How Does Real Estate Work?

The real estate industry includes the sale, leasing and renting of land and the

structures attached to it. Real property also includes the natural resources within the

boundaries of a parcel of land, such as water and crops. Real estate can be owned

by a government entity, by a private individual or company, or by an organization

such as a church.


People buy and sell real estate to make a profit or meet an investment objective.

The value of real estate tends to rise, so it is an attractive investment option.

Brokers and agents earn a portion of the sales proceeds of each transaction they

facilitate. Also read


The largest segment of the real estate industry is residential, consisting of singlefamily

homes, condominiums and townhouses. This sector is the most active and is

governed by state and local laws and regulations governing home ownership, sales,

financing, taxes, inspections, insurance and development.


Commercial real estate is used for business purposes and may include office

buildings, shopping malls, warehouses, strip malls, theaters, restaurants, and hotels.

Companies often lease commercial space rather than buying it outright.


Real estate developers turn raw land into marketable, profitable developments —

whether they’re residential, commercial or industrial. Developers analyze costs, plan

layouts and site selection, obtain financing, and oversee construction. They also

promote their finished products to potential buyers.


In some ways, real estate is like a ladder. As seniors downsize or pass away, they

create supply for move-up buyers. This provides an opportunity for first-time buyers

to enter the market, and prices generally rise as more new supply hits the market.

Investing in real estate can be a good way to diversify a portfolio and achieve longterm

financial goals. However, it is important to understand how the real estate

market works and its risks before committing to a major purchase.


Real estate agents are licensed professionals who assist individuals, families and

businesses in buying and selling properties. Agents typically specialize in a

particular area of the real estate market, such as residential or commercial. They

have access to listings in the Multiple Listing Service (MLS), and can provide detailed

information about a property that’s not available to the public.


Almost everyone uses real estate services at some point, whether they’re

purchasing a home, a vacation rental or a room in an apartment building. These

experts help people navigate complicated transactions, and they can be helpful in

finding the best value for a property. They can also advise on mortgages, insurance

policies and other aspects of the transaction.