Selling your house to a family member can feel like the easiest option. You already have a buyer lined up, there’s no need for open houses or endless showings, and you get to keep the property in the family while helping out a loved one financially.
But mixing real estate with family ties can be tricky. Without clear agreements and proper planning, even well-intentioned sales can lead to tax headaches, IRS scrutiny, or strained relationships.
Our guide explains how selling to a family member differs from a traditional home sale, key steps to follow, and tax considerations to keep in mind.
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Selling a house to family: Key insights
What you need to know
- Selling to a family member can be faster and cheaper than a traditional sale, since you don’t need to market the home or host showings.
- These transactions are considered non–arm’s-length sales, which means they face more scrutiny from the IRS.
- You may save on realtor fees, but disputes over price, repairs, or expectations can put family relationships at risk.
- Selling below market value may trigger gift tax (2025 annual exclusion: $19,000 per person, $38,000 per married couple).
- Buyers who purchase below market value may face higher capital gains taxes when they sell later.
- Inheritance often reduces tax liability thanks to a stepped-up basis, which resets the property’s value to its fair market value at the time of the original owner’s death.
- Key steps include agreeing on a process, setting a fair price, arranging financing, drafting a purchase agreement, completing due diligence, and closing with proper legal documentation.
Selling to family vs. traditional sale
Most real estate sales are arm's-length transactions, meaning the buyer and seller have no relationship with one another.
In contrast, selling a house to a family member is a non-arm’s-length transaction, meaning you have a pre-existing relationship with the buyer.
Pros
- Lower selling costs
- Flexible purchase terms
Cons
- Greater tax implications
- More IRS scrutiny
- Risk of strained relationships
Knowing your home buyer beforehand confers distinct benefits:
- Lower selling costs. With a buyer already in place, you can avoid spending money on photography, staging, curb appeal, and other enhancements to make your home “show ready.” And since you won't need a realtor to list and market your home, you can save on realtor fees or avoid hiring a realtor altogether.
- Ability to set your own purchase terms. With affordability becoming a greater issue for many first-time home buyers, selling to a family member allows you to lower your sale price or offer a more favorable interest rate than they might find with a conventional mortgage lender.
But there are a few key risks to be aware of, too:
- Greater tax implications for you and the buyer. If you cut your family member a deal, you may owe gift taxes. Your relatives could also be on the hook for higher capital gains taxes when they decide to sell.
- More scrutiny from the IRS. The IRS sees a greater risk of fraud in controlled transactions, since some people may attempt to avoid taxes by selling their homes to a relative at a loss. Therefore you may suffer more IRS scrutiny come tax season.
- Potential strain on relationships. Legal and interpersonal disputes are another risk when selling your house to a relative. For example, the buyer may want more of a “deal” on the property than you can provide. Or you and the buyer may disagree on who should be responsible for repairs before the property changes hands.
How to sell a house to a family member (6 steps)
Selling your house to a family member is often faster and simpler than a traditional home sale. However, even when it's to family, selling a house is a complex transaction that carries risks for both sides.
"It’s all about balancing personal relationships with legal, financial, and tax considerations, "says Eric Bramlett, realtor and owner of Bramlett Real Estate in Austin, TX. "To keep things fair and avoid future misunderstandings, it’s essential to treat the sale like any other.”
Step 1: Agree on the process
The first step is for you and your family member to agree on how the home sale will proceed.
For example, will you hire a realtor to help with the sale, work with an attorney, or manage the process on your own?
A realtor may not be necessary if you’re both in complete agreement about the sale price and who is responsible for what.
However, a real estate agent can help with things like:
- Determining your home's fair market value
- Drawing up the sales contract
- Acting as a liaison when questions or concerns arise
- Recommending other professionals, like appraisers, attorneys, lenders, title companies, and inspectors
- Coordinating with the various parties to keep the closing timeline on track
Should I sell without a realtor?
While some people find a realtor helpful, many people who sell a house to a relative opt to do so without a realtor.
The advantage of not using a realtor is that you’ll save money, since a realtor usually charges around 2.5–3% commission.
However, many realtors are willing to negotiate lower fees for handling only certain aspects of a home sale. And several discount brokers offer built-in savings for home sellers.
Even if you choose not to hire a real estate agent, you may need to bring other professionals on board. "At the very least, you'll want to hire an attorney," says Vancouver real estate agent Adam Chahl. "Even though it's a family member, having professionals involved ensures all legal aspects are covered and helps prevent misunderstandings later.”
Step 2: Agree on a price
When selling a house to a family member, the simplest route is to sell for fair market value, since doing so won’t trigger a gift tax on your part or increase your family member's capital gains tax if they decide to sell the property later on.
Even if you've already agreed on a sale price, documenting your home's fair market value is still a good idea to avoid future disputes over its worth.
“I’ve seen situations where skipping this step caused disagreements, even with the best intentions," cautions Ryan Fitzgerald, realtor and owner of Raleigh Realty.
Documenting your home's market value can also help you avoid tax troubles further down the road.
How to determine fair market value
The IRS defines fair market value as “the price at which a property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.”
A real estate agent can help determine market value by performing a comparative market analysis (CMA), which examines comparable properties that have sold recently in the same neighborhood. An appraisal can also determine what a home is worth. These documents can show market value if the IRS audits the transaction.
Selling a house to a family member below market value
While it may not be in your own self-interest financially, you’re free to sell your home to a family member for below fair market value. For example, you may do this to help your child buy their first property in a market that's otherwise too expensive for them. However, be aware that selling at below market value brings some important considerations.
The most important consideration is gift taxes. If you’re selling for less than market rate, then any equity you've accrued above the sale price may be considered a gift of equity by the IRS and, therefore, subject to a gift tax.
Also consider that your family member may be subject to capital gains taxes should they decide to sell in the future.
What to include in a gift letter
To help avoid problems with the IRS and the buyer's mortgage lender, you should write a gift letter. A gift letter states that you are gifting the equity to your family member and you do not expect to be paid back. It should include:
- The value of the gift
- Your name and address
- Your relationship with the recipient
- The date of the sale
- The property address
- Both of your signatures
A well-drafted gift letter helps prevent delays and ensures the sale goes smoothly. You can also find a sample gift letter on NOLO's website.
Finally, when filing the deed with the county recorder’s office, list it as a family sale. Doing so helps prevent distortion in the local real estate market since appraisers and realtors base their valuations on how much similar nearby homes have sold for.
Step 3: Determine finances
Unless you’re gifting your entire house, the buyer will need to come up with the funds to pay for the transaction. This can involve a variety of options, such as:
- Getting a conventional loan from a mortgage lender
- Making payments directly to you, through an arrangement called seller financing
- Seeing if the original mortgage will transfer, if you still owe money on the house
Conventional loan
A conventional loan, such as a fixed-rate mortgage from a bank, is one of the most common ways to fund a house purchase. It’s typically a good option for buyers who don’t have enough cash on hand to purchase the home outright.
The downside of conventional loans is that not everyone qualifies. To get the best interest rates, buyers need a good credit rating. A downpayment is also usually required, and if the buyer can’t provide a downpayment of at least 20% they’ll be required to pay for private mortgage insurance (PMI), which is usually around 1%.
To get a conventional loan, the buyer must apply directly through a lender. Some lenders have more stringent rules for providing a mortgage in a non-arm's-length transaction. As stated, there is a higher potential for fraud in these types of real estate transactions, so lenders may demand additional paperwork to make sure everything is above board, such as appraisals and “gift of equity” paperwork.
Seller financing
Seller financing bypasses a traditional mortgage and allows the buyer to pay off a house in installments paid directly to the seller. To execute this agreement, the seller and buyer sign a promissory note outlining the conditions, including the down payment amount, payment schedule, interest, and loan term (10 years, 15 years, etc.).
Seller financing is a good option for buyers who can’t qualify for a conventional mortgage. For example, the buyer may have a poor credit rating or may simply not have much of a credit history at all. It can also be helpful when prevailing interest rates are high, since the buyer and seller can set their interest rates.
However, seller financing can be risky for the seller. Because the loan is between family members, some buyers may feel there are fewer consequences for missing a payment than if the loan were with a bank. This can put you in the uncomfortable position of enforcing the loan terms with your family member, leading to disputes.
“Owner financing offers flexibility that banks won’t. I’ve seen it speed up deals and lower the financial burden with custom interest rates," says Fitzgerald. "But it’s not without risks—defaults happen, and foreclosing on a family member is a situation nobody wants to face.”
Mortgage transfer
You may be able to transfer your mortgage to the buyer. A mortgage transfer can keep mortgage costs down, meaning the buyer won’t have to make a down payment.
However, you’ll need to verify with your lender that your mortgage is “assumable,” meaning it can be transferred to another person. Unfortunately, most conventional loans include a “due-on-sale” clause that prevents them from being transferred to another person. Government-backed loans, such as VA, FHA, and USDA loans, are more likely to be assumable.
Even if your mortgage is assumable, there’s no guarantee that the buyer will be approved. You’ll need to talk to your lender about transferring your mortgage and the lender will then check to make sure the new borrower meets their credit requirements.
Step 4: Sign a purchase agreement
Even when selling to a family member, it’s important to have the purchase agreement in writing. A purchase agreement helps make sure all the terms of the sale are clear to both parties, which can help avoid disputes from arising later.
“When selling a house to a family member, handle it just like any other sale, even if it feels more personal," says Oliver Morrisey, Estate Lawyer, Owner, and Director of Empower Wills & Estate Lawyers. "You need a proper written agreement such as a contract that clearly spells out the price, terms, and any conditions."
The purchase agreement should also include the names and addresses of the buyer and seller, a description of the property, the closing date, and when the buyer will take possession.
"Even when trust is strong, having everything written down can prevent misunderstandings later, which usually pop up when you least expect them,” says Morrisey.
For greater peace of mind, you may want to hire a real estate agent or attorney to help draft your purchase agreement. You can hire a low commission real estate brokerage so that you’re not paying full price or simply negotiate a rate with a realtor based on how much work you need.
Step 5: Complete due diligence
Completing due diligence is important even when selling to a family member. As Morrisey says, “Don’t skip the usual due diligence steps like a title search. This will ensure there aren’t any hidden claims or disputes on the property that could cause issues down the road. Even if you’re selling to a family member, it’s better to sort out any potential problems before they become legal headaches.”
A title search uncovers any liens or ownership disputes. A lien is placed on a home when someone the owner owes money to claims a legal right to the property as collateral. Liens may be granted for unpaid contract work, back taxes, or overdue utility bills. A title search can be done on your own, but it’s more common to have a title company or a real estate lawyer do it for you.
A home inspection is also a good idea. While it can be tempting to skip an inspection when selling to a family member, doing so is risky. An inspection can uncover issues that neither you nor the buyer know about. It’s better to know about these issues before the sale to avoid upsetting your buyer later on.
Step 6: Close the sale
Choose the right deed
Different deeds offer different levels of protection. If you’re using an agent, they’ll handle this for you. If you’re selling FSBO, you must choose the type of deed yourself.
The most common type of deed is a general warranty deed because it’s the most secure. With a general warranty deed, the seller pledges that no one else has a stake in the property, and it is free of any outstanding liens. A general warranty deed is complicated to draft. You’ll likely need to hire an attorney if you don't have an agent.
Sellers can use a gift deed to transfer the title to a family member when no payment is exchanged for the property. The document must simply be signed and witnessed by two disinterested parties.
How to transfer a property title
Transferring a title involves a few simple steps. If you choose to hire a title company, it will perform most of these steps.
- Obtain the most recent deed from the county clerk’s office. You’ll need information, such as the legal description of the property, from that deed to create a new one.
- Draft a new deed that transfers ownership to the buyer. You can write it yourself or hire an attorney to do it for you.
- Sign the deed in the presence of a notary. You can find a notary at a local library, UPS Store, bank, college, or accountant’s office.
- Mail or hand-deliver the deed to the recipient. The recipient may also need to sign the document.
- File the deed with the county clerk’s office. This is usually the recipient’s responsibility, but you should obtain a copy of the newly recorded deed.
Finish up remaining paperwork
You and the buyer will need to finish up any remaining paperwork. If the buyer is taking out a mortgage, there will typically be more paperwork involved. During the closing process, the following documents are often necessary:
- Closing disclosure
- Proof of homeowners insurance
- Mortgage application
- Deed of trust
- Copy of purchase agreement
If you're not already working with a realtor, you and the buyer may want to consider working with a real estate attorney during the closing process to ensure all of the paperwork is in order.
Closing day
Closing day itself is when the funds for the purchase will be transferred to you and any loose ends will be tied up. Funds are typically held in an escrow account managed by a title company. Once closing is finished, the mortgage provider will release the funds to you minus any closing costs.
Other steps you’ll want to take on or leading up to closing day are:
- Clean your home
- Hand over the house keys
- Pay final utility bills
- Change your mailing address
- Cancel utilities and insurance
- Hand over documents for appliances or major home renovations
- Hire movers/moving vehicles
- Shut off the main water valve (if necessary)
Tax implications of selling a house to a family member
Key tax takeaways
- In 2025, you can gift up to $19,000 per person (or $38,000 per couple) without paying gift tax.
- Gifts above that amount count against your $13.99M lifetime exemption. This limit is set to drop to about $5M in 2026.
- Capital gains on a home sale are taxed at 0%, 15%, or 20%, depending on income and how long you’ve owned the property.
- Single sellers can exclude up to $250,000 in profits, and married couples up to $500,000, if they’ve lived in the home 2 of the last 5 years.
- If you sell below market value, your relative assumes your original tax basis, which can increase their capital gains tax later.
- Leaving the home as an inheritance provides a stepped-up basis, resetting its value to market price at the time of death and often reducing future taxes.
Tip: Tax rules are complex. For help navigating your situation, consider working with a real estate agent or a real estate attorney.
Both you and the family member you’re selling to should be aware of possible tax implications, including gift taxes and capital gains.
Gift taxes
The IRS gift tax is a levy on transferring money or property from one person to another for less than full value. In 2025, you can give up to $19,000 per recipient per person (or up to $38,000 as a married couple) during the year without paying the gift tax.
Gifts of more than $19,000 are taxed at 18–40%, depending on the amount given over the limit. The donor is responsible for paying taxes associated with the gift.
However, there's a lifetime gift tax exclusion of $13.99 million as of 2025. If you exceed your annual gift tax limit you need to report that to the IRS via a Form 709. Then the excess amount will be deducted from your lifetime exclusion. So long as you don’t exceed your lifetime exclusion, you may not have to pay any gift tax even if you’re above your annual limit.
Note that in 2026, the lifetime exclusion will revert to its pre-2018 level of approximately $5 million.
Capital gains taxes
Capital gains tax is the tax you pay on the profit (i.e., the capital gains) that you make on the sale of a property.
- If you’ve owned the home for less than a year, your gains are taxed as regular income.
- If you’ve owned it for over a year, your gains are taxed at the long-term capital gains rate (0%, 15%, or 20%, depending on income).
The good news is that the first $250,000 of capital gains you make when selling your home is exempt from the capital gains tax, so long as you’ve owned the home for two of the last five years. This exemption rises to $500,000 for married couples filing jointly.
Capital gains tax example
Suppose you bought a house in the 1990s for $125,000 and sell it in 2025 to your child for $500,000.
- Profit (capital gain): $375,000
- Exemption (single filer): –$250,000
- Taxable gain: $125,000
With taxable income between $47,025–$518,900 in 2025, the long-term capital gains rate is 15%. You’d owe about $18,750 in capital gains tax.
Taxes implications for the buyer
If your relative buys the home at fair market value, their future capital gains will only apply to the increase in value after their purchase.
But if you gift the home or sell it below market value, the IRS applies a carryover basis. That means your relative takes on your original purchase price as their tax basis. If the home has appreciated a lot since you bought it, this can lead to a much larger capital gains bill when they eventually sell.
Example: Let's say you bought a home in the 1990s for $125,000 and, after two years, gifted it to your child. What if your child sells it for $600,000?
As a single filer, they qualify for the $250,000 home sale exemption, but their taxable gain is still $225,000 ($600,000 – $125,000 – $250,000), and subject to long-term capital gains tax.
Reducing taxes with a stepped-up basis
One way to minimize your relative's future capital gains tax is to leave the home in your will or estate so that your family member inherits it.
An inherited property receives a stepped-up basis, which resets the tax basis to the home’s fair market value at the time of the original owner’s death. This can dramatically reduce or even eliminate capital gains taxes when the heir sells.
Example: If the home was worth $600,000 when you passed away, the IRS considers that the new purchase price, even if you originally bought it for $125,000. If your child later sells it for around $600,000, they may owe little to no capital gains tax.
Selling a house to family: The bottom line
Selling a house to a family member can save you time, money, and stress compared to a traditional home sale. But it also comes with unique challenges — from potential IRS scrutiny to gift tax and capital gains obligations.
Clear agreements, fair pricing, and an understanding of the tax rules are essential to prevent disputes and protect both you and your relative from unwanted surprises. In many cases, working with a professional — like a real estate agent or attorney — can make the process more secure and less stressful.
If you decide to bring in an agent, you don’t have to pay the traditional 3% listing fee. Real Estate Witch can connect you with top-rated local agents who provide full service for just a 1.5% listing fee, helping you save thousands while still getting expert guidance every step of the way. Compare agents and start saving today!
FAQ
Can I sell my house to a family member for $1?
You can sell your home at any price below market value, even $1. But the IRS may consider it a gift, and you might be required to pay gift taxes or else put it toward your lifetime exemption. If you're selling your home to a family member at a discount price, youll also want to consider your relatives capital gains tax liability.
Can I give my house to my children?
Yes. You can sell your home for any price, even $1. However, if you sell below fair market value, the difference may be treated as a gift tax issue. The IRS considers this a “gift of equity,” which could count toward your annual exclusion or lifetime exemption. Your relative may also face higher capital gains taxes later when they sell.
How can I avoid trouble with the IRS when selling my home to a family member?
The easiest way to bypass problems with the IRS is to agree on a price that is close to fair market value. A real estate agent can help you determine your home's fair market value by performing a CMA, which examines comparable properties that have sold recently in the same neighborhood.
Will I pay taxes if I sell my house to a family member at fair market value?
When you sell an asset like your house, you may need to pay capital gains taxes on your profit. Most home sellers don't need to pay capital gains taxes because the first $250,000 of profit for individuals is tax free if you've lived in your home for more than two years ($500,000 for married couples).
Will my children pay capital gains tax if I give them my house?
It's possible. When you gift your home, your tax basis the initial cost of the property becomes the recipient's tax basis. If you bought your home for cheap, gave it to a family member, and the value of the home increased by more than $250,000, they'd have to pay capital gains tax based on the initial purchase price.
What is the cheapest way to sell a house to a family member?
Since selling to a family member is often simpler than trying to find a buyer, you can usually save on real estate commission. Consider working with a low commission real estate company or negotiating a reduced rate with an agent or lawyer in exchange for help with negotiations, paperwork, and closing. For tax reasons, its also usually better for a family member to pay at least some money for your house.
Related reading
Want to learn more about selling your home? Check out these articles.
How to Find a Realtor: Find an expert real estate professional to help you with your home sale – even if you plan to sell directly to a family member.
How to Sell Your Home | The Ultimate Guide: Check out our guide to selling a house in 12 steps. We spoke to the experts to learn how to sell your home (with or without a realtor).
How to Sell Your House Without a Realtor: Selling your own home is tough. Our step-by-step guide makes it easier.
Do I Need a Real Estate Agent? This thorough primer explains how realtors can help you buy or sell a home.