Careers in Real Estate

• Real estate transactions occur frequently, involving trillions of dollars annually in the U.S.
• These transactions require skilled professionals like attorneys, bankers, and licensed real estate professionals.

Careers in Real Estate

• The real estate industry includes appraisal, property management, financing, subdivision and development, home inspection, counseling, and education.
• Real estate professionals need a basic understanding of these areas.

Brokerage

• Real estate brokerage connects people in property transactions.
• A broker is licensed to buy, sell, exchange, or lease property for others, charging a fee.
• A salesperson (sales associate/associate licensee) performs brokerage activities under a broker.
• A real estate licensee meets state licensing requirements, including education and exams.
• Managing brokers can employ sales associates and are responsible for their conduct.

Appraisal

• Appraisal develops an opinion of a property's market value using established methods and professional judgement.
• Lenders require professional appraisals.
• Appraisers need extensive valuation knowledge and must be licensed or certified in many cases.
• The Appraisal Institute is a trade association for real estate appraisers.

Property Management

• Property managers maintain property on behalf of owners, handling tasks like finding tenants, collecting rent, and repairs.
• The management agreement defines the scope of work.
• The main goal is to protect the owner’s investment and maximize returns.
• A real estate license or property management license may be required.
• The Building Owners and Managers Association International (BOMA) offers resources for owners and managers.

Financing

• Financing provides funds for real estate transactions, usually via mortgage loans.
• Professionals work in banks, credit unions, and mortgage companies.
• Mortgage loan originators must qualify for the Nationwide Multistate Licensing System and registry (NMLS).

Subdivision and Development

• Subdivision divides a single property into smaller parcels.
• Development prepares sites and constructs improvements, both on-site (homes, amenities) and off-site (water lines, sewers).
• Subdivision and development are independent processes.

Home Inspection

• Home inspection involves a visual survey of a property's structure and systems, resulting in a report.
• Some states require home inspector licensing.
• Inspectors identify deterioration, water intrusion, and mechanical issues.
• Reports help buyers make informed decisions, and contracts may be contingent on inspection results.
• The American Society of Home Inspectors is a trade group for home inspection professionals.

Counseling

• Counseling offers clients advice based on professional judgement.
• Counselors provide information for informed decisions on purchasing, leasing, or investing.
• This requires a high degree of industry expertise.

Education

• Real estate education is available for practitioners and consumers via courses and seminars.
• Licensing laws set minimum education requirements.
• Continuing education keeps licensees' skills current.

Other Areas

• Lawyers, land-use planners, and tax assessors are also involved in real estate.

Types of Real Property

• Real estate is classified as residential, commercial, mixed-use, industrial, agricultural, or special purpose.
• The market includes buying, selling, and leasing.

Types of Housing

• Diverse housing options meet varied demands.

• Home ownership indicates financial stability and is an investment.

• Loan interest can be a tax deduction.

• Leasing provides flexibility and lower initial costs.

• Single-Family Detached Houses

  • Remains popular, adapted as row houses in urban areas.
  • Multistory residences may include rental units.

• Accessory Dwelling Units (ADUs)

  • Conversions or new units on single-family lots.

• Apartment Buildings

  • Meet urban housing needs.
  • Suburban complexes offer amenities like storage, laundry, pools, and golf courses.

• Condominiums

  • Ownership with shared common facilities.
  • Owners pay monthly assessments for maintenance.
  • Can be apartment-style, single-family, or commercial.
  • Units can be rented if allowed.

• Cooperatives

  • Owners have shares in a corporation that owns the building.
  • Shareholders get a proprietary lease to a unit.
  • Shareholders pay a share of building expenses.

• Planned Unit Developments (PUDs)

  • Blend housing, recreation, and commercial units.
  • Use special zoning for maximum open space.
  • Community associations maintain common areas with fees from owners.

• Highrise Developments (Mixed-Use Developments - MUDs)

  • Combine offices, stores, theaters, and apartments.
  • Often self-contained with various amenities.

• Converted-Use Properties

  • Renovated factories, warehouses, and other buildings.
  • Can be more economical and aesthetically pleasing than new construction.

• Factory-Built Housing (Manufactured Homes)

  • Permanent residences built to federal specifications.
  • Low production cost and more space.
  • Located in manufactured home parks with community facilities.

• Modular Homes

  • Assembled on-site from factory-built components.
  • Faster and cheaper than traditional construction.

• 3D-Printed Homes

  • Emerging technology for creating homes.
  • Currently suitable for small dwellings.
  • Potential for reduced labor costs.

Fair Housing

• Housing decisions should be based on preference and finances, without discrimination.
• The Fair Housing Act prohibits discrimination based on race, color, national origin, religion, sex, familial status, or disability.
• It covers most housing, with limited exemptions (e.g., owner-occupied buildings with four or fewer units).
• Prohibits discrimination in renting, buying, mortgages, and housing assistance.
• Illegal actions include refusing to rent/sell, setting different terms, providing different services, falsely denying availability, setting different prices, using different criteria, eviction, harassment, limiting privileges, and denying organization access.
• The U.S. Department of Housing and Urban Development (HUD) provides more information.

The Real Estate Market

• A market allows goods to be bought and sold, establishing market value through supply and demand.

Supply and Demand

• Prices are set by supply and demand.
• Supply: the quantity of goods or services for sale at a given price.
• Demand: the quantity consumers are willing and able to buy at a given price.
• Balanced supply and demand leads to stable prices.
• Increased supply and stable demand causes lower prices.
• Increased demand and stable supply causes higher prices.

Uniqueness and Immobility

• Real estate is unique (no two parcels are exactly alike) and immobile (cannot be relocated).
• Real estate markets are local.
• Markets adjust slowly to supply and demand.
• Oversupply results in lower prices and low supply results in longer development times.
• Natural disasters and financial changes can disrupt markets.

Factors Affecting Supply

• Labor force availability and material costs.
• Government controls and financial policies.
• Labor shortages or high material costs decrease construction.
• High transfer and permit fees discourage development.
• Increased construction costs raise prices.
• The Federal Reserve Board (the Fed) influences interest rates.
• The Federal Housing Administration (FHA), Fannie Mae, and Ginnie Mae affect mortgage money availability.
• Government regulations impact land supply and value.
• Real estate taxation affects markets.
• Land-use controls, building codes, and zoning shape communities.

Factors Affecting Demand

• Population, demographics, and employment/wage levels.
• Demand grows with population.
• Population shifts affect demand in different areas.
• Demographics include occupants per household, ages, income, and lifestyle.
• Employment and wages affect housing affordability.
• The market is affected by major employers moving to an area.
• Consumer confidence, credit availability, and inflation influence spending.

Financial Considerations

• Home ownership offers financial benefits if property values increase.
• Equity = property value - mortgage balance.
• Homeowners can deduct mortgage interest and property taxes.
• Profit from selling a primary residence can be excluded from capital gains tax ($500,000 for married couples, $250,000 for single filers).
• The property must be owned and occupied for two of the past five years.
• First-time homebuyers can withdraw up to $10,000 from an IRA penalty-free for a down payment.

Tax Deductions

• For mortgages after December 14, 2018, interest is deductible on debt up to $750,000.
• Pre-existing loans up to $1,000,000 are grandfathered in as long as they're not over 1 million.
• Refinanced interest is deductible if the amount is not greater than the original loan.
• Interest on second mortgages is not tax-deductible (between January 1, 2018, and December 31, 2025).
• State and local real estate taxes can be an itemized deduction up to a limit of $10,000.
• Loan origination fees and discount points may be deductible.

Other Tax Benefits

• Profit from selling a primary residence is excluded from capital gains tax.
• $500,000 exclusion when married filing jointly returns.
• $250,000 exclusion for single filers.
• A first-time homebuyer may make a penalty-free withdrawal from a tax-deferred individual retirement account (IRA) for the down payment on a home.

Real Estate Investment

• Investment properties (not owner-occupied) offer tax and other incentives.
• Consult a tax professional for advice.