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Why is Real Estate So Important to our National Economic Situation?

Posted by admin on March 14, 2016
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Explained simply, if you have listened to the news, read the newspaper, or looked online, then you must’ve heard at least one report about recent real estate sales. Have you ever wondered why one segment of our economy is given so much attention? Have you ever asked yourself if the real estate market is as important as the media seems to think it is and why they think that way? Perhaps the best way to answer that question is to look at the impact of one single transaction. When a buyer looks for, and buys, a home the following items occur and impact various sectors of the economy. First of all, a real estate agent is hired creating a job for them. This impacts the receptionist in the real estate office, the transaction coordinator (if you have one) when a contract is created, the Broker, and the office Manager. When the company makes money from a transaction all of these people perform work and their jobs become a little more secure. But that’s just the real estate office where the buyer’s agent works. These same impacts occur in the office of the listing agent.

Nope, it doesn’t stop there. There is a lot more impact from this single transaction. If the buyer borrows money, as most do, a loan officer gets a job to do. This also means work for a loan processor, an underwriter, a loan closing coordinator, and their office administrative staff. Since they almost always order an appraisal, the appraiser and his or her processor get a job to do as does a surveyor and their staff. Home inspections are done in a lot of all resale transactions today so a home inspector is given a job and a paycheck. If the home inspector has administrative assistance then they get work also. If a home warranty is purchased, and they usually are, there are at least 3 people at the warranty company who have something to do to get it issued and activated.

You may be catching on to the point I am making. Here are more people that benefit. Since the homeowner has to have insurance on their home to get a mortgage the insurance agent, his or her administrative people and the company’s underwriters all have work to do as does the policy issuer. If the insurance company requires an inspection, and most do not, then an inspector would be hired. If someone doesn’t have any, the insurance is usually recommended by a title company. A title company is hired in every transaction. This provides work for a title processor, a title examiner, and a closing agent who actually does the closing. Some refer to them as escrow. Escrow can be a separate company, but the same people are involved. The receptionist and administrative staff also are involved as, in some cases, is an attorney who oversees the process. However, since almost all cases involve title insurance, a title policy sales person, and underwriter also participate in the transaction.

If the home inspection or final walk through inspection turns up any deficiencies or repairs, and most do, then a handyman and/or tradespeople (i.e. plumbers, electricians etc) all get some work. Their administrative people, if any, get work as well. Along those same lines, once the transaction closes there is a move which means business for a mover or a truck rental facility. If the former then a move coordinator/scheduler, a truck dispatcher, a driver and 2-3 laborers all get a job. Depending upon the distance driven this also means business for gas stations, hotels and restaurants en route. Move insurance is practically a requirement for most people so another insurance company gets some business.

All of this, and I am sure that I missed a few things, also occurs to some extent on the sellers side of the transaction plus if the listing was marketed and advertised then newspapers, various online marketing portals and the regional multiple listings service also are involved. If the purchase was for a new home from a builder, as opposed to a resale, there are nearly 50 more people involved from the builder’s organization. By my count a resale affects at least 47 people’s lives and incomes directly and in the case of a new build that goes up to about 75.

In conclusion, that is why real estate is so important to our economy. When sales go up or down over an extended period of time it also influences investors in their buying and selling decisions in the stock, bond and futures markets to name a few. That is why it is so widely reported. When you buy a home or sell a home you have more of an impact that you probably ever thought that you could have affecting a lot more people than you thought as well. Primarily for this reason, a few greedy people playing with the system resulted in such a huge impact on our recent economic climate. This is also the reason why real estate always makes a come back. It has to for our economic survival. It is also why it has been one of the best historical investments for the last 100 years or more. Predictability and patience can help you cash in greatly with little risk.

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