Your family is growing, and it’s time to buy a larger home. Your little sister is ready to stop paying rent and buy her first home. Yours is a perfect starter home for her.
Selling your house to a family member helps you avoid a lot of complications, stress and red tape, right? Not exactly.
That “red tape” is there for a reason. Real estate transactions are complicated. If you try to take shortcuts, you could both end up paying the price later. That’s why you need to do things by the book, just as you would if you were selling your home to a complete stranger.
Don’t make this a “handshake” deal. The property sale needs to be documented in a detailed written agreement. Don’t leave out the contingencies that you’d include in an agreement with any other buyer.
Let the buyer have a third-party inspection by a professional home inspector. This is for everyone’s protection. You may think you’ve disclosed every flaw, from the leaky water heater to the uneven steps to the mysterious stain on the shower floor that won’t come out. However, inspectors know how to look for problems in parts of your home where you may have never even ventured.
Many problems found by inspectors are cosmetic or minor and don’t require fixing. Others are potentially dangerous or at least costly. It’s best that you know what they are so you can work together to determine who will pay for any needed repairs or replacements.
Don’t finance the purchase yourself. Even if you can afford to lend your loved one the money to buy the house, it’s not wise. If he or she loses a job or gets behind on other bills and doesn’t pay each month, you could be in serious financial jeopardy. What are you going to do — start foreclosure proceedings? That’s going to make for an awkward Thanksgiving.
Selling your home to a family member or close friend can help you avoid some of the more unpleasant aspects of putting your home on the market, e.g., like strangers walking through your home and endless haggling over the price. However, it’s essential to handle the transaction professionally. An experienced Florida real estate attorney can provide valuable guidance throughout the transaction.