Last week's article discussed valuation concerns when a real estate contract includes furniture or other personal property being sold with a house or condominium. Today we are reviewing additional transaction costs that personal property contributes, then suggesting a few ways for it to remain in a residence without causing financing and Appraisal problems or adding unnecessary costs.
If you missed Part 1, take a look before starting today's article. Here is a direct link: Four reasons NOT to sell Florida real estate "Furnished" - Part 1 (thefloridarealestateblog.com)
State Transfer Taxes - "Doc Stamps"
Florida imposes a .7% Documentary Stamp Tax on "Documents that transfer an interest in Florida real property, such as deeds...". The term comes from the days when actual stamps were affixed to handwritten Deeds, verifying that the appropriate transfer tax had been paid.
Florida transfer tax on the signed Deed is calculated on the sale price (the consideration) exchanged between buyer and seller of a house or condo. When the sale closes, this tax is collected by the closing attorney or title company and paid to the local County Clerk who then forwards it to the Florida Department of Revenue.
Example - on the sale of a $400,000 house or condominium, Florida documentary stamp tax due is $2800.
For details, here is a direct link to the FLDOR webpage on Doc Stamps: Florida Dept. of Revenue - Documentary Stamp Tax (floridarevenue.com)
Most Florida real estate purchase contracts establish "Doc Stamps on the Deed" as a Seller closing cost, though remember that just about everything in real estate is negotiable. The important point is that the sale will NOT close (nor ownership transferred) until someone pays for State Doc Stamps.
When furniture and other personal property are included in the sale price and purchase contract, either the Buyer or Seller will unnecessarily pay real estate transfer tax (Doc Stamps) on the additional value. Even when personal property is not specifically itemized or mentioned in the contract, the higher sale price of a furniture-included deal increases the amount of transfer tax due.
Important - Nothing in this article is suggesting the avoidance of legitimately owed taxes. The intent is to help readers realize how personal property sold with real estate affects transaction costs at closing, and property taxes going forward.
Annual Property Taxes
Anyone buying a house or condo Furnished or Turnkey already knows they are paying more than if the same property was empty and Unfurnished. Whether or not there is a document itemizing, describing, and valuing the furnishings, all parties involved understand that additional consideration is being exchanged when real estate is sold Furnished or Turnkey.
With some basic adjustments, the sale price for a recent transaction becomes the new Assessed Value for that house or condo's annual property tax bill. Additional furniture value in the sale price increases the property's new Assessed Value from the County Property Appraiser's Office. When Assessed Value starts higher, it continues higher with annual taxable value and/or millage rate increases.
Higher sale price = Higher Assessed Value = Higher annual property taxes
Here's a link to an earlier article on property tax basics: Florida Property Taxes - a quick introduction for new owners (thefloridarealestateblog.com)
State Sales Tax (yes, really)
This is a 5th reason why personal property should not be included in real estate sales.
According to The Florida Department of Revenue, furniture and personal property sold with a house or condo constitute tangible personal property. As such, it is subject to State sales tax when ownership is transferred from one owner to another for "a consideration" (money).
When furniture or other personal property is mentioned in a real estate contract (or an addendum/amendment to the contract) and a monetary value is attached, it is taxable at Florida's current 6% sales tax rate. Some Counties levy an additional sales tax (surtax) on personal property which can range from .5% to 1.5%.
This means that if a contract, addendum, or amendment mentions, describes, and/or values the furnishings and personal property remaining in the house or condo, the Seller is responsible for collecting the tax due and sending it to the FLDOR.
Seller-side real estate licensees create a taxable situation when they attach written inventories of included personal property to an MLS listing, then to a sales contract as an addendum. When the attached inventory list indicates a price or monetary value, someone in the deal can be held responsible for paying State sales tax on the personal property's sale price - usually the buyer.
So...how do you address all these reasons NOT to include personal property in the sale of a house or condo...while still leaving furniture a Seller doesn't want to remove, and a Buyer might want?
Here are the basics:
Furniture is NOT part of Property Value
When the property is first offered for sale, the MLS listing and other public marketing should indicate the house or condo is offered with furnishings Negotiable, not Furnished or Turnkey. This sets the stage for a separate agreement and reinforces the asking price as being for the real estate only. Don't force potential Buyers to take the furniture by only offering the residence Furnished.
Have a Plan B ready (donation, garage sale) for when a Buyer makes an offer you like, yet insists on taking the residence Unfurnished and empty.
Do not price a house or condo to include any value for furniture and furnishings a Seller wants to leave there "for convenience". Price it based on current market conditions, property features and upgrades, and recent comparable sales.
When Buyers do want the furniture with a residence, draft an agreement in a completely separate document, NOT an addendum to the contract. In the agreement, do not refer to the property or the real estate contract. When you have questions about drafting a personal property agreement, speak with a Florida-licensed attorney.
When establishing a price (not value) for the furniture and personal property that stays, do not itemize on the separate agreement. Use an overall "bulk" price for everything. And be reasonable with the price. Unrealistically low (or high) pricing in the personal property agreement will raise questions to its validity.
There we are - a quick overview of some reasons why it is very important to keep personal property completely separate from the real estate when selling or buying a Florida house or condominium residence. Each real estate deal is unique, so there will be specific considerations and negotiations that apply to your transaction.
Before making financial or legal decisions regarding a real estate sale or purchase, speak with your tax/financial advisor and a Florida-licensed attorney.
Feel free to forward this article to anyone you'd like, and be sure to check out the All Posts page for more articles on how real estate really works in Florida.
Until next time -
Christopher Carter
Real Estate Broker Associate
Licensed Community Association Manager
Mortgage Financing Advisor NMLS 861361
Waterfront Realty Group, Inc. - Naples, FL 34103
(239) 898-5455 direct
I am NOT an attorney. For interpretation and application to specific circumstances of anything you read on my site, you must speak with a Florida-licensed attorney.
NO Artificial Intelligence software is used to produce any of my articles. All content is original.
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