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What Is Real Estate – A Complete Guide To Real Estate

by admin on January 7, 2021

Introduction

The real estate industry is undoubtedly a linchpin sort of industry in our society. It is a great industry to invest your money to increase it in the future. People usually buy and sell different kinds of properties, and they certainly need experts that help them understand and manage their transactions. 

The traditional real estate process has been replaced by online software or websites throughout the past few years. However, the need for a middleman, aka real estate agent, never dies. Why? As real estate is an essential yet complicated industry. Specific laws and restrictions that a real estate agent knows better than a common man belonging to any other profession. When it comes to your real estate property’s paperwork, the right real estate agent can surely come in handy to give you pieces of advice from time to time. 

Therefore, we have jotted down the following guide for helping consumers better understand the real estate process and real estate agents to learn some adequate strategies that might help them better market their business in the long run. After skimming through this article, we hope you will get some handy knowledge regarding the real estate process.

What is Real Estate?

Real estate is generally referred to as a specific land and certain natural or man-made improvements attached to that land such as water, minerals, buildings, homes, trees, bridges, and fences. Hence, real estate can be declared as a form of real property. 

Real property is the land that you have the ownership of along with the right to sell, possess, or lease that land. However, another term is used, known as personal property, when it comes to one’s possessions. Personal property typically refers to any property possessed by a person that does not fit the definition of real property. That can be clothes, furniture, cars, and whatnot. 

Types of Real Estate

what is real estate

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Real estate is generally divided into the following four categories. 

1. Commercial

Commercial property is generally the type of property that includes business places. This category can consist of strip malls, colleges, hotels, shopping centers, and offices. Apart from these, apartment buildings are also considered commercial. Logically, they are a form of residential property, but as they generate income for their owner, it certainly won’t be inaccurate to refer to them as commercial property. 

2. Residential 

This is the most common form of real estate, which generally includes resale and new construction homes. You probably have some idea of residential real estate as single-family homes. The residential real estate category includes townhouses, vacation homes, condominiums, and duplexes as well. 

3. Industrial

Another commonly known form of real estate is industrial real estate. Industrial real estate can include various sorts of buildings. For instance, the warehouses and buildings that are usually utilized for production, storage, research, and product distribution all fall into the industrial real estate category.

4. Agriculture

Another frequently known form of real estate is agricultural real estate. Agriculture real estate includes ranches or farms that farmers can utilize to cultivate various sorts of crops. People invest in agricultural real estate to earn from the agriculture business.

People Involved in Real Estate

real estate agency

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The real estate industry, as mentioned before, is quite a complicated industry. A lot goes into a single transaction related to real estate. Therefore, there is a decent amount of people involved in the real estate process to make the whole process convenient for the buyer and the seller. If you have ever sold or bought any property in your lifetime, you might have some idea of the specialties mentioned below.

1. Real estate agent

A real estate agent generally works as a liaison between the sellers and the buyers. This person is responsible for searching for potential real estate properties, listing them, negotiating the prices, and doing various other chores. Certain agents work with both the sellers and the buyers. However, most of them specialize in working with only one of them instead of both buyers and sellers. The responsibilities of the real estate agent working on the seller’s side vs. the real estate agent’s responsibilities working on the buyer’s side are quite distinct. 

2. Buyer’s Real Estate Agent

People who are looking for homes for sale or lands for sale hire a real estate agent. These agents solely work with people looking to buy a property and are responsible for hunting potential property for their clients. Apart from hunting, their responsibilities include organizing walkthroughs and showings besides negotiating the prices to make them favorable for their client. The real estate agent has to be there and assist their client throughout the whole buying process from day 1 to the day the sale is closed. 

When it comes to service charges, buyer clients usually do not pay any fee to the agent. If the agent can successfully close a real estate property deal for the buyer, they will take around 3% of the total sale price of the property paid by the seller. 

3. Seller’s Real Estate Agent

Seller’s Real Estate Agent

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People who are willing to sell their residential, commercial, industrial, or agricultural property take the aid of a real estate agent specializing in the field and know the ins and outs of the real estate industry. The real estate agents that work on the seller’s side are also known as listing agents as they list the seller’s property under their name for people to find. 

Following are certain things that a listing agent is responsible for:

  • Assisting in determining the selling price of their client’s property
  • Performing the property listing and marketing activity
  • Arranging showings and open houses 
  • Answering the queries of potential buyers 
  • Negotiating the sale price to the point that is beneficial for the buyer as well as the seller so that the deal can be successfully closed
  • Coordinating throughout the complete sale and closing process

When it comes to the listing real estate agent‘s service charges, they usually keep around 3% of the total sale price that is paid by the seller. It should be noted that the seller also has to pay another percentage of the gross sale price to the agent on the buyer’s side as well. For instance, a typical listing contract has an X% with Y% for both the cooperating agents. 

4. Real Estate Broker

Real Estate Broker

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The person that is usually considered a step above the real estate agent is known as the real estate broker. Rules for brokers vary from state to state. However, brokers are known to have more licensing and education than the typical real estate agents. Therefore, a broker has the liberty to form a real estate brokerage under their name and hire various real estate agents as the salespeople of that brokerage. 

5. Mortgage Lender

A financial institution that facilitates people by lending them money to fund their mortgage loans is known as a mortgage lender. It is much encouraged to have a loan pre-approved before even looking for a real estate property. Usually, people looking to buy a real estate property tend to work closely with a certain mortgage lender even before they go visiting properties that are put on sale. 

6. Appraiser

An appraiser is generally a person who determines the value of a certain property. This person works independently of the selling and buying party and is usually expected to provide the exact price of the seller’s property. The appraiser is usually appointed and chosen by the mortgage lender for the task. They are quite interested in acquiring an accurate and fair idea of the exact price of the property. 

The lender grants the loan only if the property is appraised for the agreed-upon sales price. The appraiser normally conducts a room-by-room survey and reviews the interior and exterior condition of the building to gain the exact idea of the price the property is worth. Once the appraiser has done their job on-site, they report back to the lender and inform them about the property’s worth. 

7. Inspector

Inspector

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Whereas the lenders hire the appraisers to determine the monetary value of a certain property, the potential buying property hires inspectors to determine the safety, structure, and possible damages and defects in the buildings shortlisted by the buyers. 

The inspection process is normally quite a lengthy process. According to the National Association of Home Inspectors, the institute responsible for training and certifying the home inspectors throughout the US, an inspector is supposed to review a list of around 1600 things while inspecting a building. 

8. Closing Attorney

The real estate attorney that is responsible for handling the transaction of the sale according to the state laws is known as the closing attorney. This sort of attorneys are called “closing” attorneys because most sellers or buyers acquire their services when everything has been finalized, rates have been negotiated, and they are finally about to close the deal. 

The closing attorneys are real helpers for the general public that does not understand the common rules and regulations of the state they reside in regarding real estate. Therefore, the closing attorneys assist the buyers and sellers in comprehending the legal documents presented to them throughout the sale process. 

Real Estate Process

Real Estate Process

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The specific steps that are generally involved in a certain real estate transaction might shift slightly depending on the type of property and the people involved in the transaction. However, most of the transactions generally take place in almost the same manner. 

For keeping it simple and understandable, we will consider a residential transaction to describe the real estate process. Industrial and commercial real estate transactions generally follow almost the same process as residential, but the residential process might be much relatable among a vast majority of consumers. In the process, we will be covering both the perspectives of the buyer and well the seller. 

Step 1: Hiring a real estate agent

The first thing that people tend to do when they decide to sell their home is hiring a listing agent to list their property and assist them during the process. Typically, clients prefer the listing agents recommended by their social circle, personal recommendations, or the one that is pretty much renowned in their locality.

At present, most people find their real estate agent through a real estate website like Trulia or Zillow. Normally, a listing agent gives a listing presentation. This presentation is usually based on how they would market and price your property, what commission they would take when the deal is closed, and various other aspects and bits of information. This presentation helps a client decide which client will be most suitable depending on their budget and requirements. 

When it comes to buying a home, people often have two options. The first option that some people prefer is hiring a real estate agent who will help them discover and shop for a property they need. The second option is to start checking out the property by yourself and hiring an agent later when you have found a property that you like. 

There is not any preferred option that you should consider from the above two. You can go for any option you like. However, if you go for the first option, your agent might suggest some potential real estate properties that you might not have found without them. Hiring an agent at the start of the process might be undoubtedly a great idea instead of letting the seller’s agent take care of things single-handedly. 

Step 2: Listing or viewing property

Listing or viewing property

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The next step for a seller is to list their property so that potential buyers can browse it. This step has several steps that are hereby mentioned.

  1. First and foremost, you have to determine the actual price of your home. Your real estate agent will help you out in doing this. Your property’s price is calculated based on certain factors, including its location, condition, upgrades, and amenities. Your real estate agent will compile a CMA (Comparative Market Analysis) that will assist you in understanding why and how your property is priced.
  1. The next step will be entering your property’s data into the IDX (Internet Data Exchange). ID consists of real estate listings from all around the country. Members and potential buyers can check out the properties listed on the IDX and contact the person against whom the property is listed. Your agent has access to the IDX, and they will be responsible for entering your property’s data on it. 
  1. The third step involves marketing your home. Your agent will help you market your home by either traditional methods or listing your home on other real estate websites approachable on the internet. These marketing tactics will surely enhance your property’s exposure to potential buyers and other real estate agents. 
  1. The final step involves hosting showings and open houses with buyers. These showings and open houses will result in giving potential buyers an enhanced look at your home. As these methods involve in-person meetings, the buyers will be able to ask more queries and concerns when exploring that you will be able to answer perfectly. This will save the time and energy of both parties as well. Certain agents might offer to create a virtual staging opportunity or real estate videos for your home as well. 

Some sellers prefer selling their property by themselves, without the aid of an agent. This method is referred to as FSBO (For Sale By Owner). This method surely saves the seller commission money, but the seller does not get access to the IDX, the CMAs, or any marketing benefit or price estimate. However, some sellers ask the buyer’s agent for a little bit of cooperation with whatever they are tangled up in.

From a buyer’s perspective, this step usually involves researching as well as viewing various properties. Sites like Zillow or Trulia come in handy at this point as there are many potential homes listed on the sites that might lie in their price range. However, some buyers also rely on their real estate agent to find properties for them according to their budget and requirements. 

Normally, buyers attend an open house of a property to browse its location, amenities, and condition. They also tend to schedule dedicated showings with the listing agent to ask various specific queries and walk through the property to have a better and deeper look. Having a pre-approved loan is preferred in such situations as the buyer will be able to place on offer in such dedicated meetings. 

Step 3: Closing the sale

Closing the sale

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For a moment, assume that you’re selling your home and somebody wants to buy it right away. What happens next?

Well, first of all, the buyer would quote a price for your home. This quote or offer could be exactly the price you wanted, above the price, or below it. It all depends on how competitive the market is and how desperately you want to sell, or the buyer wants to buy your house. 

After that, you will consider the offer, talk about it with your agent (if you hired one), and then either accept or decline the offer. There might be some space for negotiation, depending on the situation. However, in some cases, both parties immediately agree on a price if they are desperately willing to close a deal. 

After you accept the offer, the inspector will inspect your home, and the buyer will work with their mortgage lender to acquire their loan. Once the inspection is done, the down payment will be made, and the title of the property will be legally transferred to the new owner’s name after getting a bunch of papers signed by you and the new owner. 

Let’s flip the situation, and now you are buying the house. Once you have made the offer that has been accepted by the seller, the next step is submitting your earnest money. Earnest money is surely not the down payment for the property. Instead, it is a certain amount that you pay on the spot to make the seller understand that you are serious about purchasing their property. 

After that, you will order an inspection of the house to check whether any repairs need to be made. At the same moment, you should inform your mortgage lender that you have made the deal, and the paperwork to secure your loan should begin. Once the inspection is complete, the next step that you and your lender will take is ordering an appraiser to verify whether the house matches your mortgage and the offer that you made. After that, you will have to buy home insurance for your newly bought home. 

At closing, you will bring the necessary documents, including your home insurance, mortgage, and any other piece of paper required to transfer the title to your name. After the verification of the documents, the property will be finally transferred to your name. 

Marketing Strategies in Real Estate

Marketing Strategies in Real Estate

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After going through the complete real estate process for buyers and sellers, we thought it might be a good idea to mention some effective real estate marketing strategies that real estate agents can make use of.

When it comes to marketing yourself and your homes as a real estate agent, there are three types of marketing strategies that you can choose from. Following are all three of them explained briefly. 

1. Traditional Marketing

The first method that we would like to tell you about is traditional marketing. When it comes to the real estate market, unlike other industries, traditional marketing is hardly outdated. Following are some traditional marketing tips and strategies briefly mentioned in bullet points that you might want to consider for marketing yourself and your properties:

  • Use real estate business cards to market yourself as you can hand them out to people at local events, open houses, and even someone you came across in the street looking for the likes of services you provide.
  • For marketing the homes available for sale, consider going for postcards. Postcards usually have ample space for text and photos to market the property a bit more attractively. Postcards are quite cheap to mail, easy to pass out, and very quick to read as well.
  • Use direct mailers to mail personal flyers, postcards, or newsletters to your target audience. Direct mailers surely seem a bit old-school, but trust us, they are much effective when it comes to the real estate sector. 
  • Consider relying on local advertising. You can perform local advertising in different ways. For instance, you can consider having your ads placed in newsletters, billboards, or magazines. You can also leave your business cards or postcards in a specific target area or consider relying on a business instead of advertising for you in specific areas.

2. Digital Marketing

Digital Marketing

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The digital marketing world is expanding day by day and getting much better and effective as we speak. If you are not taking advantage of digital marketing in the present era, you surely leave a hefty amount of money on the table. Make sure to utilize the smart digital marketing strategies and certain effective tips mentioned as follows before you regret it.

  • Having a website is a must-to-do thing to build awareness regarding your personal brand as a real estate agent besides efficiently marketing the homes you have for sale. People prefer looking up solutions online instead of stepping out of their houses on a physical hunt for required services. A good real estate website can hold the details of homes for sale, land for sale, and other properties you have to sell. 
  • Another fine way to attract customers, building trust with them, and proving your real estate expertise is by running a blog. Your future clients might have certain queries and doubts regarding your credibility and real estate that you can conveniently answer through your blog posts. 
  • According to stats, around 90% of real estate agents use social media. There are tons of ways that you can utilize to leverage social media to market yourself and the properties you have for sale. You can make a Facebook page or an Instagram profile of your business, like all real estate companies. These platforms can help you out in marketing your homes, sharing your blog content, and connecting with potential clients. 
  • Another good way to market yourself to your target audience is through email. Acquire the email address of the people who visit your website through an online form. Once you get your clients’ email addresses, you can simply send a regular newsletter to them informing them of the latest properties that are available for sale. 

3. WOM Marketing

WOM Marketing

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Last but not least, WOM (Word-of-Mouth) marketing is quite an effective tactic when it comes to the real estate business. People are most likely to hire an agent based on recommendations and referrals. 

Every good real estate agent out there is making use of WOM to market their business to a great extent. You can also utilize this tactic to gain the attention of potential clients. Once you are finished with each client, do not forget to ask a few sentences regarding your service performance as an agent. You can also consider requesting your clients to submit their testimonials on online real estates marketing websites like Realtor, Zillow, or Yelp

To ensure good reviews from your clients, consider being a good real estate agent, and provide your client with all sorts of convenience that they expect from you. Do what you do best, provide top-notch services, and put a long-lasting impression on your clients through your talent. Once you start providing exceptional services to every one of your clients, good reviews and referrals will surely come your way without any extra effort. 

Conclusion 

The real estate industry is, for sure, a quite profitable industry to invest in. When it comes to real estate, there are various types of properties that you can invest in. However, whether you want to purchase a residential property or a commercial property, it is most certainly going to be a great idea to hire a real estate agent to assist you throughout the process. The need for a real estate agent arises in such cases because a common man is not that familiar with the laws and regulations of the state regarding real estate in that specific area. 

When it comes to marketing your real estate business and properties for sale, being a real estate agent, it’s a good idea to use the traditional, digital, and WOM marketing strategies available. However, if you are on a tight budget, consider digital marketing strategies as they won’t cost you much. You can create a real estate website and advertise your portfolio for your visitors to check out. You can also put up ads of the homes for sale, land for sale, and any other properties you have for sale at the time. Make sure to update your website from time to time and inform your audience regarding the latest happenings and upcoming events. 

In some cases, digital marketing strategies won’t cost you even a single penny. Creating a Facebook page for posting the latest updates or an Instagram account might be a good idea as a startup. However, if you have some budget, you can sponsor your Facebook or Instagram profile to target specific audiences in your locality to gain new clients. 

In addition to digital marketing, you can always rely on Word-of-Mouth marketing to grab some potential clients that might promote you in the long run after being satisfied with your services to a favorable extent. 

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