Yes you can sell your home to a family member.
You can do it yourself or hire an agent to do all of the dirty work like contracts and all of the other necessities.
Selling to a family member does have its complications though. Here’s what you need to know:
Arm’s length transaction
An arm’s length transaction is when two parties, who don’t know one another, come to the purchase agreement free and independent of each other.
When you’re related to someone, the IRS does not deem the sales process as an arm’s length transaction.
Fair market value defined by the IRS: “the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.”
Let’s say you and your family member come to an agreement on a price for the home that’s lower than fair market value. You would potentially have to report this to the IRS as a gift to the buyer.
For the 2020 and 2021 tax years, the max amount you can discount the sale without reporting it as a gift to the IRS is $15,000 for individuals, and $30,000 for married couples respectively.
Steps for selling your home to a family member
- Agree on how to go about things
- Minimize confusion by identifying who is the decision maker for both the buyer and seller
2. Hire professionals
- Hire someone/people that knows how to handle this process with ease.
3. Evaluate the home
- The home needs to be compared to other similar homes around it to find the proper list price.
4. Agree on a price
5. Closing process
As you can see, the process is very similar to a normal selling transaction process. Follow these steps to successfully sell your home to a family member.
Jake Boucher is a licensed Realtor in Massachusetts working at US Realty Consultants LLC.