When buying a residential property, you're not just purchasing the land and the house; you may also want to acquire certain personal items, such as refrigerators. This can be a point of confusion because there's a legal distinction between real and personal property. Properly addressing personal property in a real estate transaction is crucial to avoid misunderstandings and legal complications.
Real Estate vs. Personal Property
The general rule is that if an item is "bolted down," it's considered a fixture and is part of the real estate. An example of a fixture is a dishwasher. Items that are not bolted down, such as a refrigerator or a washer and dryer, are typically considered personal property.
While it's legally possible to lump personal property and real estate together in one contract, it's generally not recommended. The main reason for this is that lenders prefer not to loan money on personal property. They want to finance the real estate itself, not the movable items within it.
Using an Addendum or Separate Contract
To handle personal property, it's best to use a separate agreement. The most common method used by realtors is a Non-Realty Items Addendum. This addendum specifies which personal items are included in the sale. This separate document ensures that the lender is only loaning money for the real estate, and the personal property transaction is handled independently.
To make the addendum a valid contract, it must include consideration. This is often a nominal amount, such as a dollar, exchanged for the personal property. This simple step makes the agreement legally binding and clearly outlines the terms of the sale for both parties.
The Importance of Specificity
Whether you want a washer, dryer, or refrigerator to come with your new home, it's essential to be specific. Do not assume that these items are included. You must explicitly list each item you wish to purchase in the non-realty items addendum or a separate contract. This clarity helps prevent disputes after closing, ensuring that you get everything you expect to receive with your new home.
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