If you have friends or family looking to buy, you might think selling your home to them might seem like the easiest way to get the deal done – I mean working with those we love should be less complicated than wheeling and dealing with a complete stranger, right? Sure, there are advantages when it comes to selling to your family members or friends. You won’t be waiting indefinitely for a potential buyer to come through and they won’t face a ridiculous bidding war. However, there are a few hiccups you might run into when selling to someone you know.
So, before you offer your house to a family member, here are four things you should consider…
#1: A deal that works for both parties
In most cases, when the seller knows the buyer, they are more likely to accept a lower offer in order to give their relative or friend a good deal. Of course, we want to make the process as easy as we can for those we care about. Offering a slight discount is completely fine, but you should not risk putting yourself in a position to lose money on the sale as this could keep you from paying off your mortgage or from having enough to put down on your next home. To avoid a situation like this, hire an appraiser to evaluate your home. And if you want to give your buyer a bit of a discount, reach out to an agent to find a sales price that works for both of you.
#2: Be careful how you navigate finances
Sellers who are cutting a deal with someone they know might be tempted to skim over the financial aspects of the sale, assuming their friend or relative will be able to qualify for a mortgage without any trouble. This might not be the best decision. If your person is unable to qualify for a loan, you will be left searching for another buyer which will add on to the time it takes to finalize the sale of your home. You should treat your family member or friend just as you would any other buyer and insist that they get pre-approved for a qualifying mortgage before you come to an agreement on an offer.
#3: Handling problems down the road
When people purchase a home from family or friends, they feel like they’ve spent enough time in the house to be confident that it is in good condition. But sometimes unexpected problems can pop up later and the buyer might be a little upset which can create turmoil in the relationship. To avoid this, work with your buyer to find a licensed home inspector to inspect your home. Be as transparent as possible about any potential problems you are aware of before you close.
#4: Be sure to disclose the relationship
Make sure that the lender is aware of the relationship between you and the buyer if you decide to go through with the sale. Typically, a lender will not deny a loan application because you and the buyer have an existing relationship, but not being upfront about it could create some problems. The Federal Housing Authority (FHA) requires applicants to complete an Identity of Interest Certification form if they have an existing relationship with a seller. Conventional mortgage applications generally ask for this as well. Failing to disclose the relationship is enough to constitute mortgage fraud which could mean the loan application is denied– and you don’t want that.
Tom Reese has 20+ years experience in helping his clients sell their homes for a price that sells and makes them a profit. Tom has helped his clients buy and sell property in every neighborhood in Northern Kentucky and Cincinnati.
About Tom Reese
Helping my clients attain their dreams has been the foundation of my success. With my strong attention to customer service, I have earned my clients continued support and referrals. Put my enthusiasm and dedication to work for you!
Call Tom anytime at (859) 393-1293