Residential loan appraisers appraise the real estate, not the furniture, not the boat at the dock, not the cars in the garage, etc.
So if you are in a transactional contract deal with a significant percentage of the Purchase Price including personal property in the contract (e.g. furniture, dishes, linens, silverware, antique furniture, portable basketball goal, portable air conditioner, free-standing unaffixed trampoline/swingset/spa/shed/pool/statute, RV, camper, boat, yacht, classic car, motorcycle, rifles, non-built in safe, hanging original paintings, Ming dynasty vase, table lamps, chairs, sofas, waterbeds, stereo merely plugged into the electrical outlet, TV’s merely plugged into the electrical outlet and cable while sitting on a shelf), you may want to only use the financing contingency without the appraisal contingency because the appraised value will never include the value of the personal property which is either listed as an inventory in the SCR310 or attachments, or attached via SCR503 Bill of Sale form.
https://www.screaltors.org/wp-content/uploads/Forms/503.pdf
SCR310 appraisal contingency allows the buyer to walk unless the seller agrees to lower the Purchase Price to the appraised value and continue to Closing under "this Contract." So if your deal has a significant percentage of personal property in the Contract, the appraised value should always come in below Purchase Price unless the Parties are transacting the real estate below market value for a variety of reasons (e.g. time, motivation to sell, the relationship between the Parties, imperfect information, questionable decisions).
Easy remedy on standard forms: Checkbox NO to the appraisal contingency. The buyer can still have the financing contingency protections.
Granted lenders may look at a high percentage of personal property as a problem since the mortgage is only secured by real property, not personal property. So the lender’s underwriting issues may hinder the loan unless the buyer has significant cash or the lender’s underwriting still works even with the collateral loan to value issues with significant personal property.
This is a potential appraisal contingency issue especially with moderately priced vacation rental properties sold furnished with a significant amount of personal property (e.g. linens, dishes, furniture, recreation items, electronics).
Posted by: Byron King on 07/31/19 (This information is only accurate as of 07/31/19. You must contact SCR for updates and changes to this information after 07/31/19 as laws and regulations may change over time. SCR 803-772-5206 or email info at screaltors.org)