Can household furnishings be included in the financing of a property? The short answer is a resounding No..."the minute that Underwriting notices that personal items are part of the sales contract, the financing could be in jeopardy" says George Souto, an agent in Connecticut. "Realtors and buyers need to be careful with that."

You can negotiate to buy the furniture, though, as long as it is not part of the sales contract.  All financing comes with restrictions; specifically any "Interested Party Contributions", according to Fannie Mae.  This is defined as:

 "Costs that are normally the responsibility of the property purchaser that are paid directly or indirectly by someone else who has a financial interest in, or can influence the terms and the sale or transfer of, the subject property."

An "interested party" to a transaction includes the seller, builder or developer, the real estate agent, and anyone else who would benefit financially from the sale of the property.

So, let's say, you want to buy a home that is beautifully furnished and you are interested in buying it "lock, stock and barrel" - what do you do?

First of all, your agent and the seller's agent cannot be involved.  The buyer and seller need to work this out themselves, but it's probably best done after all home inspections are completed and agreed upon.

"Sales Concessions" are another sticking point with Fannie Mae.  If cash back or other concessions are made in the sales contract, Fannie Mae will reduce the financing by devaluing the property by the estimated value of the items.  "Not only will they result in a reduction to the financing, they may even jeopardize the financing all together if not removed from the Sales Contract." says Souto, "Exceptions would be items that are customarily thought of as being part of the house like stove, refrigerator, and dishwasher."

"Sales Concessions are IPCs that take the form of non-realty items.  They include cash, furniture, automobiles, decorator allowances, moving costs, and other giveaways, as well as financing concessions that exceed Fannie Mae limits.  Consequently, the value of sales concessions must be deducted from the sales price when calculating LTV and combined LTV ratios for underwriting and eligibility purposes."

So, you want the home and the furniture too.... Just make sure you focus on buying the property first, with the help of your knowledgeable REALTOR®.  And then you can always make the seller aware of your interest and handle these negotiations separately from the real estate sale contract.

photo credit: Plage Vinilos y Decoración

Posted in Buyer Resources, Seller Resources, Real Estate Trends

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