Real Estate Through the Years: Leaving the “Wild West” in The Dust
Alana Burns - Broker / Owner of Guardian Realty
In the second part of this series, local realtor Alana Burns discussed the history and function of relators within the property sectors of the economy, focusing on residential homeowners.
The ability to own real property (land/home/investment) is one of the most wonderful elements of life in the United States, and one of the most important ideals that makes up the American Dream.
Owning private property means you control the “Bundle of Rights” which includes 5 rights of ownership: the right of possession (the right to possess, or own the property), the right of control (your right to use or control the use of your property), the right of exclusion (the right to decide who can and can’t set foot on your property), the right of enjoyment (the right to lawfully enjoy your property how you see fit), and the right of disposition (the right to sell it, will it to someone else or otherwise transfer ownership to someone else.)
Like all things in life, these rights have limitations. A cop can enter your property without your permission if they receive a warrant to do so, a lender can take your home away for nonpayment if you have a mortgage, and you could lose your property if you don’t pay your property taxes. You also have to follow federal, state, and local laws/ordinances, and sometimes HOA rules, regarding the use of your property.
However, this chance to own real estate has many potential up-sides: a more affordable cost of living, predictability in living situation, a forced “piggy bank” of equity that can be used for investment purposes, and the creation of generational wealth that can affect your family line for the long run, if managed well.
According to the Pew Research Center the two most valuable assets for US households in 2021 were ownership of a primary residence and ownership of a retirement account.
Equity (the difference between the value of the home and the debt against the home) is weighed heavily in determining a household’s wealth. In 2021, the median net worth of U.S. households was $166,900, including the values of all assets. But their median net worth without home equity included was only $57,900.
In 2021, homeowners typically had $174,000 in equity in their homes. Among U.S. households that own their primary residence, home equity accounted for a median of 45% of their net worth. This data is profound in demonstrating how life-changing becoming a property owner is and the substantial impact it makes in the lives of people over time.
Throughout American history people have bought and sold property but it was a very high-risk venture for many years: did the person selling the land/home actually own it? Who could verify that, and in a timely manner? Was the buyer actually able to purchase it and would they continue to make payments until it was paid off? What if the same parcel was being sold to several people in some type of scam/scheme? It was hard to know. It’s no wonder that the primitive real estate industry/market was considered to be the “Wild West” during this period of time.
Confusion about the legal transfer of property and the lack of organization, standards, and accountability for those sales on government records was complex and problematic. Also, knowing whether a sales price was fair when compared to the sale/purchase of other similar properties was not compiled or available for a very long time.
Fast forward to 1908 when a solution to many of these issues was implemented: the first version of what would eventually be known as the National Association of Realtors (NAR) was created. According to NAR, their objective was "to unite the real estate men of America for the purpose of effectively exerting a combined influence upon matters affecting real estate interests. It essentially began creating a standard of practice for the sale/purchase of real estate that would protect the general pubic, and eventually started compiling sales data into a usable format that could document and follow the ebbs and flows of the real estate market in America.
Five years later in 1913 a Code of Ethics was created by NAR to guide Realtors in their jobs to assist and protect the general public, as ethically as possible. This code of ethics has been expanded throughout the years and continues to guide the industry to this day.
More than 1.5 million Realtor members agree to compete against one another and also cooperate together, in serving the general public. One by one we also simultaneously compile centralized databases of information (on MLS’s) that do the following: display current home inventory available for sale for the public to view, compile sales information including sales price and terms, how purchases are made, when purchases are completed, the history of home pricing over time, and up-to-date market trends and research. All of this information helps provide vital market data to several industries and governments throughout the country. Appraisers utilize this compiled sales information to do their jobs in appraising properties as well. As a real estate Broker and Realtor, I’m certainly biased in saying this, but collectively and individually, Realtors accomplish a great deal of good for the general public.
Find out next week what the cooperative compensation model rule is, how it benefits the public, and how the recent lawsuit settlements will be changing this industry practice very soon.
