Real Estate Agent · North Jersey, NJ · Member since 2008 · 287 posts · 51 votes
I came across this agreement that basically states you, the buyer, agrees to purchase from the seller their personal property. I thought that this might be a good way for homeowners to make some money from investors when doing a short sale flip.
Has anybody ever heard of this? Does the bank have to know if this agreement has been made? Is it even legal? I would love to hear your thoughts on this, because if it is legal I think it might be a great way to motivate some homeowners a little more. An extra 1 to 2 grand in their pocket can go a long way for us investors and certainly help us close more deals.
An agreement of sale for personal property is completely legal. I have used notarized agreements of sale for personal property for buying houses where the seller leaves all the stuff behind (CYA tactic, so that I can toss into the dumpster what is now my property). But when you have that agreement from the lender to not benefit the seller in any way, you end up circumventing / violating that agreement with the lender.
Some of the gurus used to pitch this idea, to buy somebody's stuff for more than it's worth along with their short sale - don't even think about trying that. If you do insist on pursuing doing this, I suggest you find out what the FMV would be for that used item (Craigslist or ebay might have pricing), and don't exceed that amount.
And you might want to actually arange for others to do this for you - this becomes a bit of a gray area, as to whether you benefited the seller by this type of arrangement.
There you go again putting words in my mouth. I never mentioned anything on price so don't flat out tell me I'm wrong when you're applying a conditional statement to my post! If you assumed I was talking about under $600 that's on you, not on me, I don't appreciate your candor.
I don't know if I've ever done anything to you to warrant such an attack. But if I did I sincerely apologize for any misunderstanding.
Beyond that, I have no idea why you would openly admit to not keeping receipts for your purchases, not a good practice. The tax auditor is going to have fun with you.
Andy, you are saying I am putting words in your mouth and that I am attacking you but you don't make any sense. I quoted you and put in a specific situation that I was referring to. Next time you want to disagree with someone, don't get mad when they state facts to you. I didn't start investing yesterday which is why I made it a point to point out something specific that rebuts what you said and at the same time I agreed with you that having receipts is good. There is no debate on that. Needless to say, it is clearly a simple misunderstanding. The quote you took from me mentioned craigslist so clearly I wasn't talking about million dollar purchases. No need to get mad, no one is upset, its just you and I are talking about different things.
I consider it an attack when you put words in my mouth and then tell me that I don't know what I'm talking about based entirely on your assumptions of what I meant. Clearly you did not understand what I'm saying, so next time you're not sure, don't say things like "you don't know what your talking about" or "you don't make any sense". This is an open forum for the exchange of information, I expect more tactful responses than you have given. I'll agree to a simple misunderstanding and hopefully we can avoid these in the future with a bit more care.
Md Landlord- maybe I misunderstood your point but the fact is we are talking about short sales and like other members mentioned the "F" word is being used too frequently for us to take any chances. That is why I think it's unwise to purchase anything from the homeowner and not put it in writing. My main question was to see if this is legal and if the banks should or shouldn't know about it. I will be contacting them myself and the short sales I have to ask them about it.
To answer the question of what we can do with it...here is just one example.
I met with a seller recently who had a beautiful condo in the upscale neighborhood of down town Jersey City. You can say the house was "staged" to sell with brand new furniture, piano, wine cabinet, art and paintings on the wall etc. etc.... Now I don't know it all but I do know that a staged home can sell for much more than a vacant home. So wouldn't I want to keep these things in the condo when it comes time to flip it? How other way can I do that other than offering to buy it from the seller?
This is just one example obviously but when it's beneficial to us as the buyers and we disclose properly, than it can be a win-win for us and the homeowner.
I am seriously jealous if you can get all of those things to stage the house with. A piano, paintings, and wine cabinet? Very posh! But if you don't sell the staging items with the home it's probably going to cost you a few bucks to move and store them.
I would absolutely love to have a nice Steinway grand piano for staging, but a $40,000 tax writeoff for a grand piano from a real estate company might raise some flags with the IRS.
If you are a real estate agent and a member of NAR, the NAR update that I just got e-mailed to me has a pod-cast from an attorney that addresses this very issue. When talking about how Realtors can open themselves up to liability in short sale transactions, the topic of getting any $$$ to the seller (specifically mentioned was moving van expenses), was a big issue. This holds true for investors, too.
Bill
Yea the piano was definately a nice touch lol. The current value on the condo was slightly upward of 600k and seller owed over 2.4mil and 3 years behind!
Bill- I think paying for moving expenses is something outside of the seller's immediate personal property and will be interpreted that way. I have heard of many people doing this before as well.
You tell the lender that the seller will be getting some cash from sale of personal property - it doesn't matter who the buyer of that personal property is. That lender will say: "Well, the seller will be expected to contribute that cash at closing to reduce the bank's loss."
I understand that you see those items as having value to you on the resale, in the example that you gave. But the bank is going to try and cut their losses as much as they think they can, and this money is going to be something the bank wants IMO.
Steve you make a very good point. I can't see the lender stopping the sale of the personal property- but asking them to contribute that profit at closing doesn't sound too far off. Thanks for the input.
Somehow I missed all the comments and your question back to me for this thread.
Will- isn't the personal property the homeowners to keep anyway? I've seen many cases once the homeowner moves out they take all of their furniture with them and leave the place completely vacant. They probably sell some of those things anyway. I think the question to ask is if personal property is actually considered part of the sale.
yes, the personal property (furniture, not light fixtures, kitchen appliances, etc) are the homeowners to keep and take with them and it is certainly their right to sell said items. However, as the licensed agent involved in a "short sale" transaction, you open yourself up to potential liability by involving yourself in such a manner.
I think Steve said it best in his last post:
You tell the lender that the seller will be getting some cash from sale of personal property - it doesn't matter who the buyer of that personal property is. That lender will say: "Well, the seller will be expected to contribute that cash at closing to reduce the bank's loss."This is very true, so the question remains, do you disclose or not, do you do cash or get a receipt. In my PERSONAL opinion, you simply do not involve yourself in the scenario in the first place to avopid ANY chance of scrutiny down the road.
Yes, having a pre-furnished home (staged) would be great, but then what do you do with the furniture once the buyers take it? They may not want your furniture and have their own tastes. Paying for all this furniture to stage a home would be too costly. You would be better served to hire a staging company.