Home sellers have a lot of work to do.They need to have their property listed and marketed. Sellers usually start preparing their home for sale while they’re looking for a new place to live. They also have to start reviewing offers and decide which one to accept.
Some home sellers choose to sell their residence to a family member. There are various reasons why this happens. It can make things a little more complicated, but the sale can still be accomplished in many cases.
Selling a home in Tennessee isn’t always easy. The entire process may not be completed for several weeks or months. There will be different people that become involved, and there may be delays or problems that can occur along the way. You should still be able to sell your home with a little patience, persistence and a proactive plan of action.
Here are a few things that home sellers can do if they intend to sell their house to a member of the family:
1. Have the home appraised.
A home appraisal should be scheduled regardless of who is buying the home. The appraiser will release a report with the fair market value of the property. That amount should be close to your asking price. If your price is set too high, potential buyers may shy away from your home and move on to other comparable houses. On the other hand, if you set your price too low, you may start fielding offers sooner than expected.
2. Set a reasonable price.
Your asking price should be reasonable, factoring in the home’s condition and value. You don’t need to raise or lower your price just because you’re planning on selling the property to a relative. You can have a little leeway, but the dollar amount that you accept shouldn’t deviate too much from your asking price.
3. Have the home inspected.
The home should also be inspected. A licensed inspector will review the interior and exterior condition of the home. They will then issue a statement with their findings. If there are significant items in need of repair or renovation, you can negotiate those items with the home buyer.
You can offer to pay for those changes, the buyer could pay for them or you could agree to split the costs between both parties. The inspection should still be scheduled even if you’re going to sell the home to a family member.
4. Avoid selling the home for less than fair market value if possible.
It may be tempting to sell your house to a family member at a price that’s below the fair market value. This may make the transaction appear to be a gift instead of a sale. If you’re going to use this approach, just keep in mind that the buyer may have to pay a federal gift tax if the house is sold for any discount that’s 25 percent or more under its current market value.
Fortunately, there are several ways to get around this. You could finance the sale yourself as the seller. This eliminates the need for a mortgage lender. It can also be more advantageous financially for the buyer. Just keep in mind that you’ll need to hold the buyer to the agreement and make sure that they don’t default on the arrangement.
You could also add the buyer’s name to the home’s title by filing a quitclaim deed. Quitclaim deeds are commonly used when people want to transfer the property quickly. However, they are rarely drafted in traditional real estate sales transactions. The buyer will probably have to take out a home equity loan in this instance so that you can be paid properly for the sale.
Another option is to sell the home to your relative at a minimal loss. You should also let the family member who is buying the home receive up to $13,000 annually until the sale amount of the home has been achieved. $13,000 is the maximum annual amount that homebuyers can receive as a tax-free gift without having to pay a gift tax.
5. Consider the tax implications of the transaction..
Home sales made between family members typically tend to draw more attention from the Internal Revenue Service. There’s more potential for people to take advantage of loopholes that may not necessarily be entirely legal in those situations.
Selling the house for a dollar amount that’s greater than the amount left on your mortgage balance and not taking a deduction on any losses incurred while selling the property can help you avoid potential tax headaches later on.
6. Consult a real estate attorney if necessary.
You may need to enlist the services of a real estate attorney when selling your house to a relative. The lawyer can help you with the title search and ensuring that you have the proper paperwork for the sale.
They can also assist you with any tax-related questions or legal concerns that you may have regarding the transaction. A good real estate attorney has years of experience and knowledge in handling these kinds of issues.
Make sure that you have everything included in writing in the purchase agreement. Read the agreement very carefully before signing it. The document should clearly spell out each party’s rights and responsibilities. All necessary disclosures and contingencies should be included so that the home buyer or seller can step away from the deal if their respective clauses aren’t met.
Transactions between family members can be complicated, especially when feelings and emotions are involved. The best thing to do is to use logic and common sense in these situations. Try not to let emotions interfere whenever possible. Remember that selling your home is a business transaction: nothing more, and nothing less.
You’ll probably sell your home to your relative before you know it. They get to make lasting memories in your former home. You can move on to the next phase of your active life in a new location.