Particularities of the Real Estate Market

For real estate agents that are beginning in this career or the ones that have some experience it can be difficult to remember all the specific characteristics of this market. More than that, it is not always clear how those characteristics can be used in the agent’s benefit.

I will describe some characteristics that make the real estate market so unique in the vision of Massimo Forte, a real estate specialist. His ideas were expressed in the book “Angariar para Vender” which means seek out clients to sell.

The first particularity of this market is the fixity of the product, considering that the location of the property ties its value. External factors that happen independently influence the property value directly, such as civil works developed close to it or infrastructure improvements in the neighborhood. Everything that is built around the property has an impact on its value.

Other characteristic that should be considered for those wishing to enter the real estate market is lack of liquidity. Lack of liquidity because it takes a long time for the agent to receive money for his/her work, so he/she must be financially prepared for the first months of work and the rest of the career. Any independent professional who receives a payment for every task performed instead of a monthly salary has to face this lack of liquidity problem. However, for the realtor it can be harder and more frustrating than in other liberal professions because the average time to receive the first payment is longer, usually 90 days.

The transaction process is very slow if compared to other assets or products, since the immovable asset is put up for sale until the promissory contract or deed is signed. Not only there is a lot of bureaucracy involved, the high value of properties leads customers to be more careful and undecided about their choices.

Furthermore, there is the heterogeneity of the product, considering that each property is unique. For instance, let’s consider a few apartments that are very similar because they have the same typology, size and are in the same building. Even in this case each apartment is situated in a different floor or position and this already makes a difference to define the prices.

Lastly, I would like to mention the characteristic of inelastic supply. The real estate agents or brokers should consider that the process of producing properties to satisfy demand can take a long period of time, so again the broker and agents must be financially prepared. The producing property process includes purchase of land and building permit. This process can take six months but it can easily take a year or more depending on the country, local conditions and other factors.

To be prepared for these challenges, the broker and independent agents have to do some previous research about the general market and the local market. The local market analysis gathers data such as the number of people that live in the area where the brokerage agency will execute its project; number or properties and the average of people that live in each property; number of completed transactions per year and turnover rate in years; number of sales with realtors intervention, among other factors. This analysis has to be performed before starting in this business, in order to implement a market strategy.

I hope this information will enhance your daily work or assist you in the beginning of your career as a real estate agent. Thanks for reading! If you didn’t do it yet, don’t forget to subscribe in our newsletter and share this article with colleagues.