Examining the Real Estate Market
Every market has both a demand side and a supply side. Supply and demand interact to affect property prices. Demand refers to how much goods or services are needed at certain prices. Supply, on the other hand, tells us how much of the real estate is available at any give time, at a certain price. As in any market, supply and demand are continually adjusting, and this causes changes in the price or property.
� Prices increase when demand increases or supply decreases;
� Prices decrease when demand decreases or supply increases;
� If supply and demand increase together, prices remain stable;
� If supply and demand decrease together, prices remain stable.
When it comes to real estate knowledge, nearly everybody needs some type of real estate, from a one-person apartment to an international business conglomerate. The individuals who need the real estate can be referred to as consumers of real estate. They must either be familiar with the complexities of the real estate business or, in most cases, pay someone who has expertise in this area. This is the demand for real estate knowledge.
On the supply side, expertise can come from many areas including college- and university-degree programs, proprietary school programs, on-the-job training, industry-related trade groups, and continuing education courses, to name but a few.
Physical and Economic Characteristics of Real Estate
Real Estate has physical and economic characteristics that make it distinct from other commodities. These characteristics affect the value of real estate and the real estate market. Physical characteristics describe the physical attributes of the land. Economic characteristics affect the value of real estate. Property may be classified as either real property or personal property, and distinguishing between the two is important for several reasons. In a normal real estate transaction, all property that is real goes to the purchaser while all personal property stays with the seller. Another reason is that taxes are levied differently on real and personal property.
The real estate market can be divided into five classifications, based on the use of the property. Because it is difficult to become an expert on all types of real estate, brokers tend to specialize in one or two types of property:
� Residential real estate is used for housing;
� Commercial real estate is used for business and includes retail stores and shopping malls;
� Industrial real estate includes factories, warehouses and research and development;
� Agricultural real estate;
� Miscellaneous and Special Use.
The Real Estate Sales Process
When an individual or entity decides to sell a property, or a potential buyer decides to purchase one, the services of a real estate professional are invaluable. A real estate agent’s primary responsibilities are to:
âÂ?¢ Bring both buyer and seller to a “meeting of the minds;”
� Guide both buyers and sellers through the transaction.
The sales process itself involves listing, marketing the property and qualifying buyers, showing the property and negotiating price, contract, and closing.
The Listing Contract
The listing is a contract that defines parameters of the relationship between an agent and the property owner. For example, the listing typically authorizes an agent to begin searching for potential buyers for the property. This includes setting forth a listing price. Most sellers simply do not have enough market knowledge to determine the monetary worth of their property. An agent’s expertise in this area comes to play when advising the seller to find an equitable listing price that provides value to both seller and buyer. Additionally, the listing contract also defines critical elements such as how much the compensation will be for finding a buyer and how long the marketing efforts will continue if unsuccessful.
Once the listing contract has been negotiated, an agent must start marketing the property to potential buyers. Marketing techniques are numerous and range from pounding in a “For Sale” sign on the front law to print ads and broadcast spots to using the vast resources of the Internet. It then becomes an agent’s responsibility to deal with the responses from these advertisements. Another important aspect of fulfilling the listing agreement is separating the truly interested from the merely curious. This is known as qualifying the buyer.
Negotiating The Price
Once a qualified buyer has been found, the property is presented and the price is negotiated. This can be a short, straightforward process or a long, complex one. It depends on many factors. For example, how well does the property meet the perceived needs of the buyer? It’s important to remember that in most cases, an agent represents the seller and is obligated to represent their best interests. The final step in the real estate sales process is closing the deal. If both parties are in agreement, a contract is drawn up that specifies all the details of the agreement and is signed by both parties. Because an agent’s expertise lies in real estate and not in law, he or she should not offer nor provide legal advice. Rather, an agent’s that the agreement is translated to paper.
