Does that Come with the House? What’s Actually Included.

When buying a home, people typically make certain assumptions regarding the items in the house that are included with the property.

Photo of kitchen with large center island overloooking dining area and family room with stone fireplace

As a buyer you would expect that the seller would leave the pendant lights, window blinds and fireplace insert.

In the same vein, sellers make assumptions on what they will take with them. Of course, the seller’s sofa and dishware will go, but there are other items that are not as obvious. It’s imperative that this is all spelled out in the purchase contract. There is a default list in the contract and if this is not revised, then a seller could risk losing the chandelier that has been in the family for generations or a buyer could expect to find a center island in the kitchen only to learn that it was on wheels and not fixed, and was removed from the property. It’s best for buyers and sellers to be as thoughtful and comprehensive as possible about included and excluded items to avoid any dispute at the close of escrow. Otherwise, you could be in a lawsuit over a fountain in the driveway that the sellers wheeled away and the buyers thought was part of the purchase. (True story.)

What the Contract Says is Included & Excluded

Included items and excluded items are addressed in the Residential Purchase Agreement (RPA) in paragraphs 8B and 8C, respectively.

Paragraph 8B: Items Included In Sale

The included items are the typical fixtures that are installed or “fixed”, lending to the expectation that they will stay with the property: kitchen cabinets, bathroom sinks, lawn. There are other items included in this paragraph that are deeemed fixed that have been debated over whether they are fixtures or not including light fixtures, shutters, fountains, curtain rods, garage door openers, gas logs/grates, security systems/alarms. If a seller wants to keep any such items, he or she needs to state so explicity in paragraph 8B otherwise they are to stay with the property.

Paragraph 8C: Items Excluded From Sale

And alternatively, if a buyer wants to include anything that is personal property, he or she must list it in Paragraph B(3). Specificty is key. Identify the item, the make/model if applicable, color, the room it’s in, etc. There are easy to use checkboxes for items that are techincally personal property but are often included with the property, i.e. stoves, refrigerators, and washer/dryers.

Additional Items to Consider

In recent years another category has become more prevalent and has the potential to cause some friction between buyers and sellers if not clarified in the contract: home automation systems, i.e. security cameras and doorbells, electronics that automate lighting and air control. The “brain” of such systems has to remain with the property as well as the parts, but the controllers are only left behind if they are exclusively used for that purpose. For example, if your phone has an app that controls the automation, you do not leave your phone, but if a tablet is posted by the front door to manage the automations, then that tablet stays.

Like everything else in the purchase contract, the more explicit you are up front, the smoother the transaction will go. Leaving items up in the air to deal with while you are in escrow is never ideal and by that point you may longer have any leverage to get what you want.

The Truth About Arbitration in Real Estate

If you ever made an offer on a property in California, you have read an Arbitration Clause. This clause only becomes a part of the contract if both buyer and seller agree to it, meaning they both initial the clause in the contract. And more than likely your agent told you to agree to it because “everyone does” or “it’s better than court” or for no reason at all. Well, agreeing to Arbitration may not be the right decision for you. Let me break it down for you.

Before You Get to Arbitration There’s Mediation

If a dispute arises in a real estate transaction over more than $10,000, buyers and sellers in California are required to go to mediation. Mediation is designed for both parties to find a compromise. You may find yourself in a situation where you don’t believe you should compromise. It doesn’t matter — you have to go to mediation. However, as long as you show up to mediation, you have met your contractual obligation. You aren’t required to come to a meeting of the minds. (If the value in question is less than $10,000, you would go to small claims court which is a lot cheaper and expedient.)

Next Step Arbitration

Assuming you have tried Mediation or you showed up for Mediation and promptly left, then your next step is Arbitration if you have agreed to it. Arbitration is voluntary but the decision is binding.

Advantages of Arbitration over Court

1. Your case will be heard faster.
2. The case will be resolved more quickly.
3. It will cost less.

Disadvantages of Arbitration

1. You don’t get a jury trial. If you go to court, your case will be heard by a jury of your peers.
2. There is no appeal process; the decision is binding.
3. Although it’s cheaper than court, you have to pay for it in a shorter amount of time while court & lawyer fees are spread out over
a longer period of time.

When I explain this to my clients, they typically don’t sign the Arbitration clauses. They understand that it’s still an option later on. But if a seller is dead set on it, then it can be agreed to in a counter offer. I will say that I’ve never had an client who’s an attorney that was willing to sign an Arbitration clause. And for that matter, the E&O insurance companies typically don’t want Brokers to sign these clauses in listing agreements, because they want to leave their options open.

It’s always a good idea to ask legal counsel if you are unsure of what to do.

Real Estate Advice: The Arbitration Clause in the RPA

Buyers signing an arbitration clause in a real estate contract

Signing the residential purchase contract.

To Sign or Not to Sign the Arbitration Clause in the Residential Purchase Contract

The Arbitration Clause in the Residential Purchase Contract (RPA) in Southern California is the only section of the contract that may not be agreed upon by buyer and seller and yet you still have a fully executed contract. Most buyers’ agents tell their clients to sign this clause without fully understanding it, and without fully explaining it.

The Arbitration Clause comes into effect if buyer and seller have a dispute, and mediation does not work. Mediation is compulsory, but not binding. This mean that if there’s a dispute between buyer and seller, they must go to Mediation. However if they don’t like the result, they don’t have to adhere to it. Arbitration, on the other hand, is voluntary but the decision is binding. There is no jury in an Arbitration, and you can’t appeal a decision. The upsides are that it’s much faster and much less expensive than going to court.

What a lot of agents don’t tell their clients is that you don’t have to agree to Arbitration at the time you sign the offer. Both parties can always decide to go to Arbitration at a later date even if the clause is not signed. In fact, my broker, RE/MAX Estate Properties has been instructed by our E&O insurance company not to sign the Arbitration Clause in a listing agreement for this very reason. The E&O company wants the flexibility to decide at a later date if there’s a dispute between the Broker and a seller.

Many agents go on auto-pilot when it comes time to sign the contract. They see a blank line for a signature and they assume it needs a signature. Make sure to ask your agent more questions. Ultimately the decision is up to you, but your agent should be giving you the information to help you make these decisions.