Tips and Traps When Negotiating Real Estate: What Is Personal Property?

How to Bargain for Personal Property: What Is Personal Property?

It’s important to understand the technical distinction between real and personal property. Real properly refers to the land and anything attached to the land, including the house, fences, separate garage, sheds, and so forth.

Personal property generally refers to anything that you can take with you, such as clothing, furniture, children’s toys, computers, TVs, clothes washers and dryers, refrigerators, and so forth.

There is also a gray area that is very important in real estate because it sometimes causes confusion, which can lead to bitter squabbles between buyer and seller. Consider the following true example.

Peter and Rita made an offer that was accepted on a home that was about seven years old. What Peter and Rita really liked about the house, in addition to its location and layout, were the expensive wooden blinds on all the windows. This gave the house a rich, mod­ ern look that very much appealed to them. They also liked the built- in refrigerator and stove/oven in the kitchen.

The escrow did not seem unusual, and the sale concluded within about five weeks. The buyers had not asked for a walk-through. (They were out of town at the time and, besides, the sellers were extremely neat and tidy people, so Rita and Peter figured the house would be left in good shape.)

A few days after the close of escrow, when Peter and Rita walked into their new home, they were aghast. It was clean and neat as a pin. However, all the wooden blinds were gone—the sellers had taken them. In addition, the sellers had taken the built-in refrigerator and stove/oven.

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It took the buyers milliseconds to get on the phone and contact the agent, who was likewise surprised. She contacted the sellers, who explained as follows: They had left the screws and attachment assemblies for the blinds. But the blinds themselves had not been in any way permanently attached to the house. So the sellers considered them personal property and took them. They were using them in their own new home.

Further, the so-called built-in kitchen appliances were simply sit­ ting in wells in the counter. They, too, were not attached in any way—simply held in place by weight. They were easily removed and simply unplugged from electric sockets located under the counter. The sellers likewise considered these items personal property, took them, and planned to use them later on in another house they hoped to build.

Rita and Peter were horrified and angry. They said that one of the major reasons they had bought the property was the blinds and the built-ins. They wanted them returned immediately.

When the agent conveyed the message, the sellers simply replied, “If you wanted our personal property included in the deal, you should have specified it in the sales agreement. Barring that, those items are our personal property and we’re keeping them.”

The buyers were outraged, the sellers self-righteous. It appeared that the whole thing was headed for court. However, the agent, an old friend of mine, prevailed upon the sellers to be reasonable and the built-ins were returned. Then the agent paid for part of the cost of new blinds from his own pocket—an expensive lesson learned.

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This true story occurred over 20 years ago and it’s unlikely it would occur today. Modern sales agreements typically provide (or agents should write in) that included in the purchase are all wall, window, and floor coverings and built-ins. Further, there’s the walk­ through, which originated in part just because of this situation. Thus, today it’s unlikely that Peter and Rita would find themselves in this sort of predicament.

However, the story does illustrate some of the gray areas between personal and real property. Very often, it’s simply hard to tell. For example, is a swing set in the backyard real or personal property? What about an area rug in the living room? Or a vise on a work­ bench in the garage?

In real estate, the determination of gray areas often hinges on a variety of tests, including method of attachment and intent. For example, if the swing set is secured by being sunk into holes in the ground, then the attachment suggests permanence and it probably is real property. On the other hand, if the swing set is simply sitting on top of the ground, it suggests portability and it’s probably per­sonal property.

Similarly, an area rug simply lying on the floor is undoubtedly per­sonal property. But if it’s tacked down and removing the tacks will leave marks in the floor, it’s probably real property.

TRAP

Sometimes you can inadvertently convert personal property to real. For example, you own your home and you buy an expensive vise and workbench that you nail into the wall of your garage. When you bought the vise and workbench, it was obviously personal property. However, by your method of attachment, you may have converted it to real property.