Alright, commonly we hear the term real estate and just assume it is just that. Property, house, something associated with improvements on land or just bare land. This is correct, any buildings that are permanently attached to the property (note that a shed on skids would be considered personal property) are referred to as improvements. Real estate normally includes resources or minerals that are under the land or water rights, unless they are specifically excluded, usually at the time of transfer. The same goes for the air rights, or the space above the surface of the Earth. This can also be limited to a certain distance as we start to think about airplanes and their right to travel over your property. Even though you may own the space, it can also be limited by County height limitations, and this can be further convoluted when high-rise buildings or condos come into play. In these instances the homeowner’s association may own the building footprint, while you own the inside of the condo.
Real property vs Real Estate and the Bundle of Rights
Now that we have a general idea of what is inclusive with regards to real estate, we start to understand that real estate typically refers to physical elements. So what is Real Property? What is the difference?
Real property is basically an expanded concept in terms of real estate. Not only does it include everything I mentioned above, but also what we refer to in the real estate industry as the “Bundle of Rights”, or simply, Real Property Rights.
So, Real Estate + Bundle of Rights = Real Property.
In order to conclude, we need to understand what the Bundle of Rights are. While Real Estate would be considered physical, the Bundle of Rights are not. This is a legal element. In Real Estate training, have all these weird acronyms to help us remember the different elements for various terms. The acronym for the bundle of Rights is DEEP + C, or:
Disposition – Essentially, this right protects the owner’s ability to transfer ownership, either permanently by virtue of a sale or temporarily by leasing the property.
Enjoyment – This one’s pretty self-explanatory, it gives you the right to enjoy or to participate in activities that the owner of the property enjoys.
Exclusion – This gives the owner of the ability to limit who can access the property. No trespassing…
Possession – Another right that is seemingly self-explanatory, it gives the owner the right to possess the property.
Control – Allows the owner to use the property the way they see fit.
It is important to remember that the above bundle of rights do not go without restriction. A good example is possession. Usually, if you do not pay your property taxes, the county can take possession of your property. If you are in a platted subdivision, you cannot control every element of your property as there are restrictions in place that you agree to when you take possession of the property. There are of course many other scenarios in which the above rights can be limited.
In any case, at least now we know the difference!
In anticipation of new construction in the coming year, I thought I would run through a couple of frequently asked questions and provide a bit of advice for new home shoppers.