Los Altos Real Estate Market Update – Personal Property is Causing Financing Problems
An interesting topic came up this morning in our office meeting – The inclusion of personal property in a purchase contract is having a negative effect on property valuation and loan funding. It appears that some Lenders are asking that personal property should not be written into the purchase contract.
In the past, an appraiser would note in his/her appraisal that any personal property included in the purchase does not materially affect the property’s value and the loan would fund. However, some lenders have recently changed this practice.
Personal property becomes part of the contract in Paragraph 4 of the PRDS Real Estate Purchase Contract. The most common type of personal property asked for is kitchen appliances that are not built-in (ie. refrigerator, washer, dryer).
The result of this recent change is that it creates a catch-22 for the buyer as well as an unwanted issue for the seller just prior to close of escrow The buyer should include personal property in the contract, but by writing it into paragraph 4 of the contract, a Lender may not fund the loan. How does a buyer retain the personal property and get the loan to fund?
In short, the best course of action is to check with your lender about any potential red flags prior to writing the purchase contract.
Note: I am not an attorney nor do I play one on T.V. Should you need specific legal counsel on your individual situation, see someone who is an attorney specializing in real estate law.
