You may ask, how do you sell a home to a family member? Selling your home without an experienced real estate agent can be risky. Oh, it sounds easy. You agree on a price and a date to transfer ownership, then complete the sale, right? While there are several factors to consider, you can absolutely do this successfully. Just be sure to consider the following potential issues.
- #1 Price Your Home Correctly
- #2 Get an Appraisal on the Property
- #3 Determine what paperwork you will use
- #4 Should the Buyer Get A Loan?
- #5 Should A Seller Finance the Relative’s Home Purchase?
- #6 Should the Buyer get a Home Inspection?’
- #7 Should a Buyer Get A Termite Inspection?
- #8 Do You Need A Home Warranty?
- #9 Strained Family Relationships
- #10 What If the Home Doesn’t Appraise at Contract Price
- #11 Use a Title Company
- #12 Does The Seller Need to Provide Seller Disclosures in Arizona?
- #13 What is a Lead-Based Paint Disclosure?
- #14 Phoenix Homes on the Market in the last 7 days
- $250,000 – $350,000
#1 Price Your Home Correctly
A seller normally sets a price, the buyer then makes an offer and if necessary, buyers and sellers negotiate to arrive at an agreeable sales price. The challenge you may run into is finding a price agreeable to the buyer and seller. Typically the real estate agent will look for comparable sales in your area and comparable homes actively for sale. The real estate professional will compare the properties and adjust based on the condition of a house and location. A home of similar size near you may be worth much more due to updates to the property. It could be worth much less because you have updated your house and they haven’t. You and the seller may not agree on the value of updates (or the lack of them).
#2 Get an Appraisal on the Property
Consider paying an appraiser to do a professional appraisal on your house. Appraisers are experts in pricing homes, taking into account the current market value. The appraiser is an independent third party to no attachment to the sale. Additionally, appraisers appraise dozens of houses each month so they will add value for a 3 car garage, a swimming pool, golf course lot or other special feature of the home.
#3 Determine what paperwork you will use
Decide what documentation you will use to state the agreed upon sales price, closing date, and what, if any other furniture or appliances also will be part of the sale. You will want to have the legal sellers and legal buyers to sign the documents. Title companies in Arizona will often provide an information packer for a For Sale By Owner to use in this type of transaction.
#4 Should the Buyer Get A Loan?
A buyer can get a loan to purchase a home not being sold through a real estate agent. The lender will want a copy of the purchase contract and will ask the buyer for all the same information as they would for a real estate agent purchase. The buyer should ask the lender for a letter stating the type of loan they are obtaining. A lender can also provide a pre-qualification letter for the seller. A wise seller will want proof the buyer can complete the purchase. Even if the buyer is family, it is prudent to confirm the buyer can obtain a loan and the lender can fund the sale by the sale date agreed to buy the buyer and seller.
When buying and selling a home don’t forget to transfer the utilities. CLICK HERE for a complete utility list.
#5 Should A Seller Finance the Relative’s Home Purchase?
Sellers can certainly finance the loan for the buyer. Again, this needs to be documented. The buyer and seller should agree on the interest rate and payment due date. A wise seller should also document the payment of late fees. Sellers should also document what happens if the buyer does not make the payments. In Arizona, standard public loans state a bank can foreclose on a property if no payment is made for 6 months.
At 90 days of no payment, the banks issue a “notice of default”. This puts the homeowner on notice that they are 90 days late and in 90 more days, they will foreclose on the property. The borrowers can bring the loan current day before the end of the 90 days.
Sellers should be sure they are willing to make difficult decisions should a family member default on the loan. The terms and conditions you put in the purchase contract will ensure if a buyer (family member) doesn’t honor their loan commitment, the seller has appropriate legal recourse.
#6 Should the Buyer get a Home Inspection?’
Buyers of a relative’s property should definitely get a home inspection! Often on the home inspection, problems are identified that the seller was not aware of. For instance, most of us do not go on our roofs in Arizona and inspect the tile and mortar caps. Buyers of a relative’s home will probably not look under every sink, check for water drainage in all sinks and tubs or laundry rooms. A home inspector is a neutral third party who looks at the main aspects of the home during a standard home inspection
In Arizona, home inspectors are required to be licensed by the state. Home inspectors follow w set process to inspect a house, attic, roof, sprinkler and other systems. The buyer can review the report and decide if they want to ask the seller to make repairs. At a minimum, the buyer should be aware of any issues in the house and can proceed accordingly.
#7 Should a Buyer Get A Termite Inspection?
In Arizona, we have a saying. Homes either have had termite or will have termites. Termites in the Phoenix area are typically subterranean termites. They move slowly and live in the ground. Often the first indicator of termites is the termite tube on the stem wall of the house. Termites build “tubs” from the ground into the house. Termites need to have moisture hence the tubes they build. Any home buyer in the Phoenix Metro area should have a termite inspection. If termites are detected, the house needs to be treated for termites.
#8 Do You Need A Home Warranty?
Buyers should consider asking the seller to pay for a home warranty. This is a warranty that covers the first year in the home. Should appliances, the water heater, AC unit, or pool have repairs, the home warranty can offset the expense of a major repair for the homeowner. Most real estate agent involved in a purchase transaction will request a home warranty paid for by the seller for the home buyer.
#9 Strained Family Relationships
Could a family sale strain family relations/? What if a buyer doesn’t get a home inspection, and subsequently finds a problem with the house? Could sparks fly between the seller and buyer/? Will the buyer think the seller was not honest with all the information on the house?
Will the seller have feelings hurt because they may not have been aware of a problem? Families need to decide if they can withstand any housing issues that may surface from a family transaction. Buyers and seller need to consider the family dynamics that could plague them for years.
#10 What If the Home Doesn’t Appraise at Contract Price
What if the buyer is getting a traditional loan and the property doesn’t meet the appraised price? As with any home purchase, the seller will need to agree to drop the price. Or, the buyer can pay a bit more for the house and bring in more down payment. OR the buyer can walk away from the transaction. What happens to family dynamics when this happens? Again you don’t have a buyer and seller willing to be flexible in a transaction who knows what long term impact there will be on family relationships.
#11 Use a Title Company
You will definitely want to use a title company, which is a neutral third party to hold the earnest money, receive the buyer’s loan and pay off taxes or loans accordingly to the particular situation. The title company will also run a title report to ensure there are no liens on the property. Maybe your relative didn’t intentionally mislead you regarding what they owe on the property, but buyers should protect themselves against any risky situation.
#12 Does The Seller Need to Provide Seller Disclosures in Arizona?
Sellers in Arizona are required to tell buyers specific information about the property and the property condition. A seller must disclose important information that would affect the buyer’s decision to purchase a property or the price paid for the property. (This requirement is a legal requirement in Arizona as a result of state statutes and court cases). Sellers usually complete a seller’s disclosure statement. When transactions use real estate agents, they require the seller to complete a Seller Property Disclosure Statement (SPDS). Today, this is an eight-page document. A real estate agent will require a buyer to sign the document as proof of receipt. Buyers who sign the document are not agreeing or disagreeing with the document, just providing proof they were given the document.
#13 What is a Lead-Based Paint Disclosure?
Arizona law requires a buyer to be notified that properties built before 1978 may contain lead-based paint. Transactions involving a real estate agent require the buyer, buyer’s agent, the seller, and the seller’s agent to sign this document. This ensures buyers are aware of the potential lead-based paint, and the buyers are giving written information on lead-based paint.
Sellers need to consider several potential pitfalls if they are planning to sell their property to relatives. With the right safeguards in place, this can be accomplished. Is the sale of someone’s biggest financial asset best protected as a for sale by owner transaction? This transaction could also have legal ramifications if not completed correctly. A better option may be to list your home for sale with a real estate agent, and if your relative provides the best contract offer, they get the house. Do you want the most money for your home? Sellers typically get the most money with the widest exposure to the property. Listing a property in the Multiple Listing Service (MLS) gives you this advantage.
Are you wondering what your property is worth? Contact me today for a free market analysis. When selling one of your biggest financial assets, you need to understand your home value. Send me an email or text.
#14 Phoenix Homes on the Market in the last 7 days
$250,000 – $350,000
Contact the Shirley Coomer Group at Keller Williams Realty Sonoran Living
Call or Text: 602-770-0643 for more Real Estate information.