Business Understanding How Real Estate Works

Understanding How Real Estate Works



From suburban homes to high-rise office buildings in busy metropolitan areas, real

estate encompasses any land and the man-made attachments that factor into its

value. These can include anything from air rights above the property to underground

rights below the ground. Real estate can be owned by individuals, companies or

even governments.

For those interested in a career in real estate, it helps to understand how this

business works from start to finish. This article explores the different types of real

estate, the job titles and responsibilities that comprise the industry, and the process

involved in buying and selling property.


The four main categories of real estate are land, residential, commercial and

industrial. Each type of real estate has its own unique set of challenges and perks,

and the specific steps in each are slightly different. Land is the starting point, and

developers often buy land and combine it with other properties (called assembly) in

order to increase its size or boost its value. For more info


Once land is purchased, it’s often rezoned in order to meet local planning

regulations. Then, the building process can begin. Homes and other structures can

either be built from the ground up, or an existing structure can be renovated to

accommodate a new use. In the latter case, a real estate investment group, or REIG,

may be involved in the project, purchasing and managing the property on behalf of


After a building is complete, it can be sold or leased. In some cases, an investment

property is rented out in order to make a profit, while others are “flashed” and

quickly resold – sometimes taking advantage of arbitrage and other times after

repairs that significantly raise the value.


In the modern world of real estate, buyers and sellers are able to access a huge

amount of information online. This allows them to compare home prices with the

rest of the neighborhood, view virtual tours, check government stats on traffic and

environmental hazards, and much more. Many potential buyers also secure the

services of a buyer’s agent in order to help them find properties that might

otherwise be out of their price range.


While this increased access to information is great for buyers, it can also be

overwhelming and can lead to some misinformation. That’s why it’s important for

buyers to take the time to interview and secure the services of a buyer’s rep early in

the process.

Real estate agents are responsible for assisting individuals, businesses and investors in buying and selling property. They typically work on commission, earning a percentage of the sale price for their services. This fee is usually split between the

listing and buyer’s agents. Generally speaking, a seller’s agent will make 3% of the

total sales price and a buyer’s agent will earn 3% of the total sales price. However,

this can vary depending on the area of the country and the market.

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