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Understanding How Real Estate Works

The real estate industry comprises a number of different facets and branches that

contribute to the buying, selling and ownership of property. It is important to

understand how all these facets work together in order to become successful in real


Real estate is property that includes land and anything permanently attached to it,

like buildings. It also includes any natural resources on the land, such as minerals or

water. Real estate can be used for residential, commercial or industrial purposes. It

is a common investment vehicle and can have a profound effect on a nation’s

economy. Also read Also read

Purchasing, owning and investing in real estate requires a variety of professionals.

Real estate agents sell and buy properties, appraisers determine a home’s value,

inspectors evaluate potential problems with properties, and attorneys review legal

documents and contracts. Investors hoping to succeed in real estate should focus on

education, research and mentorship.


The housing market is one of the largest and most influential in the world. Typically,

homes are the biggest purchase most people will make in their lifetimes. The

process of acquiring a home starts with a homeowner seeking out a real estate

agent, often through a recommendation or Internet research. The agent will then

present the homeowner with a listing of homes available for sale. The seller will then

choose a listing price and sign an exclusive right to sell contract with the agent,

which guarantees compensation to the agent should the home be sold within a

specific time period.


Once the listing is active, the property will receive inquiries from interested parties.

The property may be marketed through print and online advertisements as well as

open houses. Once a potential buyer views the property, they will usually request an

offer from the seller. The offer can be above or below the asking price. If the offer is

accepted, the sellers and buyers will sign a sales contract and close on the property.

There are many reasons why a property might appreciate in value. Some examples

include the construction of new homes or businesses, the discovery of natural

resources on the land and zoning changes that increase the property’s density. Land

can be valuable even if there are no structures on it because of its location or

accessibility to utilities.


The supply of available homes for sale and demand for those homes will have a

direct impact on the overall real estate market. For example, when the availability of

homes for sale falls short of demand, prices will rise until more sellers list their

homes or buyers wait longer to buy. The same principle applies to a shortage of

vacant lots for new business development. This can drive up prices and reduce the

amount of available business space. In either case, it is vital for investors to stay

abreast of current real estate trends in order to maximize their returns.