How Real Estate Works
January 12th, 2012
What Exactly Is “Real Estate”?
In legal terms, real estate is an “immovable object”. Real estate is defined by a legal description that identifies its space and place in the geography. The Registered Land Surveyor is a person with specialized knowledge on measuring and documenting land parcels according to the law. As the United States has grown, most every parcel of the land was surveyed and spatially identified before becoming legally approved for ownership under the law. The land records are open and available for all to see.
Who Keeps These Records Updated?
Under the law, when property changes hands these open records must be updated to keep the ownership current and legal. Each county government has a “Register of Deeds” or some similar office responsible for recording all ownership activity for each parcel in their jurisdiction. Title and abstract companies are private companies that search and issue guaranteed reports on these records for a fee. The rights of ownership also carry responsibilities. Easements, mineral rights, various zoning codes and variances that “run with the land” are common for almost every parcel. Your basic understanding of this system can be valuable when making certain lifestyle decisions. While a reading of the title policy may raise questions, issues are much easier to deal with before the transaction concludes than after money has changed hands.
The Role Of The Multiple Listing Service (MLS)
The following history will put the process of buying or selling real estate in perspective. The government offices only record limited information about parcels and only when certain events occur. For example, a Register of Deeds office does not keep track of when a property owner places a property on the market for sale.
The local real estate board is the trade organization for brokers and agents. Like others, this group also maintains considerable data on every parcel of property. As an example, this group does know when a property owner places property for sale. A shared listing pool began in the 1950s. Before that time, agents negotiated commission sharing on individual transactions or a company by company basis. The MLS model and its accompanying rules of order saved time for both agents and consumers. The principal advance was the printing of a MLS book containing the inventory of all real estate agents in the local Realtor board. The board then distributed the MLS book to all member agents to keep them current on the real estate activity being generated.
Technology Provides Information Quickly
In 1975, the industry began a computerized Multiple Listing Services (MLS) as a method to provide current inventory for agents. The printed MLS books could not keep data current and were expensive to print. One of the primary benefits offered by an agent is access to MLS home listings data. Because consumers do not have direct access to this data, the agent has primary control over the process of searching and filtering the MLS data under this system. These computerized systems have evolved today into a valuable resource for understanding local markets quickly and effortlessly. The availability of this essential information can reduce the time consumers spend learning the state of their local market.
The U.S. Residential Real Estate Market
The residential real estate industry is one of the largest industries in the United States. There are approximately one million real estate agents in the United States that represent approximately 10,000 real estate companies. There are a number of enterprises that tally residential home sales in the United States. A review of several of the leading reports points to about $725 billion dollars in residential sales volume in 2011.
How The Brokerage Market Is Shared
One of the nations leading real estate magazine reports the 10 largest brokerage firms accounted for less than 9% of all brokered residential real estate transaction volume in 2007, and the single largest firm accounted for less than 5% of the total transaction volume. While there are the “super brokers” with many offices and thousands of agents, the typical real estate brokerage firm in the United States averages about 10 agents. Some brokerage firms affiliate with national franchise brands, such as Electronic Realty Associates (ERA), Coldwell Banker, Prudential and RE/MAX. The franchise brands license their brand names and trademarks for a common identity and provide other marketing support to franchisee brokerage firms. These brokerage firms, like all the independent brokerage firms, typically engage agents to work for them as independent contractors and, as a result, all brokerage firms have limited direct influence over the client relationship or the quality of client service.
Knowledge And Awareness Is The Goal
Because consumers are not able to gain direct access to comprehensive and relevant information easily, there is a risk that agents will misinterpret or omit information you could see as relevant to your circumstances. Perhaps this is one of the reasons my limited research indicates that of all the regulated businesses in the United States, real estate is the second highest consumer complaint generator of many state regulating authorities. Health care regulation is the only sector that generates more complaints than real estate. One of DearMonty.com goals is to heighten the awareness of both the consumer and the agent to these circumstances with the end goal being to reduce transaction errors.