Real estate is a legal term (in some jurisdictions, notably in the USA, United Kingdom, Canada, and Australia) that encompasses land along with anything permanently affixed to the land, such as buildings, specifically property that is stationary, or fixed in location.[1] Real estate law is the body of regulations and legal codes which pertain to such matters under a particular jurisdiction. Real estate is often considered synonymous with real property (also sometimes called realty), in contrast with personal property (also sometimes called chattel or personalty under chattel law or personal property law).
However, in some situations the term "real estate" refers to the land and fixtures together, as distinguished from "real property," referring to ownership rights of the land itself.[clarification needed]
The terms real estate and real property are used primarily in common law, while civil law jurisdictions refer instead to immovable property.
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[edit] Etymology
In law, the word real means relating to a thing (res/rei, thing, from O.Fr. reel, from L.L. realis "actual," from Latin. res, "matter, thing"[2]), as distinguished from a person. Thus the law broadly distinguishes between "real" property (land and anything affixed to it) and "personal" property (everything else, e.g., clothing, furniture, money). The conceptual difference was between immovable property, which would transfer title along with the land, and movable property, which a person would retain title to. The oldest use of the term "Real Estate" that has been preserved in historical records was in 1666.[2]
The use of "real" to refer to land also reflects the ancient preference for land, and the ownership thereof (and the owners thereof). This, in turn reflects the values of the medieval feudal system, which is the ultimate root of the common law.
Some have claimed that the word Real is derived from "royal" (The word royal—and its Spanish cognate real—come from the related Latin word rex-regis, meaning king. For hundreds of years the Royal family / King owned the land, and the peasants paid rent or property taxes to be on the Royal's land. Today, just like hundreds of years in the past, we pay property taxes, or rent to be on the government's land or the Royal Estate). However, the "real" in "real property" is derived from the Latin for "thing".[3]
[edit] Real estate terminology and practice outside the United States (around the world)
[edit] Real estate as "real property" in the U.K.
In British usage, “real property”, often shortened to just “property”, generally refers to land and fixtures as such while the term “real estate” is used mostly in the context of probate law, and means all interests in land held by a deceased person at death excluding interests in money arising under a trust for sale of or charged on land.[4]
See Real property for a definition and Estate agent for a description of the practice in the UK.
[edit] Real estate in Mexico and Central America
The real estate business in Mexico and Central America is different from the way that it is conducted in the United States.
Some similarities include a variety of legal formalities (with professionals such as real estate agents generally employed to assist the buyer); taxes need to be paid (but typically less than those in U.S.); legal paperwork will ensure title; and a neutral party such as a title company will handle documentation and monies in order to smoothly make the exchange between the parties. Increasingly, U.S. title companies are doing work for U.S. buyers in Mexico and Central America.
Prices are often much cheaper than most areas of the U.S., but in many locations prices of houses and lots are as expensive as the U.S., one example being Mexico City. U.S. banks have begun to give home loans for properties in Mexico, but, so far, not for other Latin American countries.
One important difference from the United States is that each country has rules regarding where foreigners can buy. For example, in Mexico, foreigners cannot buy land or homes within 50km of the coast or 100km from a border unless they hold title in a Mexican Corporation or a Fideicomiso (a Mexican trust). In Honduras, however, they may buy beach front property directly in their name. There are also different special rules regarding certain types of property: ejidal land – communally held farm property – can only be sold after a lengthy entitlement process, but that does not prevent them from being offered for sale.
Many websites advertising and selling Mexican and Central American real estate exist, but they may need to be researched.
In Costa Rica, real estate agents do not need a license to operate, but the transfer of property requires a lawyer.
[edit] Business sector
With the development of private property ownership, real estate has become a major area of business. Purchasing real estate requires a significant investment, and each parcel of land has unique characteristics, so the real estate industry has evolved into several distinct fields. Specialists are often called on to valuate real estate and facilitate transactions. Some kinds of real estate businesses include:
- Appraisal: Professional valuation services
- Brokerages: A fee charged by the mediator who facilitates a real estate transaction between the two parties.
- Development: Improving land for use by adding or replacing buildings
- Property management: Managing a property for its owner(s)
- Real estate marketing: Managing the sales side of the property business
- Real estate investing: Managing the investment of real estate
- Relocation services: Relocating people or business to a different country
- Corporate Real Estate: Managing the real estate held by a corporation to support its core business—unlike managing the real estate held by an investor to generate income
Within each field, a business may specialize in a particular type of real estate, such as residential, commercial, or industrial property. In addition, almost all construction business effectively has a connection to real estate.
"Internet Real Estate" is a term coined by the internet investment community relating to ownership of domain names and the similarities between high quality internet domain names and real-world, prime real estate.
[edit] Residential real estate
The legal arrangement for the right to occupy a dwelling is known as the housing tenure. Types of housing tenure include owner occupancy, Tenancy, housing cooperative, condominiums (individually parceled properties in a single building), public housing, squatting, and cohousing.
Residences can be classified by if and how they are connected to neighboring residences and land. Different types of housing tenure can be used for the same physical type. For example, connected residents might be owned by a single entity and leased out, or owned separately with an agreement covering the relationship between units and common areas and concerns.
Major physical categories in North America and Europe include:
- Attached / multi-unit dwellings
- Apartment ("flat" outside North America) - An individual unit in a multi-unit building. The boundaries of the apartment are generally defined by a perimeter of locked or lockable doors. Often seen in multi-story apartment buildings.
- Multi-family house - Often seen in multi-story detached buildings, where each floor is a separate apartment or unit.
- Terraced house (a.k.a. townhouse or rowhouse) - A number of single or multi-unit buildings in a continuous row with shared walls and no intervening space.
- Condominium - Building or complex, similar to apartments, owned by individuals. Common grounds are owned and shared jointly. There are townhouse or rowhouse style condominiums as well.
- Semi-detached dwellings
- Duplex - Two units with one shared wall.
- Single-family detached home
- Portable dwellings
- Mobile homes - Potentially a full-time residence which can be (might not in practice be) movable on wheels.
- Houseboats - A floating home
- Tents - Usually very temporary, with roof and walls consisting only of fabric-like material.
The size of an apartment or house can be described in square feet or meters. In the United States this includes the area of "living space", excluding the garage and other non-living spaces. The "square meters" figure of a house in Europe reports the area of the walls enclosing the home, and thus includes any attached garage and non-living spaces.
It can also be described more roughly by the number of rooms. A studio apartment has a single bedroom with no living room (possibly a separate kitchen). A one-bedroom apartment has a living or dining room, separate from the bedroom. Two bedroom, three bedroom, and larger units are also common. (A bedroom is defined as a room with a closet for clothes storage.)
See List of house types for a complete listing of housing types and layouts, real estate trends for shifts in the market and house or home for more general information.
[edit] Market sector value
According to The Economist, "developed economies" assets at the end of 2002 were the following:
- Residential property: $48 trillion;
- Commercial property: $14 trillion;
- Equities: $20 trillion;
- Government bonds: $20 trillion;
- Corporate bonds: $13 trillion;
- Total: $115 trillion.
That makes real estate assets 54% and financial assets 46% of total stocks, bonds, and real estate assets. Assets not counted here are bank deposits, insurance "reserve" assets, and human assets; also it is not clear if all debt and equity investments are counted in the categories equities and bonds. For U.S. asset levels see FRB: Z.1 Release- Flow of Funds Accounts of the United States.
[edit] Mortgages in real estate
In recent years, many economists have recognized that the lack of effective real estate laws can be a significant barrier to investment in many developing countries. In most societies, rich or poor, a significant fraction of the total wealth is in the form of land and buildings.
In most advanced economies, the main source of capital used by individuals and small companies to purchase and improve land and buildings is mortgage loans (or other instruments). These are loans for which the real property itself constitutes collateral. Banks are willing to make such loans at favorable rates in large part because, if the borrower does not make payments, the lender can foreclose by filing a court action which allows them take back the property and sell it to get their money back. For investors, profitability can be enhanced by using an off plan or pre-construction strategy to purchase at a lower price which is often the case in the pre-construction phase of development.
But in many developing countries there is no effective means by which a lender could foreclose, so the mortgage loan industry, as such, either does not exist at all or is only available to members of privileged social classes.
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