Selling a home can be a bit of a challenge to any inexperienced seller, but in some cases selling to a family member can alleviate some of those common headaches that come along with the whole real estate transaction thing. Even if you are an experienced home buyer or seller, sometimes selling to a friend or family member is the easiest thing to do and can result in a lot less headache.
While selling to a family member isn’t inherently any different than selling to anyone else, there are a few things you need to be aware of to keep Uncle Sam happy and protect both yourself and your “buyer” from any potential trouble. Thinking of selling to a family member? Here’s our guide for how to do it.
Financing a For Sale by Owner Home
Two things you’ll want to address early on when selling to a family member are that 1) you’re technically selling a home as an FSBO (for sale by owner) and 2) how your family member will purchase the home and for what price.
Selling a home as FSBO alleviates the problems of dealing with real estate agents which can allow you to forgo a great deal of the fees that agents tack on such as commissions. Additionally, if you choose to finance the home yourself, then you can also nix many if not all of the fees that a lender would charge you.
If you’re going the route of owner financing, no matter who you’re selling to, make sure that you have a binding legal agreement outlining the loan, the terms, and everything that goes along with it. Be sure in that document that you–in the event of default–can repossess the house so you can resell it on the open market.
Transferring the Property Title
A lot of what you pay for at the closing table deals with the legalities of buying and selling a home. Title lawyers or title companies do their due diligence to make sure that both the buyer and the seller are protected in the event that there are any stray or otherwise unforeseen liens on the house. When dealing with a family member, sometimes it’s easy to overlook these details.
For that reason, it’s important to make sure you take care of the title aspect of your home. There are lots of different ways to shape this aspect of the transaction, but it’s probably best to enlist the help of a title lawyer to make sure that nothing gets overlooked.
Gifting a Home to a Family Member
There are some perfectly legitimate reasons why you would want to gift a home to your family member instead of selling it outright, and you would be perfectly within your rights to do so, but be aware of a few things.
When it comes to gifting property–or anything tangible, really–there are Federal limits to what amounts you can gift without paying taxes. Each year, you can gift a certain amount, but be aware that there are lifetime limits on such giftings and it may be smart to parlay those over many years in order to not pay unnecessary taxes.
The Federal Tax Code is very detailed on what you can or can’t gift and in what amounts, so we definitely recommend enlisting the help of a real estate or financial professional to make sure you’re making the best, most informed decisions. When in doubt, get in touch with the mortgage experts at Tidewater Mortgage Services, Inc!