The Non-Realty Items Addendum is a form issued by the Texas Real Estate Commission that can be added onto a real estate contract and is used to purchase other items (personal property) along with the home. It’s not a terribly complicated form, but it is important to know how to use and some of the pitfalls involved in using it. The basic use of the Non-Realty Items Addendum is to add items to the purchase that are not considered part of the accessories or improvements of the home, such as refrigerators, washers, dryers, and furniture just to name a few. These so-called non-realty items are often “purchased” with the home via this addendum and considered part of the entire sale. There are a few things of note with this form though, so we encourage you not to be tricked by its seemingly simplistic appearance.
The Non-Realty Items Addendum
A. For an additional sum of $_______ and other good and valuable consideration, Seller shall convey to Buyer at closing the following personal property (specify each item carefully, include description, model numbers, serial numbers, location, and other information): _____________________
The heart of the Non-Realty Items Addendum, this section asks for two things – a monetary value that will be exchanged for the goods and a list of the goods themselves. The more specific you are about the items in question, the better. If you just say “refrigerator,” it could be argued that you mean any old refrigerator, not the shiny brand new stainless steel deluxe model in the kitchen you were referring to. The monetary value also comes up a lot in legal discussions – it has been common practice for a long time to put a value of zero in the blank, but most legal theories say that this does not pass the “good and valuable consideration” test – in other words, you need to give something to get something. There is an issue with putting a value to the items as well, but we’ll get to that in a minute.
B. Seller represents and warrants that Seller owns the personal property described in Paragraph A free and clear of all encumbrances.
C. Seller does not warrant or guarantee the condition or future performance of the personal property conveyed by this document.
These two items are pretty straight forward. They are just assuring that the seller actually owns the property free and clear and state that the seller is not held responsible if the items don’t work in the future.
A Word About Exchanging Goods for Money
The Non-Realty Items Addendum is quite common in its use, but not without some controversy. The problem is that by making it part of the contract, you are now including personal property (known as chattel, which is defined as “an item of property other than real estate”) in the purchase of the house and if a lender is financing the purchase of the home, many underwriters do not want to see a form like this. Why? Because the lender is only supposed to be loaning you money to buy a house and not any personal property along with it. Their reasoning is that if you add items to the purchase, they are technically financing the purchase of those items. Many lenders these days will tell you to remove a Non-Realty Items Addendum if they see one and many lenders encourage buyers and sellers to arrange the sale of any personal property through a private bill of sale. This way, the lender is not financing that purchase and it keeps the underwriters happy.
image courtesy of Liamfm . – it has absolutely nothing to do with the post, but we thought it looked like a fun photo