Personal Property included in purchase price

[Jeremy Bair]

Hi everyone, new to posting here, but I figured that someone here has probably delt with this before but it is new to me!

I have an appraisal assignment for a furnished condo purchase. It states right in the P&S, Purchase price $XXXXX with $XXXX allocated to personal property and furnishings.

All comparables are from the same condo, and are also all furnished units... however the dollar figure for personal property and furnishings varies depending on the units...

How do I handle this?
Do I adjust out the personal property, thus appraising the unit for less than the purchase price?
Do I leave that in there as all comparables are furnished, thus that is typical for the market, and appraise it for the full purchase price?

Thanks for any help / advice on this!

 

[hastalavista]

Jeremy-

Your situation is slightly different in outward appearance from most who post to this issue in that you are saying all of your comps within the development sell furnished.

However, despite that twist, your situation is not substantially different (IMHO) from most posts on this issue assuming your assignment is to value the real property for a mortgage lending transaction.

First, analyze the contract and state that the purchase price includes personal property. Your appraisal, however, is of the unit without the personal property (I assume).

Second, analyze the sales comps; if they all have furnishings included, you will need to analyze this and determine an appropriate adjustment since you are comparing the comps to your subject, and you are valuing the subject without the personal property (therefore, you need to analyze the comps without their furnishings- like for like).

That's my two-cents.
Good luck!

 

[ccooper]

You should disclose everything.

It has been my experience that lenders do not want personal property in the collateral for their loan (unless they want to file a UCC lien on the personal property). Check with your client, my guess is they won't want it included in your value of the subject.

Therefore, you should take the value of the personal property out of the comps as well. Its easy if the personal property amounts are disclosed in your listings (subject and comps). I'm not usually this lucky.

We have many condo resorts here where many of the units sell furnished. I have often seen (thru matched paired analysis) that sometimes this furniture really didn't add that much to the sales price. Particulary if the nightly rental furniture is more than 5 years old. There have been instances where I have seen a furnished condo sell for nearly the same price as an unfurnished (identical) unit. You need to see what is happening in your market. What are the unfurnished units selling for vs. the furnished ones?

Sometimes I think that some sellers really don't want to move that furniture...big hassle. Therefore, if push comes to shove...they don't think it is worth that much.

 

[MBD]

You are licensed as a real estate appraiser, not a personal property appraiser. Mention in the contract analysis section that furniture is included in the sale, but do not include personal property in the sales comparison approach. Write in the addendum that it is typical in this marketplace for personal propert to be included in the sales price, however this appraisal report only analyzes the real property.

 

[stefan olafson]

Is there value in the personal property? What's an old couch, chair, etc... worth? I believe it's in the eye of the beholder.

Verify with PURCHASERS of comparables what the value of PP was, in their opinion, then adjust to the subject property.

Never appraise with personal property included.

 

[Lee Lansford]

...
How do I handle this?
Do I adjust out the personal property, thus appraising the unit for less than the purchase price?
Do I leave that in there as all comparables are furnished, thus that is typical for the market, and appraise it for the full purchase price?

Thanks for any help / advice on this!

#1...The market value of the real property (NOT personal property) interest is whatever it is. Don't concern yourself with the contract price.

#2...Regarding "do I leave that in there as all comparables are furnished, thus that is typical for the market, and appraise it for the full purchase price?...see #1.

 

[CANative]

Not much help so far. We're only restating the problem, i.e. we're not personal property appraisers so don't include the personal property. Instead figure out how much the personal property included in the comp sale influenced the purchase price. :Eyecrazy:

If sales always include personal property then that is probably the market value. It would not have an effect on the subject's market value indicator unless the subject did not include some similar personal property.

 

[Gregory Beck]

I would think that if everyone does the correct thing which is to appraise the condominum as a condominium, forget the furniture thats personal property. Now if all the other appraisers did the same thing wouldn't all the comparables be the same. Are there appraisers out there calculating the value of furniture and adding that to the appraised value? I don't think so.

 

[Ariba]

If sales always include personal property then that is probably the market value. It would not have an effect on the subject's market value indicator unless the subject did not include some similar personal property.

If all the information concerning personal property is available to you why do you want to ignore it? Why would you not subtract this amount indicated as personal property from the sales price? The lender is in the business of mortgage loans with real property as collateral not personal property. Owners can take all the personal property with them; it has no value to the bank in foreclosure proceedings.

 

[Kevin A. Spellman]

I typically state how much it would cost to remove the furnishing if the furnishings possess minimal value or no value. Poor quality furnishing has no value. Any seller/agent can place a price on furnishings in a sales contract, but typically second home properties owners do not want to move the furnishings. It cost more to remove the furnishing than it could possibly sell for. I discuss the cost of day labor and a trash container for the removal in my reports if necessary.