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Non Realty Addendums

August 13th, 2012 | Home Loans, Mortgages

Non-realty addendums have been the subject of conversation. From the seller, buyer or realtor perspective, points of view are similar. From the mortgage lending perspective, the viewpoint is very different.

Buyers often want to purchase seller’s items, aside from real property. Sellers are willing to sell freestanding items no longer needed or wanted. Personal property here refers to: furniture, TV’s, lawn equipment, etc.

Personal property does not belong in the earnest money contract. The non-realty addendum is the Texas document to address personal property. The language in the TREC addendum is concise:

For an additional sum of $ XXX and other and good valuable consideration, Seller shall
convey to Buyer at closing the following personal property (specify each item carefully, include
description, model numbers, serial numbers, location, and other information):

 
So why the controversy on this issue, seems easy & logical. Just fill in the price the parties agreed upon….
Generally, most say $10 or higher, depending on price agreed to. In a cash sale, that’s ok, but what if there is a mortgage being done? Just ask a mortgage company & see how different that answer is.

In the eyes of the lender, non- realty items are sales concessions. Mortgage companies finance homes, not personal property. When sales concessions exist, they must be deducted from sales price. Furthermore, appraisers cannot include personal property in appraised value. If it is referenced in the contract, lenders require it be removed. If it is referenced in non-realty addendum, lenders require it be given no value.  Remember, the non- realty addendum is still part of the contract.

How can you address buyer/seller needs while satisfying mortgage needs? The key is it cannot be part of the real property transaction. It is best to be handled by a separate bill of sale. Every brokerage firm has unique policy governing this practice. Understanding the issue allows you to create practice to fits today’s lending.

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