Should You Ever Buy or Sell Property to a Friend or Relative?
- Forget about marketing
- Better the person you know
- Consider the family discount
Friends and family can be seen as life’s most precious treasures.
Where would you be without your parents or even your siblings?
You probably have a few close friends that you can count on in times of need as well.
These relationships are necessary and as they form you create an unbreakable bond with the people involved. However, many people have said that, no matter how much they might care for them, friends and family should not be mixed with finances or business – including property.
Involving your family or friends with property transactions can go one of two ways: it can either enrich the experience for you, saving you time and money, but it can also cost you time and money along the way, in a more negative sense.
People who know you very well often take the relationship you have with them for granted and the familiarity can lead to contempt, as the saying goes.
Buying property from or selling property to family and friends is something that has to be considered by both parties involved and both parties must be on the same page before signing on the dotted line.
Consider the following points:
Forget about marketing
It is true that when you sell to family or friends, you don’t have to market the house at all.
What beats knowing someone who would love to live in your house and who is willing to buy it?
The pros are that it takes a huge chunk of stress out of the house-hunting process, but the con is that any type of hiccup might sour the relationship you have with your friend or family member.
Make sure that you cover all the bases if you decide to take the plunge.
Better the person you know
Instead of getting to know a strange buyer, you are selling to someone that you love and care for, and most importantly, someone that you know.
You already have a level of trust when it comes to the potential buyer of your property. The pro here is that you are starting from a position of strength rather than building trust from the start.
However, one of the cons is that a huge transaction like this can put strain on the relationship, especially if things are not communicated clearly.
Keep it professional and make sure that everything is put in writing.
Consider the family discount
As a seller, it might be tempting to help out a nephew or a friend that might be struggling to buy their first house. They will be extremely grateful if you were to lower the price of the house.
The pro here is that if you are in a position to help friends and family out, you can. We all want what is best for our loved ones.
But when it comes to tax the Receiver might see the difference in home value and asking price and ask Donation Tax that you have to pay.
Try to ensure that both parties are informed about the process and that there is an agreement from both sides. Consider all the options that you have before you make the decision.