n recent years, many available to members of
economists have recognized privileged social classes.
that the lack of effective
real estate laws can be a 1. Buying and selling real estate
significant barrier to investment
in many developing countries. In There are differences between
most societies, rich or poor, a buying and selling real estate
significant fraction of the total and dealing with things such as
wealth is in the form of land and stocks, bonds, and mutual funds.
buildings. In most advanced For example Most investments can
economies, the main source of be bought or sold within minutes
capital used by individuals and at the market price. Buying or
small companies to purchase and selling real estate takes months.
improve land and buildings is That difference introduces
mortgages -- bank loans for which interesting wrinkles in timing
the real property itself when to buy or sell. Like other
constitutes collateral. Banks are investments, selling at a high
willing to make such loans at point, with the intention of
favorable rates in large part buying back in at a lower price,
because if the borrower does not is one way to make a profit. The
make payments the lender can difference in the time required
foreclose, that is, file a court is intriguing.
action that lets them take the
property and sell it to get their 2. Stocks
money back. But in many
developing countries there is no Stock selling can be easy. When
effective means by which a lender the stock continues to rise,
could foreclose, so the mortgage there are often others that have
loan industry as such either does declined but can now be predicted
not exist at all or is only to rise again. The real estate
market rarely offers those kinds
of opportunities. 4. Lower prices
3. The other difference If selling a person needs to get
a new home, buy back in at a
The other difference is that lower price or wait for a new
companies differ but most stocks opportunity. The costs of doing
are alike. Real property is things can be very high.
always unique.
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