Posted on: 22 June 2018Share
It is becoming increasingly frequent for family members to try and keep property within the family for many different reasons. For example, it is often easier to negotiate a sale/purchase from a family member that you know well. You may also be more familiar with the property and therefore more comfortable making the purchase.
However, buying a home from a family member can easily become as complicated as it is simple. Indeed, the transaction still needs to done in accordance with legal standards and the fair market value of the property. This is to ensure that the seller doesn't avoid incurring expenses for capital gains tax or home valuations. Here are important tips to consider.
Determine how you will finance the property
The first step is to determine how much the home costs and how you will pay for it. Things can get messy when dealing with finances within the family, so it is important for the value of the property to be clearly defined before any negotiations are carried out.
A professional inspection/valuation should be done to assess fair market value. Afterwards, you can determine how you will pay for the home.
Is the home fully owned?
If the original owner owns the property outright (with no outstanding mortgages), the purchasing process becomes much easier. All you need to do is to agree on a purchase price that falls within fair market value guidelines.
You can then determine how you will finance the home, either by obtaining a mortgage or via an upfront payment.
Determine any legal requirements that govern the sale
All processes pertinent to the property transfer should be guided by a conveyancing professional. This will ensure that the purchase is carried out in a legal manner, and it will make it easier for you to resolve any disputes that may arise in the future regarding the purchase.
Conveyancers will ensure that a contract of sale, transfer forms and other necessary paperwork are handled as required by the law.
Is the home still under mortgage?
Buying a home that is still under mortgage from a family member involves a slightly lengthier process. The mortgage may need to be transferred to you as the buyer so you can take over the payments of the property.
It is always important to ensure that all previous mortgage payments are up to date before considering this option. An inspection should also be done to determine the current value and condition of the home before assuming the mortgage. If done correctly, this option can even allow you to tap into any accumulated home equity.