Buying a House from Your Parents: Should You Do It?

Buying a house from your parents can save you time and money, but there are steps to the buying process you need to follow to ensure benefit to both sides.
Written by Abbey Orzech
Reviewed by Melanie Reiff
Buying a house from your parents can offer lower prices, less hassle, and greater informality in the process since you probably won’t have to provide documentation of your financial capability or navigate contingencies through a third party. With proper consideration, this can be a great option for first-time homebuyers. 
While there are a lot of plus sides to buying your family home, there are some potential drawbacks you should consider. For example, the home may come with sentiment and nostalgia, but it has likely been well lived in and some areas of the house may need repairs. 
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has compiled a list of everything you should consider when buying a house from your parents—including the pros and cons and how to go about the process.
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Should I buy my parent’s house?

There are many benefits to buying your parents’ house, but there can also be major drawbacks. While it’s exciting that you’ll likely pay less money for your parents’ house, managing money within the family can be tense.

The pros of buying a house from your parents 

There is often mutual benefit to buying and selling a home within the family. Some potential pros to buying your parents’ house could include:
  • The potential of securing a nicer or larger home for first-time homebuyers
  • The added sentiment and nostalgia of keeping the family home 
  • Familiarity with the neighborhood and surrounding area
  • No or low closing costs, no real estate agent fees, no competition for the home 
  • More informality and flexibility in the buying process 
Remember that every family is different, and the success of this process will depend on the specific arrangements you and your family will make. For example, you’ll want to decide ahead of time how rent or the mortgage will be paid, and what kind of relationship your parents will have with the house after the sale. Open and honest communication is an important factor in buying a house from your parents. 

The cons of buying a house from your parents 

Mixing finances and family can be tense, and existing relationships may shape the selling process in a way that leaves one or both parties dissatisfied. These cons may never come up, but be aware of their potential! 
  • Money management within the family can be tough and may lead to familial conflict
  • The increased informality can sometimes lead to the legal groundwork slipping, causing trouble with the mortgage or taxes later
  • Big decisions, like house renovations or the amount of time your parents feel entitled to spend in the house, may be influenced by the involved family members, leading to dissatisfaction down the line

How to buy a house from your parents

While buying a house, in general, can be confusing and stressful, adding family to the mix can sometimes make things messier. You’ll want to make sure that this is the right path for your family. Follow these steps to ensure that buying a house from your parents will be beneficial for both of you.

Talk through your expectations

Before the ball really gets rolling, dedicate some time to discuss everyone’s expectations. Talk through the timeline of the sale, what role each party will take, and any lending or discounting expected to happen. Don’t just assume that everyone will be on the same page! 

Get to know the home buying process

You’ll want to do some research on the home buying process to make sure you’re on top of all the steps involved. One of the benefits of buying a home from your parents is saving money on a real estate agent, but this also leaves you without their expertise on loans, the value of the property, or any negotiating that may need to be done. 
The fewer unknowns present, the less stress everyone will feel, and the happier you’ll be with the outcome. 

Ensure you have the correct paperwork

Proper documentation like the title insurance, mortgage statements, and deed will ensure clarity in the process and be useful to check back on if there is confusion later. It may seem odd to sign contracts with your parents, but having the correct paperwork will be beneficial if there are complications down the road.
Although the process of buying a house from your parents is generally more informal than buying from a stranger, it is still important to keep the legal framework to make sure all involved parties are clear on their roles and obligations.

Examine the mortgage

Ask your parents about their current mortgage, if they have one. Find out if everything is up to date and if their loan is assumable. If their loan is not assumable, meaning you can take over their payments, you may need to take out other loans to take care of the mortgage. You’ll want to make sure that the payments you assume through the sale will work for you. 
Make sure you hammer out all the financial details so that you can identify the relevant standards of your lender. 

Understand the transaction

Buying a house from your parents would be considered a “non-arm’s length transaction”—a transaction that happens between people with stakes in each other, rather than between strangers. While this can be significantly less stressful than dealing with a stranger, know that there is potential for misrepresentation of value, inflated prices, or legal trouble if the price is too low. 

Inspect the house

Getting the house inspected by a professional will ensure that any faults in the home are things you can live with or fix easily. You don’t want to be bombarded with sudden home repair bills if there’s a surprise crack in the foundation. 
It may also be a good idea to get the house professionally appraised. Valuing the house could help guide the sale and make it easier to figure out a price. Not interested in an official appraisal? You can also research the local area real estate comps to get an idea of the value of your home.  

Discuss a gift of equity

Your parents could offer a gift of equity, or a discount on the buying price, by offering a selling point lower than the market value of the home or by paying some or all of the down payment balance. 
Down payments often stop potential homebuyers from taking that leap, so a gift of equity could offer a needed boost in your homebuying journey. 

Establish a price

After doing your inspection, appraisal, and research on local sale comparisons, and discussing the possibility of a gift of equity, decide on a fair price with your parents. Consider if there will be any discounts on rent or mortgage payments, but make sure the offering price isn’t too far below market value. There is potential for the IRS to get involved if the price is too low, as this can be considered a type of mortgage fraud. 
Key Takeaway: Be attentive to each part of the buying process! Discussing expectations, examining the mortgage, doing the proper paperwork, learning about the home buying process, inspecting the house, and determining a fair price can make buying a house from your parents a breeze.

Finalizing the sale

To officially finalize the sale, you’ll need to “close” on the purchase by going over the agreed-on price and terms of the sale with an attorney, bank, or title company.
If you need to take on a mortgage, you’ll also have to
close on the mortgage
, or legally commit to the loan.

How to find affordable home insurance?

Buying a house from your parents can make the purchasing process a lot easier, but you’ll still have the hassle of finding
home insurance
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The first thing you should do when you decide to buy a house from your parents is to discuss everyone’s expectations for the sale. This can include the selling price and the role your parents will have with the house after the sale. 
You’ll also want to examine your parents’ mortgage to make sure everything is up to date. Check with a lender to see if you can take over their mortgage payments or if you’ll need to take out a new loan. 
You and your parents may want to discuss discounts as gifts of equity as well. Once a fair price is negotiated between you, you can move on to finalizing the sale.
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