How Real Estate Industry works and How to estimate Property’s market value?

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September 05, 2019 By halsey

Real estate is the real property made up of land and improvements, which include fixtures, roads, structures, buildings, air rights above the land and underground rights below the land.


Types of Real Estate 


There are several types of real estate, each with a unique purpose and utility. The main categories are:


Residential Real Estate 

Residential real estate consists of housing for individuals, families, or groups of people.

Within residential, there are single-family homes, apartments, condominiums, townhouses, and other types of living arrangements.


Commercial Real Estate 

Commercial property refers to land and buildings that are used by businesses to carry out their operations. It includes shopping centers and malls, medical and educational buildings, hotels and offices. Apartment buildings are often considered commercial, even though they are used for residences.


Industrial Real Estate

Industrial real estate refers to land and buildings that are used by industrial businesses for activities such as factories, mechanical productions, research and development, construction, transportation, logistics, and warehousing.


Land Real Estate

Land is the baseline for all types of real property. Land typically refers to undeveloped property and vacant land. Developers acquire land and combine it with other properties and rezone it so they can increase the density and increase the value of that property.


How Real Estate Industry Works?

The real estate industry can be divided into several different areas: 

  • Development 

  • Brokerage 

  • Property management 

  • Lending 



Real estate development is a process that involves the purchase of raw land, rezoning, construction and renovation of buildings, and sale or lease of the finished product to end users. Developers earn a profit by adding value to the land ie,creating buildings or improvements, rezoning, etc. and taking the risk of financing a project.



A real estate brokerage is a firm that employs a team of real estate agents who help facilitate a transaction between the buyers and sellers of property. Their job is to represent either party and help them achieve the purchase or sale with the best possible terms.


Property management 

Property management firms help real estate owners rent out the units in their buildings. Their jobs include collecting rent, showing units, fixing deficiencies, performing repairs, and managing tenants. They charge a fee, typically a percentage of the rent, to property owners.


Real estate lending 

Lenders play a major role in the industry as virtually all properties and developments use leverage to finance their business. Lenders can include banks, credit unions, private lenders, and government institutions.


How to Define Market Value for homes ?

Market value is how much a home would sell for under normal conditions. This excludes sales where the buyer or seller is under pressure to act, perhaps due to career relocation, death of a family member, or divorce. Market value is basically an educated guess, but it can be fairly accurate if you apply the right method and consider all the important details. 

A number of factors may affect your home's market value, including:

  • External characteristics: It tells about home condition, lot size, popularity of an architectural style of property, water or sewage systems, sidewalks, paved roads and so on.

  • Internal characteristics: It is based on the size and number of rooms, construction quality, appliance condition, heating type, energy efficiency and so on.

  • Supply and demand: The number of homes for sale versus the number of buyers; how quickly the homes in your area sell.

  • Location: Interest for a particular school district, neighborhood and so on.

How to estimate the property's market value? 

The sales comparison approach is used to estimate the home's market value. This is the first method used by professional appraisers and real estate agents or brokerage to determine the market value of homes. Begin by researching recent sales of similar properties in the local area. The sale prices of these properties will provide a good place to start with in estimating your home's value. Try to find sales of least three properties that are comparable to your home. If possible, make sure these properties were sold under normal conditions. You only want properties sold at market value.

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