You've seen the shows on the television, people making millions of dollars buying dilapidated properties, making repairs and turning them around for a huge profit. You've also seen the people fail miserably. One of the key factors that separate the winners from the losers in the real estate game is knowledge. Just like any other business you enter, the more you know, the better your chances of being successful. Whether you're looking to flip houses, invest in rental properties or just want to learn more about real estate so you are better off when you purchase your own home, there is a wealth of knowledge if you know where to look.
1. WHAT IS REAL ESTATE?
Real estate is a pretty broad area. The basic definition of real estate is the land and anything attached to the land, whether it's natural or man-made. When you purchase real estate, you are purchasing the land and everything that goes with it.
Improvements: If you build a house, shed, fence or anything else on the land it is called an improvement. It doesn't matter if the thing you built makes the real estate uninhabitable, like a nuclear waste facility, it is still an improvement.
Bundle of Legal rights: Ownership of real estate comes with certain legal rights, known as the bundle of legal rights. The bundle of legal rights comes in five different areas.
Possession
Control (within the scope of the law)
Enjoyment (again, only if it's legal)
Exclusion (this is where keep out signs come in handy)
Disposition (which means you can get rid of the real estate however you choose)
When you have ownership of real estate you are said to hold the title. Title is not the piece of paper; the piece of paper used to show title is known as the deed. Just because you have the deed does not necessarily mean you have the title. If it did, people could bring an old deed and take your property.
2. DIFFERENT TYPES OF HOUSING
There are a number of different types of housing that you can own or rent. The size of your family, where you live and your financial and credit situation will all come in to play when choosing the type of property you want to live in. It used to be that most single-family homes were bought by married couples but today things are changing. Banks and financial institutions are giving more loans to single people, so your choices of homes have broadened.
Apartment Complexes These are multi-family dwellings that are usually rented. In larger cities you sometimes have the option of purchasing apartments.
Condominiums - Condominiums offer the security of owning your own home without the hassle of having to care for the outside. You have shared common areas in the condos complex which are called common elements. Maintenance fees are charged monthly to the condominiums' residents.
Cooperatives Similar to an apartment complex or a condominium. The residence own shares in a company's stock and not the actual home. When you move, you sell the stock back to the corporation.
Planned Unit Developments (PUDs) Planned developments that merge housing, commercial and recreational facilities into one community.
Mixed-Use Developments High-rise developments where shopping, recreation and housing are included in the same building.
Manufactured Housing These are commonly known as mobile homes. Mobile homes are actually considered transportation and are sold in accordance with the DOT.
These are only a few of the different types of housing available. You can find more information on the different types of housing by researching on the Internet or at your local library.
3. REAL ESTATE AGENTS
Real estate transactions are commonly handled by a representative for the buyers and sellers. This person is known as a real estate agent. The person the real estate agent represents is known as the client and the non-represented party is known as the customer. A real estate agent does not normally represent both parties as it can cause problems and is illegal in many states. For this reason both parties should have their own agent.
The real estate agent has certain responsibilities towards their client and the customer, though they are not the same or equal.
Client Responsibilities:Care use their skill and knowledge to benefit the client
Obedience follow all of the client's legal instructions
Loyalty put the client's interests above all other, including their own
Disclosure keep the client informed of all facts about the transaction
Accounting have information of all money that has changed hands in the transaction
Confidentiality keep all information about the client to themselves so it will not affect the real estate transaction
Customer ResponsibilitiesReasonable care and skill - Have knowledge of real estate laws and procedures and ensure the real estate deal is handled according to those laws and procedures.
Deal honestly (does not mean fair) - The real estate agent must be honest with the customer when discussing any aspect of real estate. However, if a customer makes an offer on a home well above what it is worth, the agent has no obligations to inform them.
Make sure all pertinent facts are disclosed A real estate agent must inform a customer of anything that is required by law to be known about a property. For example: A termite infestation or lead paint.
4. REAL ESTATE OWNERSHIP
When a person owns real estate they are said to hold an interest in the property. The degree to which a person holds that interest is known as their estate in the land. Not all interests are estates, however, to be an estate the interest must allow possession at some time and be for a specified period of time. There are two main types of estates.
Freehold estate last for an indeterminable length of time, such as a lifetime or forever.
Leasehold estate last for a fixed period of time.
There are two main types of real estate ownership, ownership in severalty and co-ownership.
Severalty property is owned by one individual
Co-ownership property is owned by two or more parties. There are four types.
o Tenancy in common parties own an undivided interest in the property. Both owners possess the property, but the ownership is divided. When a person dies, their interest is passed along according to their will.
o Joint tenancy similar to tenancy in common except when an individual dies their interest is divided among the remaining joint tenants
o Tenancy by the entirety used by some states for married couples. Both parties have equal interest in the property.
o Community property married couples only have equal interest in real estate purchased after the marriage. All other property is considered separate.
5. REAL ESTATE SPECIALIZATIONS
In the real estate field there are many different types of specializations you can qualify for. Not everyone is qualified to do every job; this way no one person or company can control every aspect of real estate.
Brokerage What most people know as real estate agents. These companies specialize in bringing people together when they want to make real estate transactions. The office is run by a broker and the broker usually has several salespersons who can conduct business on their behalf.
Appraisal Specialize in estimating a property's market value using different methods of valuation and their judgment.
Property management Maintain property on behalf of the owner.
Financing Specialize in providing the funds required to purchase real estate.
Development and subdivision Developers construct new properties while sub-dividers split existing property into smaller pieces.
Home Inspection Conduct visual inspections of properties for homeowners and financial institutions to ensure the property is sound.
There are many books and websites where you can get more information about the different real estate specializations available. Each specialization requires hours of study and experience. There is a test required to be certified in any of the real estate specializations to ensure the professional is capable of doing their job properly.
6. REAL ESTATE EDUCATION
There are many schools available if you want to learn more about real estate. You do not have to be a licensed real estate agent to take a class, though there are usually fees for taking the course. If you decide to pursue real estate as a career you can call your local real estate office or look online for more information about real estate education.
US Real Estate Licensing Network offers interactive CDs and study materials to get you ready for the Real Estate Licensing Exam in all fifty states.
Cornell University offers graduate programs in Real Estate.
Kaplan University also offers degree programs in the Real Estate Field.
For more classes in your area visit the Realtor website.
It is important to note that just because you've passed the classes of a real estate school does not guarantee licensure in your state. You must first pass the states real estate licensing exam to obtain your real estate license.
7. FIND TIPS AND TRICK FOR THE REAL ESTATE GAME
Okay, maybe it's not a game if many thousands of dollars are involved, but it can be an enjoyably stressful experience, none the less. If you decide not to use a real estate agent, or even if you do, you will want to find as much useful information as you can so you don't get the short straw when dealing with any real estate transaction.
If you are looking to buy or sell your property and need helpful tips to make the process run more smoothly you can get great tips at the ABCs of Real Estate website. Just click on a link to find home values, mortgage rates, buying and selling tips or get help finding a Realtor.
The For Sale by Owner (FSBO) website is your one-stop shopping experience for anything you need when buying or selling your home. You can list your home, find a home to buy, purchase supplies, books and pamphlets on the real estate process or get great tips to help you in the process.
Creative Real Estate Online (CREO) is another source for finding real estate information. Some of it's free, some has a price. You can sign up for the free newsletter.
