What is Real Estate? Flashcards
Accession
the right to all that one’s own property produces, including that which is added, either naturally or by human action, to the property already owned
Accretion
the process that results in the gradual increase in land area through deposits of soil by natural forces
Alluvion
the soil that gets deposited in the process of accretion
Erosion
the gradual loss of land over time
Avulsion
the sudden loss of land by an act of nature
Reliction
the exposure of previously submerged land due to receding waters
Illiquidity
an asset’s state of relative difficulty in converting to cash without loss of value
Bundle of Rights
ownership of land with all of the legal rights of possession, control, enjoyment, exclusion, and disposition
Subsurface Rights
ownership rights to all that is found beneath the surface of the tract of land owned, extending downward to the center of the earth
Air Rights
the right to use the airspace above the surface of land
Riparian Rights
rights that govern the use of flowing water, such as rivers and streams that pass through or border a property
Littoral Rights
rights that govern lakefront or oceanfront property and usually allow the property owner to use the water bordering their property
Real Estate
a part of the surface of land to the center of the earth and upward to space, plus all improvements made by man or nature
Real Property
land from the surface to the center of earth and upward into space, including everything attached by man or nature as well as the bundle of legal rights of ownership
Personal Property
any unattached, movable asset on the property not considered real estate (land plus improvements); also known as chattel or personalty
chattel
any unattached, movable asset on the property not considered real estate (land plus improvements); also known as personal property or personalty
fixture
an object that was once personal property but is now firmly attached to the land in such a way that it is considered to be a part of the real estate
trade fixture
personal property attached to real property that is owned by the tenant and needed for the tenant’s business; can be removed by tenant at expiration of lease
Land has some unique physical characteristics.
These characteristics are:
Indestructibility
Immobility
Non-homogeneity
Land’s Economic Characteristics
Scarcity Situs Modification Fixity Illiquidity
Scarcity
the economic characteristic that informs the economic principle of supply and demand. The supply of land will never increase, but the demand for land will increase as the population grows. And this is because land is scarce.
Situs
refers to the economic significance of a property’s location. The popular real estate phrase, “location, location, location,” is referring to the preferences people have for certain areas. Situs takes into account not only the geographical location of property, but also the economic qualities of that area that make it more or less desirable. Example: A buyer wants to move from a rural area to a home in a nearby city because the city has a strong local economy with plenty of job opportunities. The buyer is influenced by situs.
modification
refers to the fact that the value of land can be affected by human-made changes to the land.
Put simply: Human-made changes (modifications) can affect the value of land.
Fixity
refers to the fact that real estate exists in a fixed location and cannot be moved.
Illiquidity
refers to an asset’s state of relative difficulty in converting to cash without loss of value.
Quick Recap: Land’s Economic Characteristics
Scarcity: The supply of land is finite. There are no coastal property factories.
Situs: People prefer land for its location, both for natural (beach) and human-made reasons (good schools).
Modification: Human-made improvements can affect the value of land (new amusement park nearby).
Fixity: Land is a long-term investment. It can’t be moved, and investors must seriously consider a real estate property before purchasing.
Illiquidity: Land does NOT convert to cash very quickly relative to many other asset types.
Attachments
physical objects permanently attached to land — can be man-made or natural.
improvements
If man-made, they are usually referred to as improvements.
Examples of improvements:
Housing 🏡
Landscaping 🌷
Permanent BBQ pit 🍔
Horse stables 🏇
natural attachments
These would include trees, plants, shrubs, and native growth that people have added to a property that, once planted, are also considered to be part of the land and, therefore, real property. 🌿
A Bundle of Rights
The Right of Exclusion: The right to tell Aunt Sally that she can’t trespass on your property
The Right of Possession: The right to occupy/live/breathe on your property, no matter what Aunt Sally has to say about it
The Right of Disposition: The right to sell, lease, and/or will a property to Aunt Sally or whomever (You have the right to transfer all of your property rights or just some of them.)
The Right of Quiet Enjoyment: The right to (legally) use the property for your enjoyment however you (legally) want, no matter what
The Right of Control: The right to alter, change, or improve the property as the owner sees fit (Sorry, Aunt Sally, you have no say-so.)
Interference of Rights
Some humans show a tendency that we robot types rarely do — the tendency to interfere. Even with the bundle of rights, interference is a thing. Here are two forms of interference that are related:
Trespass: the physical invasion of land by an individual without lawful right to do so
Encroachment: the physical invasion of land by an object onto land without lawful right to do so
Put another way…
Trespass = violation by human Encroachment = violation by objects (like your neighbor's fence crossing over your property line)
nuisance
A nuisance interferes with the property owner’s right of quiet enjoyment. Loud noises, bad smells, and unsightliness are a few common examples of nuisances.
Surface Rights
Surface rights are the property owner’s rights and interests with respect to the surface of the earth, including natural elements and structures built on or attached to it (improvements).
Subsurface Rights
Subsurface rights relate to everything beneath the surface of a tract of land, down to the center of the earth. The importance of this right lies largely in the fact that it may secure ownership of mineral deposits located under the surface of a property. For this reason, subsurface rights are also commonly referred to as mineral rights.
Rule of Capture
A discussion of mineral rights should always include the rule of capture, which states that a landowner who drills a well for gas or oil on their land is entitled to all that well produces — even if the gas or oil migrates from beneath a neighbor’s property.
Supporting rights
the legal concept of responsibility adjacent landowners share.
Air Rights
are the rights to use the airspace above a property.
water rights
When a property borders a body of water or a river, the right to enjoy the water is usually included in the bundle of rights
Riparian Rights
govern the use of flowing water, such as rivers and streams that pass through or border a property.
Littoral Rights
govern lakefront or oceanfront property and usually allow the property owner to use the water bordering their property.
Appropriative Rights
Independent of land ownership claims, however, are appropriative rights, which are water rights granted by the government to take water from a body of water for a specified and approved use. An example of this would be a farmer who needs water for crops from a nearby lake.
Percolating water rights
refer to the use and ownership of underground water. Real property owners have a right to access that water by installing wells for their own use.
Appurtenances
Rights associated with real property that usually convey (transfer) when property ownership changes include: rights of access; air and water rights; and mineral, gas, and oil rights, among others.
Real Estate vs. Real Property
Real estate is the land and any improvements that have been added to it, whereas real property is all that plus the bundle of rights associated with the property.
Real estate = land + improvements
Real property = land + improvements + bundle of rights
