Saturday, November 03, 2007
Use, Location And Market Timing
Adding value to a real estate asset.
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At minimum, a Realtor always must ensure that the Client has an understanding of whatever interest he/she wants in a real estate asset and the character that particular interest might include in the wide range of real estate asset types. Real estate transactions range from simple purchases of single-family dwellings to more elaborate types of transactions, such as leasing of office, retail or warehousing space to acquisition of real estate assets in liquidation.
The value any talented real estate agent can add goes well beyond the standard of care Clients are entitled to expect, which is the knowledge or competency element of such transactions. Real "value add" derives from the structural elements that flow from experience and counselling. A good agent does not simply warn a client on what he cannot do; the key is how to deal with problems and still fulfill the Client's objectives. Take negotiating an offer, for instance: only rarely are problems insurmountable, especially in a world like real estate where flexibility almost always provides more than one approach.
A good beginning in a Realtor-Client relationship, once the issue of agency has been defined and explained, is always to ask questions and listen to the answers carefully. All experienced Realtors realize that Clients may not frame a deal in particular terms, may not reveal immediately – whether unwillingly or otherwise – exactly what is that they are looking for, may not even know, in fact, what is that they want. Therefore sorting out the various elements such as prices, rent, type of real property asset, selling, leasing, financing and many similar details may not be provided in any particular sequence, or at all. Many good agents are quite talented at the "extraction" of information early on in a clear and useful manner.
One major determination is the purpose of the Client's representation. For instance, it is very different to act on behalf of a corporation seeking to lease space in an office building as compared to a developer with a vision for building value, and how to realize it in a fairly short time horizon. But no matter what, the three old elements of value in real estate – use, location and market timing – apply to almost every transaction.
To appreciate the importance of these three elements one must first realize that real estate is the single most fundamental asset of value worldwide, and it has always been. Land and its potential uses as a resource – for agriculture, grazing, actual occupancy, access to minerals for extraction, access to water, transportation and so forth – has been fought over since Biblical times.
The real value tied up in land is inherent to its use, location and market timing, not merely its existence.
Economics is very concerned with real immovable property and rules like the one regarding its valuation and disposition, and obligations accrueing to its owners. In economic terms, real property consists of some natural capital (land per se) and infrastructural capital (buildings and improvements). Land use and land management practices have a major impact on natural resources including water, soil, nutrients, plants and animals. Land use information can be used to develop solutions for natural resource management issues such as salinity and water quality. For instance, water bodies in a region that has been deforested or having erosion will have different water quality than those in areas that are forested.
The value any talented real estate agent can add goes well beyond the standard of care Clients are entitled to expect, which is the knowledge or competency element of such transactions. Real "value add" derives from the structural elements that flow from experience and counselling. A good agent does not simply warn a client on what he cannot do; the key is how to deal with problems and still fulfill the Client's objectives. Take negotiating an offer, for instance: only rarely are problems insurmountable, especially in a world like real estate where flexibility almost always provides more than one approach.
A good beginning in a Realtor-Client relationship, once the issue of agency has been defined and explained, is always to ask questions and listen to the answers carefully. All experienced Realtors realize that Clients may not frame a deal in particular terms, may not reveal immediately – whether unwillingly or otherwise – exactly what is that they are looking for, may not even know, in fact, what is that they want. Therefore sorting out the various elements such as prices, rent, type of real property asset, selling, leasing, financing and many similar details may not be provided in any particular sequence, or at all. Many good agents are quite talented at the "extraction" of information early on in a clear and useful manner.
One major determination is the purpose of the Client's representation. For instance, it is very different to act on behalf of a corporation seeking to lease space in an office building as compared to a developer with a vision for building value, and how to realize it in a fairly short time horizon. But no matter what, the three old elements of value in real estate – use, location and market timing – apply to almost every transaction.
To appreciate the importance of these three elements one must first realize that real estate is the single most fundamental asset of value worldwide, and it has always been. Land and its potential uses as a resource – for agriculture, grazing, actual occupancy, access to minerals for extraction, access to water, transportation and so forth – has been fought over since Biblical times.
The real value tied up in land is inherent to its use, location and market timing, not merely its existence.
Economics is very concerned with real immovable property and rules like the one regarding its valuation and disposition, and obligations accrueing to its owners. In economic terms, real property consists of some natural capital (land per se) and infrastructural capital (buildings and improvements). Land use and land management practices have a major impact on natural resources including water, soil, nutrients, plants and animals. Land use information can be used to develop solutions for natural resource management issues such as salinity and water quality. For instance, water bodies in a region that has been deforested or having erosion will have different water quality than those in areas that are forested.
According to a report by FAO, land degradation has been exacerbated where there has been an absence of any land use planning, or of its orderly execution, or the existence of financial or legal incentives that have led to the wrong land use decisions, or one-sided central planning leading to over-utilization of the land resources - for instance for immediate production at all costs. As a consequence the result has often been misery for large segments of the local population and destruction of valuable ecosystems.
Such narrow approaches should be replaced by a technique for the planning and management of land resources that is integrated and holistic and where land users are central. This will ensure the long-term quality of the land for human use, the prevention or resolution of social conflicts related to land use, and the conservation of ecosystems of high biodiversity value.
Luigi Frascati
Real Estate Chronicle
Labels: REAL ESTATE
