When it comes to real estate, there are different ways of thinking about property. Property is something that can be owned or possessed. It is considered “real” or “personal” and “tangible” or “intangible.”
The main two subunits of property are real and personal property:
- Real property, also called realty or immovable property, is a subset of land that has been legally defined. Or anything attached to the land or any improvements to land made by human efforts, such as buildings, wells, mines, canals.
- Personal property, also called personalty or chattels, is generally movable, such as a car or iPhone, and is basically anything that is not real property.
In a real estate transaction, anything that is considered real property is transferred to the buyer along with the land, unless otherwise agreed. However, personal property will remain with the seller unless otherwise agreed. On a real estate contract you see this come up when items like appliances are listed for clarification purposes.
Kitchen cabinets and a standard dishwasher, for example, are affixed to the house, so they are considered real property. However, the refrigerator and washer and dryer can be rolled out of the house like a TV, so are by default considered personal property. This is important because if the real estate contract does not specify personal property ownership, the legal definition will hold true and determine the default ownership. It won’t matter that most other real estate deals treat (only due to language added to the contract) certain items like a refrigerator as being part of the house.
Property is also considered either tangible or intangible:
- Tangible property, also called corporeal property, is physical. You can touch it. Like a house, a car, or an iPhone.
- Intangible property, also called incorporeal property, is non-physical and abstract. Such as patent rights, trademarks, and even mutual funds or dollar bills. These items represent value.
Tax laws may treat property different based on whether it is tangible or intangible.
There is a lot more to consider with respect to how property is treated in a real estate transaction. Please do not hesitate to contact me if you have any questions.