The real-space (RS) linear muffin tin orbital scheme, based on the linear muffin tin orbital formalism in the atomic sphere approximation (LMTO-ASA) and on the recursion method, allows us to perform first-principles, self-consistent, density functional electronic structure calculations directly in real space. Here we show that the real space scheme can also be applied to study the electronic structure and magnetic properties of metallic surfaces and defects in these systems. To illustrate the application of this new procedure to surfaces, we use the RS-LMTO-ASA scheme to calculate the magnetic properties of an Fe overlayer on the Cu(001) surface, which have been extensively studied, using several different methods, as may be seen in the literature. We have also investigated the behavior of a substitutional Cu impurity in the Fe overlayer, since results for this system are available for comparison. We find that, as expected, our results are in very good agreement with those obtained by other methods. We note that, being implemented directly in real space, the RS-LMTO-ASA scheme does not require a high degree of symmetry. Therefore it is very flexible and can be applied in situations which are difficult to treat by other approaches.