Some sales agreements contain arbitration clauses. Typically these refer only to the deposit, but in some cases they may refer to other areas. Basically what they say is that if there is a disagreement, you will submit it to binding arbitration you will go along with whatever an arbitrator says. Keep in mind that you could be giving up significant rights if you sign an arbitration agreement. If the seller refuses to go through with the deal after you’ve made all sorts of commitments (from accepting a new job, to putting your kids in a new school, to moving across the country) you’re likely to be quite upset. You might want the right to sue for damages. However, you could lose the option of suing the seller for damages or specific performance (forcing them to sell to you) by signing this clause. (On the other hand, the sellers could be giving up the same rights, meaning that you could be avoiding the risk of being sued.) It’s a good idea to ask your attorney about this clause. If you agree to arbitration, just remember that for it to be effective, both you (the buyer) and the seller have to agree. If just one agrees, it won’t work. Also, be sure you know who the arbitrator will be. Many arbitration clauses specify that the arbitrator will be a member of the American Arbitration Association (local members are listed in the yellow pages of your phone article). This is fine, since such members are skilled at arbitration. But they are also quite expensive. It really doesn’t make much sense to use an arbitrator when his or her fee may exceed the worth of the item being arbitrated.

Do I Understand Prorations? Typically there are always some items that are “prorated,” such as taxes, fire insurance, or interest on a mortgage you might be assuming. This means they are adjusted based on who owes them.

For example, a fire insurance policy is typically written and paid for at least one year in advance. However, the house may be sold after the policy has been in effect for only three months. You, the buyer, may be taking over the policy. In this case the seller will undoubtedly want to “prorate” the cost of the insurance policy. In other words, you would pay the seller back for the nine months you are going to be using the policy. The same applies to prepaid taxes or taxes that are due. Adjustments are made in your favor or the seller’s favor, depending on when payment was made and what the date of proration is. There are usually only two questions with regard to proration: what will be prorated and on what date? Typically all items that are affected by time are prorated. Usually the proration date is the close of escrow.

Should I Write in Personal Property That Goes with the Sale? When you purchase a home, you are basically buying “real property.” Loosely defined, real property is the land, the house, and anything that’s permanently attached to it. For example, the windows in the house are real property. Personal property, on the other hand, is everything else. Furniture is personal property, as are dishes, clothes, and most things that you can take with you. For most things the definition of what’s personal and what’s real property is easily grasped and readily agreed to. However, in some circumstances the line between personal and real becomes very fine, and that’s when you can run into trouble. For example, wall-to-wall carpeting that is tacked down is normally considered real property it’s permanently attached to the house. But what about a rug that is thrown over the floor and not attached? Normally, it would be considered personal property. Drapes that are hung on rods are usually considered personal property, if you can take them off without in any way damaging the house. But the rods that hold the drapes and that are affixed by screws into the walls of the house may be considered real property. Can you see where problems could arise? You see a house and you fall in love with it. It is completely carpeted with throw rugs and drapes. You buy it. But on your final walk-through, all the carpeting is gone, as are the drapes. What happened? Why, the seller remarks innocently, those were my personal property and I took them along with the furniture. Is the seller allowed to do that? Probably, if the items weren’t permanently attached and if no mention of them was made in the sales agreement. Don’t assume anything when it comes to items such as rugs, drapes, and even appliances. (Yes, appliances! Most so-called builtin stoves and ovens just pull out and unplug. Unless they are included in a sales agreement, a seller may feel they are personal property too!) Assume they are personal property unless you are specifically told they are not. It is because of the confusion between personal and real property that today most sales agreements include a clause which states that all appliances, wall coverings, and floor coverings are included with the purchase, “except______,” and a space is left to write in any exceptions. Aseparate clause may include all appliances and light fixtures. Look for these clauses in the sales agreement, and if they are not there, ask your agent and/or attorney why they are not.

What should be fairly obvious is that the distinction between personal and real property has many gray areas. Sometimes you can take advantage of these in-between spots. For example, you look at a house and you are impressed with the kitchen. It has had a makeover and is truly beautiful. There are impressive oak cabinets and a special wall cabinet into which a large two-door refrigerator fits perfectly. You ask about the refrigerator and are told that it, of course, is the personal property of the seller. It’s not included in the sale. But, you think to yourself, where in the world am I ever going to find another refrigerator to fit so perfectly in there? Isn’t it a shame that it doesn’t go with the house.Well, of course, you can make it go with the house. When you write up your offer to purchase, indicate that one of the conditions of sale is that the refrigerator goes with the house. No refrigerator, no deal. Will the sellers accept? It depends on how anxious they are to sell. If you’re the first serious buyer to come along in months, they’ll probably grab it.