Another Arm-Length Question
Can you Owner of a Short Sale legally sell his/her furnitures, appliances, deck?, blinds, etc. to the Buyer? If so, can it happen legally out of HUD? If not and the Buyer/Seller is going to do it anyway, what should the agent do?
Replies to This Discussion
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Permalink Reply by Smitty on
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Wow. I think that's been a question agents have been debating for a while.
I'll give you my opinion, but I'm not a lawyer so don't take it as legal advice.
I think it should ALL be disclosed in the PNS and on the HUD. I don't think it's illegal at ALL, but if you are doing things UNdisclosed where money is exchanging hands then there could be an issue.
If you put it right in the PNS that the buyer is buying XYZ from the seller and also put it in the HUD, I think you've covered yourself the best you can. The lender CAN and MAY ask you to take it off the HUD. In that case, I would get it in writing from the negotiator that they want it off the HUD or out of the contract and KEEP THAT as a record. Record that you TRIED to disclose it and they asked for it to be removed. Then if you do buy appliances, furniture etc., and it comes back to bite you, you have PROOF you disclosed it and were told to remove it.
That is my non-legal opinion.
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Permalink Reply by Bryant Tutas on
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We sell many vacation homes in my area. We always sell the furniture separately. To me the key is that it is being sold as a legitimate purchase and the value is not being inflated just to get money to the seller.
Also, was the chattel part pf the original collateral for the loan? If so then it's my opinion it should be included with the purchase of the real estate. Does removing it affect the value? For example: light fixtures, blinds and built in appliances become real estate once attached and are included in the appraised value of the property. If removed the value goes down. If these items were included in the original purchase mtg then they should stay.
Furniture on the other hand is personal property. It is never included as real estate. In my opinion the seller can sell their personal property to anyone they want. And it does not need to be disclosed as it is not a part of the real estate (collateral) and has no baring on the value of the property. But again do not inflate the value.
Personal property does not need to be on the HUD.
So.....in summary...use common sense.
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Permalink Reply by Janis Schade on
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There is an official real estate document that can be drafted to sell personal belongings. Definitely not blinds, light fixtures, or built in appliances.
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Permalink Reply by joe beauchamp on
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You treat the seller's belongings as anything else that is not a fixture to the property - none of your business. The seller doesn't have to give his children to the bank or be an indentured servant to the bank. The mortgage is not on his personal belongings. Simply break down what you are really dealing with here - as much as the banks and country seem to be going to owning the souls of the 99%, they don't yet and occasionally have to obey the constitution.
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Permalink Reply by Pat Perrotta on
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I am not an attorney, and it's always best to check with the expert. My understanding is as long as they are real items that are not usually part of a sale, like here in Destin, FL, refrigerator, washer/dryer and furniture, then the seller has the right to sell to whomever they choose. The agent should stay out of it. Any sale should be done between buyer and seller. Even if those items were included in the original sale, the contract ordinarily says they have no value, and are not included in the appraised value and therefore the mortgage.
Again, always defer to the expert, in this case a Real Estate Attorney.
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Permalink Reply by Tom Gallegos on
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I am not a lawyer...
...Having closed dozens of short sales my opinion on chattel is exactly that, it's chattel. The bank's short sale approval letters discuss the borrower receiving any proceeds from the transaction. Anything they sell that is "personal property" is just that personal property and does not need to be in contract or hud unless it is a condition of the sale (chattel should not be a condition of the sale when selling short). Especially if the buyer is getting a loan, their lender will not want to see any personal property on the contract. As an agent, stay out of it. The buyer and seller can do what they want with regards to chattel. Get a legal opinion if you are concerned but if the borrower is selling their stuff in a garage sale regardless of to whom they sell it, the bank doesn't need to know or care. Just my "non-legal" opinion... Good Luck, let us know how it goes
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Permalink Reply by Trong Dang on
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Thank you for the great input.
Concerning the deck, yes I have a Seller right now that wants to take their deck with them... I argued the otherwise but their reason is pretty simple, they built it and they won't benefit from the SS, might as well take it with them since they wanted to built another one at their other place. I have talked to the Buyer and they are ok with it and we're going to put this on an addendum... What do you think?
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What the seller removes is not your problem. They would be held responsible, not you as the agent. I have never seen the bank go after a seller and I've seen them remove light fixtures, closet shelving and smoke detectors. I'm sure it could be considered mortgage fraud, but all we do as Realtors is facilitate putting a buyer and seller together, we don't have to decide whether our seller should be held accountable. You might suggest he contact an attorney, You might want to re-think your position. It's only up to us if when we list something, we have an offer, and then the seller decides to change things.
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Just like putting a washer/dryer in the contract, the seller and buyer can agree on a fixture such as the deck, however, being a fixture, the bank could object to the seller stripping its asset. The bank can always disagree and foreclose instead. The seller removing the deck at that point has stolen property. However, prior to the foreclosure, the property belongs to the seller - at some point he enters a grey area where the bank can go after him for stripping the place. I'm sure this has come up before - maybe it requires some court order to NOT strip the place.
If it were me, I'd try to word the exception in the sales contract in the best light possible - implying or calling the deck portable, etc. - anything to say it is not a fixture and is being clarified, if I could. Nobody will care if the bank lets the short sale go through - you have to stop the paperpushing pinhead from creating a brickwall here.
Hey, have your sellers attach wheels to it - like a trailer, it is no longer a fixture? ;-)
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Permalink Reply by Kevin - Greenville, SC on
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One can argue that Personal Property is required to be disclosed when the Sale is contingent upon it. After all line 102 of the HUD-1 is for Personal Property.
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Interestingly, just listened to a presentation by a title company and a lender, they both said that underwriters are now kicking back contracts with any personal items included in the sale. Unless it is pre-printed on the contract where you can check a box like a refrigerator or washer/dryer, they won't accept them. The presenters said it's best to get another agreement for furniture and other personal items even if it is a condition of the sale and no money changes hands.
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I would be extremely careful with this issue. When the approval states that the seller is to not receive any proceeds from the short sale, they are to not receive any proceeds from the short sale. You are walking on a thin line with this. If the seller and buyer some how do it without your knowledge then you are okay. But, if you are aware of this happening, it could get you in trouble. I would consult an attorney for more advise on this issue. When the lender says to remove it from the HUD, I think they are saying it is not allowed.
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