Real Property vs. Personal Property

Real Estate Exam Facts: State real estate salesperson exams typically consist of 100-150 multiple-choice questions divided into national and state-specific portions, with a 2-4 hour time limit. Most states require a score of 70-75% to pass. Exam fees range from $50-100 depending on the state. According to the National Association of Realtors (NAR), there are approximately 1.5 million licensed real estate agents in the United States. The U.S. residential real estate market is valued at over $47 trillion, with approximately 5.5 million homes sold annually.

Real estate questions often test whether an item transfers with the property or stays with the seller. To answer those questions, you must know the difference between real property and personal property and how fixtures are treated.

Core Definitions

Real property - Land, anything permanently attached to the land, and the legal rights of ownership. This includes the land, improvements, and rights such as use, enjoyment, and exclusion.

Real estate - The physical land and improvements only. It is the tangible part of real property.

Personal property - Movable items not permanently attached to the land. Personal property transfers with a bill of sale rather than a deed.

Fixture - Personal property that becomes real property because it is permanently attached or intended to be permanent.

Exam Tip: If an item is attached and intended to stay, it is usually real property.

The Fixture Tests (How Courts Decide)

Fixture questions are about intent. Courts typically use the tests below to decide whether an item is a fixture.

Table: Fixture Tests

Written agreements override assumptions. If a purchase contract says the seller is taking the refrigerator, then it stays personal property even if it looks like it could be a fixture.

Trade Fixtures and Emblements

• Trade fixtures are items a tenant installs for business use. They remain the tenant's personal property if removed before the lease ends and if the tenant repairs any damage.
• Emblements are annual crops cultivated by a tenant. These are personal property and can be harvested by the tenant.

This matters because a landlord does not automatically receive trade fixtures or crops unless the lease says otherwise.

Attachment, Severance, and Transfers

• Attachment converts personal property into real property.
• Severance converts a fixture back into personal property.
• A deed transfers real property.
• A bill of sale transfers personal property.

If a seller removes a built-in bookshelf before closing, the item is severed and becomes personal property. If it stays, it transfers as part of the real property.

Common Items and How They Transfer

Table: Common Items and Transfer

Practical Contract Strategy (How Agents Avoid Disputes)

Fixture disputes are common because buyers assume certain items stay. To prevent problems, strong contracts do three things:

1. List inclusions - Clearly list what stays (appliances, fixtures, window treatments).
2. List exclusions - Clearly list what the seller is taking.
3. Use addenda - If a special item is involved, add a written agreement.

When you list a property, your job is to ask the seller what they plan to keep and document it. That protects both sides.

Mini-Case: The Chandelier Dispute

A seller removes a dining room chandelier after the purchase agreement is signed. The buyer claims it was a fixture and should stay. The seller says it was a family heirloom.

Correct analysis: The chandelier is likely a fixture because it is attached and intended to stay. However, the seller can take it if the contract clearly excludes it. The dispute exists because the contract was not specific.

Exam Traps to Watch For

• Tenant-installed items often remain personal property even if they are attached.
• Seasonal or portable items are usually personal property.
• Intent is more important than cost or size.
• Written agreements override fixture rules.

Summary

Know the definitions, apply the fixture tests, and rely on written agreements. On the exam, look for clues about attachment, intent, and whether the item belongs to the owner or tenant.

Step-by-Step: Classify an Item on the Exam

Use a simple decision process to avoid mistakes:

1. Identify the item and how it is used.
2. Check attachment - is it built-in, wired, or permanently installed?
3. Look for intent clues - is it listed in the contract or described as staying?
4. Consider the relationship - owner items are more likely fixtures than tenant items.
5. Scan for written agreements - inclusions and exclusions control.
6. Decide how it transfers - deed or bill of sale.

Quick Comparison: Transfer Documents

Table: Transfer Documents

Applied Scenario

A seller is moving and plans to take the wall-mounted TV and custom brackets. The brackets are bolted into studs. If the contract is silent, the brackets are likely fixtures and should stay. The correct practice is to list the TV and brackets as exclusions. This prevents a dispute at the final walkthrough.

Common Mistakes

• Assuming cost determines fixture status (it does not).
• Forgetting that tenant business items are usually trade fixtures.
• Ignoring the contract language and relying on memory.
• Confusing a bill of sale with a deed.

Mastering fixtures helps you answer exam questions quickly and avoid real-world disputes.