Have you ever thought about selling a house to a family member? Here are questions you should consider before going forward with your real estate transaction.
1. Should you hire a real estate agent?
Selling a house to a family member is one of the few circumstances when it could be an acceptable plan to forego the process of hiring a real estate agent to broker the deal. If there is an agreed upon price and the condition of the house is acceptable to the buyer “as is”, then paying a real estate agent’s commission does not make sense.
However, an even seemingly straightforward real estate transaction could turn sour. So sometimes hiring an agent to help both parties through the negotiation process may make things easier, and more civil, when selling to a family member.
Agents generally work on a commission basis. If you already have an agreed-upon price, you may be able to find an agent who is willing to work for a flat fee to help facilitate the process.
2. Should you hire an appraiser?
You will need to have your home approved if your family member is seeking a mortgage, regardless if you have agreed upon a selling price. Mortgage lenders generally require appraisals to ensure that the value of the home is high enough to match the value of the mortgage.
3. Should you hire an attorney?
Experts say that one person you must hire when doing a real estate transaction with a family member is an attorney. If any legal issues arise during the sale of the home, a lawyer can provide some clarity. Additionally, a lawyer can conduct a title search to see if there are any liens on the property or if there are any zoning restrictions if your family members wish to make improvements in the future.
4. If you sell a property to a family member, do you have to pay gift tax?
Being that you are selling to a family member, you may want to give your family member a break on the price of the house, but there are tax consequences. When you sell a house to a family member at less than fair market value, it is considered a gift according to the Internal Revenue Service.
The IRS allows an individual to give up to $14,000 per year to any number of people without having to pay gift taxes. If your house’s fair market value is $14,000 or below, you would not have to pay a gift tax. However, anything over $14,000, you will have to pay a gift tax.
Have questions; interested in selling a house to a family member? Give us a call or contact us through our website.