The scope of the real estate industry
Economic characteristics of land
Scarcity, location, improvements
1) Scarcity
Basic economics - scarcity occurs when people’s needs and wants are unlimited and resources are limited
Scarcity of Land - Scarce means there isn’t much of something around. Well, scarcity means the same thing. Land is not limitless. Yeah, about a quarter of the earth’s surface is land, but once it’s gone, it’s gone. This can have a significant impact on the value of a property. Especially in highly populous areas, such as Long Island. The more scarce the land, the higher the price. It is a supply and demand concept.
https://passmasters.com/article/property-ownership/economic-characteristics-of-land/
2) Location
Permanence of investment is also known as fixity and means investments in real estate are long-term. This is due to the physical characteristics of indestructibility and immobility. Since land is immobile, investment in property becomes fixed. Land cannot be moved if the market becomes better in another location.
Since real estate transactions are complex and large amounts of money are involved, they are not made very frequently. As a result, a real estate investment is a long-term investment.
Area preference (or situs) is the most important economic characteristics of land. Situs is based on many factors, such as history, convenience, and reputation. A home in a neighborhood with great schools and a low crime rate will generally command a higher price. A house in a high crime neighborhood with poor schooling would be priced lower.
https://passmasters.com/article/property-ownership/economic-characteristics-of-land/
3) Improvements
The economic characteristic of improvements (also known as modification), states that improvements to a piece of land can have either a positive or negative impact on its value. Adding a pool and landscaping to a home will increase its value. If a nuclear power plant is built, the surrounding land values will decline.
https://passmasters.com/article/property-ownership/economic-characteristics-of-land/
How the health of the real estate market affects the economy
Our economy is cyclical. When the economy is thriving and unemployment is low, people will tend to buy and build more. When they buy and build more investors make money, consumers, make money, suppliers make money, and banks make money.
Everyone needs a place to live but upgrading to a bigger or better place is not necessary and real estate markets suffer during a down economy.
Buyer’s vs seller’s market
During a buyer’s market there are a high supply of homes and low demand that drives down prices
The opposite occurs during a seller’s market
There are a limited number of homes for sale with a high demand that drives up prices.
Last, real estate will usually have elastic demand - A change (lower) price is likely to spur more demand.
Employment opportunities in Real Estate
Real Estate Agent - Main job is to bring buyer and seller together. Must take an approved 40 hour course, pass the state exam and complete continuing education requirements.
Broker - Agents are allowed to take the broker exam after three years as working successfully as an agent.
Lenders - Agents and brokers submit purchase agreements to lenders that work with clients to get funding. Lender also works with title company.
Title Insurance - Once a purchase agreement is signed. Agents send the documents to title which transfers ownership rights.
Appraisers- A bank requires an appraisal before they will commit to lending.
Construction personnel- When economy is healthy, new building is more likely to take place.
Inspectors - Inspect property to make sure it is sound. In many cases a sale will be “contingent” upon a satisfactory inspection
LARA
https://www.michigan.gov/documents/lara/Real_Estate_517670_7.pdf
How real estate professionals make money - they bring a buyer and seller together and earn a commission on a sale. 6% is the average that is split between the buyer and seller agent. A buyer’s agent shows a listed property. The seller’s agent is the listing agent.
Brokers - a broker has more training and when they have real estate sales people working under them they earn a cut of from everyone in the office.
Advantages of Home ownership
Equity - As you pay down a loan you have “equity or value”home equity is the portion of your property that you truly “own.” If you borrowed money to purchase a home, your lender has an interest in the property until you pay off the loan, although you’re still considered the homeowner. Renters never earn any equity
Equity is the difference between the property’s value and all loan balances outstanding on the property.
Tax Benefits - Interest payments on mortgages are tax deductible.
Bundle of Rights - Homeowners have rights to possess, use, transfer, ecmumber and exclude.
Water rights
Doctrine of prior appropriation - In same cases property owners may have to apply for water rights where water is scare. On other cases, littoral and riparian rights occur.
Littoral - gives owners access to not moving bodies such as lakes and seas. Owners have the right of use without owning the body of water or the land beneath it. Littoral rights attach to the property so those rights transfer when the property is sold.
Riparian - refers to moving waters such as rivers and streams. If it is non-navigable the owner enjoys the right to use and the water and land below. Ownership rights transfer with the property.
Irrigation - Many landowners do not know that they need legal water rights to use surface water and groundwater for irrigation. ... There are many demands for water: