James S. Graner


Personal Property in the Sales Contract!

Ok you have a purchase deal completed and there a pool table and a some furniture included in the sales contract. You think to yourself "No problem, anything is possible if both parties agree in writing." If there is a mortgage involved, there might be a problem.

The Real Estate Appraiser must analyze the contract to understand the transaction. Real Estate Appraisers are required by FIRREA (Federal lending guidelines) and USPAP (appraiser's ethics) to analyze the contracts and comment on sales concessions and personal property. The personal property must be assigned a value. I know, we are supposed to be Real Estate Appraisers. Used stuff sometimes is not worth much, however it might significantly effect a transaction.

Here is where the problem comes to play. When the appraisal report comes to the Underwriter of the mortgage transaction, the value assigned to the personal property will be deducted from the sales contract in the Underwriter's paper work. As far as the Underwriter is concerned, you have a new sales price for the real estate and the personal property is to be paid for separately.

If you have a $100,000 sales price and $3,000 worth of personal property, your buyer's loan is arranged as having a $97,000 sales price. That might be a problem if the buyer is expecting a low down payment loan. Buyer will make a down payment on the sales price of the real estate and will be asked to bring the personal property payment to complete the transaction.

This is not under the control of the Appraiser, Mortgage Professional or Title Company. This is a matter of mortgage underwriting guidelines.

James S. Graner
Real Estate Appraiser
ph  (636)916-4325
cell (314)277-3336
fax (636)949-2637
Website http://appraisalmo.com
Blog       http://activerain.com/jimgraner 

Comment balloon 20 commentsJames Graner • June 15 2008 04:03PM


Concession were always a problem when it came to the appraisal, just as personal property. In fact, the mortgage states, and the buyer signs off on, that the price does not include personal property.

Posted by Patrick Lambert, Hawaii Real Estate Expert (ALLY Real Estate) over 10 years ago


I suggest you use a seperate addendum between both buyer and seller.

This is one area you as the Realtor doesn`t want to directly get involved in..

Posted by Scott Daniels Florida Real Estate 2.0. Agents Earn 100% Commission. (Florida List For Less Realty, Inc. Broker/Owner. ) over 10 years ago

Yes.  Keep those two items - house and furnishings - as far apart as possible.  Down here in the Ozarks, it more often involves boat slips, which is personal property according to the State of MO.

Posted by Joan Snodgrass (Midamerica Referral Network) over 10 years ago


That is a good point to bring up. Mortgage underwriters will catch personal property addenda in a contract and that can complicate an otherwise sound transaction. These things ought to be on a different piece of paper.

Posted by Esko Kiuru over 10 years ago

I try to get my team members to keep the real estate contract and personal property separate.  A frige is ok.  But furniture, keep it off contract (addendums included) and handle it outside of closing.  It's just simpler that way.

Posted by Ron Moore, MOORE Thoughts (RE/MAX Professionals/Regal Builders - Retired) over 10 years ago

I am so glad to see this question answered, I post this question a couple of weeks ago for Arkansas Realtors and did not get any comments. I thought it might have been the way I worded my post. As a home stager I was wondering what happens if a buyers wants to keep the furniture. I thought that in the state of Arkansas, that only attached property can be included in the sales price. Or can you say that the furniture is to "remain with the property, or does that raise a red flag with the lender too? Thanks for the post.

Posted by Donna Schoby (Liberty Bank of Arkansas) over 10 years ago


Glad this helped you!

Posted by James Graner (Residential Services: http://appraisalmo.com) over 10 years ago

James - This is a great topic that I have seen little about on AR.  Aside from the occasional washer/dryer and refrigerator, I rarely see any other personal items on a purchase agreement (perhaps it is because they show up on a separate addenda as fore-mentioned).

Posted by Sara Goodwin, Portland, Oregon Appraiser (Ashcroft & Associates) over 10 years ago


In the past, I have seen cars, trucks, boats, furniture, an old rural dog. When I took my salesperson training (I do not currently sell,) I had to speak up because the broker had very little knowledge on the subject. She just knew it was a bad idea for personal property to be on the real estate sales contract.

Posted by James Graner (Residential Services: http://appraisalmo.com) over 10 years ago

I am also a Certified Real Estate Appraiser.

What James does not say is we appraisers MUST report non-realty items contained in the contract ON THE APPRAISAL REPORT FORM.  It's on Page 1 of the form.  (Major forms accepted by Fannie/Freddie.)

And quite frankly folks, YOU and the other parties to the transaction run the risk of federal mortgage fraud laws if 'off the contract' items are actually paid for within a mortgage loan.  If I find out about such schemes I will report them.  "Cash back at closing" creativity (outside of accepted closing costs) is also against the law.

We are required to appraise to the Definition of Market Value (on the form), which in essence says the value must be reported as the NET cash in the pocket to the seller.  Non-realty concessions, and even high amounts of 'closing cost' concessions are reported on the form.  The value of those concessions reduce the net cash to the seller.  Concessions can reduce the 'value' of the home, even though some people in appraising and in real estate say "'taint necessarily so."

Posted by Anonymous over 10 years ago

James - how would you quantify a dog?  priceless?

Cert RE App - Yes, what is more alarming is when those things are not mentioned by the Realtor when that sale becomes a potential comp in the future.  That's when it really messes with universal values.

Posted by Sara Goodwin, Portland, Oregon Appraiser (Ashcroft & Associates) over 10 years ago

Mr./Mrs. Also A Certified Appraiser,  (NO NAME)

In the second paragraph, I wrote about analysing the contract and commenting on personal property. Perhaps you can read that paragraph again.

As far as trying to get around mortgage guidelines. I was writing the report with an intended audience of honest professionals. Perhaps you would like to write a blog on fraud and its consequences. Not what I am doing here, more just understanding the transaction.

Thank you for stopping by.



Posted by James Graner (Residential Services: http://appraisalmo.com) over 10 years ago

I've heard of some new construction developments where the builder was offering a new car with every purchase...I don't know how they were going to work that out! Many here in Bakersfield are now offering "free" pools or upgrades...they aren't really free now are they? All the builder is telling me is that the house isn't worth the asking price without those upgrades. I've only come across deals that have a fridge or above-ground spa included. Thankfully I've never had one with furniture included...I'd have no idea how to come up with the value for that.

Posted by John Fariss, Appraiser - Bakersfield, CA (Fariss Appraisal Services) over 10 years ago


Used household stuff do not sell much at garage sales or in the newspaper. That is a start (active listings.)

Posted by James Graner (Residential Services: http://appraisalmo.com) over 10 years ago

I haven't run into a situation including personal property (we actually have a space for personal property on our Florida contracts.) I always joke with buyers when they ask if the TV, dog or grill is included that we can always write it into the contract. I might not be so free with that statement anymore now that I know it might raise an issue.

Posted by JoEllen Stranger-Thorsen, Lake County, FL over 10 years ago


Sometimes we have these things happen in the process of making a deal.

Posted by James Graner (Residential Services: http://appraisalmo.com) over 10 years ago

James -
Thanks for the reminder to leave personal property out of the contract.

Posted by Pam Dent, REALTORĀ® - Charlottesville Virginia Homes / Horse (Gayle Harvey Real Estate, Inc.) over 10 years ago

In Virginia we have a special loan you can get from the state and personal property included the appliances.  The seller agreed to sell them to the buyer for $1.00.  Glad that is gone.

Posted by Denise Allen, Realtor@ Chesapeake, Hampton Roads (Resh Realty Group) over 10 years ago

$1.00 is not bad for a complication on the sales contract. I understand that might be a hassle over contract negociations.

Posted by James Graner (Residential Services: http://appraisalmo.com) over 10 years ago

Thanks for the information. I am currently in the process of buying a home and ran into this issue. We had a separate addendum requesting that the Agreement of Sale required them to leave the custom bar stools. Appraisal is already $6K over purchase price and we are putting 20% down. Such a hassle over a few bar stools.

Posted by Audra almost 7 years ago