How to Sell Your Home to Family
By: Tanya Torres
Selling your home is already a complex transaction you will face in a normal sale but when you are selling your home to a relative it can become even more challenging. Selling your home to a relative means that you have to be even more cautious because of how close they are to you. It can be even more challenging because there are a lot of details that you will have to pay close attention to when selling to a relative than you would with a stranger. However, it does not mean that you cannot keep your home in your family. Here are some tips to ensure that the sale goes smoothly.
Hire a Real Estate Agent
Selling anything to a family member can be difficult because you want to give them a good deal and so do they but you also want to make back what you invested too. As a result, it is important to hire a professional to help guide you and your family members during this transaction. A professional will determine the best sale price according to its fair market value while protecting your relationship to them since everything will be handled by them. An agent will go over information that can help keep your relationship between the family members good since the agent can explain that selling at a discounted rate will raise red flags with the IRS.
Price Reduction and Gifting
If you decide to gift your home then it is important that the recipient knows that they will have to pay taxes on the gift which range from 18%- %40% of the house’s value. However, if you want to help your child by giving them your home then you and your spouse can both give your child and their spouse $15,000 each as a gift. Another way to give your child your house is to have them inherit it in the long run.
Avoid an Excessive Discount
As mentioned above, if you sell a home at a huge discounted rate then you will also have to pay the taxes for it too. You will still have to pay taxes since you are giving a portion of your home to your family member as a gift. This means that this discount will be seen as a way to avoid paying the capital gains tax and the IRS will get involved as a result of the transaction.
Set Emotions Aside
Selling your home is something that should be treated in a formal and professional way rather than an informal and casual transaction. If you treat the sale of your home as something that can be bargained for at a low rate like selling at a yard sale then you will be faced with severe consequences with the IRS even if you were not aware of the outcome. Not only do you have to stay aware of following the federal tax laws but you will need to keep your emotions in check during the sale too. You do not want to tarnish your relationship with your family member while risking getting in trouble with the IRS which is why it is important to keep your emotions out of the sale and hire a professional during this sale.
Hire an Inspector
It is important that you follow all the rules and guidelines that you would if you were selling your home to a complete stranger with your family member. You may feel as if this transaction will go smoothly and easily, but it does not mean that you should not hire an inspector. If you do not hire one and a problem arises later on after the sale happens then you will be faced with a bad relationship with that family member and most of your other family members will be upset with you too. No one wants to be taken advantage of and that is why an inspector can go over the home and protect both sides of the sale.