Selling A Furnished Property

Lately, it seems I've been involved in some sales of fully furnished properties. Sellers seem a little confused about how to proceed with these sales, and don't fully understand the revised rules under which today's mortgage companies operate in regard to loaning money for a furnished property.

Mortgage companies have never liked to loan money on a furnished home. Simply put, they don't like to loan money on used furniture. So for years, real estate agents have been listing furnished properties and including the phrase "furniture adds no value" in their description of the property in the MLS and in the sales contract. I guess that worked for awhile, but now things are different.

We now have new rules from mortgage companies about writing a mortgage on a furnished property. Essentially, if any furniture is included on a sales contract for property, the loan-to-value ratio of the loan will be reduced by the value of the furniture.

This means that the furniture will have to be appraised and the amount of the appraisal will be reduced from the purchase price. This might result in the buyer being forced to come to the closing with additional funds to make up the difference.

Here's a suggestion for those who want to sell a property furnished. First, make a detailed inventory of all the furniture that is going to be left with the property. Then, clearly state that the furniture will be sold in a separate bill of sale outside of the closing. That way the furniture stays at the property but should not be considered part of the real estate transaction. Sellers can charge whatever they want for the furniture, but they should keep in mind that used furniture does not usually have a very high price.

Hope this is of some help!

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