Selling a home furnished can be an advantage or disadvantage, depending on the condition of the furniture and the needs and personal tastes of potential buyers. A new home artfully decorated with designer furniture has more appeal than a house filled with worn and outdated furniture. Even if your buyer loves and wants the furniture, purchasing a furnished home can sometimes be a hurdle, as many lenders will not fund the purchase of personal property.
Real Versus Personal Property
Before marketing your home, understand what you are selling. Real estate is the land and all things permanently attached. The artificial attachments, such as the buildings, are improvements. Real property is the interest in the land and improvements. When selling an unfurnished home, you are selling real property. When selling a furnished home, you are selling real property and personal property.
Improvements affixed to the land and house, such as light fixtures, carpeting or in ground swimming pool are real property. Items not affixed to the property, such as a portable spa or throw rugs, are personal property. A mobile home can be personal or real property, depending on the attachment to the land. Furniture is personal property.
Home Loan Issues
If your buyer is using a home loan to purchase your furnished house, her loan may not fund the purchase of personal property. Home loans are often specific to real property. While laws regarding real estate purchase contracts may vary by state, some lenders may require the buyer to specify any personal property included with the real property has zero value, if mentioned in the purchase contract.
Most home loans require an appraisal, before the lender will fund the loan. A real estate appraisal does not take into account the value of any personal property included with the offer. Therefore, if the house’s value is $100,000 and the furniture value is $20,000, the appraisal will only reflect the $100,000, meaning the property will under appraise, if you need it to appraise at $120,000 to include the full purchase price.
Offer on Furniture
When you decided to list a furnished home, consider making the furniture available outside of the home purchase, instead of including it in the price of your house. A buyer making an offer on your furnished house may significantly lower the offer and ask for the house unfurnished, marking down the price far below the value of the furniture. This turns the furniture into the buyers’ bargaining chip.