Real estate is the term used for the business which relates to property. This property could be land, building, etc. It could be residential or even commercial. The real estate business has been flourishing a lot but because of the recession period like all other business it was also affected. There are many different aspects of this business, people specialize in them and earn a lot of money by helping people with property related issues. Like all other business real estate is also governed by some laws. Different countries might have different laws. Like any other business it also has the ‘do’s’ and ‘don’ts’. There are even legal restrictions even of certain types. Most of the laws are according to the economic condition of the country. And as the economic condition varies all over the world therefore the real estate laws even vary. At some places they might be a little strict while at other they might not be (Hosteeq).
The person who is in charge of this business might be called or broker or a real estate agent. There are three areas where these agents and brokers deal in a lot, unoccupied/ vacant land, residential properties and commercial properties. Vacant land includes farms ranches and etc. It should be made sure that these areas are connected to the cities, after growth these vacant areas might be directly connected to the cities. Then the residential property is the one which exists where people live. So far it has been the most popular form of real estate business for the brokers and agents. They look for the places which have been unoccupied and then look for people who need them. Then is the commercial property, it is a bit difficult to handle as valuation of the land, its calculation is not an easy task (James).
Like in other business real estate even has the supply and demand trends. But these trends are different from those of other business. In a production business when the demand is high more identical units can be produced to meet the demand but in case of real estate u cannot make identical places when the demand increases every place is different from each other in different aspects. When there is a shortage of area and more people to live in you cannot add in more land to overcome the shortage. So there are some limitations to real estate business. If there is an oversupply that means the prices will be very low. As there would be less people to live there therefore the owners will have to adjust to price which is quoted by the customer. And when there is an undersupply the prices will go high, as more and more people will be willing to take up that place the owners would have a point of benefit in this case and might in this case and might increase the prices.
Supply and demand of real estate varies from place to place. It has the effect of local market on it. As the local interest rates, tax rates influence the other kinds of business so do they in case of real estate. Therefore balancing supply and demand is not a very easy job as you cannot create places for people in the time provided by them. There can be artificial declines created by the agents to make the business work better. This happens when for a time period the prices are kept so high that nobody even bothers looking up at the real estate business and then after that prices are lowered to so low that people think there is an opportunity in investing in it as the prices have gone down. But the customers sometimes have the knowledge of this kind of artificial things and they wait for a time being for the prices to be stable and come to their own normal price and then invest. Sometimes this strategy cannot be good for the business (James).
Now the question here arises is that, does real estate business effect the economy as other business do? Well yes real estate even has some effects on the economy. Considering the case of US, real estate contributes 10% to the economy which is a relatively high amount. If the real estate business is facing some problems then there are possibilities of unemployment of many people who are in the construction business and so on. When there is a decline in the sales of real estate the prices fall. As the prices fall the value of the property decrease even if they are selling or not. With the decrease in prices the home equity loan provided to the owner also decreases which reduces the spending of the consumer. And as 70% of the people in US are personal consumers, a reduction in consumers will let to more unemployment and the economy would effect. The good point about the lower prices of real estate is that there would be less chances of inflation.
Through marketing using different mediums like newspapers and internet real estate business has flourished even better than it was. Managing risk and administration is a very critical thing in real estate business. Proper records should be maintained to avoid uncertain things to happen. Records of selling, repairs, rental, etc are all very important. Managing risk is another task which requires the maintenance of proper records for legal purposes.
Another part of risk management is measuring risk with rewards. Whether having a tiled floor would attract more customers towards the property or marbled. It all depends on the trend being followed in the market. And these types of risks can be managed by looking at the market trends and making decisions based on them. For example, if both marble and tiles are avoided will there be any difference in the sales or not, if there would be then avoid them would not be a better option. Therefore there are few things which might affect the changes in the demands of the real estate. Some of these things can be fulfilled to meet the demand but there are some factors which are cannot be helped upon to meet the demands (James).
Work Cited Page
Hosteeq.2010, May 3, 2010 <http://www.hostseeq.com/business/real-estate.htm>
James, K, Administration and Risk management in real estate property management, Real Estate Business. 2010, May 3, 2010 <http://realestate.about.com/od/propertymanagement/a/administration.htm>
James, K. Real Estate supply and demand, Real Estate Business.2010, May 3, 2010 <http://realestate.about.com/od/realestatebasics/p/profilesupdmd.htm>,
James, K. Top 3 major types of real estate properties. 2010, May 3,2010 <http://realestate.about.com/od/realestatebasics/tp/topproptypes.htm>