Keep Personal Property Out of Your Real Estate Transaction, Please
Speak with any mortgage loan originator about the subject of personal property in purchase agreements/offers to purchase and you'll probably hear the same thing from each of them. They'll tell you that lenders don't write thirty year mortgages over personal property with a useful life of maybe three to five years. Real property and personal property aren't the same and they don't mix.
We see a lot of transactions in our remote part of northwestern Wisconsin (primarily a recreational and second home market) which involve a seller transferring furnishings and other personal property items along with the sale of their home or cottage. It's convenient for a second home buyer to purchase a home that's furnished and ready for occupancy. And if the new owner plans to rent the home during summer, the idea of buying "rental ready" is very appealing. It can be a big hassle (and expense) to furnish an empty second home and to transport beds, dressers, entertainment centers, dining tables & chairs and so forth all the way to your new vacation home on Lake Superior.
In my nearly fifteen years in the real estate business, I've often witnessed buyers and sellers squabbling over valueless items of used furniture, sometimes to the extent that they've killed the sale completely. I've seen arguments over used television sets, dining tables and chairs, wall hangings and paintings, even linens. Most of the stuff they were disputing about wasn't worth fighting over.
Buyers and sellers often fail to realize that used furniture (unless it's a precious antique) is valued at five to fifteen cents on the dollar. Yet I see parties in a transaction who will try to assign values close to retail to whatever stuff they happen to be leaving behind.
Buyers and sellers have enough trouble understanding the difference between fixtures which remain in a property at time of sale and personal property which may be removed without the consent of the other party.
But when a buyer sees something he or she wants that happens to be in the home, sometimes they will go to the wall to see that it's included in the purchase price. And some sellers will take the position that they want to be compensated handsomely for leaving anything behind.
There's probably no easy solution here, but there are best practices regarding personal property that can help make a real estate transaction go much more smoothly:
- First, buyers should not assume that every stick of furniture in a home for sale is included in the price. Unless the property is advertised as "rental ready" (furnishings, even sometimes linens, dishes, flatware & glassware included), you should assume that you would need to negotiate separately with the seller to see if these items are available.
- Any and all personal property, if included, should be transferred under a Bill of Sale. In Wisconsin, our attorney cousels us to use the language "for the sum of one dollar and other consideration" when referring to the value of such personal property being transferred. Consult with an attorney in your state or contact your local Realtor Association legal hotline for specific language that should be used when personal property is involved in any real estate sale.
- The parties should do their own negotiating of personal property items included. Real estate agents are licensed to broker real property. Unless the listing agent or buyer's agent is a licensed auctioneer, estate appraiser or an antique dealer with the credentials that might qualify them as knowledgeable about values, it is best for the parties to the trasaction to steer clear of asking the agent to serve as an intermediary when personal property is part of the deal.
Agents, stick to your own knowledge and skill set. Avoid the urge to assign a valuation to furnishings, rugs, wall hangings and other personal property items. Let the professionals deal with those issues and everyone involved will be better served in the process.