Selling your house to a family member sounds relatively simple. You don't need to worry about finding a buyer or paying real estate agent commission — you just need to sign some papers and have them write you a check.
But real estate transactions — even with family — are complicated. Transferring a property title always carries the risk that you'll encounter unexpected legal issues.
Selling to a family member below market value can also create tax problems. The IRS may treat the difference between the sale price and the home’s fair value as a gift, and attempts to sell for symbolic amounts like $1 can trigger both tax and legal consequences.
Worried about the legal or tax risks of selling to family? A realtor can guide you through the process and help avoid costly mistakes. With Clever Real Estate, you’ll get matched with top-rated local agents who charge just a 1.5% listing fee — saving thousands in commission. Take a quick quiz to see your matches today.
Can you sell a house to a family member?
Key takeaways
- It’s legal, but treat it like a real sale. Put everything in writing and decide who pays what. See how an agent helps.
- How you price the home affects taxes. Gifts, discounts, and market-value sales each have different consequences. Compare options.
- Gift tax may apply if you sell below market value. The IRS may treat the difference as a gift. Learn the 2025 limits.
- Capital gains differ for gifts vs. inheritances. Gifts use carryover basis; inheritances get a step-up. See examples.
- Get a CMA to avoid disputes. A comparative market analysis supports fair pricing and helps with lenders and the IRS. Why a CMA matters.
- Title and loan mistakes are costly. Transfers can affect title insurance or trigger due-on-sale. Transfer safely.
Selling to a family member lets you avoid the time- and money-intensive process of finding a buyer.
There's a disclaimer here, though. If you've ever lent money to a family member, owned a business with a relative, or even shared an apartment, you know it's not always easy. It's hard to have frank conversations with relatives, especially regarding money.
To avoid unnecessary family drama, treat the sale like any other for sale by owner (FSBO) transaction. Put your contract in writing, with clear details on the sale price, who's responsible for closing costs, and so on.
Some sellers hire a real estate agent or transaction coordinator to help them navigate the sale process and mediate any conflicts.
Key tip: Price your home correctly!
Even if you plan to oversee the sale yourself, you should ask an experienced local realtor for a comparative market analysis (CMA) before you and your buyer set a sale price. It's an objective assessment of what your home is worth and helps you and your buyer negotiate a fair sale price and avoid issues with a mortgage lender.
Having a CMA on hand is also useful if the IRS asks for proof that you weren't trying to avoid gift or capital gains taxes by selling your house below market value. The IRS defines a gift as any transfer to an individual, whether direct or indirect, where no full consideration, measured in money or money's worth, is received in return.[2]
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Selling a house to a family member vs. traditional sale
The key difference between selling a house to a family member and selling to someone else is that the home may sell for a price other than fair market value, because you might work with the buyer to give them a deal or gain a deal for yourself.
Selling to a family member is known as a controlled transaction, while traditional sales are called arm’s length transactions.
Controlled transaction
The buyer and seller have a relationship, for example, as family, friends, or co-workers. Controlled transactions are subject to greater scrutiny from the IRS, may incur the gift tax if you sell the property below fair market value, and often cost less in realtor fees.[1]
Arm's length transaction
The buyer and seller are strangers, each acting in their own financial self-interest. Most real estate sales are this kind of transaction, and they’re typically facilitated through a seller agent and buyer agent, who connect the buyer and seller.
How to sell a house to a family member
Follow these steps to sell your house to a family member.
1. Decide whether to use an agent or not
When you sell your house, you can list with a real estate agent or sell it without a realtor. Work with your family members to determine how you want the process to go.
You might be tempted to handle the process independently, but note that selling a house to a family member might not be as simple as it seems. There are legal, financial, and tax implications to consider, and working with a professional could help you keep everything fair, legal, and above board.
Decide with the buyer whether you want to hire professionals to guide you through the process, and decide who will pay for those services beforehand.
If you’re selling to a family member below market value, you may already be losing money (or forgoing profit) on the sale, so it could be tempting to avoid hiring an agent.
Why most sellers use an agent
Source: National Association of Realtors, 2024 Profile of Home Buyers and Sellers
2. Choose a selling price
You have three main options:
- Gift the home: Transfers value but may cause family conflicts and trigger gift tax reporting.
- Sell below market value: Makes the purchase easier but may lead to gift tax for you and future capital gains tax for the buyer.
- Sell at fair market value: Treated like a normal sale, with standard tax rules.
💡 Key tip: Ask a local realtor for a comparative market analysis, or (CMA) report. This will help you set a fair price, avoid IRS scrutiny, and provide proof of market value if needed.
Clever can connect you with an agent who can help you sort out tax implications when selling to relatives, or point you toward tax professionals who can help. Simply enter your zip code here to get matched with top-rated local agents today!
Can I sell a house to a family member for $1?
Yes, but it comes with major risks.
- Tax risk: The IRS will treat the difference between the home’s market value (e.g., $500,000) and the $1 sale price as a gift, which may require filing a gift tax return.
- Legal risk: If the property has a mortgage, selling it for $1 could trigger a due-on-sale clause, allowing the lender to demand full repayment before the transfer.
Always consult a real estate attorney or broker before attempting this kind of transfer.
3. Determine financing
Depending on the sale amount, the buyer might need to figure out a payment plan. They might be able to pay you in cash, take out a mortgage, or work with you to set up seller financing.
Seller financing is a way for you to lend the money to the buyer (or, in effect, lend the home) and set up a repayment agreement between you, without involving a bank loan. You can determine an interest rate and payment plan that works for the buyer, and the buyer won’t be subject to traditional underwriting and potential rejection.
The IRS might consider a low-interest or interest-free home loan as a gift, so work with a tax professional to determine the buyer’s tax liability based on your chosen financing.
If you have an FHA, VA, or USDA loan, ask your lender if the buyer can assume it. This lets them take over payments without new lending fees, though they’ll still need a credit check and lender approval.
4. Transfer your property title
There are several ways to transfer the title of your house to a family member:
- Special Warranty Deed Transfer: This type of transfer protects your family member from any property issues or claims you’ve had while owning the home.
- General Warranty Deed Transfer: Ensures all your property rights are transferred to your family member and guarantees them against any title issues that arise, whether during or before your ownership of the property.
- Quitclaim Deed Transfer: A quitclaim deed only transfers your property interest to your relative, but does not protect them from any legal claims.
Work with a real estate lawyer when transferring your property title. Each method has different implications, and the right choice depends on your specific situation.
How you transfer the title also determines the cost. You’ll typically pay fees for the real estate attorney you hire, plus a transfer tax or fee to your county or state based on the home's value.
You can file the documents yourself with a notary, but mistakes can be costly. An improper transfer could void your title insurance, trigger full mortgage repayment, or create other unexpected legal problems.
» LEARN: How much does a real estate lawyer cost?
Tax implications of selling a house below market value
You can always gift a house to a family member without charging for the sale. But that gift could be subject to taxes based on the home’s value and your history of such gifts.
Gift tax rules for 2025
| Annual exclusion | You can gift up to $19,000 per person each year without paying gift tax. |
| Married couples | Can combine exclusions for $38,000 per recipient. |
| Lifetime exemption | You won’t owe gift tax unless total lifetime gifts exceed $13.99 million (2025 limit). |
| Spouse exception | Unlimited gifts to your spouse are tax-free. |
Here are the details on gift tax rules:
- Annual exclusion: You can gift up to $19,000 per person each year without paying gift tax.[3]
- Married couples: Can combine exclusions for $38,000 per recipient.
- Lifetime exemption: You won’t owe gift tax unless your total lifetime gifts exceed $13.99 million (up from $13.61M in 2024).[3]
- Spouse exception: Unlimited gifts to your spouse are always tax-free.
Example: Gifting a $200,000 home
If you and your spouse gift your home to your son and daughter-in-law:
- Annual exclusion: $19,000 × 2 givers = $38,000 per recipient
- Two recipients: $76,000 excluded total
- Remaining value: $124,000 must be reported on a gift tax return (but simply counts against your lifetime $13.99M exemption)
Capital gains tax on gifted property
When gifting a home to a family member, also consider their future capital gains tax liability. If they intend to sell the home or use it for anything other than their primary residence, the home could incur capital gains.
Example:
- You bought the house for $100,000
- You gift it to your child
- They sell it for $400,000
- Taxable gain = $300,000
They may qualify for the $250,000 ($500,000 for couples) capital gains exclusion if it’s their primary residence, but any remaining gain is taxable.[4]
Capital gains tax on inherited property
If the same home is inherited instead of gifted, the cost basis is “stepped up” to its market value at the time of death. An heir could sell the house for that price without incurring capital gains tax.[5]
Example:
- Value at death: $400,000
- Heir sells for $400,000 = no taxable gain
This stepped-up basis rule applies to real estate but not to retirement accounts like 401(k)s or IRAs.
» MORE: How to sell an inherited house fast
Do you have to pay capital gains taxes on a house you sell to family?
Regardless of whether you sell your home to a family member or anyone else, it is unlikely you’ll owe capital gains taxes.
The IRS calculates capital gains as the difference between the price you paid for the home — its cost basis — and the price you eventually sell it for. If you bought a house 20 years ago for $100,000 and recently sold it to a family member for $200,000, your capital gain would be $100,000.
However, the IRS allows an exclusion of $250,000 of capital gains on real estate if you're single, and $500,000 for a married couple filing together, as long as you lived in the home at least two years out of the five years prior to its date of sale.[6]
Do you need a lawyer if you sell a house to a family member?
You don't have to use a lawyer to sell a home to a relative, but it's highly recommended. As with any legal (and family) issue, small miscommunications or misfiled paperwork can quickly go wrong. Choosing one form over another could have huge implications on taxes or legal issues.
A lawyer will ensure everything is laid out in writing and can help you avoid future legal battles or unexpected expenses.
Consulting a professional before selling your home to a family member can save you a lot in potential taxes or costs.
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FAQ
Is it illegal to sell your house to a family member?
It’s not illegal to sell a house to a family member, but it’s illegal to take any fraudulent action to avoid taxes on the sale. You have to properly report a home’s fair market value and sale price, as well as any relevant conditions of seller financing, to ensure the IRS has an accurate record of the taxable value the buyer received.
What is the cheapest way to sell a house to family?
The cheapest way to sell a house to a family member is through a direct private sale, bypassing the use of real estate agents to save on commissions and listing fees. But it's also a risky strategy that carries potential legal and financial consequences. It's generally a good idea to have all agreements documented in writing to prevent any misunderstandings. Most sellers and buyers will want to hire an attorney to manage legal documents and title transfers. You may also want to consult a local realtor or broker for a comparative market analysis (CMA) report for a home valuation. Speak to a local real estate attorney or tax advisor for more specific advice.
Can you sell a house to a family member for $1?
Yes, you can sell a house to a family member for $1. This transaction is considered a gift of the remainder of the home's market value after the $1 sale price. For 2025, the IRS allows you to gift up to $19,000 to as many people as you want annually without paying a gift tax, as long as you don't exceed your unified federal gift and estate tax exemption, which has been raised to $13.99 million over your lifetime.
Can parents gift a house to their child?
Parents can gift a home to their child, but they may be subject to estate and gift tax. If the value of the home minus the annual exclusion ($19,000 per parent per child in 2025) does not exceed the parents’ remaining lifetime gift exemption ($13.99 million per individual in 2025), no gift tax is due at the time of the transfer. However, if parents have used up their lifetime exemption, they may need to pay a gift tax on the excess value.
If the child sells the home, they might be subject to capital gains tax based on the cost basis, which is typically the value of the home at the time of gifting. Also keep in mind that if the child has not lived in the home for at least two out of the five years before selling, they cannot exclude the usual $250,000 ($500,000 for married couples) of gain from their income and will be subject to the tax.
Can you buy a house from your parents for less than market value?
While your parents are able to sell you their home for a lower price than market value, that discount may be subject to the estate and gift tax depending on the amount and their lifetime giving habits.
As of 2025, you and your spouse can each gift $19,000 to an individual annually without paying a gift tax, as long as you don't exceed your unified federal gift and estate tax exemption of $13.99 million total over your lifetime ($27.98 million between the two of you.) So, if your parents sell their home to you for $30,000 under its value, you're in the clear. If the discount is over this amount, but your parents have not made substantial donations over their lifetimes, the gift also will not be subject to the gift tax.
What are the risks of selling a house to a family member?
Be prepared for legal, tax and personal risks when you sell a house to a family member. It’s easy to cut corners, avoid important conversations, and skip official paperwork when you do business with someone close to you. But those all have serious implications. Work with a real estate agent or attorney to make sure you and the buyer agree to a fair selling price and terms, get all the proper paperwork set up for the financial and ownership agreements, and prepare for proper tax reporting.
What are the benefits of selling a house to a family member?
Selling a house to a family member means you don’t have to go through the long process of finding buyers and negotiating an offer for your home. It could also provide a benefit to the family member, who doesn’t have to go through the process of finding a home. You could also both save money on real estate agent fees, even if you work with an agent, because they’ll likely be willing to take a lower commission if they don’t have to find you a buyer.
If you sell the house at below fair market value, gift it and/or work with the buyer to set up seller financing, the buyer could benefit significantly from cost savings and the effort of securing a loan. If they had trouble qualifying for a loan or saving for a down payment, this might even be the only way for them to become a homeowner.
If the house has sentimental value in your family, selling or gifting it to a family member is a way to ensure it continues to provide that value within the family for another generation.
