When personal property is included in the sale
Many times properties are offered fully furnished, partially furnished, or may be offered as an incentive to buyers. I believe it is important to separate the house (real property) from furniture (personal property) for many reasons.
If a buyer is financing the purchase of the home, and it comes fully furnished, a real estate appraiser is going to separate the personal and real property. That means, that if you are buying a home for $400,000 fully furnished, the house may only appraise for $350,000. That means you would have to come out of pocket for the $50,000 difference, or not purchase the furniture. Even when paying cash, personal and real property prices should be distinct and separate. A solution is at the time of contract, when there is a meeting of the minds. A separate addendum should be prepared indicating that the purchase of the real property is “x” amount, and the purchase price of the personal property (furniture, etc.) is “y”, and how those amounts will be disbursed at closing. Moreover, a detailed, itemized list of personal property should be prepared for the buyer and seller for signature, so that there are no misunderstandings prior to closing the transaction.
This approach can also save money for the buyer and seller. The price that is recorded in the county records for the sale of the house will affect future property taxes, documentary stamp taxes on the deed, title insurance, and homeowners insurance.
Realtors are not in the business of evaluating furniture. It is difficult enough to come up with the right number when listing a property. There have been a couple of transactions that I can remember over the years where the buyers became obsessed over the sellers’ personal effects. They had lost focus on the real investment (the house), and began this never-ending game of “I just have to have that painting on the wall.” And, the painting was a portrait of the sellers!
I am all for including certain personal property conveying with the home. However, there has to be a common sense approach when entering into personal property territory. Furnishings are easy to identify, quantify, and list. Personal effects can become a different story from the perspective of the buyer, in that the buyer may not know what is considered “personal effects”. For example, there may be a picture on the wall that was given to the sellers by their neighbor. Or the little knick knack on the shelf may have been a gift from Auntie Allison and has sentimental value. From my perspective, these types of items should be off limits to buyers, and should be at the top of the list of excluded furnishings. Yet, at some point in time you will experience that buyer who wants everything right down to the last plastic fork in the drawer. Am I being facetious? Not really. But, I want you to understand my point. This is important, and it has killed many real estate deals. With that said, buyers, sellers and Realtors should have a clear vision when entering into contracts where personal property may become an issue with a real estate transaction. I believe it is better to price the real property according to market value, and make the personal property a separate transaction.
Mario D’Artagnan is a broker associate with The Jim Fischer Team at Gulf Coast Realty Network, Inc. Mario is a former Florida Real Estate Commission investigator, a former real estate instructor, and a published author. Mario is also a U.S. Air Force veteran. For more information, contact Mr. D’Artagnan at: mariodartagnan@ yahoo.com, or call 239-565-4445.