Real Property: Defined, Explained, Exemplified
Jamie Johnson3-minute read
February 01, 2021
If you’ve ever bought a home, then you’re already familiar with the concept of real estate and buying land. But you may be less familiar with the term real property.
Real property refers not only to the home you’ve purchased but also determines who has an interest in and can benefit from that property. This article will explain more about what real property is and explore the different types that exist.
What Is Real Property?
Real property is the land and any structures attached to it that would be factored into the property value. For example, while a basketball hoop in the driveway is removable and does nothing to increase property value, a fixed basketball court would be sold as part of the property.
Real property refers not only to the real estate and land you’ve purchased but it also includes any rights that are attached to that property. Real property is what gives you the right to own, lease, sell and use the property in any way you deem fit.
It’s always important to understand your property rights before you buy a home and the transfer of ownership takes place. If you’re in the midst of buying a home, your real estate agent can help interpret ownership rights.
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Types Of Real Property
The topic of real property may sound straightforward, but there are actually several different classifications of ownership. Let’s look at some common real property examples.
A freehold estate refers to an individual who owns real estate, and this ownership lasts for an indefinite amount of time. But to meet the criteria for a freehold estate, the asset must be immovable, such as land. And there can’t be any timeline when ownership is set to expire.
Let’s look at the three primary types of freehold estates:
- Free simple absolute: This refers to absolute, unrestricted ownership. As the property owner, you can use the land in any way you deem fit. As long as you pay your mortgage and taxes, you can own the property forever.
- Fee simple defeasible: This type of freehold estate refers to conditional ownership of land. For instance, there may be conditions stating that the land can only be used for specific purposes.
- Life estate: A life estate grants the owner interest in the property for as long as they live. The property holder is responsible for maintaining the property and keeping it in good condition.
A nonfreehold estate refers to an interest in a property that is less than a freehold estate. It typically refers to leased land or rental agreements.
Here are a few examples of nonfreehold estates:
- Tenancy for years: This is a type of lease agreement where a tenant has an interest in the rental property for a specified period of time. There is a specified beginning and end date outlined in the contract.
- Tenancy at will: Tenancy at will is a lease agreement that can be ended at any time, assuming a reasonable amount of notice is given. Typically, the tenant will be given a certain time frame for when the leasing agreement ends, and at that point, the tenant faces eviction.
- Tenancy at sufferance: This type of tenancy is created when an individual remains on the property without the property owner’s consent. This can happen when a tenant remains on the property beyond the terms of their lease agreement.
In a concurrent estate, property ownership is divided among multiple owners. Here are the different types of concurrent estates:
- Joint tenancy: In joint tenancy, multiple people acquire real property and have equal ownership of the property.
- Tenancy by the entirety: In tenancy by the entirety, spouses can jointly own the property as one legal entity.
- Tenancy in common: Tenancy in common refers to an agreement where two or more people share ownership of real property. And if one tenant dies, the property rights pass on to that person’s estate.
Real Property Vs. Personal Property
All property is either personal property or real property, and the litmus test really comes down to whether you can move the object. Real property refers to land and anything attached to it. This includes the following items:
- The attached real estate
- Trees, plants or any other vegetation
- Any other buildings or materials attached to the land
In comparison, personal property refers to anything the tenant has the right to take with them when they move off the land. So, if you have a shed located on your property, that’s considered real property. But the tools and lumbar located inside the shed are personal property.
The Bottom Line
If you’re considering buying a home, it’s important to understand your rights regarding real property. This is what determines your ability to utilize the land at your discretion, and it’s what gives you the right to eventually sell the property.
For more information on the homebuying process, be sure to check out the Learning Center at Rocket Mortgage®.
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