My Seller needs to replace about $4,000 worth of furniture in order to close a transaction on an approved short sale. Has anyone done this successfully?
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My Seller needs to replace about $4,000 worth of furniture in order to close a transaction on an approved short sale. Has anyone done this successfully?
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David, it is unfortunate that the seller is even in this position to start with. To go through all this work and stress on your part and the seller's only to have the ONE buyer out there who demands $4,000 in new furniture? Really? This is the best buyer for a short sale that you could get? Short sales are hard enough without the extra burden of such a ridiculous contingency that most experienced short sale agents would have definitely advised the seller against. I am sure B of A would definitely make an issue w/this as if they are approached with this situation as you have described, then why isn't the seller offering the lender the money to help pay down the deficiency balance? The banks think this way and I would be very careful about posing this to them as you may inadvertantly put your seller on the hook for a $4,000 cash contribution to the lender at closing....I mean since they have the money and are willing to pay it at closing in one form or another...the bank will feel entitled to this little nugget.
I guess the simple question is replace the furniture with what? Different furniture that the buyer has picked out? How do you know if you are satisfying the buyer. If the seller is in agreement to purchase new furniture for the buyer and knows where to get it, I'd work out some deal outside of escrow where the furniture is purchased and delivered upon closing of the transaction. You should not include any mention of furniture in the contract. The furniture deal is between the buyer and the seller and you know nothing. You are selling real estate and if the buyer have some other agreement about non-real property, then that's between them.
Seller can do whatever for the buyer after closing. but the furniture will never get approved by anyone in the short sale approval. Buyer and seller can agree to whatever they want outside the sale. everyone is right here if the Lender get the idea there is 4000.00 in the seller pocket they will want it.
In my experience, furniture, whether sold or given by the seller to the buyer, is not part of the agreement of sale, even though we do include certain 'customary' items which in this location includes washer/dryer, refrigerator, and micorwave.
As for what BofA will approve, I just had a case where BofA would not let the seller pay the lienable Water and Sewer bills on the HUD. These charges are normally adjusted at time of settlement, and the title company won't settle if they are not paid. The title company prefers to have these charges on the HUD. The BofA Closing dept was adamant. We had to figure out a work around that would satisfy all parties.
The original post came from David in Gulf Shores Alabama. I expect the subject property is probably a rental / investment property.
On rental properties furniture is typically included on an Addendum / Detailed list when buyers are paying cash and usually separated from the Real Property purchase. Two reasons; commissions not paid on furniture and property tax base.
The real conflict on this thread is why does the furniture need to be replaced? If this is simply because the buyer wants it replaced with something newer, - on a short sale it should never have been agreed to by the buyer and seller. It is doubtful ANY short sale lender would allow their loss to be increased by paying for furniture for a buyer ------ Ain't gonna happen.
This was actually a good topic to bring to light. Most agents are completely unaware of this subject matter since it is not really taught in pre-licensing, or any other class other than a college level real estate course.
The fact is "Chattel" can be included in a sale, we do it everyday, despite some comments saying it is not within our scope as Realtors (or licensee's). It most certainly is, and banks lend on it on almost every loan they write.
The only thing about this situation is whether or not the original mortgage/trust included the furniture??? If it did then the lender would need to discount the value of the depreciated amount of that furniture (or at least take it into consideration), but chances are very high it was not. The reason being that "chattel", other than hard appliances such as washers, dryers, ovens, refrigerators, and what we commonly call fixtures, does not normally convey, especially furniture. It has a high depreciation factor is the main reason. In other words, paying interest on a 30 year note for something that will lose all it's value in the first 4 1/2 years just isn't something the average consumer wants, banks love it because they make outrageous profits, but consumers not so much. it was actually something they did quite often prior to the 90's.
This came to light in the late 1980's when in Maryland a New Homes Builder (left out name intentionally) was sued for nearly $300 million dollars for taking profit on chattel, when it was not specifically included in a mortgage covering those items, what was then called a "Chattel Mortgage". After that point, and with the S&L bust, lenders became shy of the inclusion of personal property, although they still recognized and even gave valuable consideration to some chattel.
So then, yes we do deal with chattel daily. It is a part of your job and you should now (if not before) make sure to document each and every "Appliance, fixture, etc" in a sales contract. This is not only for your seller/buyers protection but as well as your own. It can cost you commission dollars, in fact it can cost you your license.
Unless specifically included in a sales contract, and I mean specifically, it doesn't matter. As the saying use to go, too bad so sad! If a party says they won't close "unless", prove your case or close. In the case of a short sale, never under any circumstance include the "SALE" of personal property (other than known and normally customary fixtures and appliances - but again document them). Other items are just a waste of time and make you look like an amateur.
So I agree with several others, let the buyer know it is outside the realm of that sale and that the seller (and you) are bound by agreement to not participate in any "sales" action outside of a closing. Now if the seller wants to have a garage sale and that buyer happened to come and buy all their stuff BEFORE the sale, well then, but of course they'd need to declare the income to the lender and they of course would want it applied. (No quick fixes is that moral).
Don Johnson
Broker/Owner
MORE Realty Services LLC
Licensed Real Estate Broker
www.MoreRealtyServices.com
"Because You Deserve MORE Realty Services!"
Of course we don't know what State this sale has occurred in, but in California we sell real property. Personal property can become real property by method of attachment, whether or not it is immovable, and so on. Some can be contained in the contract if specifically called out, such as a washer, dryer, spa, or a plasma affixed to a wall or in one case I know the dog was included in the transaction. But furniture, that is things like a sofa, a table, chairs and the like are never included without being specifically called out or brought in with a Bill of Sale because it is chattel. So I return to my original question, why is the furniture involved in this transaction at all?
If the buyer is obtaining a mortgage, then the buyer's lender will not allow furniture to be included in the sale. That would be considered an inducement to purchase and is not allowed in the lending world. The sales contract should not contain any stipulation for furniture to be included in a sale.
Short Sales are different than Equity Sales. This Buyer's Agent was apparently not aware of this??? Furniture etc., is done outside of escrow, not part of our deal or interest as Realtors. Buyers and Sellers operate in their own worlds..B of A will not approve this. In the Lenders world, the Seller has NO money. Why tangle up a deal with this stuff? Close it, re-list and move on..and don't do it the second time around.
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