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How the real estate sector works

Posted by juan on July 14, 2020

How the real estate sector works

The real estate sector is closely involved with the economic part of the country, therefore, it is a sector vulnerable to the crisis and has repercussions on a national and / or global scale, due to the fact that it affects the economy, politics and profit of the companies that seek maximize your profits.

There are four phases that together generate a chain cycle, composed of:

  • Impact: Mostly known as the ascending phase of the cycle, it produces a capital renewal, has multiplier effects on economic activity and generates a phase of economic growth and overcoming the crisis.
  • Boom: Considered the highest moment for the economy, since it produces a series of rigidities that interrupt the growth of the economy, thus providing the beginning of a phase of recession.
  • Recession: Corresponds to the descending phase of the cycle, produces a significant drop in investment, production and employment; If together with the recession the economy falls below the minimum level of the previous recession, we are facing a contraction.
  • Depression: It is seen as the lowest point of the cycle characterized by a high level of low demand and unemployment in consumers related to the productive capacity of consumer goods. In this phase, prices are devalued or remain stable.

As a real estate agent you must be aware of these possible falls, and work under the following basic principles to assess the price of any property:

  • Market dynamics: Markets operate according to the law of “ supply and demand ”, when supply is high and demand falls, prices fall, on the contrary, when supply is low and demand is high, prices rise .
  • Determination of value: Value is established based on an agreement between seller and buyer. This push and pull occurs between what the seller requires and what the buyer is willing to pay.
  • Local market conditions: To accurately appraise a property, its location must be constantly analyzed, verify if there are services in the area such as shopping centers, hospitals, parks, schools, banks, public transport, etc.
  • Inventory: Evaluate how many properties there are to sell in the area and if the inventory is decreasing or increasing, how long these properties have been on the market, how much the square meter is being sold, what characteristics they have, etc.
  • Compare: Analyze the data that is most relevant to the current real estate market and put into practice the principles, strategies and criteria; resulting in an information package that justifies the correct sale price.

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