The Buying and Selling of Real Estate
Real estate, as a formal profession, has been in existence for well over a century. One of the earliest evidences of real estate transactions involving an agent were in association with the US Homestead Act of 1862. Those wishing to claim the "free land" offered by President Abraham Lincoln were to pay a filing fee and a commission to the land agent for his services with submitting the necessary paperwork.
According to the National Association of Real Estate Boards (who coined the term Realtor® in the United States) real estate sales brochures with maps showing California ranches for sale have been found dating back to 1879. Clearly an organized form of promoting the purchase and sale of property has been well established over time.
Not Just A Real Estate Agent… A Realtor
Because real estate transactions involved both legal and governmental actions, agents need to be well versed in not only salesmanship, but also the procedures necessary to record the transfer of land from one party to another. Due to the high level of required training, real estate agents must be licensed for the area or areas in which they practice.
Realtors® are subject to individual state licensing laws and are required to pass an examination to prove their knowledge of the processes and procedures involved with matters pertaining to real property.
Niche Markets Emerge
As with most other broadly based professions, the market quickly segmented itself and niches appeared. A Realtor® could opt to work with those seeking commercial real estate, condominiums, ranches, investment property or any number of other select areas that fall within the vast category of real estate including luxury homes.
Defining Luxury Real Estate
While the debate is steady and hot, the general consensus about what types of real estate are considered "luxury" stems from price rather than amenities. Most agree that a home priced at $1,000,000 falls into the luxury category. Some are willing to concede to a price of $850,000, but generally homes that fall below that range would simply be titled "upscale."
Luxury homes do have several common characteristics according to The Institute for Luxury Home Marketing. Those who own homes of $1 million or more typically have an exercise room, wine closet, formal offices with multiple workstations along with elaborate security systems, panic rooms and walk-in safes.
In addition, Coldwell Banker Previews International sites 77% of luxury homeowners have designer kitchens and 46% have home theater or entertainment rooms.
Commercial vs. Residential Real Estate
While residential real estate can be defined as property intended to house individuals and families, commercial real estate is more complicated. Commercial real estate can encompass both aspects of the market.
Commercial real estate can involve aiding with the purchase and sale of office buildings, commerce centers and the like. It can, however, also include rental properties such as apartment buildings and homes. In such cases, the purchase of a residential apartment building would become a commercial transaction even though the facility is designed as one where individuals and families would live.
Commercial real estate is also concerned with zoning, building and other restrictions. Companies who wish to purchase a facility in which to operate their business must adhere to local zoning restrictions. According to Realtor.com, zoning is set in place to control the pace and development of property in certain areas. In order for a business to buy or build on any particular site, it must be zoned for commercial use.
Qualifying for a Loan
The majority of individuals and companies seek assistance, in the form of a loan, in order to purchase property. Loans of this type are referred to as "mortgages." While both types of loans are designed to fund the purchase of property, there is one primary difference between commercial and residential mortgages.
With commercial loans, the value of the building and the cash it will produce are heavily considered during the qualification process. With home loans, several factors - including credit score, income and credit history. According to Lending Tree, your credit score is the most crucial factor in the mortgage decision.
Credit scores are a culmination of factors that give a snapshot of an individual's probable ability to make payments in a timely manner. Scores range from 300 to 850 with 678 being the average. A score below 620 is generally an indication of risk greater than the lender is willing to take. It is possible to ascertain a credit score prior to applying for a mortgage in order to be prepared for any unexpected results that may appear on the report.
When buying a home or listing property for sale, be sure to investigate all aspects of the residential or commercial process. This will allow for smoother transactions and few unexpected and unwelcome surprises.
