What Is Real Property?

If you’ve ever bought a home, then you’re undoubtedly 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 it determines who has ownership interest and can benefit from that property. Let’s take a closer look at what real property is and explore the different types of real property.

Real property is the land and any structures attached to it that would factor 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 sell as part of the property.

Real property refers not only to the real estate and land you’ve purchased, but it 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 see fit.

It’s always important before you buy a home to understand your property rights and the transfer of ownership that takes place. If you’re in the process of buying a home, your real estate agent can help interpret ownership rights.

The topic of real property may sound straightforward, but several classifications of ownership actually exist. Next up are some common examples of real property.

Freehold Estates

A freehold estate refers to a person who owns real estate, and this ownership lasts an indefinite amount of time. But to meet the criteria for a freehold estate, the asset must be immovable. An example would be land and anything permanently attached to it like a house or storage shed, and there can’t be any timeline when ownership is set to expire.

Here are the three primary types of freehold estates:

• Fee simple absolute: Fee simple 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, you may encounter 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.

Nonfreehold Estates

A nonfreehold estate refers to an interest in a property that’s less than a freehold estate. It’s also known as a leasehold estate and 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. A specified beginning and end date are 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 concludes – after which the tenant faces eviction.

• Tenancy at sufferance: This type of tenancy is created when someone remains on the property without the legal right to do so and without the property owner’s consent. This can happen when a tenant stays at the property beyond the terms of their lease agreement.

Concurrent Estates

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. If one tenant dies, the property rights pass on to that person’s estate.

All property is either personal property or real property, and the determining factor is whether you can move the object.

Real Property

So, what is considered real property? In short, it’s land and anything permanently attached to it. This includes the following items:

• The attached real estate

• Trees, plants and any other vegetation

• Any other buildings or materials attached to the land

Personal Property

In comparison, personal property (sometimes referred to as “chattel”) refers to anything the tenant has the right to take with them when they move off the land. This includes items such as:

• Clothing

• Furniture

• Artwork

• Garden tools

• Vehicles

As mentioned, real property is any physical structure on a piece of land and all the rights of ownership associated with the property. Real estate refers to the land the permanent structures are attached to as well as the structures themselves. When you buy or sell a piece of real estate, like a house or a piece of land, you’re actually buying or selling real property, including the rights of ownership to the land and the physical structures built on it.

It’s possible to transfer real property to a new owner in several ways, and the best method for you will depend on your goals and your personal needs. Let’s take a look at the three most common methods of ownership transfer.

Selling The Property

When you sell your home, you’re transferring ownership of the real property to a new owner. As part of the sale, you can negotiate the terms and decide how much personal property – if any – A zero value letter is often required for any personal property listed on a purchase agreement to show that the property won’t add to the purchase price.

If the buyer agrees to the price and the terms of the sale, the ownership interest will be transferred through a property deed.

Giving The Property As A Gift

As the owner of real property, you have the right to transfer ownership to whomever you see fit, however you see fit. For many people, this means selling the property, but for others, it can mean gifting the property to someone else. If you’re thinking of gifting the property to another person, consider consulting with a real estate attorney before you start the process. They can tell you what types of contracts and forms you’ll need to fill out, and they can help you decide if gifting the property is in your best interest.

Designating A New Owner In A Will

You can also transfer ownership of a property to a designated heir or beneficiary through your will. Designating a new homeowner in your will allows a loved one or close friend to receive your home and all ownership rights to the property when you pass away. Keep in mind, however, that this method may force your loved one to pay estate tax on the property they inherit. If you’re considering the possibility of setting up a will and leaving your house to someone, speak with an attorney to make sure you choose the right options.

If you’re looking to buy a home, it’s important to understand your rights concerning real property. These rights determine your ability to utilize the land at your discretion, and they give you the legal right to eventually sell the property.

Of course, understanding your rights is just one part of the homeownership journey. You’ll also need to make sure you can afford your new home as well as find a lender you can trust to help you finance the purchase.

Start your mortgage application with Rocket Mortgage^® today. You can also give our Home Loan Experts a call at (833) 326-6018.