Real vs Personal Property

Most physical items can normally be classified into either real or personal property. This is an important distinction in the real estate industry and can translate into serious money.

The quick way to understand the difference between the two types of properties is to think of personal property, as everything not permanently attached to the real estate.

As noted above, real estate is land (with its included rights) and anything permanently attached to that land. Personal property is legally called "chattel," most probably because defining the concept of personal property became a legal need when cattle became big business.

• Attachment. The permanency of an item's attachment to the real estate determines whether it is real or personal property. For example, a pile of wooden posts would be considered personal property until they are driven into the ground to create a fence, at which time, they become part of the real property • Transfer. Real property is transferred with a deed; personal property is transferred with a bill of sale. With most home purchases, the deed transfers the land and house, while the bill of sale handles the transfer of the washer and dryer.

Per the preceding example, personally property can be converted into real property through the process of attachment. Fixtures are objects that were previously personal property but have been attached to real estate, thus making them real property. [Note: try not to confuse regular fixtures with trade fixtures; trade fixtures, sometimes called chattel fixtures, are considered personal property.]

By the same token, real property can be converted into personal property through the process of severance.

We hope that you've found our Mortgage and Real Estate Resource helpful and informative. We welcome all comments, critiques and suggestions; please send emails to [email protected]. Remember that whether your are buying a home or an office building, you are investing in real estate. As with all investments, the best investors are those who can gather the most knowledge, tools and resources. Regardless of whether you use our lending services, please spread the word about our resource center to anyone you know who may benefit from our site.

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