REAL ESTATE AND REAL PROPERTY,THE DIFFERENCE

Real Estate vs. Real Property: What's the Difference

Real Estate vs. Real Property: An Overview

Real estate and real property certainly sound very similar, and the two concepts have a lot to do with each other, but there are subtle differences between them. Understanding those differences can help you understand the nuances of the land you own and how you own it. While real estate often refers to land, the term real property takes things a little further and examines the rights related to that land.

KEY TAKEAWAYS

• Real estate is a term that refers to the physical land, structures, and resourcesReal estate and real property certainly sound very similar, and the two concepts have a lot to do with each other, but there are subtle differences between them. Understanding those differences can help you understand the nuances of the land you own and how you own it. While real estate often refers to land, the term real property takes things a little further and examines the rights related to that land.

KEY TAKEAWAYS

• Real estate is a term that refers to the physical land, structures, and resources attached to it.
• Real property includes the physical property of the real estate, but it expands its definition to include a bundle of ownership and usage rights.
• The distinction is most useful in the real estate world, where different ideas might apply to owners versus renters or leasers.
• To most of the general public, the idea of real estate encompasses real property, but from a legal perspective, the distinction is important.
• The real property consists of both physical objects and common law rights; real estate only consists of physical objects.

Real Estate

Real estate is simply a piece of land plus any natural or artificial—man-made—improvements that are attached or have been added. Natural attachments are part of the land and include trees, water, valuable mineral deposits, and oil. Artificial improvements include buildings, sidewalks, and fences. Real estate can be split into two broad categories—residential and commercial.

Residential real estate is property intended for human habitation by a single-family or multiple families. Real estate may be leased or owner-occupied, but the term residential real estate most often refers to property that is leased.

Commercial real estate has a business use and focus. This property type includes office buildings, malls, restaurants, and other such activities. Commercial real estate may be owner-occupied or leased.

Industrial real estate is a subdivision of commercial real estate and includes property where manufacturing, warehousing, production, and assembly take place.

Real Property

Real property is a less commonly used term and as such, is a less commonly understood concept. Real property is a broader term and includes the land itself and any buildings and other improvements attached to the land. It also encompasses the rights of use and enjoyment of certain land, as well as any of its improvements.

Renters and leaseholders may have the right to inhabit land or buildings—a real property consideration—but those things are not considered real estate.

Real property includes real estate, and it adds a bundle of rights. This bundle of rights is a broad term used to organize property rights—as they relate to real estate. In a nutshell, it grants property owners the ability to use their property as they see fit.1

A bundle of rights encompasses five different rights of the property owner:

1. The right to possess is the right to occupy the property.
2. The right to control is the right to determine interests and uses for others.
3. The right to enjoy is the right to use the property without outside interference.
4. The right to exclude is the right to refuse others' interests or uses for the property.
5. The right to dispose of is the right to determine how and if the property is sold or given to another party.1

There are some other complex exceptions and restrictions to these rights and legal treatments.

Key Differences

In general, the difference between real estate and real property boils down to the inclusion of the bundle of rights. The real property consists of both physical objects and common law rights whereas real estate consists only of physical objects.

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. attached to it.

• Real property includes the physical property of the real estate, but it expands its definition to include a bundle of ownership and usage rights.
• The distinction is most useful in the real estate world, where different ideas might apply to owners versus renters or leasers.
• To most of the general public, the idea of real estate encompasses real property, but from a legal perspective, the distinction is important.
• The real property consists of both physical objects and common law rights; real estate only consists of physical objects.

Real Estate

Real estate is simply a piece of land plus any natural or artificial—man-made—improvements that are attached or have been added. Natural attachments are part of the land and include trees, water, valuable mineral deposits, and oil. Artificial improvements include buildings, sidewalks, and fences. Real estate can be split into two broad categories—residential and commercial.

Residential real estate is property intended for human habitation by a single-family or multiple families. Real estate may be leased or owner-occupied, but the term residential real estate most often refers to property that is leased.

Commercial real estate has a business use and focus. This property type includes office buildings, malls, restaurants, and other such activities. Commercial real estate may be owner-occupied or leased.

Industrial real estate is a subdivision of commercial real estate and includes property where manufacturing, warehousing, production, and assembly take place.

Real Property

Real property is a less commonly used term and as such, is a less commonly understood concept. Real property is a broader term and includes the land itself and any buildings and other improvements attached to the land. It also encompasses the rights of use and enjoyment of certain land, as well as any of its improvements.

Renters and leaseholders may have the right to inhabit land or buildings—a real property consideration—but those things are not considered real estate.

Real property includes real estate, and it adds a bundle of rights. This bundle of rights is a broad term used to organize property rights—as they relate to real estate. In a nutshell, it grants property owners the ability to use their property as they see fit.1

A bundle of rights encompasses five different rights of the property owner:

1. The right to possess is the right to occupy the property.
2. The right to control is the right to determine interests and uses for others.
3. The right to enjoy is the right to use the property without outside interference.
4. The right to exclude is the right to refuse others' interests or uses for the property.
5. The right to dispose of is the right to determine how and if the property is sold or given to another party.1

There are some other complex exceptions and restrictions to these rights and legal treatments.

Key Differences

In general, the difference between real estate and real property boils down to the inclusion of the bundle of rights. The real property consists of both physical objects and common law rights whereas real estate consists only of physical objects.

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.1

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:2

• 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

Non-Freehold Estates

Non-freehold estates involve leases. They can't be passed to an heir and they exist "without—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:3

• 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.4

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.