Real estate agents need to understand the key differences between real property and personal property. Knowing how these two broad categories of property are defined and treated legally and for tax purposes is crucial when advising clients. This comprehensive guide examines real property versus personal property and provides real estate agents with the information they need.

Real Property vs. Personal Property: A Comprehensive Guide for Real Estate Agents

What is Considered Real Property?

Real property refers to land and anything permanently attached to land. This includes buildings and structures on the land, as well as natural resources like crops and minerals. The defining quality of real property is that it cannot be moved without being damaged or altered. Real estate always qualifies as real property.

Some examples of things that are categorized as real property:

Houses, apartments, condos, and other buildings
Mobile or manufactured homes if permanently affixed to land
Fixtures like plumbing, wiring, built-in appliances
Wells, septic systems, and other utility systems
Driveways, sidewalks, fences, decks, and landscaping
Mineral rights and ownership shares in oil/gas wells
Streams, rivers, ponds, and other bodies of water

What is Considered Personal Property?

Personal property refers to movable assets and personal belongings that are not permanently attached or related to the land. Personal property is not fixed to land like buildings and real estate.

Some examples of personal property:

Cash
Bank accounts and investment accounts
Cars, RVs, boats, and other vehicles
Antiques, artwork, collectibles
Clothing, jewelry, household items
Mobile tiny homes not affixed to land
Crops before they are harvested, timber before cut
Patents, copyrights, trademarks

The key defining factor for personal property is mobility.

Real Property vs. Personal Property in Texas

The state of Texas treats real and personal property differently when it comes to laws and taxes. Here are some key differences every real estate agent needs to know:

Taxation

Real estate and other real property are subject to property taxes that must be paid annually. Tax rates vary by location.
Personal items are generally not taxed on an annual basis but may require registration fees.

Transfers of Ownership

Deeds and land titles are used to transfer ownership interest in real estate and real property
Bills of sale, registrations, assignments, and endorsements transfer personal property

Exemptions from Creditors

Texas has extensive homestead exemptions that protect equity in primary residences from creditors
Personal property is not similarly protected; creditor exemptions for personal goods are quite low

Inheritance

Real property can be passed to heirs like other assets through probate and estate planning
Certain personal goods like cars receive special treatment to allow transfer upon death

Settlements

Courts use legal doctrines like co-tenancy and partition actions to divide real property
Personal property is typically easier to split by agreement during divorce and separation

Bottom line – real estate agents must know real versus personal property definitions and laws.

What is Real Property in Texas?

Texas adheres to the standard legal definition of real property. Real property in Texas refers to land, buildings, homes, structures, and other assets attached to the land. Mineral estates also qualify as real property. Key features:

Permanent attachment to the land
Transfer through deeds instead of possession
Subject to ad valorem property taxes
Protected by homestead exemption laws

Oil and gas leases are an interesting situation in Texas. Mineral estates underground are real property. However, the oil and gas itself is considered personal property – a movable, extractable resource.

Though less common, certain fixtures like appliances can be considered personalty in Texas depending on the manner and purpose of annexation. But in general, Texas real property laws follow familiar rules.

What is Considered Personal Property in an Estate in Texas?

Texas estate law defines all property that does not meet the definition of real estate as personal property. Any tangible object not attached to the land or intended to be so is personal property in Texas estates. This includes:

Cash, bank accounts, stocks, bonds, retirement accounts
Cars, RVs, and trailers registered to the deceased
Antiques, jewelry, art, collectibles, household furnishings
Intellectual property like patents and royalty rights
Mineral interests in extracted oil and gas
Crops grown on the deceased’s land

Certain specialty assets receive unique treatment under Texas estate law:

Probate is not needed to transfer the title for cars, boats, etc. to heirs
Firearms may transfer directly to heirs outside of probate
Pets can be provided for through pet trusts in Texas

Any tangible movable item is deemed personal property at death in Texas. Cash and financial assets are common estate personalty. Exceptions exist for the rapid transfer of vehicles and guns to heirs.

What are the Two Types of Personal Property?

There are two broad subcategories when classifying personal property:

Tangible personal property – Any physical, movable items like cars, jewelry, furniture, artwork, antiques, clothing, books, appliances, electronics, etc.

Intangible personal property – Non-physical property including financial instruments, intellectual property, digital assets like cryptocurrency, bank accounts, patents, royalty rights, leasehold interests, etc.

These two groupings share key traits:

Mobility and separability from real estate
Transfer through possession versus deeds
Less protection from creditors and taxation

But there are some notable differences:

Tangible property has a physical existence that must be managed
Intangible property often relies on contracts and legal rights

So personal property is divided into tangible physical objects versus intangible assets and rights. Both receive very different legal treatment compared to land and real estate under Texas law.

What is Considered Tangible Personal Property in Texas?

Texas defines tangible personal property as any movable physical object that individuals or businesses hold legal ownership over. This includes:

Household goods – furniture, appliances, electronics, artwork, antiques, jewelry
Clothing, accessories, tools, equipment, supplies
Motor vehicles, RVs, and trailers even if used as primary residences
Mobile homes not permanently affixed to land (tiny homes on wheels)
Libraries, collectibles, memorabilia, trophies
Crops are grown before harvested; newborn livestock

Businesses in Texas pay tangible personal property taxes on:

Equipment, machines, tools, spare parts
Computers, copiers, phones, electronics
Supplies, chemicals, packaging materials
Furniture, displays, decorations
Inventory held for sale or awaiting shipment

Essentially all physical movable objects qualify. The key is the lack of permanent annexation to real estate. There are some exceptions – for example, vehicles lend themselves to use as both personal and real property. The proper classification depends on specific facts and use.

Is Personal Property Taxed in Texas?

Unlike real estate and land, Texas does not require individuals to pay an annual property tax on personal goods. But some exceptions exist:

Businesses pay tax on tangible goods, equipment, inventory
Individual registration and titling fees apply for vehicles
Short-term rental taxes can apply to personal goods
Some jurisdictions tax specialty items like aircraft, boats over certain lengths, etc.

So while most household personal belongings avoid property taxes, business personal property and certain recreational vehicles may trigger taxes. The taxable status depends on the owner, asset type, manner of use, and jurisdiction.

Additionally, though no annual personal property tax applies, other Texas taxes can impact large transfers of personal property:

Sales tax on vehicles, boats, etc.
Gift tax over a certain dollar threshold
Estate tax over $11.7 million (federal)

So the tax status of personal property in Texas varies greatly depending on specifics. Consult a tax expert for guidance.

Is Cash Considered Personal Property in Texas?

Yes, under Texas law cash is deemed personal property. Financial instruments like cash, checks, bonds, and stocks all qualify as intangible movable personal property not attached to any real estate.

Even large sums of cash kept in a safe on land would still retain its classification as personalty. The mobility and non-permanent status make it personal assets exempt from claims against the real property.

However, that does not shield cash from all creditors. Though homestead exemptions protect equity in Texas real estate, no similar protections apply to cash savings. Personal property also receives much lower exemption allowances in bankruptcy compared to home equity.

So while cash counts as a personal asset, it does not receive the same protections Texas provides for primary residence home values. Creditors can potentially seize cash savings and liquid assets.

What Personal Property is Exempt in Texas?

While Texas provides generous homestead protections for primary residence equity, personal property exemptions are far more limited. These goods are 100% shielded:

Current wages for personal services
Professionally prescribed health aids
Certain public assistance benefits

Texas also allows exemptions up to a capped dollar amount for:

Home furnishings, family heirlooms, appliances – Up to $100,000
Jewelry up to 25% of exemption limit – Up to $25,000
Two firearms (can be more based on value)
Athletic and sporting equipment, bicycles – Up to $7,500
Motor vehicle depending on use – Up to $95,000

Any value over the caps can be seized by creditors. Strategic planning with attorneys may provide additional protection in special cases. Consult professionals to understand rights.

Real estate agents in Texas must have a working knowledge of laws and regulations surrounding real property versus personal property. Texas adheres to standard definitions – real property consists of land, buildings, homes, and other permanent fixtures attached to real estate. Personal property encompasses movable assets not affixed to land. While real property receives protections like homestead exemptions and equity exemptions, personal property does not. Tax implications differ as well. Businesses pay taxes on tangible goods, equipment, and inventory, while individuals avoid annual personal property taxes. Vehicles blur the line between real and personal assets. Proper classification depends on the manner of annexation and use. As advisors to clients, agents must grasp these key distinctions to provide sound guidance on financial decisions related to both real and personal property transactions. With a firm understanding of Texas statutory laws in these areas, real estate professionals can serve their clients’ best interests.