Selling A House To A Family Member
Posted on: 8 November 2017
Selling a house to a family member is much different from gifting a house to a family member. If you aren't careful, you can fall out with your loved one or lose money on the sale. Therefore, if you want to sell your house to a relative, keep the following advice in mind to enjoy a successful sale and avoid alienating your relative:
Decide Whether to Handle It like Any Other Sale
The first thing is to decide whether you want to handle the sale like any other sale or you want to make concessions for the sake of your relationship with your family member. This may seem trivial, but it is actually an important issue with the potential to prevent future controversies.
For example, what if you receive a bid that is much higher than your relative's offer and the higher bid is also from a motivated seller? You may find yourself in a family war if your loved one expects you to give them a discount while you want to treat the sale just like any other sale. Both you and your relative should be on the same page from the beginning.
Make Sure It Is Inspected By a Professional
Whether or not you have relaxed the terms of the sale for your relative, it's still advisable to have the house inspected by a professional house inspector. The inspection is necessary because neither of you knows everything about the house in question. It is only the inspector who can unearth hidden defects on the property. For example, an inspection can discover early signs of foundation issues that neither of you may be able to detect. This will allow you to negotiate with facts at hand.
Think Twice About a Steep Discount
Lastly, it's understandable that you will want to give your relative a discount, but there is a real danger in making the discount too steep. For one, selling the house at less than a fair market value could trigger an audit to confirm the valuation. Alternatively, the IRS could treat the sale as a gift from you to your relative, and she will need to pay gift taxes on the difference between the fair market value and the actual sale price. Even if that doesn't happen, and the relative ends up selling the house after a few years, they will have to pay a steep capital gains tax on the sale. Therefore, consult a tax professional before giving your relative a steep discount.
Contact your local real estate agent services for more information and assistance.
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