Yes, you can sell a house to a family member. Plus, you can avoid the time and money intensive process of finding a buyer. If you've ever lent money to a family member, run a business with a family member, or even shared an apartment as a roommate, you know that it's not always easy. It's hard to have frank conversations with those we love, especially when it comes to money.
One of the biggest mistakes you can make when selling your home to a family member is not getting a professional home appraisal. When you transfer title to your property, you'll want to make sure you consult a real estate lawyer. As you can see, there are nuances to each form of transfer, and which one is best depends on your specific situation and the tax implications of each one. Depending on the value of the property, one or both of you may have to pay taxes on donations or capital gains.
You can usually file the necessary documents yourself with the help of a notary, but you risk doing this incorrectly and having major problems in the future. For example, a transfer could void your title insurance, cause the full amount of your mortgage to expire immediately, or other unforeseen difficult problems. You can save a lot on potential taxes or costs by consulting a professional before venturing to sell your home to a family member. If you don't love your Clever partner agent, you can request to meet with another or shake hands and go in a different direction.
We offer this because we are confident that you will love working with a Clever Partner agent. If you are thinking of selling your home to a family member, be sure to speak with a real estate lawyer to understand the tax implications of doing so. However, if you expect to get the full value of your home despite selling it to a family member, you should consider the real possibility that you can get more for it by listing on the open market. They also hear from a friend of a friend that if you sell them your house, then they don't need to face succession when you're gone.
The IRS calculates capital gains as the difference between the price you paid for the home and the price you ultimately sold it for. Once you turn in the deed, your children can do whatever they want with the property, including the sale, without your consent. Unless they live in the home as their primary residence for two years first, when they sell the home, the original price you paid becomes the payee's tax base. You may think that selling your house to your child has no tax implications, but this is not true.
While your parents may sell you their home for a price lower than market value, that discount may be subject to inheritance and gift tax depending on the amount and your lifelong gift habits. Taxes aside, if you sell your home to your children for less than its fair market value, you could face a period of ineligibility for Medi-Cal benefits, as the transfer of the home is considered a gift. One of his children, or one of his grandchildren, heard how much money it cost to legalize the inheritance of a friend's parents and how long it took to sell the old house because of the probate court. Equally important, there could be tax implications if you sell a family member below market value.
You can pay taxes on the home's fair market value or you can transfer it to a family member for less than the fair market value and not have to pay taxes. Also, if you sell at an extreme discount, you may be subject to an inheritance and gift tax anyway. Caroline Feeney is the senior managing editor of HomeLight, where she oversees the Seller Resource Center, a blog that features hundreds of in-depth articles that address every step of the home sales process. .