Including furniture in the sale of a house can lead to variety of circumstances that could derail an entire housing deal or sweeten the pot, depending on the situation. Emotions often become involved when buyers and sellers start negotiating over personal items that hold sentimental value to the seller, but may be little more than decoration or utility to the buyer. Additionally, contracts can become unwieldy and complicated when addendums are created, such as for furniture.
The value of the furniture may affect the amount a borrower receives from the bank or change the adjusted value of the property. When the value of the furniture is included in the sales contract, it creates what’s termed a “sales concession.” Lenders deduct the amount of the concession from the total amount of the selling price of the house. For example, if the final price settled on is $250,000 and the negotiated price is $25,000 for all the furniture in a written sales concession, then the bank only considers a mortgage for $225,000. Sales concessions can be avoided by having the furniture listed as having no value in the final contract.
Once negotiations on the selling price of the house are completed, another round of negotiations over the value of the furniture can complicate the process and hold up the closing if the buyer and seller are far apart in their assessment of the furnishings. Sellers commonly overestimate the value of their personal property, when used furniture often is worth pennies on the dollar, according to Minneapolis Realtor and former attorney, CPA and author Ross Kaplan. On the other side of the equation, Kaplan reports that buyers often overestimate the amount of clout they hold over the seller, and expect to pay any price they want for furnishings because the seller wants to sell the house.
Buyers and sellers should instruct their real estate agents to closely monitor the conditions included in the final contract, especially when the parties negotiated for certain pieces of furniture to be included in the sale. As a rule, furnishings and appliances that are naturally connected to a house are part of the sale. Technicalities can enter into the negotiations, though. For example, chandeliers and built-in shelves typically are a natural part of the home and included in the sale, but the seller may consider those items personal property and expect to negotiate for their sale or take them with him. The buyer may agree to the additional charges or dispute the claims. Buyers and sellers need to instruct agents and closing attorneys about the decisions or conflicts they’ve encountered, and get the final agreement in writing before signing the contract.
Negotiating for non-fixed assets and furniture can be used as a successful tactic to bring buyers and sellers to a satisfactory agreement. When the price is more than the buyer expected to pay or negotiations have stalled and the seller is not willing to go down any further, one or the other may suggest including furniture in the price. The buyer may feel better about the final price, and the seller can wind up the deal with fewer items to move out and a satisfactory payout. Rugs, window treatments, and odd-sized pieces that have been custom made for a space can make the home more attractive and worth the extra money to the buyer. At the same time, those items often are useless to the seller in another space. When negotiating a deal, either party can suggest that such items be included, and everyone can leave feeling good about the deal.
Linda Ray is an award-winning journalist with more than 20 years reporting experience. She's covered business for newspapers and magazines, including the "Greenville News," "Success Magazine" and "American City Business Journals." Ray holds a journalism degree and teaches writing, career development and an FDIC course called "Money Smart."