Buying A House From Family

by Torrey
(Pennsylvania)

Buying a house at lower than market sales price: Hi Kate, Will it be difficult for my niece to get a mortgage if I sell her the family homestead for a price significantly below market value?

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Hi Torrey,

Non arm's length transaction - That's the odd term used to describe a real estate transaction that consists of one family member selling a house to another. Like yours, a lower than market sales price is often involved.

I assume you want to use the difference between the appraised value (the higher amount) and the sales price (the lower amount) as a down payment and/or equity.

Some mortgage programs allow for this and others don't. So be certain to explain your purpose upfront for a reliable response from a lender.

If the answer is a "no" at first, try another lender. I see a lot of variance among mortgage institutions when it comes to buying a house by means of a non arm's length transaction.

I'd also recommend consulting an accountant to see if you should be looking out for tax consequences.

Good luck helping your niece.

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Best Wishes,





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