The real estate business helps fulfill one of our most basic needs: shelter. For many people, this shelter is a house. But real estate is more than just shelter and houses. It includes apartments, condominiums, cooperatives, farms, retail stores, office buildings, shopping centers, warehouses, industrial plants, medical centers, and many other types of property. Hundreds of thousands of licensed professionals sell, lease, manage, appraise, or otherwise work full time in the real estate industry. The industry also provides employment for many part-time and support personnel.
The right to possess property has existed in some form since the beginning of civilization. Early nomadic societies distributed property rights among tribes and families and were probably the first to maintain communal ownership of specific plots. For those nomadic societies where land was bountiful, tribes had no need to secure individual plots of land or establish permanent residences.
The urban orientation of ancient Greece caused the dissolution of communal properties. Individual and familial ownership of land was the norm. This notion of the absolute right of ownership continued until the end of the Roman Empire.
With the decline of the Roman Empire and the subsequent barbarian invasions, families and landowners had little with which to guard their belongings and protect their land. The ensuing desire for security led to the feudal system of the Middle Ages. In feudalism, a lord held vast lands in his dominion (hence the word landlord). Those who lived on his land and farmed it were called vassals. Vowing homage and fealty (fidelity) to their lords, vassals were guaranteed protection of their lives and their chattel, or possessions. The lord, in turn, owed homage to his king, acting as the king’s vassal. So strong was the bond between vassal and lord that vassals were not considered free. However, they were not slaves either: They were more like tenants who paid their rent with the products they farmed. They were also expected to perform military services in times of war. While the lord presided over the land, vassals farmed individual plots of land and passed the rights to their offspring.
With the dissolution of the feudal system in the 13th century, vassals were able to claim true ownership of the land that they farmed. In France, however, homage and fealty were not abandoned completely until the revolution in the late 1700s, when the aristocracy was abolished. At that time, the common person obtained unconditional freedom and with it the right to own land. Such rights had not been in existence in France since the Roman Empire nearly 1,300 years earlier.
Ironically, while common people were asserting their rights to the ownership of land in Europe, European nations were establishing vast empires overseas, claiming foreign lands as their own and subjecting the native inhabitants to their system of rule. The Spanish and the Portuguese took over Central and South America. The French dominated parts of North America, Southeast Asia, and northern and western Africa. The British annexed India, parts of North America, eastern and central Africa, Hong Kong, Australia, and numerous other areas. It was said during Britain’s peak that the sun never set on the British Empire because Britain claimed land in every part of the world.
Through various treaties and purchases, the United States acquired all of its land (with the exception of Alaska and Hawaii) by the 1850s. As the American frontier opened up in the 19th century, pioneers claimed open public lands. By clearing the unclaimed land, farming it, and building a home on it, the settlers felt that they had earned the right to the land’s title for free or for a nominal price. This established what now is known as squatter’s rights. The Pre-emption Act of 1841 officially declared squatter’s rights as legitimate, gaining the support of the U.S. government because it encouraged citizens to settle west of the established states. For another 50 years, more than 200 million acres of land changed from government to private ownership, until Congress abolished the act in 1891. During this time, some individuals developed fortunes in land holdings without actually farming the land as was required by law.
So began the American system of real estate. Once private ownership of land became widespread, the need to monitor and facilitate the exchange of property grew. A number of different careers developed from this need.
The real estate industry in the United States has grown dramatically over the last 20 years. With property values increasing, transactions becoming more complicated, and property changing hands more frequently, more people are turning to real estate professionals for help in the task of buying or selling real estate.
The real estate industry is essentially a service business. There is no product to manufacture, assemble, or sell. The current or prospective owner of a property employs or contracts professionals to perform various functions, including real estate sales, management, development, leasing, and appraising. The types of properties handled by real estate professionals include houses, condominiums, apartments, farms, vacant land, office buildings, stores, shopping centers, warehouses, factories, and other industrial properties.
Upon deciding to sell a property, the owner usually contacts a local real estate agent. The owner and agent discuss the price at which the property is to be offered, the plans for advertising and creating interest in the property, and the terms under which the owner will sell. The owner then commonly gives the real estate firm a contract authorizing it as the agent for a certain period of time (several months) in trying to find a buyer for the property.
Selling real estate requires the ability to price property accurately, devise and use imaginative sales and advertising methods, and deal capably with prospective buyers. Good real estate agents, for instance, develop a knowledge of the neighborhoods they serve; they know the taxes, the schools, and the value of different locations. In selling homes, good agents know the houses extremely well, both their strengths and weaknesses. For instance, they know how much it costs to heat a given house per year, the amount of taxes paid monthly, and the age and condition of the structure.
Some real estate agents specialize in specific types of property. These agents must be particularly knowledgeable in their specialties. For example, agricultural real estate agents deal with rural properties and must know a great deal about the types of soil, the water supply and drainage, and the cost of labor in the area.
Industrial real estate also demands special knowledge from real estate brokers and agents. A successful industrial broker must know about the needs of different types of industries in order to find a suitable buyer for a property. The broker should know about transportation facilities; labor forces; local building, zoning, and tax laws, and factors such as housing, parks, and school facilities for the potential employer’s employees.
Real estate agents also may be involved in the sale or development of industrial parks, which are large areas designated for industrial use. Another example of land development is housing developments, which can be just one block of houses or an entire community with shopping centers, schools, and police and fire protection facilities.
Land development requires a broad knowledge of all phases of real estate: financing, construction, appraisal, leasing, and management. The developer’s first step is selecting the site and buying the necessary tracts of land. Usually, after borrowing money to finance the building, the developer engages a contractor to build houses or other buildings. A real estate broker hired by the developer or through the developer’s own real estate business puts the buildings up for sale.
Another branch of real estate involves building management. Real estate management is concerned with representing the owner in maintaining the property, paying operating expenses, and directing the work of the building employees. Real estate managers must account to the owner each month concerning these activities.
Owners of office buildings, apartments, shopping centers, and other types of income-producing real estate generally hire a real estate firm to manage their property, although sometimes the manager is an individual working for the owner. The managing agent often acts as a leasing agent on behalf of the owner and must have sufficient knowledge of rental market conditions and rent control laws to attain the highest degree of occupancy as well as the largest income for the property.
A leasing agent is responsible for representing the property owner in leasing the units of a property, collecting rent, and paying operating expenses. Leasing procedures differ somewhat according to whether the property is new and being leased for the first time or whether it is an existing property with previous or existing leases. New properties require careful analysis by the agent to ensure that the rent will represent an accurate estimate of the market. Owners want to obtain the highest possible rents, but it is also essential that the property rent quickly without long exposure to the market.
The leasing agent uses advertising, open houses, personal calls to potential tenants, and other sales devices in the process of leasing a new property. The same sales techniques are used in leasing existing properties, but often in these cases only one or two leases are up for renewal at a time.
Appraising real estate is another specialized segment of the business. An appraiser writes a report called an appraisal that is used to determine the market value of a property. Banks and mortgage companies usually require an appraisal on a property being financed to verify that the property is adequate security for a loan. Individuals hire appraisers to verify a property’s market value. Appraisers working for the local government to determine the assessed value of property for tax purposes are usually called assessors.
The property appraisal must take into account the selling prices of similar pieces of property and also include specific mention of any neighborhood characteristics that detract from or increase the property’s value. The appraisal report includes the structural condition of a piece of property, which is also part of the market value.
The real estate industry is subject to fluctuations of the economy. Low interest rates encourage people to seek mortgages and buy property, which stimulates the real estate industry. The real estate market can be strong in some parts of the country and weak in other parts of the country. Often, an area will be strong for a certain amount of time, followed by a decrease in the number of real estate transactions.
The U.S. Department of Labor indicates that employment for real estate agents and brokers will grow about as fast as the average through 2014. Technology is improving the productivity of agents and brokers. Real estate companies and sellers are making more information available on the Internet and agents are able to serve a much larger number of customers. The use of advanced technology is likely to discourage part-time and temporary real estate work because of the investment costs and the competition with full-time workers.
There is a trend among real estate customers to want more of a partnership with their agents instead of turning over all aspects of transactions to their agents. Agents who are willing to be flexible in how they serve clients will be more successful.
Opportunities should be good for property managers as the number of apartments increases and more new homes are increasingly being organized with community or homeowner associations that require professional management to provide community services and oversee jointly owned common areas.
For More Information:
- American Land Title Association
- Appraisal Institute
- Institute of Real Estate Management
- National Association of Realtors
- Society of Industrial and Office Realtors
Related Career Fields:
- Assessors and Appraisers
- Insurance Policy Processing Workers
- Insurance Underwriters
- Property and Casualty Insurance Agents and Brokers
- Property and Real Estate Managers
- Real Estate Agents and Brokers
- Real Estate Developers
- Risk Managers
- Title Searchers and Examiners