What Is Real Property? Definition and Types of Properties

Jean Folger has 15+ years of experience as a financial writer covering real estate, investing, active trading, the economy, and retirement planning. She is the co-founder of PowerZone Trading, a company that has provided programming, consulting, and strategy development services to active traders and investors since 2004.

​Somer G. Anderson is CPA, doctor of accounting, and an accounting and finance professor who has been working in the accounting and finance industries for more than 20 years. Her expertise covers a wide range of accounting, corporate finance, taxes, lending, and personal finance areas.

Timothy Li is a consultant, accountant, and finance manager with an MBA from USC and over 15 years of corporate finance experience. Timothy has helped provide CEOs and CFOs with deep-dive analytics, providing beautiful stories behind the numbers, graphs, and financial models.

Getting Ready to Sell

1. Avoid These Mistakes
2. Get a Fair Price
3. Playing Hardball
4. How to Stage Your Home
5. Is Staging Worth the Cost?
6. Sell Your Home Fast
7. The Case vs. Open Houses
8. Holidays: A Good Time to Sell

Real Estate Agents

1. Real Estate Agent
2. Realtor
3. Don't Sell Without an Agent
4. How Agents Are Paid
5. Commissions: Who Pays?
6. Listing Agreement
7. Exclusive Listing

The Owner-Seller Option

1. For Sale By Owner (FSBO)
2. Cut Commission Fees
3. Owner Financing
4. Seller Financing Deals

The Selling Process

1. Real Estate Contracts
2. Home Sale Contingencies
3. Contingency Clauses
4. Escrow Process
5. Short Sale vs. Foreclosure
6. When the Contract Falls Through

1. How Home Sales Are Taxed
2. Avoiding Capital Gains
3. Capital Improvements and Your Tax Bill

1. Absorption Rate
2. Affidavit of Title
3. Best and Final Offer
4. Gift of Equity
5. Multiple Listing Service
6. Open House
7. Open Listing

1. Pocket Listing
2. Right of First Offer
3. Sales and Purchase Agreement (SPA)
4. Short Sale
5. Tax Deed
6. Tax Sale

What Is Real Property?

Real property is a parcel of land and structures that are permanently attached to the land. The owner of real property has all the rights of ownership, including the right to possess, sell, lease, and enjoy the land.

Real property may be classified according to its general use as residential, commercial, agricultural, industrial, or special purpose. To understand if you have the right to sell your home, you need to know which rights you possess—or don't possess—in connection with the property.

Key Takeaways

• Real estate is defined as land at, above, and below the earth's surface, including all things permanently attached to it, whether natural or artificial.
• For practical purposes, the term real estate is synonymous with real property.
• Personal property is defined as all possessions that don't fit the definition of real property, such as clothes, cars, and furniture.

How Real Property Is Defined

To understand how real property is defined, it's helpful to start with land and real estate. Land is the earth's surface extending downward to the center of the earth and upward to infinity, including everything that is permanently attached by nature (or at least attached for the foreseeable future), such as boulders, trees, and water.

Land also includes the minerals below the earth's surface and the airspace above the land.

In contrast, real estate is defined as the land at, above, and below the earth's surface, including everything that's permanently attached to it, whether natural or artificial.

Therefore, the definition of real estate extends to all artificial, permanent improvements to the land such as streets, utilities, sewers, fences, and buildings.

Real property is a broader term than real estate, as it encompasses the interests, benefits, and rights inherent in the ownership of real estate. It includes the physical land (the surface as well as what lies below and above it), everything that is permanently attached to it—whether natural or artificial—plus all the rights of ownership, including the right to possess, sell, lease, and use the land.

Each state has its own laws regarding what real property is and how to handle its sale. For the most part, real property isn't subject to federal laws because real estate by definition doesn't move across state borders.

Estates in Real Property

The amount and kind of interest a person has in real property is called an "estate in land." Estates in land are broken down into two major classifications: freehold estates and non-freehold estates.

Freehold Estates

Freehold estates involve ownership. They have an indefinite duration and can last for a lifetime or forever. Examples of freehold estates include:

• Fee simple: A holder of an estate in fee simple is entitled to all rights in the property. It is the highest type of interest in real estate recognized by law. The estate is of unlimited duration, and when the owner dies, the estate passes to the owner's heirs.
• Life estate: A life estate is limited in duration to the life of the owner, or to the life or lives of some other designated person(s).
  

Note

Unlike a fee simple estate, a life estate isn't considered an estate of inheritance.

Non-Freehold Estates

Non-freehold estates involve leases. They can't be passed to an heir and they exist "without seisin"—or without ownership. Also known as a leasehold estate, non-freehold estates are created through written and oral leases and rental agreements.

Examples of non-freehold estates include:

• Tenancy for years: This is an estate created by a lease that has a definite beginning and end. The lease terminates automatically at the specified end date. It is also called estate for years.
• Tenancy from period to period: This estate exists when the tenancy is for a definite initial time, but is automatically renewable for an indefinite period unless the owner or tenant terminates it with prior notice. It is also called "estate from year to year."
• Tenancy at will: This type of tenancy can be terminated at any time by either the owner or tenant. It is also called estate at will.
• Tenancy at sufferance: This is the lowest form of estate known to law. It exists indirectly as a result of circumstance and is never created deliberately. It occurs when a person who formerly had a legal right to use the property remains on the property without a legal right to do so and without the owner's consent. The only difference between a tenant at sufferance and a trespasser is that the former had a right to be on the property at some point, but stayed beyond the terms of the lease or agreement. It is also called estate at sufferance.

Real Property vs. Personal Property

The law makes a clear distinction between real property and personal property. Real property is immovable. It includes the land, everything that is permanently attached to it, and the rights that "run with" the land.

Personal property, on the other hand, is movable. It is defined as everything that isn't real property, such as your clothes, furniture, cars, boats, and any other movable items that aren't attached to real estate.

Real Property vs. Real Estate

Real estate is land at, above, and below the earth's surface, including everything permanently attached to it, whether natural or artificial. Real property is everything included in real estate, plus the rights of ownership, including the right to possess, sell, lease, and enjoy the land.

What Is Real Estate vs. Real Property?

The terms real estate and real property are used interchangeably, but real property is actually a broader term. Real estate is defined as land and everything attached to it. Real property extends to the interests, benefits, and rights inherent in the ownership of real estate.

What Are Some Examples of Real Property?

A natural formation like a hill or a pond can be real property. An artificial addition such as a house, a driveway, or a garden shed can also be considered real property. If you own the land that structures are situated on, you have the right to use, manage, and dispose of the structures. These rights are derived from English common law and they are constrained by state and local laws.

Is a Car Real Property?

A car is tangible personal property, not real property, as the car can be moved. Unlike most other tangible personal property, a car can be used to secure a loan. A car loan is secured by the vehicle just as a mortgage is secured by a house.

The Bottom Line

Real estate is land at, above, and below the earth's surface, including all things permanently attached to it, whether natural or artificial. The owner of real property has all the rights of ownership, including the right to possess, sell, lease, and enjoy that land. There are several kinds of estates in real property.

The term real estate is essentially the same as real property. On the other hand, personal property is defined as all possessions that don't fit the definition of real property, such as clothes, cars, and furniture.

1. New York Bar Association. "Definition of Real Property."
2. Rocket Mortgage. "Freehold Estate: A Guide On Freehold Estates: Different Types And How They Work."
3. Law Library-American Law and Legal Information. "Estate-Nonfreehold Estates."
4. Clear Tax. "Real Property."

Getting Ready to Sell

1. Avoid These Mistakes
2. Get a Fair Price
3. Playing Hardball
4. How to Stage Your Home
5. Is Staging Worth the Cost?
6. Sell Your Home Fast
7. The Case vs. Open Houses
8. Holidays: A Good Time to Sell

Real Estate Agents

1. Real Estate Agent
2. Realtor
3. Don't Sell Without an Agent
4. How Agents Are Paid
5. Commissions: Who Pays?
6. Listing Agreement
7. Exclusive Listing

The Owner-Seller Option

1. For Sale By Owner (FSBO)
2. Cut Commission Fees
3. Owner Financing
4. Seller Financing Deals

The Selling Process

1. Real Estate Contracts
2. Home Sale Contingencies
3. Contingency Clauses
4. Escrow Process
5. Short Sale vs. Foreclosure
6. When the Contract Falls Through

1. How Home Sales Are Taxed
2. Avoiding Capital Gains
3. Capital Improvements and Your Tax Bill

1. Absorption Rate
2. Affidavit of Title
3. Best and Final Offer
4. Gift of Equity
5. Multiple Listing Service
6. Open House
7. Open Listing

1. Pocket Listing
2. Right of First Offer
3. Sales and Purchase Agreement (SPA)
4. Short Sale
5. Tax Deed
6. Tax Sale

In real estate, a short sale is an asking price for a home that is less than the amount that is due on its existing mortgage.

Selling a home without a real estate agent can save money, but there are also costs and risks involved.

Recording fees are levies charged by government agencies to document real estate transactions in order to make them a matter of public record.

A first mortgage is the primary lien on the property that secures the mortgage and has priority over all claims on a property in the event of default.

Pre-foreclosure refers to the early stage of a property being repossessed due to the property owner’s mortgage default.

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