Your home is a super personal possession and letting it go can be very difficult sometimes. The walls of your home after many years ooze with memories of the past, both up and down. A simpler way to let go is to sell the home to a family member.
This way the home isn’t totally out of your life and you still have the chance to visit and experience the home you love even if it’s now owned by someone else. What are the first steps in selling your home to a family member?
Get A Lawyer
You don’t want to make any assumptions and just hope that things never go sour between you and the family member. You should take standard precautions always so that if tensions do arise they aren’t increased by feelings of being cheated. It’s great to have someone there to make sure you aren’t missing any tax payments and to witness the signing of legal documents. Having a lawyer there really just ensures a smooth process.
Get An Appraisal
Get a solid appraisal of the home so that you know what to aim for when setting a price. This also lets you know what repairs need to be made so that you don’t hand over a lemon. You probably want to give your family member a great deal but nothing too good that you’d be losing.
If you sell your home at 25% less than market value then the family member you’re selling it to might have to pay a substantial “gift tax”. The IRS is clever but you can also be more clever.
1. Sell at a Loss
You can still allow the relative credit of the maximum legal tax-free gift of around $13,000 each year until you pay the mortgage off.
2. “Quitclaim Deed”
Quitclaim deeds are done to add the buyer’s name to the title of the home. These types of deeds are the frankest way to give property but typically when it doesn’t involve money.
3. Use Seller Financing
While only about 10% of people who sell their home become the lender, this choice does cut out the representative for family members and can mean excellent rates and terms for the buyer.
What about other taxes? This is where the lawyer comes back in. Be sure they are doing their due diligence and making sure that you are doing all the taxes necessary so that you don’t have to worry about it later.
A New Owner
When it comes to selling to a relative, however you decide to go about doing it, you now have owners you can trust. You’re also able to keep a home in the family so that new memories can be created there.