Our society relies heavily on the real estate industry. Buying and selling property requires the assistance of experts who can help people understand and manage the process.
Traditional real estate processes have been altered by software and websites over the past decade or so. But it will never replace the middleman – the real estate agent – no matter how much technology advances.
How come? Despite the importance of real estate in our society, it remains a mystery to most consumers. When it comes to buying and selling real estate, there are a lot of laws, paperwork, and best practices to follow.
Real Estate Types
Property can be classified as residential, commercial, industrial, or land.
1. A residential property
The residential market includes both new construction and resale properties. The most common type of residential property is the single-family home. Condos, townhouses, duplexes, and vacation homes are also included in this category.
2. The commercial sector
Places of business are the most common type of commercial real estate. A shopping center, strip mall, hospital, college, hotel, or office is included in this category. Since apartment buildings generate income for their owners, they are often considered commercial buildings (even though they are technically residential).
3. The industrial sector
A manufacturing building or warehouse is a building that is used for research, production, storage, and distribution of goods.
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Ranches and farms are considered to be land. Vacant land, such as undeveloped land and land for constructing homes or buildings, is also considered vacant.
Knowing the different types of real estate is important because the sale and purchase of property differs. There are also independent processes for zoning, construction, and appraisal.
Generally, agents specialize in one type of real estate due to the differences in rules and regulations. Below, we’ll talk about real estate agencies.
In Real Estate
It’s complicated, and a lot goes into each transaction. This means a lot of people are involved. Many of these professionals are involved in buying and selling property.
Types of real estate agents
The purchase or sale of residential real estate is handled by several types of agents. Here’s a breakdown of each.
Real Estate Agents
Buyers and sellers are connected to the industry through real estate agents. Among their responsibilities are finding potential properties, listing them, and negotiating prices. Many agents specialize in either buyers or sellers. Each has distinct responsibilities.
Seller’s (Listing) Agent
A seller’s agent works exclusively for people selling real estate. A listing agent lists properties under their name and brokerage so others can find them. Here’s how to list.
- A listing agent’s responsibilities include:
- Assisting with property pricing
- Marketing the property
- Managing open houses
- Prospective buyers’ questions
- Assisting with price negotiations
- Coordinating the sale and closing
A listing agent usually makes 3% of the gross sale price, paid by the seller(s) – who pay another percentage to the buyer’s agent. Typical listing contracts offer a cooperating agent X%.
A buyer’s agent
As opposed to the seller’s agent, the buyer’s agent works with buyers. Agents help clients find potential properties, organize showings and walkthroughs, negotiate on their behalf, and assist with closings.
A buyer’s agent usually does not charge the buyer. A buyer’s agent makes 3% of a sale’s gross price, which is also paid by the seller.
A license to sell
Real estate licenses are required in the state where the property exists for individuals who wish to lease, purchase, or sell real estate. Licensing requirements vary by state, including the number of hours of education, prerequisite tests, and fees.
Traders
The broker is one step above the agent. Unlike the square/rectangle analogy, brokers are agents, but agents aren’t brokers. Although the rules vary from state to state, brokers typically have more education and licensing than agents. Brokers can then hire agents as salespeople and form their own brokerages.
Mortgage lender
Lenders provide money to fund mortgage loans. Prior to touring or bidding on real estate, pre-approval for a loan is recommended. Before looking at homes or property, buyers will likely work with a mortgage lender.
An Appraiser
Appraisers work independently from buyers and sellers. In most cases, the appraiser is chosen by the mortgage lender, as it is in their best interest. Lenders must approve the loan based on the agreed-upon sale price.
Most of the appraiser’s work is done on-site and reported back to the lender, including conducting a room-by-room walkthrough.
Inspecting
An appraiser determines the value of a property, while an inspector determines its structure, safety, and potential defects. An inspector reviews hundreds of items when looking over a building.
A Closing Attorney
Real estate attorneys who specialize in closings or transactional law are known as closing attorneys. The majority of buyers and sellers encounter them at closing, so they are called “closing” attorneys. Next, we’ll discuss closing.
Lawyers help buyers and sellers understand the legal documents they are presented with during the buying or selling process.
Every one of these people plays an important role in real estate. Here’s how it works.
Buying a home
Real estate transactions vary depending on the type of property and people involved. Transactions look similar for the most part.
Our real estate process will be outlined based on a residential transaction. Consumers are more likely to relate to the residential process than the commercial or industrial processes.
Below, we’ll cover both buyer and seller perspectives.
1. Get an agent.
In most cases, people who decide to sell their home will hire a listing agent (unless they decide to sell it themselves as a For Sale By Owner).
Local advertising in a newspaper or flyer has traditionally been how clients find their listing agents. Online means like social media, online advertisements, and Zillow or Trulia help sellers find their agents. The next section discusses some of these methods.
Agents typically present listings. They will also discuss their commission structure and other competitive advantages in this pitch. Clients can choose the best agent this way.
One option for buying a home is to secure a buyer’s agent who can help them find and shop for properties, or start looking for properties themselves before hiring an agent.
An agent can introduce you to potential properties you might not have found on your own, but there’s no right or wrong way to hire one. It’s much more rewarding to hire a buyer’s agent at the beginning of the process than to rely on the listing agent. Reps can also help buyers.
2. The property is listed.
Listed properties are easier to find by potential buyers. Viewing and listing properties
Estimate the price of your home. Calculate this using your home’s location, condition, amenities, upgrades, and similar properties’ prices. To help you understand why and how your home is priced, agents will create a comparative market analysis (CMA).
IDX lets you list your home. IDX is a platform your agent uses. All real estate listings are gathered here. Members of the multiple listing service (MLS) can market and share their properties with other agents.
Sell your home. This marketing will increase your property’s exposure to other agents and buyers, whether they use traditional methods or list it on other real estate websites.
Showing properties to buyers at open houses. Open houses and showings allow potential buyers to see your home. Buyers can also ask questions and express concerns in person, saving both parties time and energy. Your agent may also create real estate videos and virtual staging opportunities.
Homeowners who sell their homes themselves are known as For Sale By Owners (FSBO). In theory, FSBOs save sellers commission money (since the seller pays both the listing and buyer’s agents), but in practice, they don’t receive any CMAs, IDX listings, or agent marketing. A cooperating commission may be paid by FSBO sellers to the buyer’s agent.
Buying involves researching and viewing properties. Some people use Zillow or Trulia to find potential homes within their price range, while others use their agent.
Many buyers attend open houses to get a feel for a property’s location, condition, and amenities. Their agent (or the listing agent) will schedule dedicated showings where they’ll walk through the property and ask more specific questions.
Before searching for homes, buyers should be pre-approved for a loan. Why? Especially in a highly competitive housing market, buyers should be prepared to make an offer on the spot if they view a home they like.
To get a loan pre-approval after viewing a property could take weeks. Other offers wouldn’t make the seller wait that long.
3. Close the deal.
Say you want to sell your home. So what?
Your home would first be offered by a buyer. If the market is competitive and you and/or the seller want to close quickly, the offer could be exactly at asking price, below or above. Your agent (if you have one) will advise you whether to accept or deny the offer. A little back-and-forth could occur, or both parties could sign a contract right away.
You would have to let that potential interested party view and make an offer on your property before any other party if you had entered into an agreement with a right-of-first-refusal clause. A right-of-first-refusal clause is usually included in a family, tenants, landlord’s, or homeowners association contract.)
In the following steps, you don’t directly contribute. Upon submission of earnest money, the buyer orders an inspection, works with their mortgage lender to secure an appraisal, and sets up their mortgage. For the most part, you just sit back and wait during this period.
The next time you see the buyers is at closing. Home closings are when the title to the property is transferred, the down payment is made, and the seller and buyer’s names are signed. Your keys are handed over and you’re on your way … though thousands richer.
Imagine you’re buying a house. You’re awesome!
We know you signed a sales contract after making an offer that was accepted. Now what? In this process, you have to make sure the house is exactly what you want – and that all happens within the contract timeline.
Earnest money is the first step. Earnest money doesn’t go to your mortgage lender – it goes to the seller to show we’re serious. Buyer gets credit for it at closing. If any repairs need to be made before closing, you would order an inspection. At the same time, you’d notify your lender that you’re under contract and begin the paperwork to secure your loan. (Repairs are to be negotiated between the sellers and buyers.)
Your lender and you will order an appraisal once the inspection is complete. In addition to researching and ordering home insurance, you’d schedule utilities and closing. To assume the home title, you must bring proof of your mortgage, home insurance, and any other required documentation.
Done! Home is yours!
A Real Estate Marketing Plan
The real estate process has been discussed from both buyer and seller perspectives. Agents, what about them? Agents, we haven’t forgotten you. Marketing your property (and yourself) is one of the most important parts of your job.
Wait. Who are you talking about?
Agents are like their own entities. Whether representing a brokerage or larger company, you have to sell yourself as an agent, a negotiator, a marketer, a financing expert, and an industry guru. One of your clients’ biggest transactions (both financially and emotionally) relies on you. In their eyes, you have to be the best.
Moreover, when you market yourself, you inherently market the homes and properties you represent. We both win!
Marketing strategies for real estate are unique. Other industries and businesses rely on traditional marketing methods like postcards and billboards.
Real estate involves all of these. Most agents don’t define their target audience for their marketing strategy – they simply want clients and buyers. Having a wider net means bringing in more revenue and selling more homes.
Most businesses define buyer personas for marketing, instead of this target audience strategy.)
Here are some different ways you can market your real estate business. Our discussion will cover both inbound and outbound marketing.
1. The Digital Age
Digital marketing is seemingly endless. Do you need to invest in every marketing opportunity? New agents, especially. As your commission allows, expand these strategies.
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Having a website helps you market your listings and build awareness of your personal brand. There are more buyers and sellers online than ever before, so if you’re not online, you’re losing revenue.
Remax Belize agent who has online presences demonstrate their legitimacy and professionalism. Including your bio, contact information, and any homes you’re currently selling should be the minimum.