Friday, March 2, 2007

What is real estate? Real property? Personal property?

So what is Real Estate? That's a fair question to ask. Well, real estate really is the piece of land you own and everything that is physically connected to it, whether natural or artificial. I think we all kinda knew that. But did you know that it doesn't just stop there? To be specific there are 4 types of rights that can be bought, sold, leased or transferred; Surface, Air, Subsurface, and Water. When you buy a piece of real estate you own the land below, known as subsurface (mineral) rights, the air above your real estate, known as air rights, and some of the water touching your property. But sometimes you may not own these, it really depends on what the deed to your house says. Some of the reasons maybe things like; BP owns the rights to the oil under your home. And believe me, if you're thinking you can just go tell planes to stop flying over your house at 30,000 ft because you don't like the little cloud it leaves behind, think again. The government beat you to it, they say if it doesn't interfere with your bundle of legal rights (which we will discuss in a second) then it's ok for them to use the air space.

So what is real property? Well it's anything physically attached to the land? I know what you're thinking, isn't that real estate? Ah ha my fine man, you're quick. Yes often times the two words are used interchangeably. But let's be a little more specific on this one. Real property is all the things physically attached to your real estate plus your bundle of legal rights. Then naturally the next question is, what is this bundle of legal rights? Let's take a look.

1) Right of Possession- pretty much you own the property and are allowed to occupy it.

2) Right to Control the property in any manner you see fit, as long as you don't break laws. You can pretty much do anything you want to your house as long as you don't break laws; like you can't turn it into an ice cream parlor because that breaks zoning laws.

3) Right of Enjoyment- use the property in any manner which is still legal. No you can't turn your new home into this years biggest crystal meth lab. Sorry!!

4) Right of Exclusion- this means if you don't like me, you have the right to tell me to stay of your land. But you can't go shooting at me just because I knocked on your door.

5) Right of Disposition- basically this means you have the right to dispose of the property in anyway you see fit. You can sell it, will it, sell some of the rights, etc.

Okay, now let's look at some example of real property. The most obvious of these is the home itself. If you have a shed in the back, it's real property. The cabinets you put in last year, that's real property cuz it's physically attached to the home. That seems like a no brainer too, but believe me, people have tried to take their cherry oak cabinets with them. You laugh, it's true. Remember that antic crystal chandelier you got from your late grandma, you know the one hanging in the foyer, that's real property too now. So whats not real property? That fridge of yours that slides out easily, it's not real property because it's easily removable. The trees in the backyard, real estate. You're TV, not real estate, you kinda get the picture now?

So what's personal property? How does it differ from real property? It's anything that would transfer with you if you left the house. Your car, your bed, your food, anything that isn't physically attached. Remember that chandelier, the one that was real property. What happens to it if you take the down? Now it becomes personal property, pretty cool huh? What about that 100 acres of trees in the back yard. They were real property. What happens when you cut them down? Now they are personal property and you can do anything with them you want. In the real estate world we call this severance.

Let's look at the flip side. Let's imagine you've decided to put down a drive way in your yard. So first you go down to the local home supply store and buy cement to put down the drive way. By the way, as a side note, why do we park on a drive way and drive on a park way? I just don't get it. Anyway, I digress. Now I think we can all agree now that the cement is personal property but guess what it becomes when you lay the drive way down? That's right, real property. In real estate we call this annexation.

Well this concludes today's lesson.

Blog done. Carry on!!

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