: "Supervising or Employing Broker"
The term "broker" is defined by the real estate licensing law of each state. In Georgia a broker is defined as a person who provides services for another for a fee, commission, or any other valuable consideration or with the intent or expectation of receiving such payment for brokerage services including negotiating sales, rents, purchases, etc. or a person who advertises as providing these services. (The full definition and description of services can be found in O.C.G.A. 43-40-1. Definitions at http://www.grec.state.ga.us/about/relaw.html
In Georgia, a salesperson, associate broker, or a community association manager means a person who acts on behalf of a real estate broker in performing any act authorized to be performed by the broker. Georgia does not have a formal definition for "supervising broker", although the broker must supervise any licensees that he/she has affiliated with his/her brokerage firm.
A few states have what is loosely referred to as "single licensing". It basically refers to there being only a "broker" license and no salesperson or associate broker licenses. However, in those states there are various levels to the broker license. So in effect, there is still more than one type of license. The key is whether the "broker" supervises (or employs) other licensees. For example, Colorado makes the distinction between different levels of the broker license: 1) The Broker licensee who works independently and has no agents/brokers that he/
she holds their license. 2) The Employing Broker who manages agents/brokers and has control and custody
of the broker's license. The employing broker must complete extensive training before supervising other licensees. South Dakota has 2 forms of broker license: 1) The Broker Associate who cannot supervise other licensees. 2) The Responsible Broker must have 2 years active status and must complete additional training before supervising other licensees.
In Georgia, only the broker can hold the licenses of agents of the firm and is required to not only supervise but is also required to provide on-going training to licensees affiliated with the firm in the License Law, Rules, and Regulations http://rules.sos.ga.gov/GAC/520-1-.07.
The following graph displays responses regarding broker supervision resulting from the AMP National Job Survey.

To sign up to receive the GREC
RENewsletter Click Here

Georgia Real Estate Commission Suite 1000 International Tower 229 Peachtree Street NE Atlanta, GA 30303-1605 Phone 404-656-3916

Graphics and Data. Copyright of AMP. Reprinted with permission from AMP.

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GREC RENews January 2016, Volume 12 Issue 1 GREC RENews December 2015, Volume 11 Issue 12
Interesting Statistics From the AMP Job Analysis
Use of Social Media

Graphics and Data Copyright of AMP. Reprinted with permission from AMP. To see the full Summary Report got to http://www.goamp.com/Publications/Home%20News%20Info/2015%20Real%20Estate%20Summary%20Report.pdf

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The Appraisers Page

Georgia Real Estate Appraisers
Useful Links:

January 2016
Valuing Vacant Land

GREAB Web Site

Appraisal Act

By: D. Scott Murphy, SRA
The first step in valuing a piece of land is to closely examine its highest and best use. The Fifth Edition of The Dictionary of Real Estate Appraisal by the Appraisal Institute defines highest and best use as: The reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, financially feasible and that results in the highest value. I prefer this definition as most textbooks don't mention, "appropriately supported" as part of the highest and best use definition.


GREAB Disciplinary Sanctions

The appraisers governing body of rules, The Uniform Standards of Professional Appraisal Practice (USPAP), does not have a definition for highest and best use. However, if an appraisal report is prepared, it requires the appraiser to summarize the support and rationale for that opinion. With an improved property there is usually little effort make to define the highest and best use. The vast majority of the time, the current use is the highest and best use. This is due to the first part of the definition, "the reasonably probable and legal use...".

We can value a single-family home as a commercial office space but if it is not reasonably probable and a legal use, we must stipulate in our report that we are basing our value on a hypothetical condition. If the home is within a subdivision and is zoned single family residential there is an extremely low reasonability that someone would use it as a commercial property and equally as low a probability that zoning would allow it and little or no chance the property could get rezoned for that use.

Next we would examine if the proposed use were even physically possible. For example, if we wanted to convert a single-family home to commercial, is it physically possible? Are the improvements such that they meet the requirements for commercial use? Does it meet handicapped requirements? Is there enough land to provide adequate parking? Many of these factors preclude conversion due to physical constraints.

Is the proposed land use change financially feasible? Does it make sense from a dollar and cents standpoint? In general, industrial is worth more than residential. However, we have seen many conversions of old industrial buildings back to residential use. We have seen retail shopping centers re-gentrified to uses historically considered inferior. Which use will yield the higher profit.

Once all those tests are met, it is still the responsibility of the appraiser to "appropriately support" his conclusion. There needs to be adequate data available to support the opinion of highest and best use.

Highest and best use analysis is critical to proper valuation of the property. An incorrect assumption could lead to a misleading opinion of value. As with all valuations, geographical competency is very important. The appraiser must have a firm grasp of the trends in the market and the motives of typical buyers and sellers.

With the proper highest and best use determined the appraiser can move on to preparing the valuation. Most residential appraisers are not properly trained to value vacant land. They rarely analyze highest and best use and most have never completed anything other than a standard form appraisal report. Appraising land is far more complicated than appraising the typical improved property. The biggest error I see in the appraisal of larger tracts of vacant land is the methodology.

If you are appraising a single subdivision lot it is appropriate to do it on an absolute basis. Much like appraising a house, adjustments are made between the subject lot and comparable lots for variances in size, location, topography,

...continued, see page 5

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The Appraisers Page

Georgia Real Estate Appraisers Board

Useful Links:

Valuing Vacant Land

January 2016

GREAB Web Site

By: D. Scott Murphy, SRA
amenities, etc. However, when appraising raw vacant acreage the valuation must be done on a per acre basis. This requires a shift in mindset and a deeper understanding of the factors



affecting value and the motivations of buyers and sellers. Where many appraisers go wrong is they value the large acreage parcel on an absolute basis.

Appraisal Act

They find the best comparables they can, they adjust for location, topography, then they get to size and this is where their analysis falls apart. They somehow come up with a "per acre"


GREAB

adjustment, which they apply to all the comparables. The problem is that when you are appraising a large tract you are really trying to solve for the price per acre. That applied to the size of the parcel gives you the overall value. So to make an adjustment for the size of the lot is incestuous. The factor for which you are trying to solve cannot be part of the equation.

Disciplinary Sanctions

Instead, the proper way to do it is to establish the price per acre of each of the comparables. Then make adjustments to the comparables based on market extracted amounts for location,

topography, utilities, other amenities, improvements and then size but only to the extent that it

represents any economies of scale. The size adjustment is only used if the comparative size of the comparable would

impact the per acre value. This is a very important adjustment, which requires great skill and knowledge of the market.

For instance, based on the theory of economies of scale (per unit costs decrease as number of units purchased

increases) traditionally the larger the lot the less per acre it is worth. So if you have a comparable which is twice the size

of your subject property, a positive adjustment should be made to compensate. However, the appraiser must consider

the actions of developers and keep in mind certain thresholds for development. Many times the value per acre increases

as site exceeds a size suitable for subdivision development. For example, lets say in a given area, based on zoning,

utilities and common area requirements, a site suitable for development of a single family home subdivision must be at

least 75 acres; then sites at 75 or more acres would sell at a premium per acre over smaller sites.

The appraiser must also analyze surplus and excess land of a site.

Excess Land: In regard to an improved site, the land not needed to serve or support the existing improvement. In regard to a vacant site or a site considered as though vacant, the land not needed to accommodate the site's primary highest and best use. Such land may be separated from the larger site and have its own highest and best use, or it may allow for future expansion of the existing or anticipated improvement.

Surplus Land: Land not necessary to support the highest and best use of the existing improvement but, because of physical limitations, building placement, or neighborhood norms, cannot be sold off separately. Such land may or may not contribute positively to value and may or may not accommodate future expansion of an existing or anticipated improvement.

What all that really means is how useful is the acreage. Can it all be developed or is part of it non-developable. Also, many sites can have pieces with different highest and best use. A large parcel on a heavily traveled road could have a strip along the roadway suitable for one use and the rear portion suitable for a different use.

This all makes appraising vacant land a very big challenge. We often get calls from clients looking for land appraisals

and are shocked at the fee; "but it is just vacant land" they say. Well I hope you can now understand there is so much

more to it.

I welcome your comments and feedback. Please send me ideas for future articles.

Dsmurphy@dsmurphy.com

678-636-4813

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