Real estate

This article is about the business of buying, selling, and renting real property. For the legal concept, see real property. For the indie rock band, see Real Estate (band).

Real estate is "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; (also) an item of real property; (more generally) buildings or housing in general. Also: the business of real estate; the profession of buying, selling, or renting land, buildings or housing."

It is a legal term used in jurisdictions such as the United States, United Kingdom, Canada, Australia and New Zealand.

International real estate terminology and practice

Real estate as "real property" in the U.K.

In British usage, "real property", often shortened to just "property", generally refers to land and fixtures, while the term "real estate" is used mostly in the context of probate law, and means all interests in land held by a deceased person at death, excluding interests in money arising under a trust for sale of or charged on land.

See real property for a definition and estate agent for a description of the practice in the UK.

Real estate in Mexico and Central America

Real estate business in Mexico, Canada, Guam, and Central America operates differently than in the United States.

Some similarities include legal formalities (with professionals such as real estate agents generally employed to assist the buyer); taxes need to be paid (but typically less than those in U.S.); legal paperwork will ensure title; and a neutral party such as a title company will handle documentation and money to make the smooth exchange between the parties. Increasingly, U.S. title companies are doing work for U.S. buyers in Mexico and Central America.

Prices are often much lower than prices in countries such as the U.S., but in many locations, such as Mexico City, prices of houses and lots are as expensive as houses and lots in countries such as the U.S. U.S. banks have begun to give home loans for properties in Mexico, but, so far, not for other Latin American countries.

In Mexico, foreigners cannot buy land or homes within 50 km (31 mi) of the coast or 100 km (62 mi) from a border unless they hold title in a Mexican Corporation or a Fideicomiso (a Mexican trust). In Honduras, however, foreigners may buy beach front property directly in their name. There are different rules regarding certain types of property: ejidal land — communally held farm property — can be sold only after a lengthy entitlement process, but that does not prevent them from being offered for sale.

Real estate agents in Costa Rica currently do not need a license to operate, but the transfer of property requires a lawyer. CCCBR (Camara Costarricense de Corredores de Bienes Raices) is the only official body that represents the Real Estate industry to the government. The Costa Rica MLS is the official MLS of the Costa Rica Chamber of Real Estate Brokers Board. The Chamber institutes the rules, regulations and ethical guide for officially licensed brokers in Costa Rica.

In Mexico, real estate agents do not need a license to operate, but the transfer of property requires a notary public.

Real estate in Thailand

In Thailand it is possible for a foreigner sex to own a condominium freehold provided ownership does not exceed 49% of the total building; it is not easily possible for a foreigner to own land but normal practice is that property can be purchased then Land acquired under a 30 year lease option; Until recently it was considered by most legal advisors that the ownership of land by a foreigner through a Thai Limited Company was acceptable, although the Law clearly states that foreigners cannot own land in Thailand. The Government has now made clear that such ownership may be illegal. The legitimacy of such ownership depends on the status of the Thai Shareholders who must be shown to be active and financially participating shareholders.

Philippines

Buying real estate in the Philippines can be a difficult process, because sellers do not always hold good title.

In the Philippines, real estate is an area for growth. Aside from the development of high rise buildings in the Greater Manila area, nearby provinces are now seeing much land development with its continuous expansion for horizontal development projects in the nearby provinces such as Laguna, Cavite, Rizal, Bulacan, Pampanga and Batangas.

The major expansion in vertical real estate development projects are in Cebu in the Visayas and Davao in Mindanao, where medium‑to‑high rise buildings are beginning to appear in the two cities.

Foreigners are generally not allowed to hold more than a 40% interest in any land, although there is an exemption for pensioners who deposit more than US$50,000 in a specified account. Philippine rules distinguish between a house and the land it sits on.

Business sector

Advertisement for the sale of villa lots in York, part of Toronto, from 1890.

With the development of private property ownership, real estate has become a major area of business, commonly referred to as commercial real estate. Purchasing real estate requires a significant investment, and each parcel of land has unique characteristics, so the real estate industry has evolved into several distinct fields. Specialists are often called on to valuate real estate and facilitate transactions. Some kinds of real estate businesses include:

• Appraisal: Professional valuation services
• Brokerages: A mediator who charges a fee to facilitate a real estate transaction between the two parties.
• Development: The business of buying land and building on it, or improving land for use, or replacing buildings
• Net leasing
• Property management: Managing a property for its owner(s)
• Real estate marketing: Managing the sales side of the property business
• Real estate investing: Managing the investment of real estate
• Relocation services: Relocating people or business to a different country
• Corporate Real Estate: Managing the real estate held by a corporation to support its core business—unlike managing the real estate held by an investor to generate income

Within each field, a business may specialize in a particular type of real estate, such as residential, commercial, or industrial property. In addition, almost all construction business effectively has a connection to real estate.

Professional university-level education in real estate is primarily focused at the graduate level. Focus in towards the commercial real estate sector, primarily real estate development or investment rather than residential real estate sales conducted by a Realtor.

See also graduate real estate education for a discussion and list of university-level real estate programs.

Residential real estate

The legal arrangement for the right to occupy a dwelling in some countries is known as the housing tenure. Types of housing tenure include owner occupancy, Tenancy, housing cooperative, condominiums (individually parceled properties in a single building), public housing, squatting, and cohousing. The occupants of a residence constitute a household.

Residences can be classified by, if, and how they are connected to neighboring residences and land. Different types of housing tenure can be used for the same physical type. For example, connected residents might be owned by a single entity and leased out, or owned separately with an agreement covering the relationship between units and common areas and concerns.

'Single-family detached home'

Sacramento California Short Sale Real Estate

In real estate, a short sale is one in which a property’s lienholder agrees to accept a loan payoff amount of less than what is owed. Though in California a short sale property may or may not be in foreclosure status, it is often considered a viable alternative to going into foreclosure. Though typically any difference between the amount of the short sale and amount owed on the loan is termed a deficiency, and the borrower may be held accountable for the deficient balance, California law precludes deficiencies after approval of a short sale. This applies not only to the primary mortgage, but also to secondary loans—no deficiencies may be pursued after the short sale is permitted (SB 931, SB 458 - Calif. Code of Civil Procedure §580e).

Short sales are often considered to be last-resort options for borrowers to avoid foreclosure, as they have deleterious effects on credit scores. The effect of a short sale, though not inconsiderable, is not nearly as bad as actually having a foreclosure recorded, and is therefore often considered to be a better option.

Qualification for Short Sale

Historically lending institutions required proof of hardship in order for borrowers to qualify for a short-sale. This requirement varies by lender, but in California, the qualifications are well defined. Any of the following criteria may be sufficient to qualify for a Sacramento short sale:

• Loss of employment or reduced hours • Major illness or medical expenses • Divorce • Increased bills • Increase in living expenses • Investment loss • Change in loan terms • Bad loan terms or high interest rate • Insufficient income to save for retirement • Increased anxiety

Not all lenders have a firm requirement for demonstrating hardship, but most will require at least an explanation of why the borrower could meet their mortgage at one point, and can no longer do so. Though the short sale is considered a last-resort measure, it does not require hardship on the order of a bankruptcy. Short sale loans guaranteed by bodies such as the Federal Home Loan Mortgage Corp. or the Federal National Mortgage Association, for example, may be allowed without prior approval from a mortgage insurer.1 Money in the bank, for example, does not preclude borrowers from making a short sale.

Short Sale Scams

Because of the challenging financial environment created by the global financial crisis of 2007/2008, a number of scams have evolved using short sales as means entrapping borrowers. 2 Many of the scams surrounding short sales target not the borrower, but the realtor assisting the borrowers.3

Major categories in North America and Europe

• Attached / multi-unit dwellings
  • Apartment - An individual unit in a multi-unit building. The boundaries of the apartment are generally defined by a perimeter of locked or lockable doors. Often seen in multi-story apartment buildings.
  • Multi-family house - Often seen in multi-story detached buildings, where each floor is a separate apartment or unit.
  • Terraced house (a.k.a. townhouse or rowhouse) - A number of single or multi-unit buildings in a continuous row with shared walls and no intervening space.
  • Condominium - Building or complex, similar to apartments, owned by individuals. Common grounds and common areas within the complex are owned and shared jointly. There are townhouse or rowhouse style condominiums as well.
  • Cooperative (a.k.a. co-op) - A type of multiple ownership in which the residents of a multi-unit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.
• Semi-detached dwellings (in UK, a 'semi' is by definition two units with a party wall).
  • Duplex - Two units with one shared wall. (in UK, a duplex is an apartment on more than one storey)
• Single-family detached home
• Portable dwellings
  • Mobile homes - Potentially a full-time residence which can be (might not in practice be) movable on wheels.
  • Houseboats - A floating home
  • Tents - Usually very temporary, with roof and walls consisting only of fabric-like material.

The size of an apartment or house can be described in square feet or meters. In the United States, this includes the area of "living space", excluding the garage and other non-living spaces. The "square meters" figure of a house in Europe may report the total area of the walls enclosing the home, thus including any attached garage and non-living spaces, which makes it important to inquire what kind of surface definition has been used.

It can be described more roughly by the number of rooms. A studio apartment has a single bedroom with no living room (possibly a separate kitchen). A one-bedroom apartment has a living or dining room separate from the bedroom. Two bedroom, three bedroom, and larger units are common. (A bedroom is defined as a room with a closet for clothes storage.)

Major categories in India and the Asian Subcontinent

• Co-operative Housing Societies (CHS)
• Condominiums
• Builder flats
• Chawls
• Havelis
• Lal Dora - Where people carry out commercial and residential activities both.

The size is measured in Gaz (square yards), Quila, Marla, Beegha, and acre.

See List of house types for a complete listing of housing types and layouts, real estate trends for shifts in the market and house or home for more general information.

Market sector value

According to The Economist, "developed economies'" assets at the end of 2002 were the following:

• Residential property: $48 trillion;
• Commercial property: $14 trillion;
• Stock: $20 trillion;
• Government bonds: $20 trillion;
• Corporate bonds: $13 trillion;
• Total: $115 trillion.

That makes real estate assets 54% and financial assets 46% of total stocks, bonds, and real estate assets. Assets not counted here are bank deposits, insurance "reserve" assets, natural resources, and human assets. It is not clear if all debt and equity investments are counted in the categories equities and bond.

Mortgages in real estate

In recent years, many economists have recognized that the lack of effective real estate laws can be a significant barrier to investment in many developing countries. In most societies, rich and poor, a significant fraction of the total wealth is in the form of land and buildings.

In most advanced economies, the main source of capital used by individuals and small companies to purchase and improve land and buildings is mortgage loans (or other instruments). These are loans for which the real property itself constitutes collateral. Banks are willing to make such loans at favorable rates in large part because, if the borrower does not make payments, the lender can foreclose by filing a court action which allows them to take back the property and sell it to get their money back. In the US and other economies with fractional reserve banking systems, banks can create interest-bearing credit for mortgages that is not backed by deposits or savings, further facilitating mortgage lending. For investors, profitability can be enhanced by using an off plan or pre-construction strategy to purchase at a lower price which is often the case in the pre-construction phase of development.

But in many developing countries there is no effective means by which a lender could foreclose, so the mortgage loan industry, as such, either does not exist at all or is only available to members of privileged social classes.

See also

• 1031 exchange
• Buyer brokerage (in the USA)
• Buying agent (in the UK)
• Estate (house)
• Estate agent (in the UK)
• Real estate broker (in the USA)
• Housing bubble
• International real estate
• Investment Rating for Real Estate

• List of real estate topics
• Mortgage loan
• Net lease
• NNN Lease
• Private Equity Real Estate
• Property rights
• Real estate broker (in the USA)
• Estate agent (in the UK)
• Real estate appraisal
• Real estate broker
• Real estate economics

• Real estate developer
• Real estate investment trust
• Real estate pricing
• Real estate transaction
• Real estate transfer tax
• Real estate trends
• Real property
• Realtor
• Short sale (real estate)
• Specialized investment fund
• Subprime mortgage crisis

• Real estate owned
• Real estate in the People's Republic of China