Real Estate Agent: a noble profession?

By
Real Estate Agent with RSVP Real Estate WA 47927
Ade HouseMy son studies business economics at Wheaton College. The kind of math he does is a bit past my level. So are some of the books he reads. During the Christmas vacation at his grandparent’s home I had a cold and finding sleep was hard. Having read the newspaper front to back and back again and feeling not in the least intellectually curious I grabbed one of his books called The Mystery of Capital.   

I expected to drop it after a few paragraphs but instead found myself engrossed for the better part of the night. Fear not, what follows here is not a book review. I did not expect this book to have anything to do with real estate; much less, make me think differently about what I do now for a living: helping people buy and sell homes. What I was reading made so much sense that I wondered why I had not read it before. The case the author presented was so clear and the facts so overwhelming I wondered why his findings weren’t as common knowledge as, let’s say, gravity.

Private Property Ownership: Engine of Economy

Without private ownership of property our way of life in the USA would not be possible. Without having documented proof of property ownership entrepreneurship would be a non starter. Over 80 percent of all businesses in this country are started because the entrepreneur puts up the equity of his home as collateral. The home is much more than a place to stay; it’s productive capital. The owner’s title is only a representation of the home but this abstract is actually more important than the tangible property.

Squatters Owned Squat

Gold RushWe should not take the obvious for granted. About 160 years ago there were about 800 separate jurisdictions in the post-gold-rush California, each jurisdiction with its own rules and limited reach. Outside the jurisdiction the property did not “exist”. It was worthless. The earlier squatters who occupied land that wasn’t their’s “owned” property but they did so outside the formal legal system. Only slowly were the laws of the land changed to reflect the reality, thus creating legal ownership. Most significant in that regard were the Preemption Act of 1841 and the Homestead Act of 1862.

To paraphrase the author of the book, Hernando De Soto: Western nations recognized social contracts created outside the law as the legitimate source of formal law and absorbed the contracts into the system. Law created popular property forming capital that drove economic growth.

$9.3 Trillion of Dead Capital

So the “Mystery” in the Mystery of Capitalism is legalized and codified ownership of private property. The author uses the discussion of the evolution of private property in the USA to make a much bigger point: unless the former states of the Soviet Union, the countries of South America and the Middle East and the entire Third World move to make “illegal” ownership “legal,” much of the capital of these countries is dead capital. De Soto estimates that about $9.3 trillion of property is owned this way: outside the legal system. A rice farmer, who works a piece of land where his family lives can’t grow the farm or buy another piece of land without proof of ownership. Likewise, the woman who runs the vegetable stand that’s part of her primitive habitat can’t use the property as collateral for getting a loan to buy books for her children.

When I consider that it took generations to overcome such conditions in this country making the private ownership of property a cornerstone of our political and economic system, I can say with pride that I am playing a significant role in a process that is essential to our way of life.

© 2007, Gerhard N. Ade
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Rainmaker
297,779
ARDELL DellaLoggia
Sound Realty - Kirkland, WA
Excellent post Gerhard.  I do think we will see a crack down on faudulent lender practices that create flip purchases with zero down.  But this post will remine me that what will be left is "the heart of the business" the family buying a home.
Jan 21, 2007 01:37 AM #1
Rainmaker
204,910
Chris Tesch
RE/MAX Bryan-College Station - College Station, TX
College Station, Texas Real Estate
Gerhard, equity and stability are both wonderful tools for people to use.  I truly believe that we can make a difference in peoples lives.  By working hard and putting the clients needs before our commissions we can help them come to ne of the best financial decisions of their lives!
Jan 21, 2007 04:21 AM #2
Rainmaker
451,249
Allison Stewart
St.Cloud Homes - Saint Cloud, FL
St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904

Excellent Intellectual Post Gerhard 

Well thought out and presented. Much can be learned from our evolution of legalized ownership. Thak you for posting this informative piece.

Jan 21, 2007 05:15 AM #3
Rainmaker
605,919
Sharon Simms
Coastal Properties Group International - Saint Petersburg, FL
St. Pete FL - CRS CIPS CLHMS RSPS
Talk about not seeing the forest for the trees - home equity is indeed capital, whether to finance a business, a child's education, a second home....
Jan 21, 2007 06:40 AM #4
Rainmaker
200,410
William Collins
ERA Queen City Realty - Scotch Plains, NJ
Director of Property Management

Gerhard,

Thanks for the post. I like a "role in a process that is essential to our way of life". 

Jan 21, 2007 07:09 AM #5
Rainmaker
307,627
Maggie Dokic
Special Miami Homes - Miami, FL
CDPE, SFR, Pinecrest | Palmetto Bay |
Gerhard, thanks for the cliff notes!  I'm so glad you read it as I can't possibly add another book to my ever-growing list.  What a great point to make.  I didn't realize the number of entrepeneurships financing their mission through a HELOC was that high.  I am one of them!  My real estate career might be dead in the water were it not for the money from my home's equity I pumped into it.  Thanks for your well-written post.
Jan 21, 2007 07:22 AM #6
Anonymous
Anonymous
Very good post, I enjoyed it.
Jan 21, 2007 08:37 AM #7
Rainer
111,289
Carole Cohen
Howard Hanna Cleveland City Office - Cleveland, OH
Realtor, ePRO

I was ready to flag this as a feature by the second paragraph then I saw that it already WAS! Excellent, I really liked The home is much more than a place to stay; it's productive capital. The owner's title is only a representation of the home but this abstract is actually more important than the tangible property.

As for the squatters, and social contracts, we to this day have laws that say after a period of time an easement or an occupied piece of land becomes the property of someone else. This sounds like a book I would enjoy and thanks for bringing it to our attention with such a well written post. I guess there was an upside to having a cold!

Jan 21, 2007 09:06 AM #8
Rainmaker
222,606
Rick & Ines - Miami Beach Real Estate
Majestic Properties - Miami Beach, FL

Gerhard, what an important post.  Home ownership is the single most important investment in the majority of people's lives.  Rick and I have been dedicating a lot of our time to first-time home buyers for this same reason.  People who for generations have been renting and are afraid to buy their own home.

Ines

Jan 21, 2007 09:17 AM #9
Rainer
51,441
John Hruska
Homes Charlotte, LLC - Charlotte, NC
Excellent Intellectual Post Gerhard  Thanks for sharing
Jan 21, 2007 09:18 AM #10
Ambassador
1,892,853
Jeff Dowler CRS
Solutions Real Estate - Carlsbad, CA
Carlsbad CA Homes for Sale (760) 840-1360
Well articulated post, Gerhard. I think I'd rather bookmark this for reading again rather than trying to tackle the book, on top of the 4 others I am currently reading.
Jan 21, 2007 07:27 PM #11
Rainer
99,630
Kaushik Sirkar
Call Realty, Inc. - Chandler, AZ
Sounds like a very interesting book!  Very little time to read these days, but maybe next time i'm on a flight....
Jan 21, 2007 07:49 PM #12
Rainer
11,739
Brenda Brown
Coldwell Banker Evergreen Realty - Tillamook, OR
e-PRO

Wouldn't it be nice to see those that look in to our industry understand that the majority of Real Estate Agents and Realtors are not out there just to make a buck, but also to help them bring fruition to their dreams?  Lately this is something that as time goes on is harder and harder for first home buyers.  I hate seeing these people struggling to find a home that they can own that is not just some big pile of garbage, but is a livable and affordable home.  Finding a home to put down roots shouldn't just be a dream in any country.  It should be more attainable than it is.

Jan 21, 2007 08:49 PM #13
Rainer
3,928
David Love
David Alan Love, Realtors - Merced, CA
CRS,GRI,SRES,CDPE
Excellent post. The Homestead Act was huge. Now consider the effect of the G.I Bill for both homeownership and tuition after WWII. Suddenly, almost everyone had the opportunity to own a home.
Jan 21, 2007 09:51 PM #14
Rainer
122,017
Christy Powers
Keller Williams Coastal Area Partners - Pooler, GA
Pooler, Savannah Real Estate Agent
Hmmm...I remember a little of this. It never dawned on me that it could pertain to us here and now. I never realized the foreign countries were not taking advantage of the "illegal" ownership. It provoked some thought. Which for me is good, especially at this hour and the lack of sleep I had the past week. 
Jan 21, 2007 10:22 PM #15
Rainmaker
72,001
Gerhard Ade
RSVP Real Estate - Seattle, WA
Real Estate with Confidence

Ade HouseThanks for the compliments and additional thoughts, all. It's good to look at the bigger picture once in a while. The author of the book, Hernando De Soto, refers to another book which I am reading now. It's called The Noblest Triumph. The subtitle is: Property and Prosperity through the ages.

David: hadn't thought of the G.I Bill in the context. Thanks!

Jan 21, 2007 10:59 PM #16
Rainer
13,045
Orville Ivor McCallister
Keller Williams Realty La Mesa - San Diego, CA

Awesome post I love being a Realtor and i like to find like minded people.  We protect peoples largest asset and we help people acheive the american dream.

Orville McCallister  

 

Jan 22, 2007 12:31 AM #17
Rainmaker
297,779
ARDELL DellaLoggia
Sound Realty - Kirkland, WA
If you see anything new on a decent piece of land for $1.2 or so, give me a heads up.  Obviously if it's in the MLS I'll be showing it tomorrow.  But if you know anything that's not listed, give me a holler.  Kirklland, Redmond..
Jan 31, 2007 10:41 PM #18
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Gerhard Ade

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