For Sale By Owner

Real estate as an alternative investment option has come up in a big way. In fact it is considered extremely profitable to invest in real estate as the demand is outstripping supply, with more and more home being offered on sale by the owners. However this phenomenal upsurge leads to a real estate bubble often and can jeopardized the investors’ interest. Nonetheless more and more real estate is finding its way into more and more portfolios.

The real estate segment mainly consists of immovable assets in the form of building, lands etc. its peculiarity lies in the fact that although the nature of the asset in terms of its uses can be changed it is very difficult and at one point impossible to create new real estate asset. Hence the demand outstrips the inelastic supply resulting in prices skyrocketing.

As an investment in an asset real estate too has its market to facilitate transactions and dealings between ready for sale by buyers, and sellers, typically in the lines of a share market or debt market. Only difference is the nature of dealings and the type of players present.

Real estate in fact is an important investment vehicle for pension funds and life insurance companies. Currently a trend towards the development of negotiable forms of real estate property interest is clearly witnessed. Although real estate is gaining in importance it is yet to have an organized efficient market like capital markets. Mainly private deals occupy the major portion.

The valuation in real estate is just like any other securities depending on the intrinsic value approach. The brokers play an active role in facilitating trade in the real estate market. In this regard the concept of Multiple Listing Service deserves a mention. MLS is a database which enables to share relevant information amongst the brokers, sellers, buyers and all related parties. This is extensively used by the brokers acting on behalf of the sellers or buyers to dissipate information helping in smooth function of the market.

The emergence of derivative instruments having real estate assets as its underlying; points to the development of this type of investments. Specifically, the mortgage backed securities which are sold in the secondary market with the buyer getting the interest directly as a reward for holding it, known as ‘pass through’ have become quite popular in the developed countries. The Eurodollar market is prominent in this respect.

The trend points to a very promising future for the real estate markets which are slowly evolving and getting structured with active trading to be seen.