Buying A House From Parents Or Family: How To Make It Work

8 Min Read
Updated March 6, 2024
Written By
Victoria Araj
Older Couple Face Timing On iPad With Their Adult Child

Many home buyers are eager to make purchasing property less complicated, and if you’re young and looking to buy your first home, you might be wondering if buying your parents’ house from them is the way to go.

But is buying a house from a family member really any less complicated than buying one from a stranger? In many ways, it can be, but there are also some unique things to watch out for when you start mixing relationships and real estate.

Why Buy A House From Your Parents?

There can be many motivations for choosing to purchase from family. Let’s take a look at a few of the most common.

More Buying Power

Many people consider buying a house from a parent as the first-choice way of achieving home ownership. Purchasing from family is typically cheaper and less formal than buying from a stranger, so it can be a good way to buy your first home, especially if buying from your parents allows you to get a larger, nicer or better located house.

Elder Care And Family Support

Others face the decision of buying an elderly parent’s home when the parent can no longer take care of it. In some cases, you might choose to purchase the property as a second home and rent it, or you might move in yourself and use it as a primary residence.

Some people even buy and then rent homes back to their parents – or other family members – for financial support and tax benefits. It’s important to note that there can be consequences from the IRS for reducing rent too much or letting family live rent free.


Home is where the heart is, and that’s especially true when you’re talking about your childhood home. Keeping a home in the family can be a sentimental motivation for parents to sell to children, and vice versa.

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How To Buy A Home From Family

Family transactions can be a great way to support loved ones and preserve treasured memories, but they can also get messy. Before you dive in, learn how to navigate the process and pitfalls of buying a house from family.


Discuss Your Expectations

If you’re close with your family, it’s easy to assume that everyone knows what everyone else is talking about. While that may be the case when you’re making holiday plans or reminiscing about inside jokes, it might not carry over to real estate.

Make sure you think through everything and discuss concerns with your family before getting too far into the buying process. Here are some common issues that you might want to discuss, but the possibilities are endless.

  • How much will the house cost?
  • When will the sale take place?
  • How will moving work?
  • Do your parents expect to stay in the house, either full- or part-time?


Use Proper Documentation

Since you’re just dealing with your parents, it might seem ridiculous to start drawing up contracts, but having the right paperwork can make a big difference when things get complicated. Once you all know what you want and expect, put it in writing. Even if nothing goes wrong, it can help to see everything laid out clearly in front of you, and it might be helpful to return to later. Depending on what you need to do down the line, you might even need it for external sources like your lender.


Understand Non-Arm’s Length Transactions

The non-arm’s length transaction is essential when you’re buying from family. Normal home buying (in other words, from a stranger) is considered “arm’s length” because the parties involved aren’t connected and can look out for their own interests without getting tangled in the others’. A non-arm’s length transaction is also known as an identity of interest. When you’re dealing with family, though, your decisions can easily be influenced by the other person – so you’ll need to know the legal implications of that relationship.


Assess The Mortgage

Do your parents fully own their home? Are they still paying off the mortgage? Are all the payments up to date? Make sure you know where you stand and how you’re going to take on financial responsibility for the house.

Here are a few possible scenarios:

  • Your parents own the home outright, and you can purchase it with cash or take out a new mortgage.
  • The mortgage isn’t paid off, but the loan is assumable, meaning you can take it from your parents and pick up the payments where they left off.
  • The mortgage isn’t paid off and the loan is not assumable. In this case, you can try contacting the lender to ask about a transfer, but you may need to start from scratch on a new mortgage.

Every lender has different rules, so make sure you know how yours handles non-arm’s length mortgage transactions, gifts of equity and all the other unique parts of family-family sales.


Determine A Price

Even if you’ve already talked about your price expectations, you’ll need to do some research before you set an actual sales price for the house. Let’s review a few steps you can take to make this process go smoothly.

  • An appraisal is essential for determining market value, and it will likely be required if you mortgage the house.
  • If you’re not using an agent, you can also look at real estate comps yourself to get a better idea of what similar homes cost.
  • Sellers should consider how much they want to discount the price, if at all.
  • Make sure everyone is aware of any potential tax implications. For example, much like with reduced rent, the IRS could get involved if the sales price of the house is too far below market value.


Consider A Gift Of Equity

Gifts of equity are effectively a discount on a property’s sale price. When buying a house from your parents, they can choose to cover some or all of your down payment by selling the home to you for that much less. This can be a huge help, as down payments can be one of the largest barriers to home ownership.


Research The Home Buying Process

Not using a real estate agent? While that’s common in family-to-family sales, it’s also a disadvantage because you’ll miss out on all their legal knowledge and assistance. You’ll have to pick up the slack, so make sure you understand what it’s like to buy a home for sale by owner, plus all the steps involved in the home buying process.


Get An Inspection

As a final note, one part of the home buying process you don’t want to skip is the inspection. Even if you know the house well and your parents don’t know of any issues, it’s good to have a professional come in and assess what might not be visible to you. You don’t want to buy your parents’ house only to discover the roof needs work or that there’s a major mold problem. Getting an inspection before you close the deal will prevent any unpleasant surprises.

The Pros And Cons Of Buying From Parents Or Family

Let’s boil it down to the basics. What’s good about buying property from family, and what are the challenges?


The benefits of buying a house from family aren’t hard to see. When done right, they typically come with financial benefits for both buyer and seller. These may include:

  • Low or no down payment
  • No agent commissions
  • Lower closing costs
  • Lower sales price
  • Keeping a home in the family and preserving the home for the next generation
  • Flexible and casual relationship between seller and buyer

Keep in mind that what you’ll pay as the buyer totally depends on the arrangement you make with your family. Most parents are willing to discount the sales price when selling to children based on money saved elsewhere in the process, but this isn’t required.


The list of cons isn’t long, but it’s significant and worth careful consideration:

  • Risk of family conflict and drama
  • You may still need traditional financing, which could get complicated if your parents still have a mortgage on the home
  • Potential tax issues

Should You Buy Your Parents’ House?

It’s one thing to understand what the benefits and obstacles are, but it can be harder to figure out which deserves greater weight. Are the advantages worth it, or should you steer clear of mixing family and real estate transactions?

Of course, there’s no easy answer to that question. The only right choice is the one that works best for you and your family in your unique situation. Here are some questions you can ask yourself to help make that decision:

  • Is the house paid off?
  • Can you afford to buy the house?
  • Can you communicate clearly with the family members involved?
  • What relationship will your parents have with the house after it’s sold?
  • Do you have other family members who might want the house?

The Bottom Line: Balancing Family And Finance Can Be Tough

While it might seem like buying a house from a family member would be a no-brainer, the process can get complicated. That’s why it’s important to get everyone on the same page as soon as possible, set expectations early and decide whether a house is worth the potential drama.

If you’re sure buying a house from family is the right move for you, your first step should be to learn the legal ins and outs of the process, starting with non-arm’s length transactions.

Need to mortgage your parents’ house? No problem. Visit to see your loan options.


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