Question Details

Windy City G…, Home Buyer in Chicago, IL

I want to buy my parents house. It is valued at 350K, but they are going to sell it to me at 250K. Can?

Asked by Windy City Girl, Chicago, IL Tue Jan 29, 2008

someone give me advice on what steps to take to complete the transaction, as well as what the tax implications will be for my parents? I live in Chicago. I would appreciate a quick response due to wanting to act quickly on the low mortgage rates.

Thank you!

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Windy City - take a small detour but have your parents visit with a good tax advisor/attorney who is familiar with their overall financial plan and their estate plan - someone who is knowledgeable about the gift tax, estate tax, and income tax consequences of gifts (not someone who has done a few wills over the years but someone who does tax planning every day). What you are looking to do can be done fairly easily but depending upon a number of variables that have nothing to do with real estate, there are potential tax ramifications to your parents today, and also to you in the future when the property is sold - there may be another way of structuring the transaction to minimize the tax implications and to maximize the benefit to you in the future (for example, selling it to you for $350k but then gifting you $20,000 each year for 5 years so that your net purchase price is $250,000 - perhaps more complicated but enabling you to have a "basis" in the home of $350,000 - there may be other less complicated ways that accomplish the same thing).

If you have no siblings, your parents have never given any significant gifts previously, your parents potential estate is small, and at their death, everything they have is going to you, then the time spent with an advisor will be minimal. However, if any of these assumptions is false, then the time spent with a tax professional will be worthwhile to them. The real estate aspect of this question is relatively straight forward but there are other aspects about your question that are probably best answered with other professionals who are familiar with your parents financial and estate plans - those answers should be understood before focusing on how to do the real estate transaction as it may impact how the real estate portion is completed.

Have them call their tax advisor today and in the meantime, you can be getting pre-approved for a mortgage (see how much you can qualify for - the more you can qualify for, the more options you and your parents may have) with a lendor - you have a wonderful opportunity and I hope it works out well for all of you.
2 votes Thank Flag Link Tue Jan 29, 2008
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