INTRODUCTION TO THE REAL ESTATE BUSINESS
Real estate activities Professional specialties Property type specialization
Why hire a real estate professional
In its broadest sense, the real estate industry is the largest single industry in the American economy. Within it one might include the construction industry, itself often considered our country’s largest business. In addition, the real estate industry may be said to include the creation, management, and demolition of every residence and business facility in the nation: offices, warehouses, factories, stores, and special purpose buildings such as hospitals and government facilities. The real estate business would include as well the managing of all the 8 Principles of Real Estate Practice in Florida
undeveloped land in the country: national parks, forests, and the vast quantity of unused federal property.
Real estate professionals are individuals and business organizations whose sole enterprise is performing a real estate-related service or function. A wide range of professions is available to persons wishing to enter the real estate business.
activities Real estate professionals perform the following property-related functions:
creation and improvement
management and maintenance
Creation and improvement. Creating real properties from raw land involves capital formation, financing, construction contracting, and regulatory approvals. The key parties involved in this aspect of the business are generally the developer, the landowner, and the mortgage lender. Also involved are market analysts, architects, engineers, space planners, interior designers, and construction subcontractors.
Experts who manage the legal aspects of the development project include real estate attorneys, title companies, surveyors, property insurance companies, and government regulatory officials. The brokerage community, with the assistance of professional appraisers, usually handles the ownership and leasing transactions that occur over the many phases of development.
Management and maintenance. All real estate, whether raw land or improved property, must be managed and maintained. The two principal types of managers are property managers and asset managers. Property managers and their staff oversee specific properties on behalf of the owners, making sure the condition of the property and its financial performance meet specific standards.
Community association managers (CAMs) manage such residential properties as mobile home parks, planned unit developments (PUDs), cooperatives, time-shares, condominiums, and homeowners’ associations.
Asset managers oversee groups of properties, or portfolios. Their role is to achieve the investment objectives of the owners as opposed to managing day-to-day operations.
The scope of management work is detailed in a management agreement.
Maintenance personnel include engineers, systems technicians, janitorial staff, and other employees needed to maintain the property’s condition. Section 1: Course Overview: The Real Estate Business 9
Demolition. Demolition experts in conjunction with excavation and debris removal experts serve to remove properties that are no longer economically viable from the market.
Investment ownership. A specialized niche in the real estate business is the real estate investor who risks capital in order to buy, hold, and sell real properties. In contrast to property owners whose primary interest is in some other business, the real estate investor focuses on identifying and exploiting real estate investment opportunities for profit. The real estate investor provides capital and liquidity to the real estate market.
Regulation. All real estate is to some degree regulated by government. The principal areas of regulation are usage, taxation, and housing administration. Professional regulatory functions include public planners, zoning administrators, building inspectors, assessors, and administrators of specific federal statutes such as Federal Fair Housing Laws.
Transfer. Rights and interests in real estate can be bought, sold, assigned, leased, exchanged, inherited, or otherwise transferred from one owner to another. Real estate brokers and the brokers’ associates are generally centrally involved in such transfers. Other professional participants are mortgage brokers, mortgage bankers, appraisers, insurers, and title companies. 10 Principles of Real Estate Practice in Florida
specialties In summary, the six primary functional areas are populated by professionals with the following specialties.
Professions in Real Estate
Creating developers market analysts
public and private planners surveyors
building contractors public and private inspectors
space planners mortgage brokers
mortgage lenders and bankers securities companies
title and escrow companies attorneys
real estate brokers and agents
Maintaining property managers asset managers
maintenance engineers maintenance technicians corporate managers
Destroying demolition contractors excavators
Holding investors corporate managers
Regulating assessors public planners
zoning administrators building inspectors
Transferring brokers and agents appraisers
lenders and bankers mortgage brokers
title and escrow companies attorneys
specialization In addition to specializing by function, many professionals also specialize in the type of property they work with. According to the purpose of ownership, properties are classified as residential, commercial, or investment properties.
Residential property refers to property that is owned and used for habitation. Such properties may be further classified in terms of how many families they are designed to house, whether they are attached to other units or detached, and so forth.
Commercial property generally refers to retail and office properties, but may also include industrial real estate. The term “commercial” relates to the fact that the property can potentially generate income from a business’s usage.
Investment property refers to any property that is held by its owners for investment purposes. All classifications of property may be investment properties. Generally, however, the term does not refer to owner-occupied residences, even though such properties constitute an investment. Apartments, condominiums, cooperatives, and single-family homes may be considered as investment property if non-occupants own the property for investment purposes. These properties are also referred to as residential income properties. Section 1: Course Overview: The Real Estate Business 11
According to use, the following classifications of real properties are commonly accepted.
Classifications of Real Estate by Use
residential income farm and ranch
office special purpose
These categories often have overlapping uses. A bank, for example, may have retail as well as office operations. An industrial distribution facility may include extensive office space. A retail center may contain offices.
Special purpose properties include publicly or privately owned recreational facilities, government buildings, churches and schools.
Why hire a real
estate professional There are many reasons a member of the public hires a real estate professional. The real estate professional offers expert information on the real estate market, specifically in the areas of:
The real estate professional knows how to transfer real property and who needs to be involved in transferring the property legally.
The real estate professional understands the current economic market conditions and the current local real estate market.
how to market real estate
The real estate professional understands the best way to advertise and/or promote a specific piece of real property depending on the audience that may buy the property.