Ask Brian is a weekly column by Real Estate Expert Brian Kline. If you have questions on real estate investing, DIY, home buying/selling, or other housing inquiries please email your questions to email@example.com.
Q1. Ron Echols from Nashville, TN asks. Brian, are real estate agents becoming obsolete and are they being eliminated because of technology? I’ve been thinking about getting my real estate license and wonder if it’s worth it, your input would be appreciated.
A1. Hello Ron. You certainly aren’t the only person with that question on their mind. The short answer is that technology will not replace real estate agents any time soon. However, agents who fail to stay current with new technology are endanger of becoming obsolete. And the role of agents is destine to change significantly. In the short term (5 to 7 years), technology is best suited to work in tandem with real estate agents. There are no robots coming that will be able to show a home with the ability to point out the nuances that appeal to individual buyers.
On the other hand, when you consider the Internet of Things (IoT), more and more of an agent’s mundane activities will continue to become digitally connected. Many people refer to this technology as “Deep Learning”. This strongly implies Artificial Intelligence that provides answers without providing understanding. Although this will grow roots in all real estate transactions, in the early stages it is likely to dominate commercial real estate. When it comes to people buying and selling homes, artificial intelligence comes up very short of providing an experience handling something that so emotionally impacts people’s lives. There are no algorithms to explain the underlying message behind your client’s body language. It might become able to detect changes in mood but technology can never understand the full story. At today’s level of technology, real estate agents need to stay on the leading edge. A good way of doing this is by tuning into realtybiznews.com/technology.
Longer term, there is a technology coming that is currently known as “block chain”. In its very early stages, this is the technology underpinning cryptocurrency such as bitcoin. Most technology experts don’t expect this to fully mature for about 20 years. Although this will evolve significantly, the current application is Distributed Ledger Technology (DLT). The biggest impact is expected to be to complex legal contracts with everything associated being digitally connected. The concept is that when one legal document is updated, all affected documents will be immediately updated. The implications are vast. An example is a lien placed on a property title being instantly transmitted to everyone having an interest in the property. Right down to someone about to sign a purchase offer or someone else accepting the property as loan collateral.
Ron, yours is a great question but even the most thorough book cannot predict or explain all of the changes that technology will bring to the real estate profession over the span of a career. I hope this answer helps at least a little.
Q2. Bethanny from Albany, NY asks. I’m very interested in getting into the real estate investing game. For about 2 months I’ve been reading and studying the subject. One of my frustrations is all of the abbreviations that I come across when reading or talking to people that have been in the business for years. It’s like a foreign language. For instance, I was reading classified adverts and it took me 10 minutes to figure out the FSBO means For Sale By Owner. Can you help?
A1. Hello Bethanny. Learning the lingo is a great early step as you educate yourself. Congratulations for your astute efforts. Here is a shortlist of some of the most used acronyms. Keep in mind that just knowing the words doesn’t provide a full understanding of some of these. You need to understand these in context and many are math equations where the variables can be important.
APR - Annual Percentage Rate
ARM - Adjustable Rate Mortgage
ARV - After Repair Value, or After Renovation Value
AP - Asking Price
AV - Appraised Value
CAP - Capitalization
CCR or COCR - Cash on Cash Return
CGT - Capital Gains Tax
CMA - Comparative Market Analysis
COMP - Comparable
COMM - Commission
CRB - Certified Real Estate Broker
DBA - Doing Business As
DCR - Debt Coverage Ratio
DP - Down Payment
FCRA - Fair Credit Reporting Act
FMV - Fair Market Value
HELOC - Home Equity Line of Credit
HOA - Home Owners Association
HVAC - Heating Ventilation and Air Conditioning
L/O - Lease Option
L/P - Lease Purchase
LLC - Limited Liability Company
LOC - Line of Credit
LOI - Letter of Intent
LP - Limited Partnership
LPOA - Limited Power of Attorney
LTC - Loan-to-Cost
LTV - Loan-to-Value
MAO - Maximum Allowable Offer
MOA - Memorandum of Agreement
MV - Market Value
NOI - Net Operating Income
PITI - Principal Interest Taxes and Insurance
PC - Purchase Contract
PMI - Private Mortgage Insurance
REIT - Real Estate Investment Trust
REO - Real Estate Owned (by bank)
RFO - Ready for Occupancy
ROI - Return on Investment
SFR - Single Family Residence
TIL - Truth in Lending
Bethanny, that certainly isn’t a comprehensive list and a few may have more than one meaning. However, it should help as you get started.
Our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions or inquiries to firstname.lastname@example.org.
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