Home Selling in 97302>Question Details

Guinstone1, Home Seller in 97302

Should we sell our home to our kids, rent to them, or give them a lease with option to buy?

Asked by Guinstone1, 97302 Wed Jan 26, 2011

Help the community by answering this question:


Dave Sutton’s answer
Talk to an attorney whose practice is Trusts, Wills & Estates. A good attorney can make a trust do many things and protect everyone's interest, both now and in the future. I'm guessing you can structure a trust that best meets your needs.
0 votes Thank Flag Link Fri Jan 28, 2011
As already noted, that really depends on what your kids want as well as what you want. It also depends on your tax situation. Here's some rough guidance:

Do this if:
You want to sell now.
Your kids want to buy now.
Financially, you can afford to sell, either because you've got a replacement property to purchase or can otherwise handle the tax consequences.
Your kids are financially able to buy now.
Note: You can sell to your kids with owner financing. That way, even if they couldn't buy conventionally, you can make it happen. And you can structure the terms to fit your financial needs.

Do this if:
You want to retain ownership in the home--either to sell to them later or to continue as a rental.
Your kids can't buy conventionally and you don't want to get involved in owner financing.
It makes financial sense--either because you'd take a big tax hit by selling or because you're looking for a regular stream of income.

Frankly--and I'm a big supporter of lease-options--this doesn't make much sense in this situation. A lease option allows someone to lease now with the option--but not obligation--to buy in the future. If they just want to rent, let them rent. If they want to buy, sell it to them. The only situation in which it would make sense is that they think they might want to buy your home, but they're not sure.

One other thing that may be a problem is that you ask if you should sell your home "to our kids." As in two or more of your children? That technically is possible, but might not be a good idea from a family relations and estate planning standpoint. Would they both/all live in the house? Would one live there while the others lived elsewhere? And what would happen if one wanted to sell and the other(s) didn't? That sort of problem comes up a lot.

You might want to consider placing the house into a trust--either a traditional trust or a land trust. There are a lot of reasons--too long to go into here--about why that could make more sense for you and your children.

So, the first thing you have to do is determine what your goals are and what your kids' wishes are.

Once that's clear, go to a good lawyer--preferably one with estate-planning experience--and discuss those goals with him/her and come up with the best way to handle the situation.

Hope that helps.
0 votes Thank Flag Link Thu Jan 27, 2011
Don Tepper, Real Estate Pro in Burke, VA
With a lease you get the property into a contract for a period of time that can cause you problems if you don't like how the property is treated, Renting in a month-to-month option gives you more flexibility if you want to change directions, if you think your kids are ready to buy this will be a life changing experience from parent to kids and this will be my best option, the second one is the rent (in a monthly basis), it depends how much your kids care and are willing to protect your property, the worse looking listings I have showed are listings where the kids are living in parents property (mainly boys for some crazy reason) reducing the value of the property big time!!!
0 votes Thank Flag Link Thu Oct 31, 2013
You have to consider your tax issues? You have a $500,000 in profit excluded from the sale if you are a married couple and have lived in the house the last 3 of 5 years. Talk to an account and tax attorney and see if it makes sense to sell or lease option and fix it up for them or what ever makes the most sense for you. Good luck, Tom Inglesby, Broker, RA/MAX Equity Group
0 votes Thank Flag Link Sat Jul 6, 2013
Definitely Sell!

The majority of parents who rent to their kids end up letting them slide on the timeliness of the payment and once that happens, then a pattern develops.

Keep the peace with your kids, sell the home and let someone else worry about whether they make the mortgage payment. It will also help the kids if they realize they are accountable to someone other than you!

Here's to happy families!

Becky Overall, Broker
Prudential Real Estate Professionals
licensed in the state of Oregon
Selling the American Dream since 1992
0 votes Thank Flag Link Thu Aug 16, 2012
It depends on both of your tax situations and income/expenses. Talk with your tax person to see which of those make sense. If you can sell the home to them without huge tax consequence and they can afford to buy without a too high debt ratio- that sounds like it would make the most sense. If they just need to rent a while and it would give you extra income that does not become a tax burden on you - that may also make sense. Without knowing both of your tax, income, etc story - no one can really answer that for you!
0 votes Thank Flag Link Thu Jan 27, 2011
Given the limited infomation you've given it's impossible to offer advice however, here are some considerations.
First, would your kids qualify for a decent home loan? If so, with rates low and probably heading higher it would be best for them to get their own loan today.

Second, how long have you lived in your home? Currently, if you have lived in your home two of the last five years you will probably get to take any calital gains tax free on sale. Also, keep in mind that even if you've lived there forever and figure you can rent the home for up to three years and still meet the two of five requirement the tax law could change before you get to realize the tax savings. You just never know these days.

Third, do you still owe money on the home? This question is important becasue if you see the home on contract you could have the note called as "due on sale". This doesn't happen opften but it can and you need to know the risks. To alleviate this a lease option works but sooner or later the kids have to buy anyway, right? If so, why not sell it to them now when rates are low so they can buy it.

As I said, I can't offer advide but hopefully this info helps.
0 votes Thank Flag Link Thu Jan 27, 2011
Well what do the kids want?
0 votes Thank Flag Link Thu Jan 27, 2011
Yes I will echo the below answers...

Both You and your children will need to 1st define your overall objectives. I believe for the short and the long run, this can only be done by 1st seeking credible advice regarding Tax implications. (advantages/disadvantages)

At todays market prices, if I were your child and I could afford & qualify to Buy it, I would certainly want to lean in that direction.
IF I were you, I would desire my child to be able to actually qualify and i would also want them to have a legitimate "Vested interest" in the property.

The terms would be based on the dynamics of the tax implications...

Hope this helps!

***please feel free to click on the "Thumbs up" button for all answers that are helpful and eventually pick a "Best answer"
0 votes Thank Flag Link Thu Jan 27, 2011

With limited information and not knowing your financial back ground, our recommendation is to consult a tax accountant. With any consideration of this nature there will be pro's and con's for both you and your children....it probably best to weigh all factors with accuracy.

0 votes Thank Flag Link Thu Jan 27, 2011
Wow! That's a question that begs a lot more questions: It really depends on a lot of factors. That's a really good question to discuss with an accountant and with your kids. If you're thinking about making the transfer soon, and all other factors aside, you might be doing the kids a favor to sell to them outright if a conventional mortgage will be involved.

Mortgage interest rates can't get much lower than they are right now. All other things being equal, that would give your kids a pretty attractive monthly payment.

Best of luck!
Web Reference: http://www.bybryson.com
0 votes Thank Flag Link Thu Jan 27, 2011
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