What parents should know about selling their house to their child
A familiar face across the closing table can be disarming: When selling a home to a family member, the transaction is personal. Credit: Unsplash/©Tierra Mallorca
A familiar face across the closing table can be disarming:When selling a home to a family member, the transaction is personal.
But real estate attorneys caution against treating the sale too differently from any other transaction.
"Even though it's family, it's still a legal transaction," said Farmingdale-based attorney Rachel Cherny.
Newsday asked local lawyers what a parent should know about selling a home to an adult child.
"We find that to be one of the more enjoyable transactions, because everyone knows each other…the children are familiar with the house," said Michael Ackerman, of Muttontown-based Ackerman Law. "Sometimes it's their childhood home."
Have separate lawyers
Experts recommend the buyer and seller have their own lawyers, so that each party can speak freely and confidentially.
"You want to make sure everyone's properly protected with separate lawyers, so in the future, if there's a potential for disagreement, there were lawyers there to protect both parties," Cherny said.
This becomes an even bigger concern if the seller has multiple children, she said.
While the family members can choose to waive concerns about conflict of interest and use the same attorney, experts warn against it. Having separate lawyers allows for private conversations about sensitive topics.
"The purchaser might say, 'I love my mother and father, but I really don't want the illegal deck, and it bothers me,' " Cherny said. "And they might not be comfortable saying that to their parents."
Consult other experts, too
Professionals like an accountant and an estate attorney can help avoid complications down the road.
Some familial transactions involve a gift of equity from the parent. This can help the child afford the home, but may have consequences for the seller. An accountant can assess the situation and give advice tailored to the specific circumstance.
An estate attorney can ensure the sale does not complicate estate planning.
Think about the future
If a client has multiple children, attorney Michael Fedele, of the Melville-based Fedele Law Group, said he will usually implement a family agreement.
"You want the family all to be on the same page," Fedele said. "You don't want the parents to pass away and then two years later the siblings are arguing that the younger sibling got the home for a steal."
A family agreement outlines the terms to which the family has agreed.
"Everybody signs it, so that nobody could come after anybody after the parents pass," Fedele said.
Notice flexibility
A transaction kept within the family might offer each party more flexibility than an "arm's-length transaction," Cherny said.
Parents may choose to cover certain costs; children may choose to overlook a feature for which the homeowner does not have the proper permits.
"There's interesting ways we can work with it that is a little more friendly than in an arms-length transaction," she said.
Arielle Dollinger joined Newsday as a staff reporter in 2022. Previously, she covered local and national news as a freelancer for The New York Times, Newsday and other outlets.
