The Cascade Team Real Estate
1. Irregular Inclusions. During the course of their transactions, most buyers and sellers become familiar with the distinction between fixtures and personal property. Fixtures, items which are attached permanently to the property, are included in the sale - personal property items are neither attached nor included in the transaction. They are not included unless the buyer and seller expressly agree to include them, that is. Here’s a tip: if you’re not sure that something will stay after closing, write it into the contract. And sellers, if there’s something you want to make sure you can take with you, pull it out of the property before showing it or at the very least, expressly exclude it from your contract. Your agent will help.
Most often, buyers and sellers negotiate to include items (“inclusions”) that would keep the look, feel or function of the home the same as it was when the buyer first viewed it, like appliances, television screens, custom furnishings and even lawn mowers, tractors and pool equipment. On occasion, though, the negotiations turn to slightly stranger items. Many an agent has heard of or worked on a deal where one party wanted to keep - or leave - the seller’s dog. (Outrageous, I know. But you know what they say about different strokes.) I’ve also seen and heard of home sale contracts that include the tombs of the family cemetery on the grounds, or require the buyer to keep the tenants that are currently in the property. (In fact, some municipalities’ eviction control laws require that tenants be allowed to stay after sale, in some cases.)
But there’s also a lighter side of this conversation. Sellers have thrown in everything from a $1000 bar tab at the local watering hole, to another whole vacation home as a bonus to their home’s buyer.
Last year, Law and Order TV star Christopher Meloni reportedly offered his Manhattan condo for sale, offering a 2013 Porsche Panamera as a bonus if the buyer closed by a certain date. Hollywood, generally, doesn’t disappoint when it comes to weird real estate inclusions: my friend Ann Brenoff, reported a few years back that actor George Hamilton's demanded that the seller of his LA condo, who owned a famous bakery, throw in a dozen cookies every month for the year following close of escrow.
2. Life Estates. In real estate law, a life estate is a type of ownership interest or deed that is only good for the life of a particular person. For example, a wife might pass away and leave her husband a life estate in her home, then direct him to pass it to her children. Some parents even go ahead and transfer their properties to an heir before they die, retaining a life estate so that the title in the property goes directly to the heir upon their death without any other estate planning required. Issues can arise, however, given that life tenants (the person who has title until their death) are not able to sell the property and might not be able to even mortgage or make other desired changes to it.
3. The Rule Against Perpetuities. The Rule Against Perpetuities is another arcane law that prevents a property’s owner from dictating what happens to that property far into the future. Traditionally, the Rule Against Perpetuities prohibits people from creating interests in property that could possibly be activated more than 21 years after the death of a “life in being” at the time the interest was created.
It’s a bit complicated, but the long and the short is that the intention of the law is to prohibit someone from dictating and limiting what can happen with a property for many, many generations in the future. This used to be the law everywhere, but many states have eliminated it entirely, or extended the time frame to 90 years. Other courts choose to wait and see how things turn out rather than invalidating will provisions that violate this rule. In fact, the state of Florida’s stance is to wait and see - for 360 years. (No typo.)
If you have reason to want to control what happens to your property for generations to come, it behooves you to work with a seasoned, skilled estate planning attorney precisely to avoid violating this and other strange real estate rules.
4. Escalators. When the market heats up and buyers are forced into fast-paced competition with each other, escalator clauses tend to come into vogue. An escalator clause is inserted into a buyer’s offer to purchase a property, and essentially guarantees the seller that the buyer will beat any other legitimate offer by a certain dollar amount, up to some maximum price. There are a couple of challenges with escalators. First, they tend to set the scene for disputes about whether another offer was legitimate. More importantly, they tend to result in purchase prices that are not justified by the recent sales data on comparable properties - prices that are not likely to be supported on appraisal. So, both buyers and sellers in transactions with escalators should be prepared for the possibility that the property won’t appraise. Smart sellers and listing agents in these situations often will not accept a contract with an escalator unless and until the buyer agrees and proves that they can make up the difference between the purchase price and the appraisal price with their own cash.
5. Seller Contingencies. If you read much about real estate, you’ve probably seen thousands of references to the first-time buyer and the downsizing empty nester. But today’s market has created a whole new persona that is being forced to bring back a long-ignored contract clause. I call this player the Exasperated Seller/Buyer. These are folks who waited long and patiently for the market to recover so they could sell their home and move. Now that they are no longer underwater, they are concerned about selling because it’s so difficult to buy!
These folks have reintroduced the phenomenon of Seller Contingencies, contract clauses in which the seller accepts a buyer’s offer contingent upon the seller being able to find and successfully purchase their next home. The effect of a Seller Contingency is often to extend all the time frames of the contract and escrow events until the seller has secured a new home. It also allows a seller to back out of the deal entirely if they can’t find another place, and empowers the buyer to give the seller notice of their intention to back out and buy another property if the seller doesn’t move the deal forward.
The Cascade Team Real Estate