Selling a Home To A Family Member
Make sure it’s Mutually Beneficial!
When selling a home to a family member, it is important to make sure that the deal is mutually beneficial. You want to protect yourself from taxes and the paperwork issues down the line. You also want to ensure that the family member gets as much value out of their purchase as possible.
A good way to do this is by setting up an escrow account for the purchase. The money goes into an account then when the transaction has been completed, the money will be released. This way, you can be sure that when they take possession of your property, they'll have enough money in hand to complete the sale and so do you.
Most all homes are sold using a title/escrow company, Scott can help you navigate the paperwork and help you deal with the escrow company.
Helping a family member buy a home
Helping a family member buy a home can be a rewarding and satisfying experience. And, if they are not able to afford to buy on your own, it's good to know the risks involved in co-signing for a mortgage.
Co-signing a mortgage is a good idea if the person can't afford to purchase a home or needs help with the down payment. It should not be used as an emergency fund for someone that has no intention of paying off their debt. Co-signing on a loan is putting yourself at risk and you are only helping them by enabling them to buy something that they could not normally afford on their own.
There are many risks involved when co-signing for a mortgage. One of the main risks is financial: co-signer may be legally responsible if borrower defaults on the loan. Another risk is social: co-signer may find themselves in uncomfortable conversations with friends, family members, and acquaintances who are in debt because of borrower’s inability to repay the loan.
Your Not Helping!
Are you helping someone buy a home, that cannot get a loan?
There are many reasons that someone may not qualify for a loan. For example, they may have too much debt, bad credit or they are self-employed. If you are trying to help someone buy a home but cannot get a loan, there is a solution. They can increase their down payment instead so that the lender will approve them.
If a family member can’t get a loan because of there debt to income is not good. Don’t help your family member bury themselves in more debt. Unless your willing to take over the payments at some point.
Selling a Home to a Family Member
It is important that you first have an honest discussion with the family member you are considering buying the home from. You may need to have this conversation in person or over the phone.
There are a variety of things to consider when selling a home to a family member. The most important question is "Is this the right decision?" Sellers should also consider whether the property is suitable for the prospective buyer and if they would accept any conditions that have been put on it.
Selling a home to a family member is not always an easy task, but it can be easier by following these steps.
1) Discuss with the family member what they want out of this deal and why they want to sell their home to you.
2) Determine if it makes sense for you financially to buy their home and how much it will cost you in terms of time and effort.
3) Determine how much money the family member needs for their new place, including expenses like furniture, moving costs, closing expenses, etc., as well as any other costs they will need help with.
One of the most common, and unusual, challenges a real estate professional faces is selling a home to family members. Though we are told that some families are so close, there’s never any conflict, there are many situations where it’s not so simple.
It’s always best to ask the question up front: What if you don’t get along with the person you’re selling your home to? If this is not a good fit for either party, then it will become an even more difficult process.
The first thing to do when considering who to sell your home to is evaluating their financial situation. If they have plenty of money to afford the home, and can put down the down payment of the home when the time comes, then that might be a better option for you.
Having a professional help you
When selling to a family member you can both save some money, and the person selling can save on the real estate professional fees they would normally spend when listing the home.
Most real estate professionals will help you with the process for a flat fee. They can do this without charging you the full 6 percent, Because they are not getting professional photos, and spending money on marketing.
In general, it is in your best interest to avoid any discussion about who pays or what fees are associated with buying a house. Let your real estate agent take care of this discussion.
One of the biggest reasons to use a real estate professional like Scott Schulte, is he can help you with the pricing of the home. Before a seller makes the decision to sell to any buyer, they need to know where the home lands for market value. Having Scott do a CMA Comparative Market analysis before you come to a final number can really help both parties understand the market based on the actual condition of the home.
Getting your home value starts with our simple Home Valuation Tool.
Homeowners can use a tool that takes into account a variety of criteria to get their home's value. This should never be used to get a final number, but this will give you an idea of what is going on in the area.
The tool is available for anyone in Arizona.
This tool will help you get an estimate of your home’s value and it also provides valuable information about recent sales and active homes listed in your area, and its relative worth in comparison to other homes in the area.
Selling a Home Less Than Market Value To A Family Member
People often put their homes up for sale to live in a smaller place, to downsize. But if you can't afford the upkeep of your home, why not gift it to your kids or sell it to them for less than it is worth?
If you want to give your home to someone, or you simply don't want it anymore, there are a few ways that you can make this happen. You can sell the property for a lot less than what it is worth, and then give the equity as a gift. You must talk this over with your CPA - an accountant who knows about taxes and estate planning. Do not do this without talking to your CPA!
Check out Selling A Home For Cash (In 2021)
Bottom Line:
Being generous and helping family is always going to feel good, until you get a tax bill. Please if you take anything away from this post, use a professional CPA prior to going through with selling to a family member. And Scott is always here to help if you need with the paperwork and help managing the sale.
Also another good read: Selling a Home Costs
Photo by: Andreas Wohlfahrt
