![]() ![]() Then, we’re all happy.’”ĭo: Plan for the buyer’s home inspection and appraisal “The seller may say, ‘I’ll give you 2% off because I’m getting 2% off on the commission. ![]() “I find sellers are willing to discount to the level that they’re not paying it to a realtor,” says Kaminsky. Over the years, Kaminsky has seen sellers reconcile their need to help a friend and receive a fair sales price in creative ways. Otherwise, recognize that price could be a point of contention and tricky to negotiate with a friend. If you’re certain that you won’t have any regrets about offering a discount, then there is nothing wrong with that, and you should be sure to file the correct paperwork regarding the gift of equity if applicable. Not to mention, selling a house comes with its own expenses, including settlement fees, attorney fees, and transfer taxes. A home is often a person’s most valuable asset. But selling below market value is not a decision to be taken lightly. It’s human nature to want to help a friend. It’s also advisable to get a home appraisal for an official record of what your home was worth when you sold it to a friend. The CMA gets more detailed than an online estimate and is able to account for nuances like recent upgrades, curb appeal, and issues like road noise. A CMA looks at the sale prices of nearby homes with similar characteristics to yours, then makes dollar adjustments based on competitive differences to provide a pricing recommendation. If you hire a real estate agent, they will include a comparative market analysis (CMA) as part of their services. Get Estimate Use other tools like a CMA and appraisal That way, you can provide documentation to your tax advisor to determine if you made a gift of equity to your friend. So, it’s best to determine how much the home is worth, either through a real estate agent’s comparative market analysis or, more formally, by having it professionally appraised. Gift amounts that eventually exceed the exclusion threshold of $12.06 million are taxed at a rate of anywhere from 18%-40%. If the gift amount exceeds that guideline, it must be reported so that it can be subtracted from your lifetime exemption limit of $12.06 million in gifts. They may be subject to heightened scrutiny and trigger a tax event for either party.įor example, if you offer your friend a discount on your home – intentionally or not – it may be considered a “gift of equity” subject to gift taxes.Īs outlined in IRS Publication 709, you can generally give up to $16,000 in value to as many people as you want - or $32,000 if married and filing jointly - without having to report those gifts to the IRS. Non-arm’s-length transactions are legal but can create a higher risk of fraud and require correct tax allocation. (This is in contrast to an arm’s-length transaction, where the parties doing business are unaffiliated and acting in their own self-interest.) Selling a house to a friend is an example of a non-arm’s length transaction, an arrangement that may lead the parties to make an agreement that diverges from typical market terms. “They help clients save money by representing both sides and a pre-arranged discount.”ĭo: Consider the tax implications of selling below market value ![]() “Good agents who understand their dual fiduciary responsibility to both clients can walk that line very effectively,” Kaminsky says. While the seller and the buyer can each engage their own agent, some states allow one agent to represent both parties. Kaminsky says that for a transaction among friends, he’s amenable to discussing a commission discount or even a flat fee.Īn agent won’t need to offer their full level of service to include yard signs, digital marketing, and professional photography, but they can act as a neutral go-between to prevent strain or awkwardness during negotiations.Īn agent can also help you determine the fair market value of the home or find an appraiser so you don’t unintentionally sell your property at a discount. “If you don’t have professionals involved, you can make a mistake that could cost you later.” “It’s always tougher to negotiate with a friend,” says Edward Kaminsky, a top real estate agent in Los Angeles County. But it’s the moment when your friend asks if you’ll throw in the furniture as part of the deal or lower the price just a little more that you might be glad to have an agent to communicate on your behalf. If you’re wondering, “Can I sell my house to my friend without a realtor?,” the short answer is yes. Hiring a real estate agent is not compulsory when you sell a house to a friend. ![]()
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