Furnished home for sale

[DTS]

I was watching a program on TV last night with my wife. On this program people look at 3-4 homes then they'll make an offer on one of them.

Anyway, this one home was a furnished model. Obviously, the price was higher because of this. I got to wondering how this would show up on a 1098.

Is the loan written up separately, taking into account the furnishings, therefore, no mortgage interest for this part or is it considered part of the home and land?

Hope this post makes sense. Having a hard time phrasing what I want to say.

Dennis

[Gretel]

I understand perfectly what you ask, Dennis. No answer from Montana though. Very interesting question (as though our lives are not interesting enough).

[S T]

Haven't seen it, But

Haven't seen this yet, but I am sure we might encounter one of these days, and of course as Gabriele says, we are not challenged enough already!

I would think that if the t/p purchased one of these homes, the furniture is probably included in the mortgage (total sales price) and not segregated.

So I know where you are going with your thoughts since we both just attended the OCEA class on Home Mortgage Interest.

My thoughts would be , the close of escrow documents would reflect the total purchase price (house and furnishings), and down payment (which might cover the furnishings) so mortgage then might be acquistion debt and the form 1098 would reflect the interest amount . So if amounts are within the prescribed guidelines, form 1098 amount would be deductible mortgage interest.

S

[jainen]

appraised value of the real estate

Would you make a 30 year loan on used furniture? Neither will the banks. Under FNMA rules mortgage loans are based on the appraised value of the real estate.

[DTS]

Furniture

Jainen,

How would the closing docs show the purchase of the furniture (or would they?) if the bank will not finance the loan that includes this furniture? Would it be a included in a separate sales contract?

It seems to me that this cost has to accounted for somehow, somewhere.

Dennis

[jainen]

be happy

That's what they do in business escrows, where they need to allocate the price to the various assets. The mortgage is only secured by the real estate. A separate loan or a larger down payment has to cover personal property.

It would be a very rare problem in residential. Furnishings almost never add any value to the property. That is, if they are antiques or anything significant it's better and even easier to sell the collection separately. The home buyers have their own preferences--they may accept the existing furniture as a convenience to the seller, but they won't pay extra for it. The appraiser will back them up, and everyone will be happy!

[Gary]

I bought one

It just so happens that I bought a model home from the builder. I had the option of buying the furniture and all the amenities they put in model homes, and I bought it. I had to pay cash for this part of the purchase. It was not added onto the mortgage.

gary

[DTS]

Thanks...

for the responses. Like Sandy said, I've never run across this type of transaction, either. Kind of got my mind to thinking!

Gary, it was a good thing you were there to lend your first-hand knowledge to this question!

Dennis

[Unregistered]

It is included in the mortgage, and not segregated,

here in the "sticks" where mobile homes are often sold furnished from the factory. In these instances the sale price of the home reflects the total cost, and the mortgage covers the total cost. This is common in the mobile home industry, for which I do maybe 30 -40 sch. A's for client's who own these properties every year.

JoshInNC

[DTS]

What to do now???

Well, it now looks like I would have to just look at the docs and/or call the lender to see what they loaned the money on.

Personally, I can really see doing this both ways. I guess if this situation ever comes across my desk, I'll see what I can find in the way of further research on this. Must be something definitive out there.

Might just be a crap-shoot.

Thanks,
Dennis

[Jan]

Morgage

Well, it now looks like I would have to just look at the docs and/or call the lender to see what they loaned the money on.

DTS--I don't see that it matters what they loan the money on. As long as your mortgage is a secured debt. In other words, your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender.

Generally, home mortgage interest is any interest you pay on a loan secured by your home. The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan.

What about the mortgage insurance that some people have to pay, it is included in there monthly loan payments along with interest. Is this deductible?

I'm just kicking around some ideas.

[S T]

More

Has anyone ever looked at real estate listing for sale, particularly maybe vacation home listings (that a t/p might purchase as a residence) a lot of them include the furnishings. The asking price states "includes furnishings".

Seems like the listing agent or the seller would control the segregation of real estate vs personal property, they in turn provide the instructions to escrow. I would think that there is enough down payment on the transaction, that the mortgage company would not have a concern, as long as it is within their guidelines, and as pointed out prior, the loan is secured by the residence.

Then could be another twist on this separation of real property vs personal property, in that the local State Taxing Authority would more than likely want to collect sales tax on the personal property if it was segregated. After all if you purchase furniture/furnishings at your local furniture store, you have to pay sales tax. On a business level, transfer of equipment and furniture/fixtures, this is always an item of concern for the purchaser as they have to pay sales tax on the value of the transfer.

There are specialized escrow companies that handle "business" transactions and are use to dealing with business personal property separated from business real estate, etc, and collect sales tax on business property like furniture/fixtures/equipment.

Other escrows primarily handle "straight real estate deals" mostly residential or income properties. They probably would not have an idea on how to separate out real estate from personal property and probably would not think about the collection of sales tax. Seems like the most I have ever seen on your "normal" residential transaction would be credits to the buyer for carpet allowance and some repairs, and credits for closing escrow costs.

Sandy