What is Real Estate?
Real estate is the land, the buildings, the right to a specified building or part of a building and any goods, assets or other property included in a property transaction.
There are many historical examples of real estate transactions. One of the earliest records of a real estate transaction is of Abraham purchasing a field with a cave for four hundred silver pieces from Ephron. Abraham and Ephron negotiated directly without the assistance of an intermediary.
Other examples can be traced back to Roman times when slaves were used to acquire property on behalf of their masters. Unfortunately in this example the 'agents' who assisted in arranging these transactions were not paid for their services.
Today, real estate agents and their clients are protected by law and the agent recieves a commission for his or her efforts on behalf of the principal.
Who can deal in real estate?
There are two main categories of people who are entitled to deal in real estate: the owners of the property and licensed estate agents.
The owner of the property may be an individual, a group of people or a company. The owner has a right to sell or rent their property at will to a second party for a negotiated price. Only the vendor and the purchaser are involved if the property is sold; or the landlord and tenant if the property is rented. For example, where the owner is a company that is established for the purpose of buying, improving and then reselling that property, i.e. a property developer, the relationship is more complex, but still only two parties are involved. The company as a seperate legal entity owns the property and through its employees can sell that property. The company is, therefore, the vendor who sells to a purchaser.
Alternatively, the company may be a property management company which owns, for example, a shopping centre. As landlord, the company through the efforts of its employees leases shops directly to tenants.
An estate agent sells or rents property on behalf of another person. In a sales transaction three parties would be involved: the vendor, the agent and the purchaser. In a rental transaction the landlord, the agents and the tenant would be involved. The agent must hold a licence.
Types of property
Most property sold and leased is residential real estate. Other types of property handled by real estate agents include commercial, industrial and rural property.
Residential Property: Residential property is sold or leased as single detatched dwellings such as a house, attatched units such as terraced houses; or as strata title units.
Commercial Property: Real estate agencies selling or leasing land which is zoned for business use are dealing in commercial real estate. The phrase retail property (used to refer to shops) is a specialised type of commercial property.
Industrial Property: Industrial real estate is property zoned for manufacturing, assembly or related use. Agents can be involved in both the sale and rental of this type of property.
Rural Property: Rural real estate is land designated for agricultural or pastoral use and is either sold or let by real estate agents.
The category of property is determined by its use rather than its location. For example, a property with a dwelling designed for private accomadation is residential real estate regardless of whether it is situated in a large urban area or a small country town. Land value, however, is determined more so by location.
All types of properties can be sold by estate agents, yet the use made of the property by the purchaser must conform with the relevant zoning regulations.
A big thanks to my mum, who herself is a real estate agent, for providing me with all this information.