Real estate is a legal term that encompasses land along with anything permanently affixed to the land, such as buildings. Real estate is often considered synonymous with real property , in contrast with personal property . However, for technical purposes, some people prefer to distinguish real estate, referring to the land and fixtures themselves, from real property, referring to ownership rights over real estate.
The terms real estate and real property are used primarily in common law, while civil law jurisdictions refer instead to immovable property. Property law, the area of the common law that governs real property, differs from contract law in that it focuses primarily on rights that one person holds over all other people, as opposed to specific individuals.
In recent years, many economists, such as Hernando de Soto of the Institute for Liberty and Democracy, have recognized that the lack of effective real estate laws can be a significant barrier to investment in many developing countries. In most societies, rich or poor, a significant fraction of the total wealth is in the form of land and buildings. In most advanced economies, the main source of capital used by individuals and small companies to purchase and improve land and buildings is mortgages bank loans for which the real property itself constitutes collateral.
Banks are willing to make such loans at favorable rates in large part because if the borrower does not make payments the lender can foreclose, that is, file a court action that lets them take the property and sell it to get their money back. However, in many developing countries, there is no effective means by which a lender could foreclose, so the mortgage loan industry as such either does not exist at all or is only available to members of privileged social classes. In the United States, rising rates and the importance of decisions regarding home finance products are leading to the rapid rise of Certified Mortgage Planners, industry experts that work in concert with Certified Financial Planners to align the mortgage decisions of consumers with their larger financial portfolio(s).
