Real Estate Basics – Understanding Real Estate as a Profession

Posted by admin on May 10, 2010 under Real Estate License Basics | Be the First to Comment

To understand real estate as profession, you must first understand what real estate is to successfully earn your real estate license. Real estate is more than just the property on a piece of land; real estate is defined as the land plus all appurtenances, whether natural or man-made. An appurtenance is a right, privilege or improvement made to a piece of land that passes with the transfer of title. A house on a piece of land would be an example of a manmade appurtenance. A stream running across the property is a natural appurtenance.

When a piece of land is purchased, the ownership of the land is from the surface of the land located at the coordinates listed on the deed, down to the center of the earth, and up and outward infinitely. There are separate individual rights associated with the air above the land, minerals and other things found in the land, water running across the land, and even light and sound. These rights, which can be categorized as air, surface and subsurface rights, can be sold separately, making it possible for one piece of property to have up to three separate owners, or sold together as a bundle of rights which is known a Livery of Seisin, which translates to I own it and the right to sell it.

Land has both physical and economic characteristics. Physically a parcel of land must be immobile, indestructible, and be unique.  Economically land requires a demand, usefulness, scarcity and transferability. DUST is a useful acronym to remember for the real estate exam. If any of the four economic characteristics of land in missing then the property value will diminish.

Property can be separated into real property and personal property. In the simplest definition, real property is that which cannot be moved from the land. Personal property is considered to be things that are easily moved, or anything that is not real property. There are a number of ways in which personal property can become real property, known as annexation. A fixture is something that was personal property and is now real property. For example, a central air conditioning unit is personal property until it is affixed in the home and becomes real property. A fixture is a man-made appurtenance.

Trade fixtures are an exception and considered to be personal property. Any fixture that a tenant installs specific to the business they are running remains the personal property of the tenant provided they remove the fixture prior to vacating the property and restore the property to its original condition.  If the trade fixture is not removed prior to the end of the lease, it becomes a fixture and considered to be the real property belonging to the property owner. Real property can also become personal property by severance. A tree on a piece of land is real property, unless the tree is chopped down and the wood from the tree becomes personal property.

Understanding real estate as a profession requires knowing what property is and what the rights are for those who wish to own it. These concepts are important to know when earning your real estate license.