When making an offer on a property, it is normal to request that appliances be left in the home. In certain cases, home buyers may try and get additional personal property to be included also, such as decorative items or equipment. Prior to adding these to real estate contracts, it is useful to know the affect that it can have on the mortgage process. This article discusses the topic of guidelines for adding personal property to real estate contracts.
How Lenders Handle Personal Property
When adding personal property to real estate contracts, buyers might be willing to pay a higher dollar amount for the property given the value of those items. However, mortgage companies and appraisers do not attribute any value for personal property. This is understandable since lenders are issuing money according to the real estate. If a borrower defaults on the mortgage, they can take initiative to foreclose on the property. Lenders do not foreclose on personal property, so those do not add value to a home from a lender's point of view. If a buyer increases the offer dollar amount to include personal property, it is likely that the appraisal will not be as high as the purchase price. Furthermore, some underwriters may have an issue with particular items being listed in real estate contracts.
Solutions for Handling Personal Property
Personal property may be handled by several different means. If the items have inexpensive total value and the agreed to price is not cushioned to include them, then they may be noted in real estate contracts as gifted items. For more expensive things, or a long list of items, it would be prudent to address it in a different document. The owner would basically be agreeing to sell the items for a particular amount to the Buyer simultaneously with the home sale. The price and important details would not be included in the official real estate contracts and the home sale would thus not be contingent upon the purchase of the items.
Guidelines For Adding Personal Property To Real Estate Contracts
Buyers may certainly purchase specific personal property from a seller of a property, but how that is transacted may differ depending on the particular items. Speak with your real estate representative and loan officer early on to determine the best solution. This will diminish delays in the appraisal process. The above info. on "Guidelines for adding personal property to real estate contracts" was provided courtesy of Sonny Solomon at The Keyes Company.