If you are thinking about selling your home to a family member, here are a few things you should consider:
- An inspection and an appraisal.
While your family members may be familiar with the house and love it as much as you do, no one wants a surprise. An inspection may reveal things you may not even know. For example, you’re not going to intentionally sell your son or daughter a house with a mold problem, but since mold tends to hide in the walls, you may not be aware the house has an issue.
As for the appraisal, you and the family member you’re selling to probably aren’t aware of what the house is worth. In this case, you may intentionally sell the house below market value because, after all, it’s family. However, you definitely don’t want to overcharge a family member.
- Your relative may have to pay a gift tax.
You may want to give your family member a break on the price of the house because it’s your gift to them, typically called a gift of equity.
It is important to review your situation with an accountant.
Selling to a family member isn’t as easy as simply handing the keys over and walking away from the house. It’s a complicated process. An experienced real estate lawyer, such as Michael Gutman, can help make the process easier.
- Preparing a contract:
Its important to have a contract to outline the agreement between the buyer and seller. The buyers mortgage company will require a contract. It’s a family matter, and you may consider the contract just a formality, however, a properly prepared contract will help the buyer and seller understand and allocate their responsibilities.