PHYSICAL CHARACTERISTICS OF REAL ESTATE
Legal concepts of land and real estate /
Unique physical features of land
Legal concepts of land and real estate
Land. As discussed in an earlier section, the legal concept of land encompasses
- the surface area of the earth
- everything beneath the surface of the earth extending downward to its center
- all natural things permanently attached to the earth
- the air above the surface of the earth extending outward to infinity.
Land, therefore, includes minerals beneath the earth’s surface, water on or below the earth’s surface, and the air above the surface. In addition, land includes all plants attached to the ground or in the ground, such as trees and grass.
Real estate. The concept of real estate, in addition to land, encompasses man-made structures, known as improvements, that are “permanently” attached to the land. “Permanently attached,” as mentioned earlier, is a question of intention; if a person constructs a house with the intention of creating a permanent dwelling, the house is considered real estate. If a camper affixes a tent to the land with the intention of moving it to another camp in a week, the tent is not considered real estate.
Unique physical features of land
The unique physical characteristics of land, also mentioned earlier, are: immobility, indestructibility, and heterogeneity.
Immobility and location. Land is immobile, since a parcel of land cannot be moved from one site to another. In other words, the geographical location of a tract of land is fixed and cannot be changed. One can transport portions of the land such as mined coal, dirt, or cut plants. However, as soon as such elements are detached from the land, they are no longer considered land.
As the upcoming appraisal section will demonstrate, the economics of land reflect the effects of immobility and location in the following ways:
- valuation of land and real estate is heavily influenced by conditions and changes in the surrounding area
- highest and best use, a valuation concept, is fundamentally determined by the locational and environmental value of a site to different potential users intending different usesThe use and user that yield the greatest value for the site constitute the highest and best use. A decline in this value, relative to other uses, often leads to a change in highest and best use and a change in actual land use for the site.
Indestructibility. Land is indestructible in the sense that one would have to remove a segment of the planet all the way to the core in order to destroy it. Even then, the portion extending upward to infinity would remain. For the same reason, land is considered to be permanent.
The indestructibility of land is reflected in real estate investment, tax accounting, and insurance, in that
- real estate investors tend to regard real estate as a long-term investment, meaning they hold onto their investments for a long time
- land does not depreciate (while improvements do)
- improvements, but not land, are covered by property insurance
Heterogeneity. Land is non-homogeneous, since no two parcels of land are exactly the same. Admittedly, two adjacent parcels may be very similar and have the same economic value. However, they are inherently different because each parcel has a unique location.
