Whether buying a home, land or commercial building – beware of personal property in real estate sales. Items that transfer from seller to buyer are referred to as either “real property” or “personal property.” Real property is the land itself and the improvements built on it, such as a house, garage, barn, swimming pool, or anything considered “attached” (real estate people say “appurtenant”). Personal property is, therefore, anything “not attached.” Or is it? Things are not always as they appear.
More than one buyer has been burned by bad assumptions regarding what is real or personal property and what is or is not included in a real estate sale. So, let’s look at some examples of items that could go either way. Let’s also look how we can protect ourselves from bad assumptions about what’s included or not included in the sale.
Here are examples of just a few items that commonly straddle the line between real and personal property:
- Book shelves. Many book shelves (not including built-ins) are bolted to walls for safety and therefore might be considered part of the structure. Here in earthquake-prone California, any stand-alone shelving over four feet tall is usually anchored to a wall to keep it from tipping over during a big shake and may appear permanently installed. But 99% of the time sellers will take those shelves with them since they can be easily removed with a screwdriver, leaving only minor holes in the walls that can be filled and painted.
- Dishwasher. Since dishwashers are most often installed in tight spaces that support standard 24” or 30” appliances, buyers often assume that the dishwasher comes with the property. But dishwashers can be removed just as easily as a clothes washer – remove a couple front mounting screws, unplug the power cord, disconnect the water lines, and disconnect the drain. Since clothes washers and dryers are most often considered personal property, it’s not a good idea to assume that the dishwasher comes with the house, either. Same with similar kitchen devices such as trash compactors, microwave ovens and refrigerators with ice makers.
- Lighting fixtures. This is one of the most common switcheroos in home sales. During the final inspection or on move-in day, it’s common to discover that the ornate chandelier you observed gracing the dining room when you made your purchase offer has been removed or exchanged with a $100 knock-off.
- Faucets and Shower Heads. It’s hard to find a shower head that has just the right water pressure and dispersion to fit your personal preferences. After years trying to find just the right shower head to wake up to in the morning, would we leave that shower head behind when we move? Not me – and not most sellers. Same with kitchen faucets that we’ve become accustomed to. With a quick twist of a wrench they are free to accompany us to our new home. Like light fixtures, many high-end faucets and shower heads are replaced with cheaper, less attractive models between when an offer is accepted and escrow closing.
- Garden Tools and Supplies. Just because the seller is moving to a retirement condo in Palm Beach doesn’t mean he’s going to leave those bags of lawn fertilizer and boxes of rose dust in the garage. Same with hoses hanging on the garden water spigots. These are obviously personal property, but many buyers assume the seller will leave them behind on moving day. Often, these items and garden tools not taken to the seller’s new home are donated to charity or given away to family or neighbors.
So, what can buyers do to protect themselves when they believe they are buying not only a nice piece of real estate, but also several items that might be considered personal property? Here are some simple steps to do just that.
- Prepare a property inventory to submit with your purchase offer. If you need to visit the property several times to complete the inventory, do it. The purchase offer – once signed – becomes the purchase contract and therefore needs to list everything you are buying. If the seller responds with a counter offer that includes taking the kitchen faucet with him, negotiate a reasonable price adjustment.
- Take detailed photos of every inch of the property to document not only the presence of items in your inventory, but also the condition. Since digital photography is cheap, take lots of pictures, including close ups of identification plates and stickers that show the model number and serial number of appliances you want included in the deal. You may also wish to make a video that highlights certain high value items.
- Refer to the photos during your final walk-through to identify anything that might have been damaged or replaced. If anything is changed or missing, have your broker inform the seller immediately and request in writing either return of the item or replacement with a mutually-agreeable item.
Finally, it’s a good idea to review the value of personal property included in the sale to determine if purchase of those items should be handled via a separate Bill Of Sale. Your broker and escrow officer can advise you on how to make that happen. One reason for sorting out personal property is that you may not want to pay mortgage interest on the cost of those items. Lowering the purchase price of a property by deducting the value of personal items bought separately could also reduce the cost basis that determines annual property taxes and capital gains taxes at re-sale (consult a tax professional for advice on your specific situation). If you (or your broker) like to haggle, you may also find the seller more willing to negotiate the price of personal items listed on a Bill Of Sale compared to haggling over the purchase price of the property when personal items are included.
I hope you found this information regarding personal property in real estate sales helpful. If you have questions about personal property in real estate sales or buy/sell/investment strategies, drop me a line! Contact Us