Lending Appraisal EXCLUDES furniture!

8 Replies

I'm looking at a particular market and I've heard from a number of people to be careful because most appraisers in this market will under-appraise furnished houses. E.g., if I'm buying a furnished house for $300k, they'll insist the house is only worth $280k because the $300k price includes $20k of furniture. This is apparently quite common in some areas, especially areas where it's not necessarily typical of houses to sell furnished. Has anyone else run into this? I know in many areas like Pigeon Forge, ALL of the properties sell furnished - so I'm assuming lenders don't insist on removing $20k from every appraisal to account for the value of the furniture?

I mean, I realize that an appraisal should be based on house + land value, and that technically furniture shouldn't be included in a home's value (since furniture is a depreciating asset). BUT, it's a little ridiculous for appraisers to discount furnished home sales by $10-$20k to account for the cost of the furniture, right? That just makes it a huge pain in the neck for people to finance and buy furnished homes in this area.

Furniture is not real estate and should not be included in the appraisal or in the list price of a home.  In real estate transactions, furniture is on a separate bill of sale and a lender will not touch it; I frequently write furniture bills of sale for fully furnished houses in the amount of $1.  

The list price should not reflect the cost of furniture; if it does, there's a problem with the listing prices.  If the appraisers insist on deducting the cost of the furniture, the only recourse seems to be to challenge the appraisal.  Ultimately, I'd talk with some local real estate agents and see how it's typically handled.

The way that we get around this in my market is this: we have a separate bill of sale for the furniture for the cost of $1. So that way we don’t run into the issue of the appraiser asking how much of the purchase price is real estate and how much is personal property. Obviously, Fannie and Freddie lenders can only lend on real estate, and not furniture/personal property, so having the separate bill of sale stating the exact cost of the furniture eliminates that confusion. 

Do you value the cost of the gasoline in the tank of a car when you sell it?  Furniture is the same thing as gasoline.

Originally posted by @Paul Sandhu :

Do you value the cost of the gasoline in the tank of a car when you sell it?  Furniture is the same thing as gasoline.

 Wait, you sell your cars with gas still in them? I've been doing it wrong all this time :(


Originally posted by @DJ M. :
Originally posted by @Paul Sandhu:

Do you value the cost of the gasoline in the tank of a car when you sell it?  Furniture is the same thing as gasoline.

 Wait, you sell your cars with gas still in them? I've been doing it wrong all this time :(

It's an old joke about beat up cars.  You can double the value of the car by filling up the gas tank.

 

We've run into this and as others have stated, the cost of the furniture is often a separate bill of sale. One appraiser came in $20,000 less than the purchase price so we renegotiated with the sellers and ultimately ended up having to come up with another $7000 out of pocket.