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.
All content ©2008-2010 by Matt Stigliano unless otherwise noted.
Matt Stigliano, Realtor® Becker Properties | (210) 646-HOME | www.RErockstar.com
"Your all access pass to San Antonio real estate."
Matt - You did a great job of summing things up on this topic! Wanna help train my agents? :)
Jason - Thanks, that's a great compliment from you and I really appreciate it. My first broker was very big on understanding the contract and making sure you weren't putting things where they didn't belong (Special Provisions was his personal pet peeve). I learned quickly what was "right" and "wrong" when making mock-offers. I hope both agents and consumers read this one and learn something.
Great stuff Matt! I recently sold a house where two big screen tvs professionally installed became the final negotiation points. Seller inidicated in the original contract they did not stay, but in the end he left them because he was able to get the price he wanted for the house by doing so. Worked out fine, but we were very careful with contract wording.
I have a contract, buyer specified that the particular refrigerator that's in the kitchen will stay. That fridge quit working last weekend. Oops. I see negotiations in my future!
Ann - Interesting thing about the TVs, since they are in essence built-in in many cases these days - hardwired for surround sound and mounted with very serious brackets to hold them up. I've never run across a case about these but I would love to see how the TV could/couldn't be shown to be permanent and therefore a fixture of a home. I wonder if there has ever been a legal case involving them?
Joetta - That's why I carry seller's coverage on my listings from a residential service contract company. It gives my seller's peace of mind, helps the buyer avoid the dreaded "pre-existing conditions" clause and gets things like that fixed in a jiffy.
Did I just say "jiffy?"
Matt- Great explanation of the rules. The TV arangements will hopefully work their way out. The prices of the high end models seem to be declining pretty quickly. So a seller may be inclined to leave a model with a good offer or some reasonable compensation. (reasonable-maybe).
Matt - as usual...great post! I have a contract (active option) my buyers wanted to go look again...for the fourth time...totally fun for me because they are first time home buyers and soooo excited!! BUT because the seller "excluded" the chandelier...they became concerned about the stove, dishwasher, fans, etc....I had to explain that if, after closing, they come in to find no carpet, stove, fridge, etc. it will take one call!!! Funny stuff!
Wayne - I always love the unusual things in contracts. I just did one that asked for the horse sculpture in the back yard. I don't know why, but making those little parts to the offer always seems fun to me.
Jeanna - The good news is that they have an agent who knows what stays and what goes. I've seen a few offers that have had asked for things to stay that legally were staying in the first place. I don't see that as "playing it safe," but instead see it as "not knowing the difference between real and personal property" and "not knowing your contracts very well."
It amazes me what some things people will ask for1
I was once told that if you have a high end item that is staying with the property it is a good idea to write down the model and serial number of the item on the contract.
Marie - Being as specific as possible is always a good idea, so that there is no confusion later and it only tightens up the legal side of things in case it gets to that point. I usually try and snap a photo as well to keep in my files.
Matt - I like this series and am going to check out your newer posts. Window treatments often get over-looked here. As in your contract, they are supposed to stay with the house, but sellers tend to take them.
I learned this lesson the hard way, when I was the seller. We advertised my mother-in-law's oceanfront cottage in Maine for sale "partially furnished." We meant that to include whatever we did not plan to take. The buyers perceived it as keeping with the house whatever they wanted to stay. It was so ambiguous and quickly led to a catfight. The closing attorney screame, "Are you telling me this deal is going down the toilet over a PINEAPPLE POST BED??" I felt that it was my bed and I wanted to keep it. The buyer felt that the room wouldn't look the same without it. I kept the bed but I'm older and wiser now!
Erik - Thanks. The window treatment issue is always one that we face. I always try to spell it out for the sellers, but even then it sometimes gets forgotten.
Leslie - Ouch. I can see where the problem arises in something like that. Being specific is the key. We are told to try and use serial numbers, colors, model numbers - so that even if someone swaps it out with a different one, we can call them on it and say "that's not the one we asked for."