Real Property vs. Personal Property: Key Differences and Conversion Methods Explained

Understanding what makes real property and personal property different (and how they can be converted from one to the other) will impact how the property is treated during a sale, as well. You’ll also be expected to

negotiate (and get in writing) who is taking the in-wall vacuum, or who gets the tiny fridge. If not, your clients could end up in court (and you could end up with a bad referral)

have knowledge about how the transfer of ownership is carried out for each type of property. With that said, here are the answers to some key questions related to real and personal property:

1. What is Real Property?
Real property is a term used to refer to land, as well as anything that’s permanently attached or affixed to it. Examples of real property include houses, buildings, commercial structures, and land. Also, any improvements made to the land or buildings such as plumbing systems, electrical wiring, and HVAC units are considered part of the real property.

2. What is Personal Property?
Personal property, on the other hand, is moveable and can be easily transported from one location to another. This can include tangible things like furniture, electronics, and jewelry, as well as intangible things like stocks and digital assets. Some personal property may not be tangible such as intellectual property or trademarks.

3. How Can Real Property be converted into Personal Property?
If a thing that is on real property is not permanently attached to the land, it can usually be considered personal property. Portable buildings, mobile homes, and any removable structures that have not been permanently affixed to the land are examples of personal property that can be found on real property. Similarly, many crop plants are personal property, but the land they grow on is real property. Once you remove the plants, they become personal property.

4. How Can Personal Property be Converted into Real Property?
Personal property can be converted to real property by being affixed or attached to the land, where it loses its moveable nature and becomes part of the land or building. For instance, if you install a set of cabinets, an HVAC unit, or a water heater in a real property building, they become part of the building and are now considered real property. A good example is when a mobile home becomes affixed to the ground by being installed permanently on a foundation.

5. How are real and personal property treated differently during sales?
During the sale of real property, the ownership of the land, buildings, and anything permanently attached to them is transferred from the seller to the buyer using a deed. The transfer of real property can also trigger additional costs and commissions, particularly if a real estate agent is involved in the sale.

In contrast, the sale of personal property is typically much simpler, with the transfer of ownership being accomplished through a bill of sale. Personal property may also be sold through auction or private sale, with the transaction being made final once the buyer receives the personal property and the seller receives the payment.

In conclusion, understanding how real property and personal property differ, and how each type of property can be converted from one to the other, is critical for anyone who wants to engage in property sales. As a tutor, I hope this explanation has been helpful.

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