Selling To Family
Selling to a family member is not uncommon, but it can become tricky and should be done with professional guidance. It is perfectly legal to sell to family as long as it is not being done to avoid taxes. If the home is being sold at a very discounted rate, you might have to pay an estate and gift tax, but it is very much like any other real estate transaction.
If selling to an adult child, one option is to do an owner-financed sale. Payments would be made directly to the owner instead of a bank. But it must be legally arranged in case of default.
When transferring a property title, a quitclaim deed transfers your interest in the property to your relative, but they are not protected from legal claims. A general warranty deed transfer gives all the property rights to your family member and protects from future actions against said property. A special warranty deed transfer protects the family member from any issues that might have come up when seller owned the home. There are different tax implications for each type of transfer so an attorney should be consulted before doing anything.
As for gifting a house, you can gift up to a certain amount each year to as many people as you choose without being hit with a gift tax, but you cannot go over your federal gift and estate tax exemption in your lifetime. Some people will gift a certain amount of their home each year to their family member so that it’s tax-free. However, if you gift a home to a family member, unless they live there and it’s their primary residence for two years, when they sell, the original price paid is the tax basis for the person you gave the home to.
It is always highly recommended to seek professional advice and guidance when any kind of real estate tax is involved. And we at Whippet Properties of Florida can get you to the right person!