Personal Property Agreements

The revisions to the 2019 Residential Contract included changes to the sections on personal property. A new form, the Personal Property Agreement (PPA) was introduced at the same time. These revisions and the new form, have led to many questions about when and how to deal with personal property.

What has changed?

Section 2.5.4 now allows the parties to check a box to select the PPA. By selecting this option, the parties agree to enter into this separate agreement for the sale of additional personal property concurrently with the sale of the real
property.

What is the reason for the PPA?

Many lenders require that the seller and buyer exclude personal property from the sale of real estate. In the lender’s view, the loan is made based on the purchase price of the real property and personal property should be excluded. The PPA provides an approved form for brokers’ use in this situation. The sale of real estate in Colorado’s resort communities often includes the sale of valuable personal property and the PPA fulfills the need for this purpose.

When to use the PPA

Using the Contract should be the first choice. The PPA is not always required for the sale of personal property. Section 2.5.4 allows the parties to include a list of the personal property sold by attaching an exhibit to the Contract if the list of personal property is too lengthy. This method can be used in cash transactions, or when the lender has no concerns about including personal property in the Contract for the real estate. However, if the lender requires that the Contract should deal only with the sale of real property, then the PPA must be used. Finally, the parties can always choose to use the PPA from the outset.

Implications in using either the Contract or the PPA?

The answer to this question will depend on the method chosen.

If the Contract section 2.5.4 is used:

1. The purchase price will include both the real and personal property, unless the parties specify a separate price for the personal property. It is important that the seller and buyer understand this, and the brokers should not assume that this is the case.
2. The settlement statements and the Real Property Transfer Declaration will be completed in the following manner:
   1. Settlement statements for both seller and buyer – there will be no separate line item for the personal property (the purchase price includes both).
   2. The RPTD (Form TD-1000) will state that the total sales price includes real and personal property and a list of the personal property and the approximate value will be disclosed.

If the PPA is used:

1. The purchase price will cover only the sale of the real property and will exclude the purchase price of the personal property (remember that the Contract clearly states that the PPA is a separate agreement outside of the Contract).
2. The PPA will show a separate purchase price for the personal property.
3. The settlement statements and the Real Property Transfer Declaration will be completed in the following manner:
   1. Settlement statements for both seller and buyer – these statements will not refer to any consideration for the personal property. However, if the parties want the closing company to collect this additional consideration at closing, then the settlement statements will include a line item for the personal property. Many brokers may prefer to deal with this aspect outside of the closing process;
   2. The Real Property Transfer Declaration (Form TD-1000) will show only the purchase price for the real property. Because the PPA is outside of the Contract, there is no need to list the personal property sold under the PPA.