When buying or selling a home, it is important to understand the distinction between real property and personal property—especially when furniture, artwork, appliances, or other household items are expected to remain with the home.

Real Property vs. Personal Property

Real property generally includes the land, the home, and items permanently attached—or “affixed”—to the property. Examples include:

• Trees and landscaping
• Plumbing pipes and sinks
• Electrical wiring and attached light fixtures
• Built-in cabinetry
• Other permanently installed features

Personal property generally consists of movable items that are not permanently attached to the home or land. Examples include:

• Furniture
• Artwork and rugs
• Dishes and household accessories
• Tools and gardening equipment
• Cans of paint
• Exercise equipment
• Freestanding appliances

Although the distinction may sound straightforward, personal property can create unexpected disagreements during an otherwise successful real estate transaction.

Do Not Assume an Item Is Included

A buyer may assume that the trash container fitting perfectly inside a pull-out kitchen cabinet will remain with the home. The same may be true of a microwave that fits neatly on a kitchen shelf, patio furniture selected for a particular space, or garage storage racks. On move-in day, the buyer may discover that those items are gone. Even when an item has relatively little monetary value, the buyer may feel disappointed or misled.

The best way to prevent this problem is simple: clearly identify in writing any personal property that is to be included in the sale.

Buyers and sellers should not rely on assumptions, photographs from the listing, or informal conversations. If an item matters, it should be specifically addressed in the appropriate written agreement.

Personal Property as Part of Repair Negotiations

Personal property may also become part of negotiations during the inspection and due diligence period.

For example, a professional home inspection may reveal that the roof requires repairs. Rather than asking the seller to complete the work before closing, the buyer may prefer to hire a contractor after taking ownership. This allows the buyer to select the roofer, oversee the work, and control the timing and quality of the repairs.

As compensation for the unexpected expense, the buyer might ask the seller to leave the living room furniture at no additional cost.

This type of arrangement can benefit both parties. The buyer receives furniture that already fits the style and dimensions of the home. The money that would otherwise have been spent furnishing the room may be directed toward the roof repair. The seller avoids coordinating a repair while preparing to move and does not have to relocate or sell furniture that may not work in the next home.

However, the agreement should carefully identify every item being transferred. “Living room furniture” may mean different things to the buyer and seller. Does it include the sofa, chairs, coffee table, lamps, rug, artwork, and decorative accessories—or only some of those items?

A detailed written list helps prevent misunderstandings.

Purchasing a Fully Furnished Home

Buyers of vacation homes and second homes frequently purchase properties with some or all of the furnishings and household contents included.

When a substantial amount of personal property is being transferred, the parties should document the transaction through a separate Personal Property Sale Agreement rather than simply adding the value of the contents to the real estate purchase price. Why keep the transactions separate?

A Separate Agreement Creates a Clear Record

A Personal Property Sale Agreement can include a detailed inventory of the items being sold. Depending on the extent of the furnishings, the inventory may include:

• Written descriptions
• Photographs
• Video documentation
• Serial numbers for valuable electronics or equipment
• The condition of significant items
• Any items specifically excluded from the sale

Both parties sign the agreement to confirm exactly what is being transferred.

A real estate purchase contract is primarily designed to address the purchase and sale of the home and land. A Personal Property Sale Agreement is designed to address movable belongings. Keeping the two transactions separate can make each agreement easier to understand and administer.

The Personal Property Sale Agreement should also address its relationship to the home purchase. Buyers will generally want the personal property purchase to be contingent upon the successful closing of the real estate transaction. If the home sale does not close, the buyer should not remain obligated to purchase furniture intended for that home.

Separating Personal Property May Prevent Financing and Valuation Problems

There are financial and lending reasons to separate the transactions. Mortgage lenders finance real property—not furniture, artwork, household goods, or other personal belongings. Including a significant value for personal property within the real estate purchase price may raise questions involving financing, underwriting, or appraisal.

Appraisers evaluate the value of the real estate. Personal property does not contribute to the appraised value of the home in the same manner as the land and permanent improvements.

Separating the personal property transaction may prevent the personal property amount from being included in calculations that are based on the real estate purchase price, depending on the terms of the listing and brokerage agreements.

Before assigning values or structuring the transaction, the parties should consult their real estate professionals, lender, tax adviser, and legal counsel as appropriate.

Clarity Protects Everyone

Personal property can add convenience, value, and flexibility to a home sale. It can also create confusion when the parties have different expectations.

Whether the transaction involves a single microwave, a room of furniture, equestrian equipment, outdoor furnishings, or the complete contents of a second home, the key is to document the agreement carefully.

A clear written agreement should identify:

• The specific items included
• The agreed value or purchase price, if any
• The condition in which the items will be transferred
• When ownership transfers
• Whether the personal property sale depends upon the real estate closing
• Any items specifically excluded

Thoughtful documentation at the beginning of the transaction can help avoid disappointment and disputes at the end.

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This article is provided solely for general informational purposes and does not constitute legal, tax, lending, or other professional advice. Although the author is an attorney, no attorney-client relationship is created by this article. Real estate laws, contract requirements, lending guidelines, and individual circumstances vary. Buyers and sellers should consult qualified professionals regarding their specific transaction.