San Antonio's Rockstar Turned Realtor®

photo courtest of dvs

The roof, the roof, the roof is on fire. *

You and your agent have your offer accepted, you've done your inspections and the title company and lender are doing their work to get your home closed in a few short days.  You're about as excited as you can be and can't wait.  By this time next week you'll be putting the keys into the front door of your new home at 123 Fake Street.  Life is good.  In anticipation of your new address, you decide to swing by the house and take a look at the front yard to plan out your new flower beds under the windows.  As you pull up at the curb, your jaw drops in horror.

Your new home is engulfed in flames.

Your dream of home ownership is now a nightmare.  As the firetrucks scream to the home a million things go through your head, but one thing is louder than everything else and helps drown out the noise of the fire engines. What do I do now?

Welcome to Realtor® Speak 102.

This scenario is horrifying and wouldn't be a lot of fun to live through, but it does happen.  I've never had it happen to any of my clients and I hope to keep it that way, but in case it ever does, I'm prepared to deal with the consequences.  Thanks to the Texas Real Estate Commission's One To Four Family Residential Contract (Resale), we have a plan of action and a way to deal with this scenario when buying or selling a home.  It's called Casualty Loss and it's in Paragraph 14.

With this one simple paragraph, your problems are solved.  Casualty Loss gives you a few remedies in a situation where your new home is damaged, destroyed, or decimated before you close.  Here's a basic look at your options:

• Have the seller restore the home to its previous condition by the closing date.  You made an offer on the home in it's previous condition, so it must be restored to that state.
• If the seller fails to return it to its previous condition due to factors beyond their control, you (the buyer) may:
  • Terminate the contract and keep your earnest money
  • Allow the seller up to 15 extra days to fix the problem (and the closing date automatically is extended with it).
  • Accept the property in its damaged state and have the seller assign to you any of the proceeds from their insurance claim (and they would pay their deductible at closing via a credit to you).

No one wants this to happen to them, but it's nice to know the "what if" of the situation and that there are remedies for you and your family if this does ever occur.  I hope to never have to invoke this paragraph in one of my transactions, but I know that if I'm your San Antonio real estate agent, I've got you covered thanks to our promulgated forms.

* Hope those of you out there that just read that line and started singing along enjoyed the reference.

This is a post in a series on real estate education to help define some of the finer points of contracts and the process of buying and selling real estate in San Antonio, Texas (it's Texas real estate, so if you live outside of Texas, these articles may not apply to you).  You can read the previous posts; "Realtor® Speak 102: What are all these charges on my HUD-1 Settlement Statement?," "Realtor® Speak 102: What do I need to bring to closing?," "Realtor® Speak 102: Who's paying for the survey?," and "Realtor® Speak 102: Does that come with the house?" or check out my ongoing series Realtor® Speak 101 at RErockstar.com.

photo courtesy of bossco

I've been doing what I call "Realtor® Speak 101" over on my site, www.rerockstar.com, for some time now.  In it I try to explain some of the concepts of real estate that I most often get asked about and explain the how, why, who, what, when, and where of them.  In this series, "Realtor® Speak 102" I will take some of the more specific questions about the offer/contract and elaborate on them in order to help you understand the finer points of it all.

Does that come with the house?

When showing homes to clients, on of the most frequently asked questions is "Does that come with the house?"  Clients can be referring to just about anything from appliances to curtains to pets to the watercolor painting of the house.  As we stroll through the home, clients often see things that they love and want to remain in their new home, but there can be some confusion as to what stays, what goes, and what might be possible to ask when writing the offer.

What stays, what goes?

The Texas Real Estate Commission's One To Four Family Residential Contract (Resale) is a standardized form that we use in Texas for the purchase of single family homes (there are forms for things like condominiums and commercial real estate as well, but we're going to talk about single family homes here).  It is updated and revised as TREC sees the need (last revision date 6/30/08) and provides a solid basis for buying a home.

Let's take a look at Paragraph 2, Section A-D.

Paragraph 2, Section A

This section defines the property by it's legal description (Lot, Block, Addition) as well as its address.

Paragraph 2, Section B

Probably one of the most important sections to our discussion of "Does that come with the house?"  This section lays out the legal description of "improvements."  These are considered part of the property when they are "permanently installed and built-in."  Ceiling fans are a common one for clients to ask about.  As you can see in the list, ceiling fans are considered part of the property.  This list is the base definition of what is included with a home, but the phrase "permanently installed and built-in" seems to be where the most confusion arrives.  One of the ways to look at it is: if you were to remove the item, would it leave a hole in the wall or require major renovations after it had been removed?

Let's look a few examples.  How about a microwave?  A counter top microwave is not installed or built-in.  You can pack it up when you move.  A microwave installed over your stove?  Permanently installed and built-in so it's going to stay with the house.  Refrigerator?  This one is very common to ask about.  Refrigerators are not technically considered built-in or permanent (unless it's one of those cool Sub-Zero ones that is built into your existing cabinet structure), so they are not part of the property.  A lot of people think (erroneously) that the fridge stays behind.  Plants?  If they're in a pot on your front porch, pack them up.  If they're planted in the ground, they belong to the new owners.

A great rule of thumb for sellers is that if you don't want it to stay with the house, pack it up before you put your home on the market.  This helps prevent any miscommunication later down the road.  I've seen sellers and buyers argue over a ceiling fan that the seller had intended to replace with a different one, but nobody ever mentioned until the end.  The buyers will win this battle every time.  If you didn't have it in the contract (under Paragraph 2, Section D) as an exclusion, the buyers own it now.

Paragraph 2, Section C

Paragraph C helps define some of the lesser known items that are considered as part of the property.  I suspect that most of the items on this list arose from actual lawsuits (above ground pool?) in the past.  One important thing I'd like to point out - "curtains and rods, blinds, window shades, draperies and rods."  What you see on the windows comes with the home.  Sellers must clearly point out any exclusions in Paragraph 2, Section D if they plan on keeping any of these.  Most sellers don't and it can cause some serious battles at the closing table.  Maybe I should repeat my line from earlier:

A great rule of thumb for sellers is that if you don't want it to stay with the house, pack it up before you put your home on the market.

Paragraph 2, Section D

As I mentioned before this section is for any exclusions to the items that are part of the property.  Occasionally, in the MLS, a listing agent might state that this or that does not convey with the property.  In this case, the buyer's agent should fill in the items in Section D when making the offer.  It is often looked over, I can tell you that, but it is crucial to having an iron-clad contract and to avoid any wrangling at the closing table.  I don't like surprises and neither do my clients.

Can I ask for it in the offer?

Of course, no matter if it's attached, permanently installed, or built-in - if you as a buyer want it, it can be written into your offer.  In Texas, we use a form called the Non-Realty Items Addendum To Contract (from the Texas Association Of Realtors®) to add items that don't fall within the definitions laid out in Paragraph 2, Section B and Section C.  Want to buy the house, but only if the cat comes with it?  We can ask for it.  Simply have to have the furniture set on the patio?  We can ask for it.  No matter what item it is in the house, if it's not covered in Paragraph 2, we can ask for it with this form.  Many agents make the mistake of asking for items that are already covered in Paragraph 2, but it is not necessary.  This comes down to knowing the contract and understanding how it works - putting something in there twice doesn't make it any more legal than it was the first time around.

Have a question that's been bugging you about your real estate transaction?  Contact me - I'd love to answer them in Realtor® Speak 102.

This is a post in a series on real estate education to help define some of the finer points of contracts and the process of buying and selling real estate in San Antonio, Texas (it's Texas real estate, so if you live outside of Texas, these articles may not apply to you).  You can read the previous posts; "Realtor® Speak 102: What are all these charges on my HUD-1 Settlement Statement?," "Realtor® Speak 102: What do I need to bring to closing?," "Realtor® Speak 102: Who's paying for the survey?," "Realtor® Speak 102: Does that come with the house?," and "Realtor® Speak 102: What if the house burns down?" or check out my ongoing series Realtor® Speak 101 at RErockstar.com.