Diversity and variety of the real estate market

Today, real estate is one of the most profitable and safest ways to invest money. Even if, due to the crisis, apartments become cheaper some time, anyway, in the long run, there is a rise in price per square metre. That is why, there are many people who would like to invest in residential and commercial real estate. Although the main problem for many prospective investors is that they do not understand how the real estate market really works.

There are many concepts, classifications and definitions to make sense out of even before starting to study the situation in the real estate market. What’s the difference between an investor and a shareholder? Who are developers and how are they different from general contractors? What do brokers and appraisers do? Before investing in real estate, you have to get answers to all these and many other questions. So, as part of our article, we will consider all market participants, conduct a small analysis of their features.

The backbone of the real estate market: buyers and tenants

As noted previously, the real estate market in Ukraine is quite diverse. Its main subjects are:

• buyers;
• sellers;
• insurers;
• brokers and appraisers;
• investors and shareholders;
• customers and developers;
• contractors and subcontractors;
• other bodies involved in the systematization of the market (for example, land funds, management companies, etc.).

You don't need to deeply analyse the real estate market in Kyiv or in any other city to understand that the entire market exists for two subjects: buyers and tenants. These are individuals and legal entities using the property. In other words, they buy property or rent it for their own purposes. When it comes to residential real estate, these are mainly people who buy apartments for living. There are also companies that buy out the lion's share of apartments and parking spaces in new buildings, and then rent them out, receiving a stable income, or resell them.

Anyways, these are the people using the property. It is they who dictate the conditions in the market to a great extent. It’s certainly the seller who sets the prices. But the supply depends on the demand. For example, if two-room apartments are in the greatest demand, the developers predominantly offer them.

Who are investors and shareholders?

Almost all customers start selling apartments at the initial stages of building a house. This is due to the fact that any company needs an infusion of money, so it is irrational to wait until the house is be built for several years. Those who invest during the development phase are called shareholders. In most cases, these are individuals who, in order to save money, buy an apartment at the excavation stage. Prices at the early stages of construction are always lower, because there are certain risks. In fact, shareholders chip in for construction, that’s where the term “shared-equity construction” comes from. The object of share construction is all residential and non-residential premises in an apartment building or any other real estate object.

Since many companies do not have the entire amount for building from scratch, the money for the construction comes from the shareholders. The risks are that sometimes there are unscrupulous developers. And if you turn to such a developer, the participants in shared construction may be left without the promised square meters, and without the money invested.

Investors are people or companies that invest in the purchase or construction of real estate. Simply put, these are ordinary buyers of square metres. At the same time, those persons who invest in construction not only money but also intellectual property can also be called investors. They can develop new construction technologies or train qualified specialists.

Developers

“Employer” and “developer” are similar concepts that are often confused. And this is not surprising, because the concept of “developer” does not appear in most legislative acts. The employer is the person who owns the land plot on which the facility is being built. The customer may not own the property, but in this case, he should lease the site. Otherwise, such construction is illegal.

A developer is an entity directly involved in the construction of a building. He acts as a employer. In most cases, the customer and the developer are one and the same company.

You can often hear about “apartments from the developer”. This means that the living space is sold directly by the company that built the house or ordered its construction. This method of buying is considered to be the most profitable, because the buyer not only acquires legally sound apartment, which has not yet had owners, but can also save money on the purchase, because they does not pay for the services of intermediaries.

What do brokers, appraisers, brokers and realtors do?

The function of brokers, dealers, appraisers and realtors can be summed up in one sentence as follows: they bring sellers and buyers together and help to cut deals. Let's take a closer look at each of these subjects:

• Brokers. These are specialists who provide a wide range of services. Mostly brokers, through their agents, organize and control the process of buying and selling real estate. In simple terms, they act as intermediaries between the seller and the buyer. At the same time, such an intermediary does not represent anyone's interests. A broker can carry out various operations: searching for a buyer or seller, preparing documents, consulting in the field of appraisal and law, insurance mediation, etc.
• Realtors. These are professionals who solve complex problems. The main feature of realtors is that they represent the interests of one of the parties in the deal. For example, a person wants to find an apartment that would meet certain requirements. He turns to a realtor, who looks for suitable options, checks the documents, negotiates with the seller, prepares all the necessary papers, and controls the process of concluding the deal. A good realtor is always interested in the client's satisfaction with the result.
• Appraisers. Such specialists are highly specialized, they are responsible only for real estate appraisal. The task of an appraiser is to study information about an object, compare it with other real estate objects on the market, and determine the most accurate market value. Both sellers and buyers can apply for the appraiser’s services. The sellers apply when they want to put up real estate for sale at market value. That is, they are afraid to sell too cheap, but they do not want to overprice either. Buyers turn to them when they want to know if the property they like is worth the money they ask for. Also, their services can be ordered by third parties, for example, banks issuing mortgages.
• Dealers. These are typical intermediaries who do not represent anyone's interests. The dealer's task is to connect the seller with the buyer and get a reward for this. At the same time, one of the parties may not even guess that a third party participates in the contract, who also takes a percentage for their services. The situation in the real estate market makes it possible for some dealers to work outside the legal status. That is, they do not enter into any agreement with either side, but simply hope for their reward. Of course, in this case, they work at risk for themselves.

Contractors and general contractors in the real estate market of Ukraine

Three more important actors in the real estate market:

• Contractor. This is the company responsible for ensuring that the house is completed on time. Simply put, this is a performer who must perform a fixed amount of work for a certain amount.
• General contractor. If you figure out who the general contractor is, everything is simple here: this is the same as contractor, but not performing the work independently. The peculiarity of general contractors is that they transfer most of the work under the contract to other contractors. But the general contractor is still primarily responsible for the final result. In other words, this is a company that does not have a sufficient number of its own equipment and its own specialists, therefore it attracts third parties.
• Subcontractor. This is the third-party organization that the general contractor attracts to perform certain tasks for the construction of a real estate object.

Such a definition as developer is also commonly found. This concept is not enshrined in regulatory legal acts. Most often, developers are diversified companies that can invest in construction, and act as a general contractor and developer.

If you understand all the considered concepts, it is easier for you to analyse the real estate market in Kyiv, which means that he will be able to invest money more profitably. The main is to remember that before investing in real estate, you always have to carefully check the company to which you are giving money. It is better to cooperate only with trusted and reliable companies. These, of course, include RIEL, RIEL Real Estate Corporation, which has been engaged in the construction and sale of modern real estate in Kyiv and Lviv for many years.