You’re planning to put your house on the market and buy a larger one to accommodate your growing family. Then a sibling, cousin or former in-law mentions that it’s just what they’re looking for as they downsize or relocate.
That will simplify things considerably, right? Yes and no. It will save you the time and hassle of putting it on the market and having prospective buyers traipsing through. However, you don’t want to cut too many corners. A completely do-it-yourself transaction could lead to missing important details that could lead to tax and/or legal problems and leave you and your relative battling. Here are the people that need to be involved:
You want to be sure that you’re selling the home for a fair price. Even if you’ve done your homework and know what neighboring homes are selling for, having it appraised is still best. Further, if your buyer is getting a mortgage, the lender will likely require an appraisal.
A real estate agent
If you and your buyer have agreed on a price and what repairs (if any) you’ll do, you understandably don’t need or want a real estate agent taking a commission. However, you can likely get one to help you manage the process for a flat fee. If you and your relative both have agents (you for your new purchase and them for their sale), they might both agree to handle this transaction for a relatively small additional fee.
You never know when a seemingly simple real estate transaction can hit a snag. Letting your agents hash it out can keep the peace between the two of you.
When you’re selling a home to a family member, it’s a good idea to have an attorney. They can help ensure that the deal you make won’t cost you later. For example, if you give your family member too much of a price break, you could end up paying a gift tax. An attorney can also help you decide what title transfer process is best and make sure you’re not missing any documentation that will come back to haunt you.
Selling to a relative may create more problems than it solves. If you decide to do it, it’s just important to understand that it shouldn’t be a “do-it-yourself” operation.