Things to Consider While Selling Your Portsmouth Virginia Real Estate to Your Kids
Selling your Portsmouth Virginia real estate to your children is not much different from selling it to a stranger. The process is more or less the same. There are many people who sell their Portsmouth Virginia real estate to their kids. Here’s how it’s done.
Appraisal
Hire a certified appraiser to assess the value of your home. You will probably want to sell it for less than its market value, but you still need to know its market value to plan for potential tax liabilities.
Consider owner financing
When you set up owner financing, you are the lender and your children will make their home loan payments to you. An advantage of this financing model is that you can set it up in any way. Even if your child does not have good credit, you can still decide to sell your home to them. When you are the bank, you can establish the terms and conditions. Replacement terms are also decided by you.
If you are not interested in owner financing, you could encourage your child to get a traditional home loan. Once they have been approved, they can make an offer. Help them to find the best financing deals for them.
Signing the deed
You may sign the deed over to your kid at a highly discounted rate or without requiring payment. It depends on you. If you are like most parents, you will not want to make a huge profit when selling your home to your kid. If you have a mortgage on the Portsmouth Virginia real estate, you can continue to pay it after signing the deed over to your son/daughter. Or you can draft another contract stating that you will receive the mortgage payments from your child. If you are planning to sell it at a highly discounted rate, the IRS may ask you to pay a gift tax. Generally speaking, if you want to sign the deed over without charging a sale price, then you must have free and clear ownership of the property. Otherwise, the ‘due on sale’ clause might require you to pay off the mortgage after transferring the deed.
Even if you are willing to pay off the home loan, once the property gets transferred to your child, they will have to pay the property tax. So, sell your home only if you are confident that your child can afford its taxes and upkeep.
Even if you trust your children, it makes sense to draft a clear contract. Hire a lawyer to help you with the paperwork for the Portsmouth Virginia real estate.
Keep in mind that the deed has nothing to do with the mortgage. When you transfer the deed, the mortgage does not get transferred automatically. Some mortgage lenders insist that their borrowers should seek their permission before transferring the deed.
Some mortgages come with a ‘due on sale’ clause. What this means is that when you transfer the ownership of this property to another individual, the mortgage will become due. So, if you are considering owner financing, you will have to pay off the home loan first.