Principles of Real Estate: Property, Ownership, and Transfer
This chapter covers the foundational concepts every Texas real estate agent must know: what real property is, the rights that come with ownership, the ways title is held and transferred, and the public and private limits on land use. Texas is regulated by the Texas Real Estate Commission (TREC) under the Texas Real Estate License Act (TRELA, Tex. Occ. Code ch. 1101; the statutory short title at § 1101.001 is The Real Estate License Act, and TRELA is the Commission's own usage; checked 2026-09-09), and Texas is a community property state, so several rules here are Texas-specific. Statutory amounts and program details can change, so always confirm current TREC rules and Texas statutes before relying on a number.
Real vs. Personal Property and Fixtures
Real property is land, everything permanently attached to it (improvements such as buildings and fences), and the natural attachments like trees and minerals, together with the bundle of legal rights that ownership carries. Personal property, also called chattel or personalty, is movable and not permanently affixed to the land. This distinction is one of the most tested ideas on the Texas exam because real property transfers with the deed, while personal property does not transfer unless the contract specifically says so. When a buyer and seller disagree after closing, the fight is almost always about whether a particular item was a fixture that stayed or personal property that could be removed. A fixture is an item that was once personal property but has become part of the real estate through permanent attachment. Texas courts, like most states, apply a three-part test to decide, and you should learn it well. First is the method or degree of attachment: an item bolted, wired, cemented, or built into the structure leans toward being a fixture. Second is adaptation: an item custom-fitted to the property, such as a made-to-measure storm window or a key to the front door, is treated as part of the realty even if lightly attached. Third, and usually most important, is the intention of the person who installed the item, judged by objective evidence rather than after-the-fact claims. Notice that original cost is not part of the fixture test, a favorite trap answer. A special category is the trade fixture: an item a commercial tenant installs to conduct business, such as shelving or a walk-in cooler, generally remains the tenant's personal property and may be removed before the lease ends, with the tenant repairing any damage. Because these disputes are so common, the safest practice is to name ambiguous items directly in the contract. In Texas transactions the TREC promulgated contract already lists accessories and improvements, and the parties can add or exclude specific items in writing so nothing is left to argument.
Estates and Forms of Ownership
An estate describes the degree, quantity, nature, and duration of a person's interest in land. The broadest split is between freehold estates, which involve ownership for an indefinite time, and leasehold (less-than-freehold) estates, which involve the right to possess for a defined term. Among freehold estates, fee simple absolute is the highest and most complete form of ownership: it lasts indefinitely, passes to heirs, and can be freely sold, mortgaged, or gifted, subject only to government powers and any private restrictions. A fee simple defeasible is ownership subject to a condition that, if violated, can end or forfeit the estate. A life estate lasts only for the life of a named measuring person; when that person dies, the property either passes to a remainderman named by the grantor or reverts to the grantor or their heirs. How two or more co-owners hold title matters enormously because it controls what happens on death and sale. Tenancy in common is the default for co-owners in Texas: each holds an undivided fractional interest that passes to their own heirs or devisees, with no automatic survivorship. Joint tenancy carries the right of survivorship, so a deceased owner's share passes automatically to the surviving owners and bypasses probate, but Texas requires a written survivorship agreement to create it rather than presuming it. Layered on top of all this is the Texas community property system, which is central to the exam. Most property acquired by either spouse during the marriage is presumed to be community property owned equally by both, while property owned before marriage, or received during marriage by gift, will, or inheritance, is that spouse's separate property. Because a non-owner spouse may still have homestead and marital rights, prudent practice and many title companies call for both spouses to sign the deed and other closing documents on a homestead, even if only one spouse holds record title. Always verify current marital-property and homestead rules, since the specifics can change.
Deeds and Transfer of Title
Title, meaning the legal evidence and right of ownership, is transferred from one living owner to another by a deed, a written instrument running from a grantor (the current owner) to a grantee (the new owner). Understanding the anatomy of a valid deed and the different levels of protection each type offers is essential exam material and everyday practice. For a deed to be valid in Texas, it must be in writing, name an identifiable grantee, contain a legal description of the property, include words of conveyance (a granting clause), be signed by a competent grantor, and be delivered by the grantor and accepted by the grantee. Consideration is usually recited but need not be the true price, and a gift deed can be valid without money changing hands. The type of deed controls how much the grantor warrants about the title. A general warranty deed offers the broadest protection: the grantor warrants the title against all defects, including those that arose before the grantor owned the property, and defends the grantee against lawful claims. A special warranty deed warrants only against defects that arose during the grantor's own period of ownership, which is common when the seller is an entity, a relocation company, or an estate. A quitclaim deed conveys only whatever interest the grantor may hold, with no warranties at all, and is typically used to release or clear a possible cloud on title rather than to sell property. Deeds used in special circumstances include the deed of trust used to secure a loan and a trustee's or sheriff's deed used after foreclosure or execution. A crucial exam point is recording. A deed is valid and fully effective between the grantor and grantee upon delivery and acceptance, even if it is never recorded. Recording the deed in the county property records is not required for validity, but it gives constructive (public) notice of the grantee's ownership and establishes priority against later buyers or lienholders who lack notice, protecting the grantee under the recording statutes.
Encumbrances: Liens, Easements, and Encroachments
An encumbrance is any claim, right, or interest that a party other than the owner holds in a property, and it limits or reduces what the owner can do or how freely the property can be sold. Encumbrances divide into two families. Financial encumbrances, called liens, secure the payment of a debt and attach to the property rather than the person. Non-financial encumbrances affect the use or physical condition of the land, and include easements, deed restrictions, licenses, and encroachments. Agents must be able to spot encumbrances early because they directly affect value, marketability, and whether clear title can be delivered at closing. Liens include mortgage or deed-of-trust liens, ad valorem property tax liens, federal tax liens, judgment liens, and mechanic's and materialman's liens filed by contractors who were not paid; most monetary liens must be paid and released at closing so the buyer receives clear title. Property tax liens generally take priority over other liens regardless of when they were recorded. An easement is the right to use another person's land for a specific purpose. An easement appurtenant benefits an adjoining parcel: the parcel that enjoys the right is the dominant estate and the parcel that is burdened is the servient estate, and the easement runs with the land, automatically passing to new owners of both parcels. An easement in gross benefits a person or company rather than a neighboring parcel, the classic example being a utility company's right to run lines across many properties. Easements can be created by express grant, by necessity (such as a landlocked parcel needing access), or by long, open, and continuous use ripening into a prescriptive easement. A license, by contrast, is mere temporary permission that can be revoked. An encroachment is an unauthorized physical intrusion of an improvement, such as a fence, roof overhang, or driveway, onto adjoining land; encroachments are usually discovered by a survey and can cloud title or trigger disputes, so agents should recommend a current survey when boundaries are uncertain.
Government and Private Limits on Land
Ownership in the United States is never absolute; it is always subject to superior government powers and can be further limited by private agreements. The four government powers over land are easy to remember with the acronym PETE: Police power, Eminent domain, Taxation, and Escheat. Police power is the broad authority of state and local government to regulate the use of land to protect public health, safety, morals, and general welfare. It underlies zoning ordinances, building codes, subdivision regulations, and environmental rules, and because it is a regulation rather than a taking, no compensation is generally owed to the owner. Eminent domain is the power of government (and certain utilities and agencies) to take private property for a public use, exercised through a court process called condemnation; the key constitutional limit is that the owner must receive just compensation, usually fair market value. Taxation is the power to levy ad valorem property taxes, which become a priority lien and can lead to a tax sale if unpaid. Escheat is the power by which property passes to the state when an owner dies leaving no valid will and no locatable heirs, preventing land from becoming ownerless. Layered on top of these public powers are private limits. Deed restrictions and restrictive covenants, often recorded by a developer and enforced through a homeowners association, control matters like building setbacks, minimum square footage, permitted uses, and architectural style. When a private deed restriction and a public zoning rule both apply and they conflict, the more restrictive of the two generally controls, because the owner must satisfy both. Note that a private covenant that attempts to discriminate based on a protected class is unenforceable under fair housing law even if it remains printed in old records. Agents should read applicable restrictions and check zoning before advising a client on what can be built or how a property can be used, and should recommend that clients verify current rules with the county or municipality, since ordinances change.
Last updated: September 2026
Practice stays free. The full Texas Real Estate Sales Agent Exam study guide is the material itself, taught start to finish — a downloadable PDF + EPUB you keep.